China's influence is finally upon us
This week’s column comes from a hotel room in Beverly Hills where your humble columnist is nursing the mother of all hangovers. I went on a bender last night and the consequences are still painful. I blame myself, of course, but not half as much as I blame China. The Middle Kingdom is responsible for a lot of things these days, including my bed-ridden state. Let me explain.
The reason I drank so much is because a very good Californian friend has discovered a new favourite cocktail she calls ‘Green Sky’. It consists of Johnnie Walker Black drunk Chinese style, which means mixed with freshly brewed green tea and served over ice. The memory of it now gives me the shudders but last night I have to admit it was astoundingly good. And I’m not the only one who thinks so.
Ewan Gunn, Diageo’s global Scotch brand ambassador, has said that when he first heard of the drink and its popularity in China he was “not horrified, but very surprised”. On his next trip to China, Gunn sought out the beverage and was “blown away”. I know what he means. Johnnie Walker has begun to endorse the cocktail not only in China but globally, as a signature way to drink its whisky. Hence the fact that my uber-trendy friend was raving about it on Sunset Boulevard last night.
Five years ago, we talked about China in terms of the potential sales that Western brands could enjoy there. In the intervening years, that potential has been realised and China is usually the biggest single market for many of the world’s famous brands. But it is a demanding market and more and more customisation is being required to win in China. And much of that customisation is being experienced, first hand, back home.
That’s why when you sit down to watch Iron Man 3 this week you will see Tony Stark battling Sir Ben Kingsley as his arch nemesis.
Sir Ben has many attractions, including an Oscar, but probably the main reason he was cast to play The Mandarin was that he is not Chinese. In the original comic-book, The Mandarin was of Chinese ethnicity. But that was long ago, before China became the second biggest market for American cinema and Hollywood became super-conscious of alienating a key customer.
In recent years, unpopular footage for Chinese audiences have been edited in blockbusters, for example the scene in Skyfall when a Chinese executive is assassinated by a French hitman. In other instances, additional Chinese scenes are specially added. In the Chinese version of Brad Pitt’s upcoming movie, World War Z, the zombie plague that besets mankind is discovered by a heroic Chinese scientist in a section of the film spoken entirely in Mandarin, which Western audiences won’t see. These are special versions, of course, and increasingly the Chinese version is becoming the global one too.
The hottest new BMW is the 335Li. At first glance, it might look like a conventional BMW 3-Series sedan, but on closer inspection buyers will see that it is bigger - about 11 centimetres longer than the traditional 3-Series. That’s because there is a growing market in China for sedans that can be chauffeur-driven and have extra room in the back for busy executives. With China soon to represent half of all global vehicle sales, expect more and more of the Chinese preferences to pervade international car design.
But have some sympathy for automaker Volvo. While it was saved from bankruptcy by Chinese company Geely, it is now caught in the unusual pincer movement of being both run by Chinese executives and mostly aimed at Chinese consumers. That became clear in a recent interview on Swedish television with Geely chairman, Li Shufu. “There are weaknesses in Volvo. The car is clearly too Scandinavian in touch,” Shufu told a clearly gobsmacked Swedish reporter. “The Chinese have a different idea of what the interior should look like. Volvo has not taken into account this aspect. If this will work in China, the interior needs to change. This requires an adjustment,” he explained.
It’s a similar story for many luxury brands.
A weak euro and high Chinese tariffs on luxury goods have combined to create huge pricing disparities between what a luxury brand will cost in China and in Europe. Chanel’s Timeless Classic Flap bag, which in France retails at €3,100 ($4,034) will cost a Chinese shopper 37,000 yuan, or about $5,850. These disparities have caused massive logistical issues as Chinese consumers flocked overseas to make their purchase while neglecting their own domestic boutiques.
Several of the large luxury brands, including Prada, have opted to increase prices at home to reduce the disparity felt in China. The result has been greater consistency for the Chinese but higher prices for European clients. Again, with China the biggest market in the world for luxury these days, they get priority and other consumers must adapt to a Chinese dominated reality.
From prices to products to the way they are promoted, the Chinese influence is upon us. If only the Chinese had demanded a stronger brand of Aspirin.