Maintaining the trust of consumers
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Don't be misleading
There are certainly penalties for misleading consumers.
The Taiwanese Tinghsin International Group, owner of the Master Kong brand, was in trouble last year after it was revealed through a rumor that spread on the Internet the main source for its bottled water was not a natural spring but came out of a tap.
The company later claimed the urban water supply was safer than natural water, the quality of which varied with the seasons and often contained hazardous microbes.
Joy Huang, research analyst at retail research company Euromonitor, based in Shanghai, said the problem for the company was not the safety of the product but its potentially misleading advertising.
She said soft drinks manufacturers were vulnerable to quality control issues since the majority of their consumers were young and likely to be influenced by netizen campaigns such as this one.
"If there is any issue with quality control, a rumor can spread very fast now and can do a lot of damage to a brand in a matter of hours," she said.
"It can be difficult for soft drinks manufacturers since they are under pressure to control costs but at the same time ensure quality control. The two can be contradictory and a compromise has to be reached," she said.
New strategies
Bernhard Hartmann, managing director at international management consultants A.T. Kearney China in Shanghai, said foreign companies were increasingly having to adapt their products to satisfy Chinese consumers.
He cited the example of Kraft, which brought its Oriel dark chocolate cookies, a leading brand internationally, to the country but found them not to Chinese tastes.
"They were too sweet and so they had to produce the cookie in a different form. It has become more of a wafer biscuit. Campbell soups also had to introduce more flavored broths to meet Chinese tastes," he said.
"Car manufacturers here also have to pay attention to the leg room in the back of some of the models because many of the buyers have drivers and therefore sit in the rear themselves."
Hartmann said multinational companies have to be aware that Chinese consumers vary in different parts of the country.
"The idea that one product fits all will not fly here. You have only got to look at food and the different cuisines around the country," he said.
Keh at Guanghua School of Management said that it has never been more important for foreign companies to really focus on what Chinese consumers want.
"There is a lot of loyalty now to Chinese brands. Young consumers, if they can afford it, will buy Nike or Adidas. However, if they are on a budget, they would feel a sense of pride also in buying Chinese brands such as Li Ning or Anta," he said.
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