As the global economic recession continues to impact Americans, observers have noticed that the US is increasingly becoming a service economy and losing its historical focus on manufacturing. The New York Times has reported that over the past decade, the US has lost one-third of its manufacturing jobs – five million in total.
Many have suggested that revitalizing the economy and restoring global competitiveness will require a shift toward greater production and export of goods from the United States, increasing the value of the economy and providing more US jobs. Professor Laura D’Andrea Tyson, an economic adviser during the Clinton administration, has stated that manufactured goods constitute 60% of the United States’ total exports of goods and services, and that increasing exports of these goods is necessary to reduce the trade deficit and restore balance to the economy.
Fortunately, an increasing number of American businesses have found great prosperity in exporting their goods to an unexpected market: China. While the People’s Republic of China is widely considered an emerging superpower and a political, economic and military rival of the United States, the Chinese middle class has become more and more hungry for hip American brands. Since 2000, American exports to China have increased by a remarkable 542%. And by 2030, the middle class of the world’s most populous nation is expected to grow to 1 billion – placing two-thirds of the world’s middle class in the Asia-Pacific region.
The US-China Business Council estimates that this market weighs in at $250 billion today, and many US businesses have been more than happy to meet the massive Chinese demand for popular brands of goods, often adapting their offerings to appeal to the local culture and its tastes. From chicken to coffee and blue jeans to beer, here are just a few of the American products that have taken hold among China’s burgeoning middle class.
On this side of the Pacific, Pabst Blue Ribbon has reinvented itself as the beer of choice for twenty-something urban hipsters, who “ironically” down the previously stodgy, blue-collar brand by the case. But in China, PBR’s brand-new brew is quickly becoming one of the most high-class and in-demand beers.
Marketed as “Blue Ribbon 1844” and compared to French brandy and Bordeaux wine, this specialty beer is presented in elegant, shadowy lighting reminiscent of a Crown Royal whiskey ad. Contrary to to PBR’s American image as a cheap beer for the working class, just one bottle of Blue Ribbon 1844 will set you back $44. As an executive at Pabst explained, “There’s the nouveau riche, and in China, perception is everything—look at me, I’m rich.” And playing on that need to keep up appearances has clearly paid off for Pabst.
In the United States, Kentucky Fried Chicken places a distant 9th compared to other fast food restaurants. But in China, KFC reigns supreme, with the most locations out of any fast food purveyor in the country – 4,260 stores in all, only slightly less than the 4,793 KFC locations in the US. Remarkably, a Bloomberg story from 2011 reported that the Colonel’s image was more ubiquitous in China than Chairman Mao’s portrait, and KFC still ranks higher today than the uncontested US leader in fast food: McDonald’s has a mere 2,000 stores in China.
How has KFC maintained its lead? The restaurant has taken advantage of the fact that fried chicken is a staple of Chinese food, making it a natural fit for regional tastes. They’ve also offered a number of dishes specialized for the Chinese market, including rice congee, egg custard tarts, tree fungus salad, and the Dragon Twister wrap. KFC plans to open an additional 700 stores in China this year, further widening the lead on its competitors.
For decades, the ubiquitous “Intel Inside” sticker has served as a symbol of quality hardware. From desktops to mobile devices, the Santa Clara semiconductor company is the world leader in cutting-edge microprocessors for nearly every kind of computer.
Today, Intel controls 79% of the global PC processor market and 84% of the mobile processor market overall. While the number of PC shipments in the US has declined, the proliferation of PCs in China has continued unabated, creating a lucrative opportunity for Intel. China’s Milky Way-2 supercomputer, currently the fastest in the world, is powered by more than 80,000 Intel processors.
In the 1890s, Levi Strauss & Co. produced the world’s first blue jeans: the Levi 501s. Throughout the 20th century, Levi’s denim products would go on to become an icon of youthful rebelliousness and American independence. Yet these world-famous jeans have also become a chic new fashion item in the Chinese market.
Though Levi’s initially withdrew from China in 1993 in protest of the country’s human rights record, the company decided to return in 2008. While Levi’s jeans initially sold for over $100 a pair, in 2010, the company launched a more inexpensive line, priced at only $40-60 – well within the price range of the crucial age 20-40 demographic. With hundreds of stores currently operating in China, Levi’s plans on expanding this to 1,000 by 2015.
Pringles potato chips – or crisps, depending on your perspective – were first offered as an alternative to greasy, broken, bagged chips from other companies. Individually formed and pressed from a paste of potatoes, wheat and flour, these chips are identical and stackable, fitting neatly into sealed tubular containers and available in a wide variety of flavors.
Originally marketed by Proctor & Gamble in the US starting in 1967, Pringles’ overseas offerings go far beyond the conventional fare of barbecue or cheddar cheese. To keep its snacks relevant to Asian markets, Pringles has released chips in the creative and unexpected flavors of soft shell crab, grilled shrimp, and seaweed – colored, of course, in enticing shades of pink and green.
The Starbucks coffee shop has become a ubiquitous feature of the American urban and suburban landscape – spreading so quickly that some of its 13,000+ US franchises have even opened up across the street from one another. On average, the chain opens two new stores a day, and has been largely responsible for driving the demand for gourmet beverages.
But Starbucks’ venti-sized growth hasn’t been limited to the US. Almost a third of the chain’s franchises are now located overseas, including 851 in China – up from a single store in Beijing in 1999. With the strategy of “getting it right in China”, Starbucks has decorated its stores with traditional Chinese woodcarvings and tables, as well as graffiti by local artists. Inside, the chains offer iced rice dumplings and green tea Frappuccinos alongside their more Western lattes and croissants. Starbucks also sells its drinks at a 75% higher price than in the West. Relying on a blend of American innovation and a regional aesthetic, the company expects that China will be its second-largest market by 2014, with 1,500 locations by 2015.
Redmond’s reigning giant of the software industry has unambiguously dominated the operating system market for decades. Its Windows desktop OS – also found on servers and mobile devices – powers the majority of programs used today: everything from online games, to architectural and graphic design, to industrial control systems.
Ninety-one percent of desktop PCs worldwide run Windows, and the Chinese market is no exception to Microsoft’s continued success: Various versions of Windows are used on 93% of PCs in China. The Windows Phone OS for smartphones has also begun to break into the Chinese market. Although Android and iOS remain dominant, Microsoft’s mobile market share is at 3% and rising. And while the Chinese government has worked to develop the Linux-based Kylin operating system as a competitor, it remains to be seen whether this will be any more successful at challenging Windows than previous efforts to bring Linux to the desktop.
With the success of these businesses in appealing to the ever-growing Chinese middle class, more American companies are certain to follow suit and recognize the benefits of focusing on manufacturing and exports. Whether it’s a classic beer or cutting-edge hardware, these companies have shown that they’ve got what it takes to remain flexible during difficult times, adapt their products to new and diverse markets, and turn a profit with the power of innovation.