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Levi's leads multinationals' big assault on China


Priscilla Siew
 
Symbolic of China's growing importance to the global economy, multinational corporations are going to great lengths to tailor their products to Chinese preferences. Some companies have in fact gone a step further by launching new brands or product lines specifically designed for the market. Levi's is the latest global brand to distinguish itself by launching a range targeted towards the Chinese middle class market, which is currently estimated to total 157 million people.
 
Levi's will be launching a new global brand in China and select Asian markets which have yet to be disclosed. The brand will be launched in autumn 2010 throughout 20 stores across China, a network that is planned to increase to 1,000 stores by 2015. A sign of the changing economic climate, this is the first time that the US apparel company has launched a new brand outside of its home market.
 
The new range is targeted at the segment of upwardly mobile, educated, youthful consumers around the age of 18 to 28. To overcome the affordability barrier the new brand will be priced lower, costing around $50 for a pair of jeans in order to enable a wide range of the Chinese middle class to buy their first pair of foreign-branded jeans.
 
Foreign brand manufacturers in China, particularly western companies, have long recognised the need to adapt their offerings in order to appeal to the Chinese market. KFC, for instance, offers milk tea with grass jelly (a jelly dessert boasting certain health benefits), egg tart (a traditional Canton dessert), a Peking duck variation of the burrito and a Sze Chuan spicy beef wrap. Coca-Cola recently launched a new product called Spritea, a lemonade soft-drink infused with green tea. On the other hand, skincare companies too have found a need to customise their products and marketing in accordance with Chinese tastes. In order to appeal to the aspirations of Chinese women for fairer skin, nearly all brands of skincare products have a skin-whitening range.
 
Levi's is not the only clothing company with plans to launch a brand particular to China: haute couture label Hermes will be launching a new range later this year. Its Shang Xia line of clothing and accessories will be tailored for Chinese customers, with designs inspired by Chinese culture and philosophy and manufactured using Chinese raw materials and craftsmanship. If the new line proves successful in China, Hermes plans to introduce it in Paris, rolling out the brand globally. The range will be priced lower than Hermes, enabling the company to reach a different consumer segment without compromising the image of its main line.
 
China's spectacular economic growth over the last decade and its burgeoning middle class have made it an attractive market for many global companies. In addition China has weathered the global downturn much better than many other countries, giving companies the confidence to increase their investments in the country. Many corporations are now looking to China as their next engine of growth, as expansion in developed markets slows down.
 
Whereas other multinational businesses have entered the Chinese market with existing products customised to Chinese taste, Levi's and Hermes have identified ‘made-for-China’ as their blue ocean strategy for competing in the increasingly crowded consumer market.
 
Priscilla Siew is a senior analyst at Datamonitor.
 

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