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Education: Category again leads in value appreciation

China’s focus on testing and achievement powers growth


Education again topped the list of categories in value growth, increasing 68 percent, after a 46 percent rise a year ago. A combination of factors powered the growth of the education category in China. They include the determination of Chinese to succeed and have their children succeed, and the reality of educational success in China, which requires navigating an elaborate testing system.


The end of the one-child policy and increased competition for university admission also help ensure the continued growth of the education category and its two leading brands, New Oriental and Xueersi. New Oriental expects the market for K-to-12 after-school tutoring to expand by a 14 percent compounded annual growth rate (CAGR) between 2015 and 2020. Meanwhile, the number of babies born annually in China increased 16.6 percent between 2009 and 2016, according to Xueersi. In Beijing, the births increased over 42.1 percent during the same period.


New Oriental, the brand of the New Oriental Education & Technology Group, had almost five million enrollments and operated around 900 learning centers as of August 31, 2017. The brand focuses on language education, especially English, along with test preparation for admission to schools in China and other countries, particularly the US. It also offers vocational training, and it operates an online site called Koolearn.


At Tal Education Group, which controls the Xueersi brand, enrollment reached 3.2 million, an increase of 86.5 percent during the first six months of fiscal 2018 (ending August 31, 2017), and net revenues increased 66.8 percent year-on-year. The company operated 575 learning centers in 36 cities. The success of online education accelerated growth, with revenue from Xueersi.com rising over 90 percent between 2016 and 2017. The brand continues to add course offerings for grades K- to-12, along with both small-class tutoring services and premium-price private tutoring.


To address a perceived weakness in Chinese education—the focus on rote learning—Xueersi introduced a new English three-part language program in which classroom time is spent developing critical thinking ability. Outside the classroom, the program expects students to study vocabulary and grammar prior to class, and to sharpen speaking skills online by interacting with teachers from North America.