China 2014: Overview
Brand value rebounded, with?the increase distributed across most product categories, in the BrandZ™ Top 100 Most Valuable Chinese Brands 2014. Total brand value reached $379.8 billion.
The number of brands covered in the 2014 report doubled to 100, and the categories increased by eight to 21, with the addition of cars, catering, education, furniture, hotels, jewelry retail, personal care and real estate.
Year-on-year, the Top 50 brands increased 13 percent and all comparable product categories appreciated, except for two, alcohol and consumer electronics, which declined mostly because of industry-specific factors.
In an example of the connection between brand value and stock market performance, two portfolios of brands from the BrandZ™ China ranking again significantly outperformed the MSCI China, a weighted index of Chinese stocks.
These other key trends corroborate the growing strength of Chinese brands overall and the increasing appearance of market-driven Chinese brands finding consumer acceptance both at home and abroad:
Market-driven brands grew more rapidly in brand value than State Owned Enterprise (SOE) brands, although SOEs continued to dominate the ranking in overall brand value.
Market-driven brands comprise two-thirds of brands ranked 51- to-100 in this year’s expanded report, pointing to future growth.
Chinese brands are now roughly comparable in brand equity, the power to influence purchase, with foreign brands competing in China, although Chinese brands lag in differentiation.
As Chinese brands expand abroad, overseas revenue?is increasing and consumer recognition and consideration is gradually rising, especially in fast- growing markets.
Chinese consumer trust in brands stabilized after several years?of decline related to food and product safety breaches.
The expansion of the BrandZ™ Top 100 Most Valuable Chinese Brands 2014 recognizes the significant implications for brands at this inflection point in China’s development, with the new government focused on managing future growth while remediating residual problems following 30 years of rapid economic progress. This rebalancing relies more on consumer spending, rather than production and exports, for wealth creation. It envisions a society that’s prosperous, equitable and internationally engaged.
Advancing the “Chinese Dream”
The government titles this agenda the “Chinese Dream.” The “Dream” both shapes and reflects the shifting attitudes of China’s consumers. The rapidly expanding middle class still wants a better life, but the “Chinese Dream” is not simply about acquiring material wealth. People also seek improved health and personal well-being and a more sustainable relationship between work and free time. Rather than abandoning history and heritage, they adapt them to enrich the present.
Rebalancing continues the momentum of market-driven, export-focused policies that have propelled the country since the “Reform and Opening Up” of 1978. The World Bank predicts that China’s economy will expand by about 7.7 percent in 2014, much slower than the years of double-digit growth during the past decade, but still a healthy rate many times faster than most established economies.
In a rebalancing China, being?a well-known or famous brand?is still important. But it’s no? longer enough. Consumers want brands they can trust; brands?that understand and respond ?to their needs; brands that are meaningfully differentiated. Consumer enlightenment and empowerment, which evolved over decades in the West, has happened overnight in China.
Rebalancing touches most categories
The influence of the “Chinese Dream,” and the economic and social rebalancing to achieve it, are evident in product categories added to the BrandZ™ Top 100 Most Valuable Chinese Brands 2014. For example:
Cars and jewelry retail reflect rising affluence and expanded consumption.
Hotels and catering, or restaurants, also reflect the purchasing habits of a widened middle class, as well as its concern with work-life balance, and spending on domestic tourism.
Personal care also indicates the concern with work-life balance.
China’s economic and social changes are evident in the performances of some of the repeat categories, as well. Driven in part by the growing attention?to personal well-being, the health care category appreciated 67 percent in brand value. The home appliance category grew 36 percent in brand value based on the home ownership trend in China and overseas sales. The technology category grew 28 percent in brand value on strong performances by brands like Tencent, the Internet portal, which improved 68 percent in brand value.
The brand value of the food and dairy category rebounded 62 percent as brands acknowledged food safety problems and launched initiatives to ensure supply chain safety and upgrade operations with world-class food processing knowhow.
Financial institutions responded to the government’s liberalization of interest rates and lower investment in infrastructure, which drives lending. Banks cultivated two customer groups especially: small businesses that need capital for growth; and affluent individuals who need wealth management services. The brand value of the financial institutions category appreciated a relatively modest 7 percent.
At the same time, the government’s discouragement of lavish spend on events impacted the alcohol category, especially the brand values of baijiu, the traditional Chinese white alcohol, and wine, which also felt the effects of foreign competition and consumer distrust when harmful chemicals were found in some products.
The alcohol category declined 6 percent, buoyed in part by the strength of beer sales. Consumer electronics declined 35 percent in brand value as it adjusted to e-commerce, which has impacted the category worldwide.
Accelerating growth at home and abroad.
Rebalancing includes expanding China’s urbanization policy, which created concentrations of wealth in the major coastal cities. Over half of China’s population now lives in cities compared with around one-fifth in 1980. In the next phase of urbanization, the government will focus on lower tier cities in an attempt to sustain economic growth, more evenly distribute wealth, and improve living standards and buying power throughout the country.
An unofficial tier system organizes cities into a hierarchy based on size and economic development. Many of the roughly 270 second and third tier cities are becoming conurbations consisting of a core city with several million people surrounded by towns and villages connected by roads and public transportation.
Growing faster than the coastal metropolises, these lower tier cities are the frontier of brand building. Although some outlying locations are geographically remote and underserved by physical retail, the Internet connects the inhabitants to each other, to information and to brands. Of the almost 600 million Chinese who use the Internet, over 420 million access it with a mobile device.
And the scale of China, with 1.3 billion inhabitants, only suggests the market potential.
The per-person consumption of certain products, services and commodities—beer, insurance and sugar, for example—is lower in China than in other countries, a reality that draws the attention of global brand marketers and motivates Chinese brands to grow strong companies and brands and also to find international partners and acquisitions.
Today’s rebalancing China is different from China during the early years of “Reform and Opening Up,” when Chinese consumers typically desired foreign brands and Chinese brands served as OEMs (Original Equipment Manufacturers) making products for Western brand marketers.
Chinese are wealthier and more sophisticated consumers. Both market-driven brands and certain SOEs pay more attention to brand building at home and sometimes abroad. Brands like Lenovo, the Chinese PC maker that leads the domestic market in sales and also derives 57 percent of its revenue from overseas, make the possibilities seem limitless.
Realizing the possibilities depends on brand strength. And in a rebalancing China, the importance of creating and sustaining strongly differentiated brands becomes even greater. The BrandZ™ Top 100 Most Valuable Chinese Brands proves the point: With a 13 percent rise, China’s leading brands grew in value at twice the rate of China’s economy.