China economy

Chinese patriotism pierces through missile defence shield as consumers brush aside South Korean personal care products

A report from Kantar Worldpanel and Bain & Co shows how a diplomatic row over a US-backed missile defence system can lead to shunning of South Korean facial creams and lipsticks and slow down high-speed personal care products sales growth in China

PUBLISHED : Tuesday, 24 October, 2017, 1:30pm
UPDATED : Tuesday, 24 October, 2017, 11:06pm

South Korea’s decision to deploy a controversial missile defence system has had another unintended ripple in China – a slowdown in the growth of personal care products in the world’s second largest economy.

The diplomatic row between Beijing and Seoul over the US-backed missile defence system has already led to a collapse in the number of Chinese tourists to popular South Korean destinations and boycott of their goods in the country.

The latest market analysis showed on Tuesday how the shunning of South Korean facial creams and lipsticks in China can filter through and drag down “high-speed” sales growth of personal care products in China.

Personal care products include skin care, shampoo, personal wash, toothpaste, cosmetics, hair conditioner and toothbrushes.

The report, however, did not disclose the exact scale of the sales.

Sales of personal care products in China grew by 8.3 per cent year on year in the first half of 2017, down from 9.2 per cent in the first half of 2016, said consultancy Bain & Co and market research firm Kantar Worldpanel, in a joint report on Tuesday, on the evolving shoppers’ behaviour in China.

In 2016, sales rose 10.5 per cent year on year to a four-year high.

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“There’s a solid reason for the stalling of this high-speed sector,” the report said. “South Korea’s decision in mid-2016 to deploy the THAAD system to neutralise missile threats from North Korea created anti-South Korea sentiment in China, causing repercussions in the cosmetics aisle, as Chinese consumers shunned popular South Korean imports.”

In the first half of 2017, sales of South Korean skin care and cosmetics products dropped 4.8 per cent.

In China, personal care average selling price growth also felt the pinch, falling from 8.4 per cent a year ago to 5.7 per cent in the first half of this year, as many of the South Korean brands sell at a premium.

But still, personal care products outperformed the fast-moving consumer goods market in general, where sales gained by a mere 2 per cent compared to a year ago in the first half.

Meanwhile, the steadily increasing acceptance of online shopping is leading to an overall decline in the buying frequency of consumer goods in China. When shoppers buy online, they tend to place bigger orders, minimising the need for more frequent purchases.

Yet the growing popularity of e-commerce has little to do with brand loyalty over the past five years, the report found.

“Loyalty patterns are not altered by shoppers’ movements between offline and online channels, which means that the imperative for brands to drive penetration to grow continues to be paramount,” said Bruno Lannes, partner in Bain’s Greater China consumer products practice and co-author of the report.