HONG KONG (AdAge.com) -- While many big Chinese brands are inward-looking, two are poised to break out internationally: Chery Automobile Co. and sportswear marketer Li Ning. Here's why they are worth watching.
Taking a cue from a Chinese character that means both "crisis" and "opportunity," Chery is turning the global recession that started in the U.S. into an opportunity at home and possibly overseas. China became the world's largest car market in January 2009, years ahead of most experts' estimates. At the same time Americans stopped buying cars, China's government dropped taxes on small-passenger-car sales to jump-start consumption in its own economy. Chinese consumers responded enthusiastically, snapping up 1.15 million vehicles in April, a new monthly record.
China's largest private automaker, it sold a record 35,000 cars in January 2009, showed 32 products under its four sub-brands -- Chery, Riich, Rely and Karry -- as part of a multibrand strategy "to help them explore different market segments with distinctively branded products," said Yang Jian, managing editor of Automotive News China.
Chery raised $425 million this month by selling a 20% stake to domestic investors to boost its development and expansion plans, according to spokesman Jin Yibo.
Some of the automaker's most advanced car models, such as Eastar and A5, are already sold in Latin America, the Middle East, Africa, and Southeast Asia. "Less-mature markets have demographics that lend themselves to new market entrants who compete primarily on price," said Bill Russo, president of Synergistics auto consultancy. Chery has indicated it also has plans to enter the U.S. market.
Chery expects to sell 419,000 vehicles this year, nearly 18% more than it sold in 2008. The company became famous in the early part of the century for its cheap subcompact QQ series, which sells for as little as $4,500, but its image is changing as its products move upscale. One of the most telling signs of the company's ambition is Riich, a luxury brand it launched in late March that comprises sedan, hatchback, crossover and SUV models. Marketed to Chinese officials, it competes against Western brands such as Audi and plays into a rising sense of patriotism.
When it comes to buying sneakers and tracksuits, Chinese kids want the latest, hippest fashions, a trend that benefits international brands such as Adidas, Nike and Puma. Li Ning has been surprisingly adept at fending off bigger rivals in China by tapping overseas opportunities and downplaying its local origins at home.
Li Ning is an official marketing partner of the National Basketball Association, an expensive but valuable relationship in China, where basketball is hugely popular. It also has sponsorship deals with four U.S. players, including Shaquille O'Neal of the Phoenix Suns.
Li Ning sponsors the national basketball teams of Spain and Argentina and has deals with tennis pro Ivan Ljubicic and Yelena Isinbayeva, a two-time Olympic pole-vault gold medalist and world-record holder. It has also expanded into international markets such as Russia, Southeast Asia and Spain.
The company's founder and namesake is an Olympic-medal-winning gymnast who was China's first celebrity athlete and also one of its first entrepreneurs. Li Ning was established in 1990 and operates more than 6,200 retail stores in China, including 1,012 it opened in 2008.
In addition to developing its flagship Li Ning brand, which is pricey for many Chinese, the marketer and retailer introduced a mass-market sportswear and accessories brand called Z-do in retail stores such as Walmart in 2007. The line is about half the price of Li Ning products.
The investments are paying off. China's largest sporting-goods producer claims to have up to 50% of China's sportswear-market sales, although exact figures are not available. Li Ning's revenue last year grew almost 54% to $978 million and the company said its orders for the fourth quarter of 2009 rose 14.5% year on year.
The Olympic Games in Beijing helped boost Li Ning's position. Members of the Chinese national gymnastics, diving, table-tennis and shooting teams all wore Li Ning clothing and shoes. Li Ning also sponsored other nations including Spain, Sweden, Argentina and the U.S.