Modeling China’s Domestic Infant Formula Enterprises to Win in Lower-tier Markets
Apr 24, 2020
Demand for infant formula in China’s lower-tier market has expanded for various reasons including: continuing increased urbanization, the poor penetration of international stakeholders in these markets, the optimized retail and marketing strategies of domestic enterprises operating in these markets, a relatively high birthrate and the increased spending power of consumers in these cities.
Success in China's lower-tier cities requires the adoption of a hyperlocalization strategy involving the adoption of the most efficient marketing channels, curation of private domain traffic, scientific content marketing, development of close relationships with bricks and mortar store owners, emphasis on consumer engagement, and improved services.
The strategies adopted by domestic enterprises offer an excellent model for international stakeholders looking to gain traction in these emerging markets.
The Resurgence of Domestic Infant Formula Brands
The melamine scandal was a black swan event that reshaped the Chinese infant formula sector. Despite occurring over ten years ago, the sequelae of the disaster are still impacting the domestic industry. The market share of domestic players was 70% in 2008 and had dropped to 30% by 2015 . However, in recent years, the market proportion of Chinese domestic milk powder brands has been rising, and by 2019, domestic stakeholders control more than 60% of the market .
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