The Chinese Brands Dominating U.S. Rivals Like McDonald’s and Apple | WSJ

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(upbeat music) - This may look just like your regular American fast food restaurant (speaking in Chinese) with a meal that comes with a burger, fries and a drink. But if you look closely, the wrapper proudly declares that this burger has been made in China. I'm sitting in Tastien. It's China's answer to McDonald's, and as you can see it, you have all this language here made in China, a Chinese burger for a Chinese stomach, and you can see that they've just got all sorts of Chinese imagery around. A little bit of McDonald's transported to Imperial era China. And Tastien is just one example of a Chinese brand squeezing out US rivals. China once presented a huge opportunity for American brands, but now local challenges are eating their lunch and that threatens dominance they have held for decades. (gentle music) China is the world's second largest consumer market. The country has more than 1 billion shoppers were once seen as an untapped gold mine for Western brands. This is Beijing's premier shopping district, and you don't have to look far to see which companies have taken center stage. There's American brands all around me. Over here we got Ralph Lauren, Tom Ford, and right behind me is perhaps the best known of all of the brands, Apple. In the first quarter of 2024, Apple saw its smartphone sales fall 19% while that of its Chinese rival, Huawei Technologies saw its sales rise 70% For China, apple saw its revenue fall by 8% to $16.4 billion, and Apple isn't the only American company that's been struggling a little bit more in China lately. From luxury cosmetics firm, Estee Lauder, which is expecting sales in China to fall to retail giant Walmart, which has closed more than a hundred stores nationwide over the past five years. Executives of some of America's biggest brand names in China are increasingly worried about their weak performance in the country. - Local brands are expanding so rapidly in China. Any CEO who is worried about his performance, his profits is going to be affected by them. And we have seen stock prices fall. Nike stock prices fall, for example, on the back of kind of weakening performance in China. - [Speaker] China. - China once represented almost a fifth of Nike's global sales. Nike has long dominated China sportswear market, but that's changing. Younger Chinese consumers are increasingly gravitating towards brands that incorporate elements of traditional Chinese culture and style, and it's allowed brands like Anta right over there to make inroads in a market that long has been dominated by Nike and other Western brands. Chinese consumers are trying new brands like Anta on for size, and in many cases they aren't going back. As the sponsor of the Chinese Olympic team, Anta has found a place among Chinese shoppers as a brand that matches growing nationalist sentiment. - [Speaker] Anta supports the new generation of Chinese Olympic athletes. - It was very much linked to very big and bold expressions of Chinese pride. So think about your large logos, red and yellow color combination. It's resonating, especially with younger consumers today because they don't have the same level of adoration for the West as the past generations. It's not about, you know, blind kind of, I'll buy something from the West just by virtue of it being from the West. - American brands have reaped huge profits by capitalizing on changing Chinese consumer tastes. Starbucks largely created China's new coffee culture in a country long dominated by tea drinkers, but supremacy is now under threat. At the end of 2023, Luckin Coffee surpassed Starbucks's, China's biggest coffee chain by sales and units. Analysts credit luck and success to its operating model, which requires minimal staff to run their branches. Luckin prices its coffee at a substantial discount, often up to 50% less than Starbucks. - You know, there's a price war going around with coffee brands. Starbucks has largely avoided that. They are kind of committing to their premium offering. They're focusing on what they do best. That should be the way for many of these American brands who feel threatened because you don't want your brand identity to get lost as you follow the trend. - Starbucks executives insist they won't cut prices as the company positions itself as a superior brand. But sales for Starbucks have dropped 8% during the first quarter of this year, while Luckin's have surged 41%. That contributed to the company lowering its forecast for the rest of the year. The announcement spooked the market causing Starbucks' share price to plummet in May. The US coffee giant still has plans to make China its biggest market, but it's now in a race to win wallets. In 2023, Starbucks opened nearly 900 new stores across China, bringing its total in the country to almost 7,000. But in that same year alone, Luckin opened more stores than the entire Starbucks operation in the country and now has nearly 19,000 locations. - Luckin is expanding very rapidly in tier two, tier three cities where Starbucks might not have that big of a presence. It's really forging its own brand story in a way that resonates with who the new middle classes are. - American brands have had a near free run at the Chinese market for decades, but that's coming to an end. - I think to lose out on China is a huge missed opportunity, not just in terms of dollars, but in terms of cementing your brand presence in one of the largest consumer markets in the world. - What was once an enormous opportunity for American companies could come back to bite as Chinese rivals chip away at their market dominance. But of course, the real question with this Chinese burger is not, you know, whether it is very Chinese or very American, it's about whether it tastes good. (upbeat music)
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Channel: The Wall Street Journal
Views: 515,105
Rating: undefined out of 5
Keywords: china, china news, chinese business, chinese brands, tastien, tastien burger, tastien china, anta, anta shoes, luckin coffee, luckin coffee vs starbucks, starbucks stock, huawei, huawei vs iphone, apple, apple in china, nike, mcdonalds, tastien vs mcdonalds, nationalism, chinese nationalism, fast food, burger, consumer market, beijing, shopping, brand names, us brands in china, sportswear market, china brands, luckin coffee china, foreign companies in china, brands in china, bnss
Id: hHOSEFRtaNc
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Length: 6min 21sec (381 seconds)
Published: Tue Jul 09 2024
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