Bottom of ranking holds greatest value growth potential
The presence of eight SOEs (State Owned Enterprises) produces a disproportionately high level of brand value in the Top 10.
These SOE brands are growing more slowly in brand value than market-driven brands, however, which outnumber SOEs two-to-one in the bottom half of the ranking, brands 51-to-100.
This imbalance suggests that the brands at the bottom half of the ranking contain greatest brand value growth potential, which can be realized as China’s market continues to develop.
Only one-tenth of the BrandZ™ Top 100 brands in number, the Top 10 today account for two-thirds (67 percent) of the Top 100 brand value. In contrast, the brands ranked 51-to-100, account for only 5 percent of the Top 100 brand value.
But this concentration of brand value in the Top 10 contrasts sharply with the distribution of brand value in the BrandZ™ Top 100 Most Valuable Global Brands.
In the BrandZ™ Global Top 100, the Top 10 brands account for only one-third (35 percent) of total brand value, while the brands ranked 51-to-100 represent one quarter (24 percent) of value.
Over time, brand value in China should mirror this more even distribution. Technology and other fast-growing categories will drive this shift.
Brand contribution higher for brands ranked lower
The level of brand contribution in the BrandZ™ Top 100 Most Valuable Chinese Brands is higher for brands below the Top 10. Brand contribution is a BrandZ™ metric that strips away financials and other factors to determine the influence of brand alone in the mind of the consumer. The Top 10 brands score lower than the Top 100 average in brand contribution.
Eight of the Top 10 brands are large SOEs (State Owned Enterprises) that derive much of their brand value from financial performance rather than the power of brand alone. The brands lower in the ranking are more likely to be market driven, relying on brand alone for more of their brand value.
Brand contribution is expressed on a 1-to-5 scale, 5 being the highest score. The average brand contribution score of the BrandZ™ Top 100 Most Valuable Chinese Brands was 3.18. The Top 10 brands, predominately SOEs, averaged a brand contribution score of 2.80, while the brands ranked 51-to-100, two-thirds of which are market-driven brands, averaged 3.20.
Age comparison reveals youth of ranked brands
Almost half the brands in the BrandZ™ Top 100 Most Valuable Chinese Brands are 20-years old or less, and 74 brands are under 35-years old. Only 12 brands are over 64-years old.
These age categories roughly group the brands into three periods of Chinese history: brands established before the formation of the People’s Republic of China in 1949; brands established in the early years of the PRC; and brands established after the “Reform and Opening Up” in 1978.
A brand’s age, when it was formed and the political and economic developments that influenced its growth, continue to shape the challenges and opportunities it faces today. (See related story)
In general, the distribution of valuable Chinese brands across time suggests: (1) Chinese brands can gain value rapidly; and (2) Chinese brands can sustain value. The oldest brands indicate respect for heritage and a desire in Chinese society to create something new while preserving some of the old.
BrandZ™ China Top 100 by Brand Age
Almost half the brands in the BrandZ™ Top 100 Most Valuable Chinese Brands are 20-years old or less, and 74 are under 35-years old. Only 12 brands are over 64-years old.
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Age of a brand helps identify strategic priorities
In China, perhaps more than in most countries, a brand’s age can be correlated closely with periods of the country’s social and political development.
The correlation is an important context for understanding a brand’s behavior and predicting the strategic priorities that would most likely produce future success.
BrandZ™ divides the brands into these three age categories: brands established before the formation of the People's Republic of China in 1949; after the PRC but before the "Reform and Opening Up" in 1978; and after “Reform and Opening Up.” Each of those periods influenced the categories and brands that emerged.
Before establishment of the People’s Republic of China
Chinese civilization began over 5,000 years ago during the Bronze Age. Today’s brands don’t have quite that length of history, but some have substantial heritage. Tong Ren Tang, a traditional Chinese medicine (TCM), was established in 1669, during the early years of the Qing Dynasty, and Yunnan Baiyao, also a TCM, was established in 1902.
Celebrating its 165th anniversary in 2013, China’s oldest jewelry merchant, Lao Feng Xiang, was formed in 1848, during an earlier era of intense international trade. The provisional government of Dr. Sun Yatsen established the Bank of China in 1912, a year after the demise of the Qing Dynasty.
Implications: These traditional Chinese brands have demonstrated their resilience. To continue to flourish they need to constantly rejuvenate, remain relevant to customers, leverage their brand equity and continue to extend into new categories. China’s rebalancing is an opportunity for these brands to assert their relevance as consumers seek stability from the past to balance the rapid pace of change.
Before the “Reform and Opening Up”
These brands were formed in the early years of the PRC when the government established SOEs (State Owned Enterprises) to build the country’s cities and infrastructure in a steady, systematized way. Brands include Construction Bank of China, which was formed in 1954 to fund state economic development plans, and the large insurance companies China Life and PICC.
Two baijiu brands, Yanghe and Moutai, date from this period. Moutai was established in 1951, when the government consolidated several producers of China’s traditional white alcohol.
Implications: Although some of these brands are over 60-years old, the government influenced their growth for much of that time. Therefore, they’re in the relatively early stages of brand building. To sustain success they’ll need to transform from product-oriented strategies to brand-building, market-facing strategies.
After the “Reform and Opening Up”
With the launch of market reforms in 1978, followed by the establishment of the four original Special Economic Zones on China’s southeast coast in 1980, China invigorated its economy and intensified international trade. Many new brands, particularly in technology and consumer products, emerged during the 30 years of remarkable growth that followed these developments.
These brands include Lenovo, the PC and mobile device maker that derives more than half of its revenue from overseas sales; Haier, which sells home appliances in over 100 countries; and Baidu, the search-engine based ecosystem.
Implications: These brands developed rapidly and have established themselves. They’re visible and they’re purchased. To maintain momentum, these brands must create strong consumer emotional bonding and anticipate consumers’ emerging needs.