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Chinese Companies Can't Build Brands? Think Again

How many Chinese brands can you name? Probably fewer than the fingers on your hand. Atlantic Monthly journalist James Fallows believes China's lack of global brands is proof it is not an economic superpower. As he wrote last month, 44% of Americans think that the world's leading economic power is China. "People who think this are crazy," Fallows wrote on his blog. "Name 20 large American corporations that do business worldwide. Without trying, you can probably name 50. Try to name even 10 from China."

Most people can't. In part, that's because Chinese companies traditionally haven't cared much about building brands. Lacking marketing talent and looking for a quick buck, they competed on price rather than spend the time and money on brand-building. After all, it took decades for Japanese and Korean companies like Toyota and Samsung to become global players.

The world has changed, though, and Chinese companies with the potential to become global brands have emerged. For brand managers, it would be a mistake to discount Chinese companies. Take sports-apparel maker Li Ning as an example. It is competing head to head with Nike (NIKE) and Adidas on design and product selection, and opened its first retail store in Portland this month. It has even opened design operations near Nike's headquarters in Beaverton, Ore., and is taking advantage of the downturn to hire American talent.

Herbal tea maker Wang Lao Ji, based in Guangzhou, is another example of a Chinese company that has mastered the art of branding. Although a bottle of its tea costs double the price of Coke (KO) and Pepsi (PEP) in China, Wang Lao Ji is taking market share from them both. It's China's market leader in canned drinks, with about $2.5 billion in sales. The company's marketing campaigns emphasize health and a way of life that resonate with Chinese consumers. Wang Lao Ji's threat is so fierce that it was one of the main reasons Coke tried to buy China Huiyuan, the top Chinese pure-juice brand, in 2008, a deal that Beijing regulators vetoed on anti-trust grounds.

EXPECT AN INVASION

True, few Chinese brands are known by American consumers, but the reason for that isn't that Chinese don't know how to brand; rather, it's that most brand-savvy consumer-focused Chinese firms have elected not to go to the U.S. and Western Europe. That will change. In several hundred interviews my firm (the China Market Research Group) conducted with senior executives of consumer products companies, just over 50% said they expected to enter the U.S. in five years, but only after first targeting their home market, where retail sales are growing 15% a year, and regions like Africa and the Middle East, where local competition is weak. In the next five years, Americans should be prepared to start seeing Chinese brands on the shelves of Wal-Mart (WMT)and not just the Made in China label.

Aside from discounting the increasing threat from Chinese brands, there are two other major mistakes brand managers commonly make in China. They often believe Chinese consumers are the same as those in the West. This might sound like Marketing 101, but many brands simply forget to localize products and marketing campaigns.

British retailer Marks and Spencer is a case study in what not to do. In Britain, M&S successfully sells to middle-class women between 35 and 45 years of age.

Regions : Asia

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