The Chinese are coming

By Rachel Barnes and Sarah Shearman, marketingmagazine.co.uk, Wednesday, 30 November 2011 12:00AM

Exclusive research shows that awareness of Chinese brands in Europe is low, but experts say that is about to change. By Rachel Barnes and Sarah Shearman.

Li-Ning has annual sales worth about $1.4bn (£900m)

Li-Ning has annual sales worth about $1.4bn (£900m)

The business and financial worlds seem to be obsessed with China, but consumers in Europe are yet to truly buy in to brands owned by companies from the engine room of the world's economy.

Much has been written about the lure of China for Western brands. Now, however, a reverse movement from East to West is taking shape. Brands from China have the UK and European markets on their radar, with some predicting that the popularity of such brands will burgeon.

Research by branding agency Calling Brands - formerly known as Dave, before it expanded to the Far East earlier this month - and published exclusively by Marketing reveals that awareness in Europe of goods from China is extremely low, with only 2% of respondents saying they would 'always' consider a Chinese brand.

The survey of 1476 people from the UK, France and Germany also found that 53% had no strong views about Chinese consumer brands. However, while 'low price' was the attribution most associated with brands from China (59%), reliability (3%), high quality (2%), good value (16%) and trustworthiness (2%) all scored poorly.

According to Nikki Jones, director of consulting at Calling Brands, European consumers are showing unprecedented interest in how the companies they are buying from treat people, where they operate and what their values are.

'Chinese brands must build different, positive attributes and take a clear position on ethics to be successful in Europe,' she explains. 'Apart from "low price", China doesn't have a clear image in Europe. The opportunity for Chinese brand-owners is to become cultural pioneers and show what Chinese provenance means.'

Jones adds that while most people surveyed had either neutral or negative perceptions of brands from China, these were often based on hearsay or a lack of information.

The 2008 Beijing Olympics helped to make the country more familiar to consumers, and gave some Chinese brands a boost, particularly Li-Ning, the sports brand. It is named after its founder, the Olympic gold-medal-winning gymnast, who was the torch bearer at the opening ceremony.

Adidas was an official sponsor of the Beijing Games, but Li-Ning wore his own brand of trainers when he lit the Olympic cauldron - an ambush marketing stunt that gained him and his company significant publicity.

Now the brand, which has annual sales worth about $1.4bn (£900m), is eyeing opportunities around the London 2012 Olympics. Its official sponsorship of several of China's Olympic teams will mean it has a presence at the event, which it hopes will provide a global launch pad and a chance to 'upgrade the brand image'.

Li-Ning currently sells only its badminton range in the UK, through sports distributor Goode Sport.

Nick Goode, partner at Goode Sport, says that, while some Chinese brands might face image problems in the eyes of UK consumers, Li-Ning is a high-end product.

'It was stocked by Harrods last year. Many Chinese brands carry baggage in terms of how "Made in Hong Kong" is seen by people, but Li-Ning is used by the top badminton players,' he adds.

'The range is expensive (with) technically advanced products. Some Chinese brands might be seen as low-price, but not Li-Ning; it's all about quality.'

Brand awareness

Calling Brands' research identified 10 leading Chinese brands (see bar chart below) which have either begun their expansion outside the domestic market or have stated such ambitions. As well as Li-Ning and beer brand Tsingtao (see case study, below), those chosen went largely unrecognised.

Chinese technology firm Lenovo is the world's third-biggest PC manufacturer, with annual sales of $21bn (£13.5bn). It scored by far the highest when it came to prompted brand awareness, while mobile brand Huawei ($28bn/£18.1bn sales) and white goods brand Haier ($17.8bn/£11.5bn sales) followed in joint second.

The latter two brands have big plans to expand in the UK. Haier is plotting its first major campaign, and Huawei, which launched its first branded handset in the UK this month and announced the opening of a London design centre, has set a target of quadrupling its turnover within 10 years. Huawei's Vision smartphone and MediaPad tablet, which launch in 2012, will be its flagship products in the UK.

Chinese clothing brand Bosideng, meanwhile, which makes down jackets, paid £20m for a property near Oxford Street in the summer, and plans to spend up to £6m refurbishing it before its opening next year. The $886m (£570m) brand is sold in 7579 retail outlets in China. However, its strategy to maintain growth is to win over Europeans, and, with that, create a greater aspirational draw for the brand in its home nation.

There are few experts who doubt China can turn its brand reputation around. According to Jones, it took many years for Japanese products to gain a reputation for quality. South Korea, too, has successfully sold its brands to the world, from Kia and Hyundai to LG and Samsung.

It was not long ago that 'Made in Taiwan' was perceived as simply meaning that a product was cheap. Now, Taiwanese mobile brand HTC is the world's fourth-biggest smartphone maker, although it has been shaken by recent profit warnings.

Mike Etherington, marketing director for Europe at Lenovo, which launched its first UK campaign last month and plans higher-profile activity next year, says people's preconceived ideas about Chinese companies are changing. He also claims that Lenovo does not 'feel' like a Chinese company.

The research backs up his opinion, as Lenovo scores far higher than other Chinese brands when it comes to positive perceptions (see bar chart, below).

'If you go back 10 years, people would complain that everything was manufactured in China,' says Etherington. 'The world is now used to the fact that China has a very strong manufacturing industry and doesn't just make cheap stuff.'

Marketing leadership

Etherington adds that Lenovo's growth in China is helped by its success in Europe. 'We are investing in marketing in a way I have never seen before, to the sum of 2% to 3% of turnover, as well as investing in people,' he continues.

'The company had been led by financial and sales executives, but now we have a strong marketing leader at board level with global chief marketing officer David Roman. You notice the difference in attitude of the leadership toward marketing, which is refreshing. It has been a big change culturally within the company.'

Stephen Maher, chief executive of integrated agency MBA, which recently met representatives of Chinese brands, including China Telecom, agrees that the challenge is to change perceptions.

'BMW makes cars in China, Apple makes phones in China, there are so many premium products we are buying that are made there. Consumer perception of Chinese products is not based on reality,' he argues. Maher predicts the floodgates are about to open for Chinese brands, just as they did for US brands in the 50s and 60s.

'Currently we don't know many, if any, Chinese brands - yet they are vast in their home territory,' he points out. 'There will be many more Chinese brands here in the next few years. That can happen in any sector: Chinese wine, for example, will be huge, just like Chilean wine 20 years ago.'

With immense financial and manufacturing resources, Brand China is ready to set up shop in the UK.

TSINGTAO CASE STUDY

Chinese beer brand Tsingtao, which has been distributed in the UK by Halewood International since 2008, has grown its sales by 32% in that period, according to its brand manager, Steven Downham.

While it is well established on the menus of Chinese restaurants, Tsingtao has the mainstream market in its sights. 'We are positioning Tsingtao as a premium beer of choice in the world beers category in the multiples and we have an active in-store marketing programme,' explains Downham. 'We are planning the same for on-trade chains, which already attract our core audience of 25-plus, adventure-driven, stylish individuals.'

Downham plans to target mainstream consumer-lifestyle media in 2012. 'We will talk about heritage, the fact it's a genuine import and is brewed using 100% natural ingredients,' he adds.

'Part of our consumer marketing programme will teach people how to pronounce Tsingtao ("Ching Dow"], essential when asking for it in a bar'

Other campaigns include a competition to find the UK's favourite Chinese restaurant.

This article was first published on marketingmagazine.co.uk

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