BW's 20 Best Chinese Brands
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The 2008 Beijing Olympics will doubtless be a gloriously defining moment for China—an international image blast underscoring the mainland's arrival as an economic power. And perhaps more important for Chinese companies selling everything from booze to bank accounts, it is shaping up to be the marketing opportunity of the decade. The prize that they're chasing: the kind of brand recognition enjoyed by past Olympic sponsors such as Coca-Cola (KO), Adidas, and Samsung.
Small wonder, then, that Chinese computer maker Lenovo is thinking big a full two years before the torch is lit. Lenovo on Aug. 8 began its Olympic marketing blitz, launching a new line of desktop computers, called KaiTian, aimed at Olympic organizers and business executives alike.
A Lenovo ad campaign will soon appear in 200 countries, and the company is conducting an "Olympic & Lenovo Thousand County Tour" across the mainland to trumpet its ties to the sporting bonanza. "The brand will be a flag that leads the company as it goes forward," says Lenovo Chairman Yang Yuanqing.
The PC maker may be the highest-profile example of China's emerging brand power, but it's far from the only one. Air China, China Mobile, telecom equipment maker ZTE, and dozens of other companies are in the vanguard of China's growing number of powerful brands. They hope to emerge as truly global players—dominant at home and strong enough to muscle in on consumer awareness abroad.
Yet the process is likely to be grueling, and full of fits and starts. The truth is, foreign brands still have a strong pull on the purse strings of mainland consumers. General Motors (GM), Volkswagen, Toyota (TM), Nissan (NSANY), and Honda (HMC) control about 80% of the mainland auto market. China remains heavily dependent on foreign technology, and Nokia, Motorola (MOT), and Samsung are immensely popular with Chinese mobile phone users.
Dozens of Chinese companies suffer mightily from a capacity overhang. That cuts into the profitability of their brands, crimping resources that could be spent on product innovation and big-ticket marketing campaigns.
To get a sense of which Chinese products and services are really clicking with consumers, BusinessWeek China teamed up with global consultancy Interbrand for our first annual study of the 20 best Chinese brands. Interbrand evaluates brands much the way securities analysts value assets: on the basis of how much they generate in profits and what they are likely to earn in the future.
In this survey, Interbrand looked only at listed companies with solid financial data, and assessed such characteristics as brand loyalty, geographical reach, and forward-looking industry trends. Hence some powerful state-owned companies weren't eligible. In addition, Chinese brands acquired by foreign companies were excluded (see BusinessWeek.com, 8/28/06, "China's Top 20 Brands").
It's a rigorous standard, and some well-known Chinese companies suffering from weak earnings or that have been laying out piles of cash for capital expenditures over the last year didn't make the cut. These include Tsingtao Brewery, appliance-maker Haier, television manufacturer TCL, and auto makers DongFeng Motors and Shanghai Automotive Industry.
To be sure, such brands still have vast potential, but at the moment they aren't churning out much in the way of profits. "Many famous Chinese brands have fallen deeply into the trap of price wars, or the overemployment of capital," which hurt their ranking, says Frank Chen, the Shanghai-based managing director of Interbrand China. "A brand is valuable only if it can produce earnings."
In this first ranking of Chinese brand earnings power, China Mobile grabbed top honors. Along with Lenovo, China Mobile is a high-profile sponsor of the Beijing Olympics. It enjoys a 75% share of the mainland cellular market, about three times its rival, China Unicom.
When the Chinese mobile market really took off in 2002, "China Mobile made an important decision to use brand management as the main way to increase competitiveness," says Lu Xiangdong, vice-president of the company. The carrier set up special promotional programs for big-spending users, made it easier to settle bills online, and created hotline phone numbers where subscribers with service or billing problems can contact representatives immediately.
The emphasis on branding has paid off: China Mobile boasts more than 200 million customers, making it the world's largest mobile phone operator. It also has a strong global partnership with Sony Ericsson Mobile Communications and is now itching to boost its profile in overseas markets.
Other service companies also received high rankings. Perhaps not surprisingly, Bank of China, China Construction Bank, and China Merchants Bank all made it into the top 10. The mainland's blistering growth has ratcheted up demand for corporate loans, and rising incomes mean savers are salting away more money in bank deposits.
China Construction and Bank of China both had successful initial public offerings in Hong Kong this year and boast powerful national branch networks. Their logos can be seen everywhere, on bank branches and billboards, in newspaper and TV ads.
The banks' challenge will be to keep their brand advantage as the likes of Citibank (C), HSBC, and other Western rivals move into retail banking next year as part of the opening of financial services mandated by China's World Trade Organization membership.
One player that seems likely to survive that transition smoothly is financial services concern Ping An. Back in 2002 it diversified beyond life insurance into trust services and securities and has strategic tie-ups with Goldman Sachs (GS), Morgan Stanley (MS), and HSBC.
"Half of the company's high-level management team members are from overseas," says Sun Jianyi, vice-CEO at Ping An. He attributes the company's brand popularity to its strong local roots as well as its willingness to embrace international business practices. That's a key selling point for Ping An, which calls itself an "international financial group" in ads.
The growing importance of leisure is also reflected in the rankings. Spirit makers Kweichow Moutai and Wuliangye Yibin, which enjoy a combined 60% of the drinks market, made the list, as did Changyu wine, the nation's leading domestic wine and brandy maker.
NetEase, China's biggest online game operator, is another hot leisure brand. The company is a leader in online fantasy and adventure role-playing games. Overall revenues in that business jumped 54%, to $460 million, in 2005, and are on track to reach $2.1 billion by the end of the decade, figures research firm IDC.
NetEase looks set to capture a big chunk of that. It has a smash hit with its Westward Journey Online II, which is based on the famous Chinese novel Journey to the West and its film adaptation by Hong Kong actor and director Stephen Chow Sing-Chi.
The game has attracted more than 83 million registered users, and NetEase's "Power to the People" ad campaign has raised the brand's cool factor among online gamers, who tend to be skeptical of authority. The company has started to rake in revenues by reducing fees to enter games but charging for virtual ammo and other digital doodads needed to advance within them.
While Chinese brands with foreign market exposure such as China Mobile, Lenovo, and Air China are relatively familiar names in the West, some less well-known companies are starting to register abroad as well. One is Gree Electric Appliances, the world's biggest maker of air conditioners. It has moved successfully into high-end, digitally controlled units and has expanded overseas production.
It's even setting up its own retail outlets as far away as Brazil, where it picked up a consumer satisfaction award last year. "Gree products have gained popularity in foreign markets," notes company President Dong Mingzhu.
As Chinese brands continue to gain strength, the real companies to watch will be those that push their names to the forefront in key industries such as personal computers, autos, and telecom equipment. These include Huawei Technologies and others that aren't eligible for the BusinessWeek China/Interbrand list.
Huawei is spending heavily on research and development to take on industry leader Cisco Systems (CSCO) in the global market for routers and other telecom gear. So far it has made great strides in developing countries, and it's going after more developed markets such as Western Europe.
The best Chinese companies will adapt to nonstop pricing pressure at home while finding ways to move ahead in both emerging and developed markets against big branded multinationals. So by the time the Olympic torch is lit two years from now, expect China's top brands to be setting new records at home and abroad.
To see China’s Best Brands, click here.