Chinese fortunes

It's enough to make any marketer with a pulse salivate: 1.3 billion consumers with a propensity for Western brands. It's no wonder companies like Home Depot and McCain Canada want into China.

It’s enough to make any marketer with a pulse salivate: 1.3 billion consumers with a propensity for Western brands. It’s no wonder companies like Home Depot and McCain Canada want into China.

They can learn plenty from those who have gone before them – firms like Sun Life Financial and L’Oréal who say local marketing is the way to go, when bolstered by Western know-how.

With an influx of Western investment comes an explosion in advertising: According to Nielsen Media Research, estimated ad expenditure in China shot up 42% between 2002 and 2003, from US$16.9 million to US$24 million. That was after an increase of 43% between 2002 and 2001, when ad spend hovered at about US$11.8 million. By the end of the decade, NMR predicts China’s ad industry will become the second largest in the world, after the U.S.

‘It’s an enormous market that everyone is attracted to,’ says David Weiner, senior partner at National Public Relations in Toronto, and an MBA teacher at Tsinghua University in Beijing. He says there are about 400 million Chinese consumers currently identified as middle class, a number that

is growing by the day. ‘In Beijing, you’ll see Western-style suburban homes with swimming pools.’

The Chinese are also

increasingly brand savvy, a reality that comes with more affluence. ‘It’s a market where Chinese companies themselves will begin to invest in brands, so there’s a window of opportunity western companies need to exploit.’

Waterloo, Ont.-based Sun Life Financial has wasted no time gaining a foothold in the Far East, through a joint partnership with the Beijing-based China Everbright Group. The China Insurance Regulatory Commission requires 200 million RMB yuan (CDN$34 million) of capital to start a life insurance joint venture company. Sun Life and the China Everbright Group split that cost and the firm started up in the city of Tianjin in April 2002 and then expanded to Beijing in April 2004.

According to Dikran Ohannessian, president of Sun Life Everbright Insurance Company, who is based in Toronto but spends 60% of his time in the Far East, the plan was to leverage its Canadian expertise and build a company with local sensitivities. Canadians Timothy Chen and Andrew Cheung were relocated to assume the CEO and VP marketing posts respectively. The fact that they are both of Chinese descent is no coincidence. Says Ohannessian: ‘It is imperative that people who understand the market and the culture run the business.’

The potential in China is massive, as the country evolves from a state-provided health and social benefits system to one where

citizens are being asked to care for their own needs. It also means products like life

insurance must be simpler and the advertising more educational.

To that end, Sun Life Everbright recently gave away 60 days of free coverage for children’s accidental life insurance – and brochures

outlining the offer – with the purchase of a McDonald’s Happy Meal in Beijing.

(See sidebar on page 34.)

Like Sun Life Everbright, L’Oréal, which has been in China since 1996, doesn’t typically adapt global marketing campaigns for China. Its marketing department in Beijing is staffed mainly with local talent and, in addition to distinct advertising, many of the products within its brand portfolio are produced

specifically with Chinese women in mind.

Joe Zhou, communication and PR manager for L’Oréal China, gives an example: Lancôme, which leads the high-end Chinese cosmetics market with a share of close to 20%,

contains more whitening properties in its products in response to local tastes. In April, the company launched three Garnier products (Light Cream, Light Lotion and Fresh Cleansing Milk) specifically formulated for young Chinese women.

L’Oréal cosmetics are advertised in the usual ways: on TV, billboards, and in

magazines – and they naturally depict Asian models. But the firm has also partnered with, a popular Internet portal where users can find info about its brands, as well as advice and tips on makeup application.

So far so good: L’Oréal China’s sales reached CDN$235 million in 2003, up 69.3% over the previous year.

Despite such success, distribution and logistics are still a huge issue, warns Weiner. ‘Expect to go many years without any positive flow out of China, with the expectation that eventually there will be a big payoff.’

Want a piece?

Wholly foreign-owned ad agencies may be established in China after Dec. 10, 2005. Currently, foreign agencies can launch joint

ventures with domestic parties.

Need an ad agency? Many multinationals like JWT have a presence in post-Mao China. Canada’s own Cossette is opening a

branding and design entity, Identica, in Shanghai. Or you can try the Chinese

Advertising Association (, which boasts 265 ad companies (some of which are state-owned).

Behind the idea

McDonald’s Happy Meals: Do you want insurance with that?

Forget little plastic toys. Sun Life Everbright gave away serious stuff with the purchase of a McDonald’s Happy Meal in Beijing this spring. The firm offered 60 days of free coverage for children’s accidental life insurance with Happy Meals. An enclosed brochure (image shown above) outlined the offer. This sounds wacky by Canadian standards, but for Sun Life Everbright, which also does newspaper, radio and bus ads to build awareness – all starring absurdly happy people – the objective of the promo was to leverage the popularity of McD’s in a market infatuated by Western goods.

In an e-mail exchange from China, VP marketing Andrew Cheung explained that the initiative stemmed from a marketing session for the Beijing launch.

Along with booths in department stores, McDonald’s was chosen as a major marketing vehicle for two main reasons: it’s a well-established brand in China’s capital, and there are similarities between the target customers of both companies – 25-to-50s with children, as well as an above-average income and education. Unlike its cheap eats connotation in North America, in China the chain is viewed as a place to fill up on expensive, imported fare. (Ideas that were dropped for one reason or another included giving away free kites, and a laser light ad on the side of a building.)

Tying into the Happy Meal was actually McDonald’s’ stipulation, according to Cheung. ‘They preferred [that] the gift related to children, and we had to come up with a product that matched their needs,’ he says, adding that the major cost of the program was printing the promotional material, at about CDN$12,700.

The QSR was also sticky about any hard sell, or follow-up push by the insurance company, so Sun Life Everbright simply sent a thank you letter to the 16,000 customers that signed up during the month-long program. Be that as it may, targeted efforts like this one have helped Sun Life Everbright become one of the most successful insurance startups in the country, according to president Dikran Ohannessian. Gistbox
Scintillating stats

* In 2003, total retail sales of consumer goods reached CDN$729 million, beating the previous year by 9%, according to the National Bureau of Statistics in China. Of the total, motor vehicle sales increased 68.5%, telecom equipment 71%, electric and electronic appliances for household use 18% and furniture 28%. Also:
* Mobile phone users numbered 269 million while total telephone subscribers totaled 263 million.
* Food industry profits shot up 30% to CDN$11 billion, while the catering industry (mostly consisting of fast food restaurants) grew by 11.5%.