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Top 20 Risers

Value growth leaders serve
needs of China’s middle class
Government policy influence crosses categories
The Top 20 Risers, the brands that appreciated the most in value year-on-year in the BrandZÔ Top 100 Most Valuable Chinese Brands, reflect an economy that is growing, but at a slower pace, increasingly driven by the needs and aspirations of China’s expanding middle class. In short, the performance of the Top 20 Risers – the pace of value growth and the categories driving it – is a window into dynamics reshaping China’s economy and the lives of Chinese consumers.
First, consider the pace of growth: Of the Top 20 Risers, the Number 1 brand increased 58 percent in value, and Number 20 increased 13 percent. Compare these results with the 2016 Top 20 Risers, where the Number 1 brand increased 81 percent and brand Number 20 increased 41 percent. This slower rate of growth is consistent with the overall slowdown in China’s economy, which expanded 6.7 percent in 2016, compared with 6.9 percent in 2015.
Second, consider the categories: The 11 categories and the number of brands in each are: Alcohol with five brands; technology, three brands; education, home appliances, and real estate with two brands each; and with one brand apiece, apparel, cars, hotels, personal care, retail, and travel agencies. These are generally consumer-driven categories. Their presence indicates the direction of economic growth, as does the absence of strategic and infrastructure categories, dominated by State Owned Enterprises (SOEs), such as banks or oil and gas.
The categories also reveal both the impact of government policies on the economy and the ability of specific brands to either leverage policies or advance despite them. The Number 1 and 2 brands in value growth, both in the education category, meet consumer needs and advance national priorities. Xueersi increased 58 percent and New Oriental, 43 percent. These brands specialize in afterschool tutoring, test preparation, and English language learning. They prepare Chinese adults and children for success in the changing domestic and global economies.
Five brands in the 2017 Top 20 Risers also were listed in the Top 20 Risers a year ago: Moutai, an alcohol brand; Anta, an apparel brand; the appliance brands Robam and Supor; and NetEase, in the technology category. Their reappearance indicates that although economic and consumer trends, and government policies can impact entire categories, positively or negatively, value growth ultimately depends on brand building skills.
Marketing initiatives spur growth
With five brands in the 2017 BrandZÔ China Top 20 Risers, the most represented category is alcohol, which includes brands of baijiu, the Chinese traditional white alcohol, beer, and wine. A year ago only one alcohol brand was represented because the category was still negatively impacted by the government policy discouraging extravagant official entertaining and gift giving. Using a variety of brand building tactics, including changes in pricing, distribution, and marketing, these baijiu brands made the Top 20 Risers: Moutai, Luzhou Laojiao, Gujing Gong Jiu, and Wu Liang Ye. Marketing initiatives, including event sponsorship and the use of celebrity endorsers, helped Harbin Beer increase in brand value.
The second most represented category in the Top 20 Risers this year is technology, a category with strong representation of market-driven brands rather than SOEs. The three technology Top 20 Riser brands reflect the centrality of the category in Chinese life and in the advanced used of consumer technology in China compared with the West. Tencent, China’s most valuable brand, increased 29 percent in value based on the strength of its social media apps, like WeChat. The web portal Sina’s initiatives in live video and self-broadcasting helped build its following among young people and influenced its 43 percent value rise. NetEase, a maker of online and mobile games, and a major e-mail service supplier, increased 36 percent in value.
In contrast, the most represented category in the Top 20 Risers a year ago, insurance, does not appear in the Top 20 Risers this year. The category, dominated by State Owned Enterprises (SOEs), responds quickly to shifts in government priorities, such as the current supply-side policies aimed at curbing oversupply and, in the case of insurance, discouraging the sale of insurance policies for short-term investment rather than long-term risk protection. Over time, government priorities have helped to propel and slow insurance category growth.
Intertwined influences
The intertwined influence of government policy, consumer demand, and consummate brand building efforts is evident across categories represented in the Top 20 Risers. A year ago, four appliance brands appeared in the Top 20 Risers. This year, only two appliance brands made the list. The reduction in brands occurred because large appliances have achieved significant penetration, in part because of governmental temporary incentives to stimulate sales. The two Top 20 Riser brands this year – Robam and Supor, which both specialize in small appliances – effectively communicated the lifestyle benefits of their brand to middle class consumers.
A combination of influences also explains the presence of one car brand, BYD, and one apparel brand, Anta. A government reduction in the purchasing tax for electric cars helped drive sales of BYD. At the same time, BYD positioned itself to meet consumer concerns about poor air quality in China’s major cities. Growth of the sportswear brand Anta reflects the active lifestyle and interest in personal health among China’s middle class, and it indicates the brand’s ability to compete effectively against global competition. Anta also benefited from the government’s promotion of sports to demonstrate Chinese soft power at international competitions.
Similarly, government incentives help drive the real estate category because building is an important driver of economic growth. When the housing sector overheated however, government regulations and higher mortgage rates helped control speculation. The two real estate brands in the Top 20 Risers – Country Garden and Vanke – effectively increased brand value despite this changing economic environment.
This ability to align aggressive brand building with favorable government policies also applies to the travel agencies and hotels categories and the brands in the Top20 Risers, online travel agency Ctrip and Hanting Hotels. Both brands responded effectively to the increased desire for travel, enabled by growing consumer affluence. At the same time, both brands were well positioned to benefit from the government’s focus on domestic tourism as driver of consumption.
Regardless of the boost or drag supplied by government policy, brand value growth depends on understanding and meeting the needs of the consumer in relevant meaningful ways. Brand is especially determinative in competitive categories like personal care. The one personal care brand in the Top 20 Risers is Dabao, China’s Number 1 cosmetic brand, in Kantar Worldpanel’s Brand Footprint report, which notes that over 23 percent of Chinese choose the brand an average of twice a year.