BrandZ™ China Top 100 rises 12 percent in value
In decade of sustained growth China ranking surpasses Global
Decade of growth transitions to post-COVID “New Normal”
This 10th anniversary of edition the BrandZ™Most Valuable Chinese Brands report coincides with the outbreak of the COVID-19 pandemic. The year marks an inflection point between a transformative decade of steady brand value growth and the advent of a “New Normal.”
When China locked down to contain the spread of the coronavirus, brands across the 24 categories studied in the China Top 100 report were already contending with the consequences of slowing economic growth, an aging population, and intensifying China-US trade tensions.
The pandemic intensified these concerns. It also influenced consumer values, attitudes, and behaviors affecting where people shop, what they buy, how they interact with media, and their relationship with brands.
Categories experienced the impact unevenly. For some demand spiked, for others it plummeted, and recovery patterns varied. Still, the China Top 100 increased 12 percent in value year-on-year, demonstrating the resilience of strong brands and their ability to build and sustain value.
BrandZ™ launched the China Top 50 in 2011 and expanded the ranking to the Top 100 in 2014 to more fully capture the dynamism of the Chinese market. During the past 10 years, the China Top 50 grew 225 percent in value, outpacing the Global Top 50, which grew 126 percent. Similarly, the China Top 100 increased 162 percent since 2014, while the Global Top 100 rose only 74 percent.
In addition, a stock portfolio of the BrandZ™ China Top 100 grew at three times the rate of the MSCI China Index over the past decade. The Brand Contribution Portfolio of brands that excel in the BrandZ™ measurement of brand strength increased over five times the rate of the MSCI.
Among this years highlights:
- Entertainment led category growth, rising 221 percent, following a similar performance year ago.
- Leading the 16 China Top 100 newcomers in total value were Douyin, the short-form video brand, and Pinduoduo the other popular e-commerce app.
- The education brand Xueersi led the Top Risers, increasing 120 percent in value on top of a 91 percent rise a year ago.
The pandemic accelerated several existing trends that will initially shape the “New Normal.” The importance of national pride and an inclination to buy Chinese products increased. And the accumulation of wealth has declined in priority as Chinese society adjusts to prosperity and the enjoyment of material well-being becomes as important as achieving it.
The pandemic also marked the culmination of a decade of market disruption and transformation that altered China’s brand landscape. Only 56 brands from the BrandZ™ China Top 100 of six years ago remain in the ranking. In contrast, 70 survivor brands remain in the Global Top 100.
Disruption and transformation
In 2011, three categories—banks, telecom providers, and insurance—contributed 70 percent of BrandZ China Top 50 value. This year, those categories contribute less than a quarter of Top 50 value. Instead, indicative of future growth, a different three categories—retail, technology, and lifestyle platform—contribute 51 percent of Top 50 ranking value.
Most of the newcomers come from these categories or other expanding categories, as indicated by the seven Unicorn newcomers: Douyin and Kuaishou (entertainment), Ke, Lianjia. and Ziroom (real estate agents), and Toutiao and Zhihu (technology).
Competitive pressures also altered the brand landscape. The BAT triumvirate—Baidu, Alibaba, and Tencent—no longer dominates search, e-commerce, and social media unchallenged. Only a few years ago these powerful digital brands seemed invincible. In the digital world, however, new ideas and value propositions can quickly capture the consumer imagination.
Meituan, the services, platform entered the BrandZ™ China Top 10, surpassing Baidu, which, along with Tencent, attempted to strengthen advertising revenue. The BAT brands and e-commerce giant JD also faced new competition with the rapid rise of Pinduoduo, which qualified for the BrandZ™ China Top 100 for the first time, after completing an IPO and meeting ranking eligibility criteria. The slower percentage growth rates of the major online platforms also reflect the giant scale of these businesses.
The popularity of some of the other newcomers, including the short-format video apps such as ByteDance-owned Douyin (known as TikTok around the world) and Kuaishou, and the news aggregator site Toutiao, also owned by ByteDance, demonstrate the evolution in the way many Chinese consumers get their information and, to some extent, how they shop.
These brands, and others, like the beauty site Little Red Book, create appealing content to attract large audiences that can be seamlessly monetized with advertising or e-commerce. Although they are not as big or ubiquitous as major ecosystems like Tencent’s WeChat or Alibaba, these brands have simplified people’s lives by integrating a social and commerce experience.
Brand growth initiatives
Meanwhile, Alibaba continued to reinforce its position as China’s most valuable brand. Its Singles’ Day sales reached a record $38.3 billion, a 26 percent year-on-year increase. It was the first Singles’ Day under new leadership, following the decision of Jack Ma to step down as chairman of Alibaba, 20 years after founding the company.
Like many brands, Alibaba focused much of its growth ambitions on lower tier and overseas markets. To meet the growing demand for cross-border retail, Alibaba acquired NetEaseKoala, the leading cross-border site. It introduced the Alibaba Operating System, indicative of the brand’s progression from e-commerce specialist to a technology company in which e-commerce is one of several integrated businesses, including online entertainment and other digital services
To drive New Retail and O2O to new levels, Alibaba offered its Alibaba Operating Systems to help its partner brands optimize their digital operations. To expand its own e-commerce business by adding more purchase occasions, Alibaba introduced a program that linked data and logistics to recognize and immediately meet micro moments of need, like the desire for a cold beer.
Alibaba also expanded its Freshippo stores, formerly known as Hema, which double as retail and distribution locations. To strengthen its physical presence and align with the growing market for experience, JD.com Inc. opened its largest physical store, JD E-Space, an expansive experiential center where consumers can test products from a wide range of categories, including electronics, fitness, and beauty, and then scan codes for purchase and delivery.
Indicating the growth potential in lower tier cities, Meituan, the services app, reportedly gained most of its new food delivery users in lower tier markets. BrandZ™ newcomer 58.com, the online classified ad marketplace, launched a new brand called 58 Town to serve lower tier communities.
Meanwhile, according to Kantar research, the five Chinese brands most recognized outside of China were Alibaba, along with four technology brands: Huawei, Xiaomi, Lenovo, and Hisense. Among other brands increasing international presence were home appliances makers Midea and Haier, which has transformed into an Internet of Things ecosystem organization. Encouraged by these examples, even mid-size Chinese brands explored overseas expansion.
Consumers continue spending
As brands continued investing and pursuing growth opportunities, consumers generally continued spending. China’s annual GDP growth, 6.1 percent during 2019, may have slowed to its lowest rate in several decades, but it was still strong relative to other major economies.
Consumers often looked for bargains. But in certain categories, they actually traded up. Cars sales overall declined for the second consecutive year, however the luxury car sector demonstrated strength, even in lower tier markets. In personal care, young consumers seeking affordable luxury purchased prestige lipstick, makeup, and skin care brands. This “lipstick effect” extended to basic FMCG, with people finding affordable luxury by trading up to higher quality instant noodles, for example, according to the Worldpanel division of Kantar.
New Chinese brands emerged especially in personal care to fulfill the needs of young consumers reluctant to use their parents’ brands. At the same time, older, traditional Chinese brands used by their parents reappeared or rejuvenated with products and communication that appealed to young audiences.
In addition, some new branded or unbranded local products appeared, made by Chinese OEMs with extra production capacity because trade tensions or the lure of lower labor costs had driven their Western manufacturer customers to other country markets. More smaller Chinese brands emerged, appealing to consumers because of their quality, affordability, and Chinese origin, which linked with the rise in Chinese national pride, particularly among young people.
The rise of Chinese pride helped drive the resurgence of the athleisure brand Li-Ning, which returned to the BrandZ™ China Top 100 for the first time since 2013. The repositioned brand promoted Chinese product quality and celebrated Chinese culture with calligraphy and other Chinese designs decorating its products. Li-Ning was featured at the New York Fashion Show.
Consumers quarantined at home had little need to buy more apparel and store closures added pressure. Still, the apparel category increased in value 23 percent on the strength of online sales and because the category leaders offered the comfortable on-trend athleisure styles preferred by consumers and appropriate for at- home living.
Despite the shutdown of physical stores, even the retail category increased, although at a more modest 14 percent compared with 55 percent a year ago. Retail has transformed into a sophisticated, data-driven O2O phenomenon that enabled home-bound consumers to shop on a mobile device and expect rapid delivery or easy contactless pick-up.
With theater, sports, and other events canceled to sustain social distancing, business dried up for the lifestyle platform brands that sell event tickets, although demand remained for their food delivery operations, which helped increase category value 28 percent.
Sales of large appliances plummeted because consumers postponed big-ticket purchases and avoided the risk of having an installer present during the pandemic. But with more time for home cooking, sales of small appliances spiked. Both the home appliances and IoT ecosystems categories increased 15 percent.
People also spent more time online, as reflected in the value growth of the two fastest rising categories: entertainment and education, which rose 221 percent and 92 percent. The number of online education users reached 423 million in March 2020, more than doubling in just two years, according to the China Internet Network Information Center (CNNIC).
Travel services—agents, airlines, and hotels—declined significantly in value, as did the cars category. The value of the transport category remained unchanged because with nowhere to go during the lockdown, few people used car hailing services.