China 100 outperforms Global 100, but experiences more brand churn
23% Top 100 value rise
exceeds all prior years
The 2018 BrandZ™ Top 100 Most Valuable Chinese Brands increased 23 percent, after a 6 percent increase a year earlier. The percent increase for the 2018 BrandZ™ China ranking was the highest since the ranking expanded from 50 to 100 brands in 2014.
China Top 100 growth
beats Global Top 100
Since 2014, the BrandZ™ Top 100 Most Valuable Chinese Brands has increased 80 percent in value, around three times the rate of BrandZ™ Global Top 100, which increased a healthy 27 percent over the same five-year period. The China Top 100 grew from a lower base, but the Global Top 100 includes some of the world’s fastest-growing brands, such as the Global Top 5: Google, Apple, Microsoft, Amazon, and Facebook.
produce value growth
Market-driven brands produced most of the value growth in the BrandZ™ China Top 100 over the past five years. Market-driven brands increased 271 percent in value since 2014, while State Owned Enterprises (SOEs) only increased slightly in value. This shift is significant because SOEs dominated the ranking in 2014, comprising 71 percent of its value. In contrast, SOE comprise only 40 percent of the 2018 China Top 100. This power shift from SOEs to market-driven brands corresponds to the transition of China’s economic engine from production to consumption. It illustrates that brand strength has become the main determinant for building brand value.
Tech and retail
drive value shift
Two categories dominated by market-driven brands drove this shift in value generation—technology and retail (including e-commerce). While these two categories added brands and greater brand value than other categories, three categories dominated by strategic SOEs lost value—banks, telecom providers, and oil and gas.
Value growth rate
causes brand churn
Significant brand churn resulted from the value rise of the BrandZ™ China Top 100, and the shift in value growth from SOEs to market-driven brands. Over the past five years, 28 brands dropped from the China Top 100, compared with 18 that dropped from the Global Top 100. The high dropout rate for the China Top 100 indicates how competitive the Chinese market has become.
One key element distinguished the dropout brands from the survivors—Brand Power. In 2014, the BrandZ™ China Top 100 overall scored 159 in Brand Power. Dropout brands averaged a Brand Power score of 124, and surviving brands scored an average of 168. In 2018, the China Top 100 overall scored 162 in Brand Power. And surviving brands scored an average of 175. This finding indicates the importance of brand to sustain success in China’s rapidly changing market.
Brand Power: Brand Power is a BrandZ™ measurement of a brand’s competitive position in a category. It roughly correlates with volume share. Brand Power is a BrandZ™ component of brand equity, which is the consumer predisposition to choose one brand over another. An average Brand Power score is 100.
Sustained growth possible across ownership, categories
These five-year findings reveal a critical dichotomy: the most valuable Chinese brands are increasing in value faster than the most valuable global brands; but more Chinese brands are unable to keep up with the rapid pace of growth and are dropping out of the Top 100 rankings. In China today, it is possible for a strong brand to win—or lose, to a stronger brand. The shifting of China’s economic propellant from production to consumption best explains why.
Economic change disrupted the hegemony of State Owned Enterprises (SOEs) and opened opportunity for market-driven brands, better positioned to serve the needs of people enjoying greater prosperity and willing to pay for products to enhance their lives. How brands need to respond is more complicated and requires brand-specific insights about consumers and communications. Here are some initial implications:
- Finding 3 indicates that market-driven brands increased almost three-fold in value over the past five years, while SOEs only increased slightly. It would be a mistake to interpret this finding as an endorsement of a particular ownership model, however. Rather, the finding affirms the brand-building strategies of market-driven brands. The implication is that any brand, regardless of ownership, can build value when it acts like a market-driven brand.
- How does a market-driven brand act? Finding 4 shows that brands in technology and retail (including e-commerce)—two categories dominated by market-driven brands—produced the greatest proportion of value increase in the China Top 100. The implication is not that rapid brand value rise is limited to two categories. Rather, it suggests that lessons of technology and retail brands should be applied across categories. The technology and retail brands generally excel in innovation, which increases the perception among consumers that these brands are different.
- Being seen as Different is a component of Brand Power, a BrandZ™ measurement of brand equity, the consumer predisposition to choose one brand over another. The other components of Brand Power are Meaningful (meeting needs in relevant ways) and Salient (coming easily to mind). As noted in Finding 6, brands that scored high in Brand Power were much more likely to remain in the ranking, while brands lower in Brand Power dropped out. The implication is that sustained growth is possible for any brand, regardless of ownership or category.