China's Power Brands
Bold entrepreneurs are producing the mainland's hot consumer products. But the multinationals are fighting back. Who will the big winners be?
How do you get rich in China these days? Build a brand. That's what 35-year-old Huang Guangyu has done. The Guangdong native started out at 18, renting a market stall in Beijing and hawking cheap plastic appliances. Today, his GOME Electrical Appliances is China's top consumer-electronics chain, with well over 100 stores, $2 billion in sales, and the kind of high-plateau brand recognition that Circuit City (CC ) and Best Buy (BBY ) enjoy in the U.S.
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Chinese companies are also learning how to raid the competition. Li-Ning has hired Wu Xianyong, a former Procter & Gamble (PG ) manager, to run its marketing and branding. Wu made sure that many of the Chinese athletes at the Athens Olympics wore Li-Ning shoes and other equipment. Such product placement gave Li-Ning an Olympic boost in sales in China, where the company has more than 2,000 outlets and the top spot in athletic shoes, with 12.39% market share, according to Sinomonitor International, a Beijing market monitoring firm. "All of us [Chinese consumer goods] companies must thank P&G for our development," says Li-Ning's general manager Zhang Zhiyong. Geely's Nan Yang, a senior vice-president for overseas production, was formerly general manager of Shanghai Volkswagen Automotive Co., the joint venture between Volkswagen and Shanghai Automotive Industry Corp. Nan has overseen Geely's push into parts of the Arab world. The head of Wahaha's Future Cola unit once was the Beijing bottler for Pepsi.
Like Westerners, the Chinese are learning how to advertise on a grand scale. Ad spending last year was $24 billion in China, making it the third-biggest ad market in the world. A big chunk of that spending will be by Chinese companies, and lines such as Li-Ning's "Anything is possible" are known by millions. The ad spending will only increase as the 2008 date of the Beijing Olympics approaches. Lenovo already became the first-ever Chinese company to be an official "top" sponsor of an Olympics -- up there with Coca Cola and Panasonic -- when it signed on to back the 2008 games. It's part of "a longtime dream to become an international brand," says marketing boss Alice Li. Sports marketing is a fast-rising category even without the coming Olympics. To keep its brand front-of-mind in China, SVA in 2001 bought Shanghai's soccer team. Meanwhile, the world beckons. SVA has established its foothold in the U.S. Meanwhile, TCL, with the Alcatel deal it just signed, has big plans for Europe. Geely has borrowed from the Koreans' early marketing strategy and entered other developing countries as a first step to overseas expansion, starting with the Middle East. On Oct. 10, Haier announced it is opening an R&D center and factory in fast-growing India.
Some efforts will fail. But with every ad campaign, every marketing battle, every product launch, the Chinese learn more. Does another Chinese juggernaut, like the one that has taken over much of global manufacturing lie ahead? Not now. But give them time, and the best of these brands will prove themselves.
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