American Brands Struggle in China's Market Dominance

Chinese brands are challenging US rivals in the Chinese consumer market, threatening the dominance American brands have held for decades.

### American Brands Face Tough Challenge as Chinese Rivals Gain Ground
* 🇨🇳  American brands like Apple and Nike are facing challenges in China as local brands such as **Huawei and Anta** are rapidly **expanding and gaining popularity**.
* 🛍️  China, as the **world's second-largest consumer market**, was once seen as a **huge opportunity for Western brands**.
* 📉  In the first quarter of 2024, Apple's smartphone sales in China fell by **19%**, while Huawei's sales rose by **70%**.
* 🏆  Anta, as a sponsor of the Chinese Olympic team, has successfully positioned itself as a brand that resonates with **growing nationalist sentiment** and **supports Chinese athletes**.
* ☕  Luckin Coffee surpassed Starbucks as China's largest coffee chain by sales and units at the end of 2023, mainly due to its **price-competitive operating model**.
* 📉  Despite Starbucks' commitment to its **premium brand positioning** and refusal to engage in **price wars**, its sales in China dropped by **8%** in the first quarter of the year.
* 📈  Starbucks still aims to make China its **largest market** and has been rapidly expanding its store network, but Luckin's **even faster expansion** and **price advantage** pose a **significant challenge**.
* 🍔  The ultimate question for American brands is whether they can **maintain their market dominance in China** as local competitors continue to grow.

[Music] This may look just like your regular American fast food restaurant 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 tasan, it's China's answer to McDonald's. And as you can see, 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. China is the world's second largest consumer market. The country's 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 stores nationwide over the past 5 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, and um, CEO who is worried about his performance, his profits is going to be threatened by them. We have seen stock prizes fall, Nike stock prizes fall, for example, on the back of kind of weakening.

performance in China. China once represented almost a fifth of Global sales. Nike has long dominated China's 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 a sponsor of the Chinese Olympic team, Anta has found a place among Chinese Shoppers as a brand that matches growing nationalist sentiment and 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 combinations. 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 that Supremacy is now under threat. At the end of 2023, Luckin Coffee surpassed Starbucks as China's biggest coffee chain by sales and units. Analysts credit Luckin's 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 luckens 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, luckan opened more stores than the entire Starbucks operation in the country and now has nearly 19,000 locations. Lockin is expanding very rapidly in tier 2, tier three cities where Starbucks might not have that big of a presence. It's really forging its own grand 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 M

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.

How Chinese Brands Are Dominating U.S. Rivals Like McDonalds and Apple | WSJ

The Wall Street Journal takes you inside carefully selected stories and events in a visually captivating way so you can dig deeper into the news and insights that matter to you. 

The Wall Street Journal

The Impact of Chinese Brands on the Dominance of American Companies

Chinese brands like Tasan are challenging US fast food chains in China's growing consumer market.

American companies like Apple and Walmart are facing declining sales and store closures in China, while Chinese brands like Huawei are experiencing significant growth.

This competition from local Chinese brands is causing concern and financial strain for some of the biggest American companies operating in China.

The Shift in Chinese Consumer Preferences

Nike's dominance in the Chinese sportswear market is being challenged by local brand Anta, as younger consumers are drawn to their traditional Chinese style.

Anta's association with the Chinese Olympic team has helped it resonate with nationalist sentiment and the new generation.

Meanwhile, Luckin Coffee's success in China is attributed to its low-cost model, causing a significant threat to Starbucks, which is refusing to engage in a price war, despite experiencing a drop in sales.

Starbucks' Struggle in the Chinese Market

Luckin's rapid expansion in China has caused Starbucks to lower its yearly forecast.

The company's share price took a hit after the announcement, despite plans to dominate the Chinese market.

While Starbucks has nearly 7,000 stores in China, Luckin has almost 19,000, mainly targeting tier 2 and tier 3 cities, posing a significant challenge to the American coffee giant.

The Impact of Chinese Burgers on the American Market

American companies face a growing threat from Chinese rivals in one of the largest consumer markets.

The competition raises questions about the taste and appeal of Chinese-style burgers to American consumers.