Kang Shi Fu - Insights into Chinese consumer psychology, competitive strategy

Over the last 2 days, I had the good fortune to attend the FutureChina 2010 Summit organised by Business China. It was extremely packed with well-regarded speakers, businessmen and leaders who have extensive experience in China.

Mr Wei Ying Chiao is Chairman of Ting Hsin International Group. They have a few well-established food-related brands in China, chief among them is a brand called Kang Shi Fu "康师傅". Their performance has been astonishing, being the market leader in the bottled tea category, instant noodles and bottled fruit juice categories (over 50 percent each).

Mr Wei Ying Chiao explained that their dominance can be attributed to successful branding, superior execution, competitive strategy and focus.

When one first hears the brand Kang Shi Fu, one immediately assumes that the founders' family surname is "Kang". However, there are more interesting twists which demonstrates a very in-depth understanding of Chinese consumer psychology. "Shi Fu" in China is a common term used to refer to skilled workers such as drivers, repairmen and chefs. It carries the connotations of possessing mastery and of being shown respect. This term also grew in popularity in the late 1980s to replace the previous term of "同志" (comrade), which was around the time Ting Hsin started to make investments in China's packaged foods industry.

"Kang", being part of the words 健康 (health), also represent the founders' desire to bring healthy quality food to the Chinese masses. In addition, Kang Shi Fu has proven catchy among consumers.

Mr Wei also explained how they developed their strategy against large foreign competitors such as Coca-Cola. They started out with bottled teas, as these were very familiar to Chinese consumers' tastes and preferences. Only after establishing their position in the bottled teas market, they then extended the brand to other foodstuffs. They have only recently expanded to include product ranges such as carbonated soft drinks, as they now have the capital and resources to battle with Coca-Cola and Pepsi. This also explains why they chose to focus on instant noodles, a common pre-packaged food common to the Asian market. Their product is so successful that Kang Shi Fu instant noodles can be found in the convenience stores in some Western countries.

If the market for bottled drinks is spilt into a high end market and low end market, Mr Wei revealed that Ting Hsin actually has more than 70 percent of the high end market. This shows the strength of their branding strategy in promoting Kang Shi Fu as a sign of quality.

However, Mr Wei also revealed some problems with business expansion. The threat posed by foreign competitors like Coca-Cola is fierce. Finding talent is also a problem, as increasingly, the battle is not over costs of manufacturing, but over the depth of talent. Mr Wei revealed that Ting Hsin is a family-owned business, with the 4 brothers sharing equal equity.

Mr Wei was also asked about whether he had ever considered bringing the brand "Kang Shi Fu" overseas. He revealed that with annual growth of 35 percent in China alone, he was already too busy managing that growth. He also used this to illustrate the point that the Chinese market is big enough.

"Kang Shi Fu" was a very good example of a well-executed branding and business strategy by a team who understood the local nuances of Chinese consumers well. I heartily agree with Mr Wei's bold prediction that they will continue to do well against Coca-Cola.