Gone are the days when big multinationals in China could easily dominate every consumersegment from toothpaste to laundry detergent.

For years, companies such as Procter & Gamble Co. PG +3.13% mainly had to worry about counterfeits, as their brands, such as Crest, were the hot items for the newly expanding consumer market.

That isn't always the case anymore.

Take for instance a Chinese herbal toothpaste for whitening and sensitive gums. It sells for the equivalent of about $8.60, roughly double the price of Crest 3D White Vivid, one of P&G's pricier brands. Yet the herbal toothpaste's market share in China grew to 8.8% in 2011 from 1.1% five years ago, according to market research firm Euromonitor International. Over that same period, P&G's market share in the toothpastecategory fell to 19.7% from 20.8%. Toothpaste market share in China for Unilever NV, UN +2.61% which sells the Zhonghua brand there, fell to 9.9% from 12%, according to Euromonitor. (In other markets, Unilever produces Close Up and Signal brand toothpastes.)

Industry insiders say losses of a point or two are small enough in the short term for foreign companies to manage. But the Chinese brand, made by Yunnan Baiyao Group Co., 000538.SZ +1.23% one of many local competitors gaining market share at the expense of foreign giants, is a sign of a changing consumer environment, some people say.

'P&G and Unilever will have to fight harder for shelf space and fight harder to differentiate from domestic brands that are now offering a wider range of products and features,' said Ben Cavender, a senior analyst at China Market Research Group.

Chinese companies like Yunnan Baiyao are gaining as they sharpen their branding.

Hengan International Group Co. 1044.HK +1.66% overtook P&G in tissues and hygiene products in 2010 and held its lead last year with a market share of 10.6% compared with P&G's 10.5%, according to Euromonitor data. Guangzhou Liby Enterprise Group Co. and Nice Group are dominating markets for home-care products like detergents and soaps with a combined market share of 27.6%, compared with P&G's 7.6% and Unilever's 6.6%, according to Euromonitor.

Local brands are closing the perceived quality gap with foreign products as well. For some products, consumers no longer readilydistinguish between the two. In a survey by market research firm Nielsen of 300 consumers in China's smaller cities, the places where shoppers are sharply increasing their spending on home and personal care goods, around 70% of consumers thought P&G's Ariel laundry detergent was a local brand.

The rise of China's homegrown household brands comes as foreign consumer goods companies are relying more on emerging markets to make up for sluggish growth in Europe and the U.S.

While sales growth has slowed as China's economy has cooled, the numbers are still strong. Euromonitor estimates the country's market for beauty and personal care will grow by 12% this year to 203 billion yuan ($32 billion), while the market for home-care products will grow by 11% to 78 billion yuan ($12.2 billion).

China is P&G's second-largest market, with $6 billion in sales, and home to many of the company's best sellers globally. While P&G's market share in diapers, laundry care and hair care has risen in China, its share of oral care, bath and shower, and skin care slipped in 2011, according to Bernstein Research's analysis of Euromonitor data.

On Friday, P&G reported that its sales