Understanding the powerful Chinese government should be the top priority for Australian brands looking to move into the lucrative Chinese market, according to Blackmores executive director, Marcus Blackmore.
The vitamin king told Which-50 prospective brands could “do well to copy some of the things we’ve done”. Chief among them, Blackmore says, is understanding a government and bureaucracy that will act in the interest of its people, and often outperform their western counterparts.
Blackmores is the often cited success story of Australian brand’s push into China via ecommerce platforms. The vitamin and supplement brand derives a reported 40 per cent of its total annual sales from China, taking a significant chunk of the $20 billion local market.
“A lot of companies trying to establish themselves in China have failed. I think one thing that underpins that failure more than anything else is a lack of appreciation of the role of government in China,” Blackmore said.
“We forget, at the end of the day, it is basically a socialist economy and that the government is all mighty powerful. And it’s no different to this country – if you want to operate in this country then you better know the regulations and you better know the federal government … or you won’t be in business.”
“It’s the same sort of thing in China but you have a wider perspective from the government,” Blackmore told Which-50 at a press briefing before the Alibaba expo in Sydney last weekend.
According to its executive director, Blackmores relies on a strong Chinese presence and deep understanding of the “challenges of dealing with government”.
“You can virtually do anything you want in China. But as one of the commentators said, just remember where you are. I thought that was an appropriate point. You need to understand the nuances of the Chinese government and the Chinese people.”
“My leadership in China have dealt with the Chinese government. We have a view that the quality, the capability and the educational capability of the Chinese bureaucracy exceeds what most western worlds have.
“They are very well informed, they are very well educated.”
Blackmores CEO Richard Henfrey agrees, “relationships matter” in China. He said the company’s strong local presence and long term partnerships are critical to Blackmore’s success in China.
“Go local and understand the market,” Henfrey said.
“Having local knowledge, experience, contacts and language is critical for success including tailored products to meet consumer needs and innovative marketing for local appeal. Don’t assume what works in another market will work in China.”
Executive Director, Marcus Blackmore noted the Chinese government’s short term ban on supplements, since overturned, as an example of the power the government yields over foreign brands. And while the ban that prohibited much of Blackmores’ products being sold into China hurt – “We became a fish oil company overnight” – he ultimately agreed with the decision and the ensuing regulations.
The ban was necessary, Blackmore says, to reel back the low quality supplements and “airy fairy” claims flooding the market at the time. It also gave the government time to update regulations to match a fast growing population.
“The one thing we forget is, as a socialist country the Chinese government is very concerned about their people. They have a strong affinity for their people and a strong affinity to protect their people.”
Blackmores felt that affinity firsthand in 2017 when the company was fined and publicly shamed for misleading advertising in China over some of the claims made in their advertisements.
According to Blackmore there is “not a hell of a lot” different between Australian and Chinese consumers, particularly China’s emerging middle class.
“They want some western sort of products but they’re demanding of quality and things like that.”