Chinese companies shifting to new brand of growth

The values of brands held by private-sector companies in China are growing three times as fast as those belonging to State-owned enterprises, another sign that the center of the nation's economic gravity is shifting toward consumers, a study released on Tuesday showed.

The findings are contained in a study, 2014 WPP BrandZ Top 100 Most Valuable Chinese Brands, conducted by WPP Plc and affiliate Millward Brown.

Market-driven brands (mostly those of private companies) in the top 50 of the study's rankings are set to see value growth of 27 percent, compared with 9 percent for SOEs.

Companies that hold market-driven brands tend to invest more in long-term, innovative brand building when it comes to using the media and interacting with their customers, while SOEs just rely on TV and print channels, said Doreen Wang, head of branding at Millward Brown China.

One of the companies whose brand value is rising the fastest is healthcare specialist China Resources Sanjiu Medical & Pharmaceutical Co Ltd, which is set to see its brand value increase 86 percent, driven in part by domestic consumers' growing attention to personal health. Yunnan Baiyao Group Co Ltd, ranking third, is also gaining from the trend.

Dairy companies Inner Mongolia Yili Industrial Group Co Ltd, China Mengniu Dairy Co Ltd and Bright Dairy & Food Co Ltd are also among top risers, due to expansions and acquisitions in China and abroad.

Wang Yulei, vice-president of Tmall, noted that the private sector accounts for just 29 percent of China's market in terms of brand value while SOE brands account for 71 percent.

But he said that small and medium-sized companies have seen tremendous opportunities for growth in recent years amid an ongoing process of market opening and the relaxation of government policies.

China Mobile Ltd remains the nation's most valuable brand for a fourth year, with a value of $61.4 billion, up 21 percent.

Technology, which was the fastest-growing category in the previous study, continues to rise in brand value, which is up 28 percent.

Brand value increased in 11 categories, including technology, financial institutions, airlines, insurance, and oil and natural gas. But the beverage category declined 6 percent as alcohol and wine brands felt the impact of reduced government spending on entertainment and strong competition from foreign brands.

Wang of Tmall said that the current priority of many Chinese brands, which are still on a steep learning curve, is survival. Branding is second to survival, he said. "It will take a long time for Chinese brands to consider branding in systematic ways."

Lack of experience in brand management also contributes to the gap between Chinese and foreign brands, said Juliet Zhu, a professor of marketing at the Cheung Kong Graduate School of Business.

Success lies in truly understanding consumers' needs and enhancing product quality and service, Zhu said.

"Chinese consumers are very sensitive in pricing and branding," she added. Maintaining consistent quality and keeping brands relevant and memorable by adopting traditional and new media also matter, she said.

The report found that global consumers are more likely to buy Chinese brands in the computer, technology or home appliance categories. Brands such as Lenovo Group Ltd, Air China Ltd and China Eastern Airlines Corp Ltd are already deriving the largest proportion of their revenue from overseas markets.

Chinese home appliances' position in emerging markets is quite strong, said Millward Brown's Wang, adding that Chinese brands planning to go global should consider whether their products are in one of the categories favored by global markets.