Green tea toothpaste

With a population of 1.2 billion and a rapidly expanding middle class, China is the largest consumer goods market after the United States and even with a slowing economy, remains key to the future of global brands.

China's economy is expected to grow at its slowest pace in 24 years this year, but that's still 7.4 percent. The US economy, by comparison, is expected to grow at just 1.7 percent.

Many of the Chinese firms taking on the international conglomerates are little-known abroad, but their local know-how is helping them broaden their appeal at home.

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Hawley & Hazel, a joint venture owned by Colgate-Palmolive and its Hong Kong-based founders, makes Darlie toothpaste which leads the domestic market according to Kantar and Bain, playing to Chinese tastes with green tea and jasmine flavours.

Another popular toothpaste brand is made by Yunnan Baiyao Group Co Ltd, which uses its history as one of the biggest and oldest traditional Chinese medicine makers in the country as a selling point.

Tingyi Cayman Islands Holding Corp, which bottles and distributes PepsiCo Inc products in China, also says it makes a point of developing traditional Chinese flavours such as snow pear and pickled plum.

"There are a lot of things that Chinese prefer localized," said Bruce Rockowitz, chief executive of Global Brands Group and former CEO of global sourcing firm Li & Fung. "Foreign brands haven't adapted well enough."

In a bid to fend off competition, market leader Coca-Cola launched small-sized products, which helped boost its China sales. It also offered shoppers discounts, like rival PepsiCo.

Coca-Cola, however, saw its market share drop more than 3 percentage points to 13.1 percent last year, while PepsiCo Inc fell 1.8 percentage points to 3.9 percent, according to Euromonitor data.

Coca-Cola International president Ahmet Bozer said he was happy with the company's 9 percent sales volume growth in China during the second quarter.

"From a competitive standpoint, we are quite pleased," he said on a conference call with reporters.

Pepsi said in an email to Reuters that its China revenue grew by low double-digits in the second quarter. It also said its relationship with Tingyi and a research and development center in Shanghai helped it develop products geared to the local market.