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Wednesday, December 13, 2017
 Chinese Social Media is Key for Milk Powder Companies  

Global milk powder companies are scrutinizing Chinese social media reports as many as four times a day to gauge consumer reaction to a high-profile pricing investigation and food safety scare that threaten company images in the $14.5 billion China market. 

The stepped-up monitoring of the microblogging site Weibo and local online forums reflects the outsize role the social media play in China, where access to information is restricted. Chatter about food safety scares spreads with lightning speed on Weibo, so companies are learning to keep constant track of their online brand reputations. 

Earlier this month, five international milk powder companies and one Chinese company were fined a record $110 million after an investigation into price fixing in the sector, while a botulism scare at Fonterra tarnished the wider reputation of imported milk powder. 

Reuters analyzed the frequency of Weibo posts mentioning the major infant formula brands and found that the number of posts had begun to increase as early as May and then peaked at the start of August, around the time of the botulism scare. 

The earlier spikes could be explained by the spread of rumors around the milk powder price investigation, which was publicly disclosed in July but had been in the works for four months. The viral nature of the social media can also amplify the chatter without necessarily reflecting wider consumer thinking because a single message can be reposted thousands of times. 

Abbott, a U.S. company, said it was stepping up social media engagement worldwide. “Our use of social media is increasing globally as we look to better understand, respond to and connect with our customers around the world,” said Kelly Morrison, an Abbott spokeswoman. 

Chinese consumers are highly sensitive to dairy safety after a scandal in 2008 involving baby milk powder contaminated by melamine, an industrial chemical. At least six babies died, and thousands more fell ill. 

For the international infant formula brands, the recent scandals hit a particularly sensitive spot: their reputations for safety, which was their primary edge over local rivals. “The picture that is being painted in China is that their quality isn’t that much better than local firms,” said Torsten Stocker, a partner in Hong Kong at the consulting firm AT Kearney. 

He said that infant formula companies had made use of online media to gauge consumer sentiment, track the spread of conversations related to their brands and work out how to respond to the crisis. 

Consultants will now create detailed reports using the data to identify weak spots of brands through the crisis and helping milk powder makers with recovery drives, he said, adding that some companies had asked for updates four times a day. 

Milk powder makers are also using analysis of the online Chinese retailer Taobao, owned by Alibaba, to map out demand hotspots in China’s multitude of lower-tier cities, where analysts predict that 80 percent of growth in the sector will come from. China has more than 150 cities with populations of more than one million, and the major Western brands have yet to establish coast-to-coast distribution channels. 

“Many firms are looking at Taobao, which is a good indicator because it tells you where demand is, but where the physical infrastructure hasn’t yet reached,” said Jeff Walters, managing director at Boston Consulting Group, which advises a number of milk powder companies in China. 

Global infant formula companies in China have traditionally benefited from high prices and a domestic sector dogged by safety fears, but analysts said the recent turmoil could be the start of a more challenging period for companies in China. 

The Chinese authorities are also looking to consolidate the sector and create stronger local champions, which means the global companies will be taking on fewer but more formidable competitors. 

“Now companies are going to have to get a lot smarter. They’re going have to come up with the right pricing, the right brand image and focus on far better distribution,” said Shaun Rein, managing director of China Market Research Group. 

 

Source: New York Times

 


Posted on Tuesday, August 27, 2013 (Archive on Tuesday, September 03, 2013)
Posted by bholcomb@adpi.org  Contributed by bholcomb@adpi.org
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