As Chinese consumer brands seek growth beyond their domestic markets, they are discovering a significant edge over their Asian competitors: the extensive global ethnic Chinese diaspora. According to a recent study by Bain & Company, Chinese companies are uniquely positioned to tap into this large demographic, which offers a disproportionate advantage compared to their Japanese and South Korean counterparts.
David Zehner, a senior partner at Bain, highlighted this strategic advantage in an interview with CNBC, noting that the ethnic Chinese population abroad is substantial enough to provide a distinct market opportunity for Chinese brands. “The ethnic Chinese population overseas is so large in many markets that there’s a disproportionate opportunity for Chinese companies to target these communities,” Zehner explained.
Bain’s latest research, released on Thursday, examines data through 2023 for 150 publicly traded consumer goods companies based in the Asia-Pacific region. The study finds that while Chinese consumer businesses have been slower to expand globally compared to their Japanese and South Korean peers, their unique market positioning offers a considerable upside.
Zehner observed that with domestic growth slowing, many Chinese companies are looking to replicate the success stories seen in Japan and Korea. These firms often begin their international journey by targeting other Asian markets before venturing into Europe and North America.
The United Nations estimates that approximately 60 million ethnic Chinese live outside of mainland China. In the United States, despite being a minority, there are about 5.2 million people of Chinese descent, according to the U.S. Census Bureau. Singapore, with a population of 5.92 million, has a 74% ethnic Chinese demographic, according to government data from June 2023.
Chinese brands are capitalizing on this demographic by integrating sports into their global strategies. For instance, brands like Haier and Keenon have accelerated their international expansion as domestic consumption has struggled since the pandemic. Xiaomi, a leading Chinese smartphone and home appliance company, now generates over 40% of its revenue from international markets. Alibaba’s overseas e-commerce business has also seen significant growth, becoming the second-largest segment after domestic e-commerce.
Despite these successes, Chinese consumer companies have not yet matched the international revenue contributions of their Japanese and South Korean counterparts. Bain’s study highlights that while Japanese firms in the fast-moving consumer goods sector achieve significant overseas revenue, and South Korean companies also have a notable international presence, Chinese companies are still catching up. For example, out of 16 Chinese fast-moving consumer goods companies examined, five focus solely on the domestic market, nine earn up to 10% of their revenue from overseas, and only two achieve between 10% to 50% in international sales.
Zehner predicts that this is just the beginning for Chinese companies. “I think there will be many opportunities for Chinese companies in various parts of the world to build new categories where they are not yet developed,” he said. He also pointed out that Asian culture and brands are gaining increasing influence in Western markets, which could further benefit Chinese companies.
Recent examples of Chinese brands expanding globally include Miniso, a retailer that opened its largest store in Jakarta and reached its 200th U.S. store milestone. Miniso’s international revenue for the quarter ending June 30 grew by 35.5% to $207.8 million, while its domestic revenue increased by 18% to $347.5 million.
However, the path to global success is not without challenges. Chinese tea brand Chagee faced difficulties entering the Singapore market through local partnerships and decided to change its strategy by directly managing its stores. Other Chinese brands use markets like Singapore as testing grounds for cultural adaptation before targeting Western consumers.
Zehner advises that companies must approach international expansion with a long-term perspective. “The prize will go to those who can learn and adapt quickly, rather than assuming that domestic strategies will work seamlessly abroad,” he said. He emphasizes that companies should not expect immediate returns on marketing investments and should prepare for a gradual and strategic approach to international growth.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna Sahu holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
