Many global companies, looking to tap China's rapid growth in recent years, have focused on the country's most affluent urban customers but while this strategy may have made sense in the past, it will no longer be the most profitable in the near future, finds the research by the McKinsey Global Institute (MGI).

It reveals that a far larger, more complex segment - the urban middle class - will soon "redefine the Chinese market". And while some companies are already focusing on this new class, many others risk missing a significant opportunity.

"Over the next 20 years more people will migrate to China's cities for higher-paying jobs. These working consumers, once the country's poorest, will steadily climb the income ladder, creating a new and massive middle class," write Diana Farell, Ulrich Gersch and Elizabeth Stephenson.

The report forecasts two phases of steep growth in the middle class; the first, in 2010, will be the lower middle class, defined as households with annual incomes of RMB25,001 to 40,000.

A decade later the upper middle class, with annual household incomes of RMB40,001 to 100,000, will follow. A household income of RMB100,000 can be compared to a household earning $40,000 in the United States, say the authors, in terms of the lifestyle it can buy.

By 2011, the lower middle class will include about 290 million people, or about 44 per cent of the urban population, say the McKinsey analysts.

This class will have a spending power of RMB4.8 trillion, and be younger than the middle classes in the west, owing to the advantages afforded them by better education than their parents.

The manufacturers of mass consumer goods therefore need to change their strategy to reach tomorrow's middle-class consumers, even though today they are still urban workers that are relatively poor, argue the authors.

Some early movers have already begun creating models to target this segment profitably.

Procter & Gamble markets more affordable Olay products in supermarkets and high-end lines such as Olay Regenerist in department stores. This multitiered branding allows it to "follow its customers up the income ladder", say the authors.

In the food sector, Danone has adopted a similar approach by making smaller pack sizes in its biscuit lines, allowing it to sell some products at just RMB1, while retaining the premium brand.

Such a move is important when China is expected to be one of the fastest-growing food markets in the world. McKinsey forecasts annual growth of 6.7 per cent during the next 20 years, with urban food consumption to reach RMB4,786 billion in 2025.

By serving blue-collar workers today, "businesses will gain the exposure and experience necessary to stay relevant as the incomes - and tastes - of urban consumers evolve," concludes the report.

More in this research can be found in the latest issue of The McKinsey Quarterly.