International: China's power brands eye global expansion

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[hong kong] Global marketers like Procter & Gamble Co., General Motors Corp. and Coca-Cola Co. see China's one billion-plus population as the world's biggest market, but the country is also home to a new generation of companies eager to enter the world stage themselves. Among them: local players Legend, Haier, TCL and dozens of others itching to become household names in the U.S. within the next decade.

"Rising quality standards and heavy ad spending by local companies have created a handful of powerful Chinese brands," said T.B. Song, chairman of WPP Group's Ogilvy & Mather, Greater China, in Shanghai.

While there are still stumbling blocks, Chinese companies are waking up to marketing. They are also turning out products that compete on price and, increasingly, on quality, following in the footsteps of cheap and once-shoddy Korean imports turned global brands like Samsung, Kia, Hyundai and LG. Samsung, for example, now commands a $400 million global ad budget, with Interpublic Group of Cos.' Foote Cone & Belding Worldwide as lead agency.

When, not if

"It is a matter of when, not if, Chinese brands go beyond the borders of Greater China," said Chris Walton, CEO of WPP's MindShare, China, in Shanghai.

The standouts, like Heier and TV marketer TCL, are progressive. They benefit from sheer sale, cheap labor, and a Confucian can-do attitude.

Haier has been transformed by savvy management from the near-bankrupt Qingdao Refrigerator Plant to a $19 billion group that cracked the Middle East market with an air conditioner developed exclusively for the desert. Haier also found a home for its compact refrigerators in U.S. college dorms.

"I fully expect companies in the categories of automobiles, airlines, real estate, finance, insurance and food to quickly join the likes of Haier and Legend over the next five to ten years," Mr. Walton said.

In November 2002, Haier named Grey Global Group to develop a national marketing communications platform in mainland China, the first step towards turning it into a global brand.


Haier already sells well in the U.S. from its own factory in Camden, S.C. In 2002, Haier sold almost $500 million in air conditioners, refrigerators, freezers and wine cabinets through chains like Wal-Mart, Home Depot and Target. The company hopes to double U.S. sales by 2005 and is likely to seek a U.S. stock exchange listing. "Haier has a vision that we are eager to translate into an umbrella positioning and branding platform to establish the company as a world-class player," said Viveca Chan, Grey's chairman-CEO, Hong Kong & China.

China's top-selling computer brand, Legend, started in 1984 as a distributor for giants like IBM Corp. and Hewlett-Packard Co. Legend combined its knowledge with its own local language capability and access to cheap labor to make its own computers, gaining more than one-third of China's computer market. Known more for low prices than quality, Legend is beefing up R&D and branching into other areas such as digital cameras, printers and audio players.

Another example is Tsingtao Brewery Co. A staple in Chinese restaurants around the world, Tsingtao forged a strategic alliance in 2002 with Anheuser-Busch Cos. to get its brand into overseas supermarkets, in return for giving A-B a strategic foothold in China, the world's second-largest beer market.

On another front, the 999 pharmaceutical division of the SanJiu Enterprise Group distributes Chinese medicines all over the world, such as Gan Da tablets to treat hepatitis, and 999 Gingko leaf tablets for high blood pressure and heart disease. So far, 999 has only dabbled in advertising aimed at overseas Chinese communities, but these traditional remedies complement a growing interest in natural medicine in the U.S.

different approach

Taking a promotional approach, the Li-Ning Sports Good Co., China's largest sporting goods brand, is sponsoring teams in countries like France and Russia, even though the company doesn't do any international advertising yet. But the sponsorships help build brand exposure and relevance, said Dennis Wong, CEO, Hong Kong & China of Publicis Groupe's Leo Burnett Worldwide, Hong Kong. "Li-Ning wants to become a major player in international sports brands in the next five to 10 years."

So far, the battle between Chinese companies and foreign rivals has been on Chinese turf. Since joining the World Trade Organization, many of China's tariffs and other trade barriers have been reduced. Chinese companies have fought back, with better distribution and lower pricing, but now are discovering the bonus of branding.

Two years ago, local companies "contributed nothing" to J. Walter Thompson Co.'s Chinese revenues, said Tom Doctoroff, the WPP agency's area director, Northeast Asia and CEO, China, based in Shanghai. But in 2002, clients like TV marketer TCL, 999 and ginseng king Wenji accounted for 28% of JWT's mainland Chinese revenues. "Nimble local competitors are appearing in every corner of the competitive battlefield."

Globally, multinationals still have several advantages over Chinese competitors, which so far have had little brand equity among consumers. Haier refrigerators, for example, sell across America on price, not branding. "At this moment, Haier is perhaps more established [than other Chinese brands] in their international sales network, but they still need a lot of work to get to global brand status," said Grey's Ms. Chan.

government influence

Also, many large state-run companies are heavily influenced by China's Communist party, even in the rare case of a CEO who is not a party member. Staying tuned to both the market and the party line can result in decision-making chaos.

Among mainland companies that are tomorrow's brand leaders, Janice Chan, M&C Saatchi's Hong Kong-based managing director, Greater China, said many still lack know-how and "need a deeper understanding of buyers and consumers in foreign countries, better marketing skills and more respect for rules of the game played by the rest of the world."

But they are learning fast. Multinationals probably have just a few years to shield themselves from the Chinese threat, said JWT's Mr. Doctoroff. "In some industries, the tidal wave is already approaching the shore."

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