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Newcomers: Market forces and brand strength propel newcomers

New category, logistics, represented with 5 brands

 

Five of the 11 Newcomers, brands that appear in the BrandZ™ China Top 100 for the first time, are in logistics, a category added to the ranking this year. Two of the brands are in health care, and these categories are also represented with one brand apiece: travel agencies, real estate, home appliances, and alcohol.

 

Each of the Newcomer brands benefited from a combination of brand strength and market forces that drove expansion of their respective categories. The travel agency category rose 57 percent; alcohol, 37 percent; and real estate, 28 percent, for example. Category dynamics alone do not explain the rise of these brands, however, because other brands from these same categories dropped out of the BrandZ™ China Top 100.

 

Logistics illustrates the point. Until recently, the category barely existed in China, where individual couriers typically delivered packages piled on their bicycles. The meteoric rise of e-commerce exponentially increased the number of packages and opened an opportunity to rationalize a fragmented business into a category. The delivery business expanded by around 50 percent between 2010 and 2014, according to China’s State Post Bureau.

 

The Chinese government was eager to establish a logistics category. To obtain funding for accelerated growth, many logistics brands pursued back-door listings, in which they purchased or merged with public companies to gain instant presence on stock exchanges. These five newcomers emerged as leaders: SF Express, YTO, Yunda Express, ZTO Express, and STO.

 

SF Express, rooted in a business that began in 1993, is now the largest of the services and the last to go public, early in 2017. Funds are helping the brand expand, even in the US, with the opening of a new logistics center in California. By purchasing a major stake in a Hong Kong-based logistics company, YTO, established in 2000, expects to expand its global presence. Alibaba holds a stake in YTO.

 

The burgeoning concern with personal health among Chinese middle-class consumers drove the popularity of two of the newcomer brands—Dong EE Jiao and By-Health. Dong EE Jiao experienced strong demand for products made from a gelatin contained in donkey skin. By-Health is a maker of vitamins, dietary supplements, and other health and wellness products. Both brands envision a global market for Chinese health and wellness products.

 

Newcomer Qunar is a travel booking website acquired from Baidu by Ctrip, China’s most valuable travel brand. The alcohol newcomer, National Cellar 1573, is a brand of baijiu, China’s traditional white liquor made from sorghum. The 1573 date refers to the founding of the brand during the Ming dynasty, a heritage that enables this high-end sub-brand of the Luzhou Laojiao Company to command a premium. Flyco produces small electric gadgets such as shavers, hair curlers, and garment steamers—the kind of convenience lifestyle products that Chinese consumers are increasingly willing to spend their discretionary money on.