Anta takes on Nike and Adidas

Battle for control of sportswear market moves into smaller cities

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FUJIAN--Anta, one of China’s largest local sportswear marketers, is promoting its high-tech A-Cool product line just as summer kicks off in one of the hottest sportswear markets in the world. The effort is the latest in a string of aggressive measures by Anta to upgrade its brand image and business performance.

The latest campaign built around the marketing strategy, "Forge yourself,” created by JWT, promotes Anta’s breathable running shoes and apparel, which let consumers play hard even in summer heat. Advertising broke in late March in TV, print, and online media and point-of-sale merchandising.

Anta’s target consumers are active youths aged 14-to-25, said Michiel Hofstee, general manager of JWT, Shanghai. They view sports as “a platform on which they could utilize their own power, conquer difficulties and challenge themselves to get better, even in hot summer [weather].”

The campaign is the latest round in a fierce battle for control of China’s second and third tier cities, home to more than 150 million teenagers and young adults. As industry giants Nike and Adidas push their brands deeper into China's outlying urban centers, Anta is one of two major local players, alongside Beijing-based Li Ning, putting up a stiff fight for market share.

Like many local manufacturers, Anta’s stronghold is not China’s first-tier cities. In Beijing, Shanghai and Guangzhou, its homegrown brand pales next to sophisticated foreign brands and even Li Ning, the recognized leader of China's sportswear industry.

“Nike and Adidas have a competitive advantage in tier one cities,” admitted Samuel Xu, Anta's marketing director based in JinJiang at Anta’s headquarters in Fujian, a hardscrabble province in southeastern China with a strong manufacturing base. "So we focus on tier two and tier three cities.”

These aren't small markets. Nearly all have populations greater than one million, and many are well over five million. In its primary markets, Anta is a very strong contender. In general, local manufacturers in categories ranging from sneakers to soft drinks have stronger distribution networks in these cities, as well as lower prices and a better understanding of China’s cultural nuances and complex retail market.

Anta, which means “safe step” in Chinese, is no exception. Founded as a factory in 1991, Anta has turned a substantial head start in second and third-tier cities into a leadership position. The company sells its products in over 4,000 retail outlets across the country, and operates several hundred of them directly. Market share estimates in China’s lower tiers are unreliable, but Anta is regarded as the leading local player, based on the volume of shoe sales, although Li Ning is still the top local brand in apparel sales.

The private company generated $250 million in sales revenue in 2005, according to Xinhua, the state-run news agency, about 55% of which came from its sports shoe business. Sales of sports garments accounted for 40% of the total, and other sporting goods 5%.

While strong distribution and low prices have been the backbone of Anta's growth, branding has been weak. Anta sneakers and clothes are much cheaper than those of its high-end rivals, a big help in price-sensitive markets. But Nike and Adidas have become more adept at operating in China’s smaller cities, and middle class consumers are earning more, and starting to care more about brands.

Until recently, observed P.T. Black, a partner at Shanghai-based youth marketing consultancy Jigsaw, “Anta’s brand was minimally above having no brand at all. This is not a comfortable place to be.”

Anta’s high sales volume was born out of “good distribution, price competitiveness and a strong understanding of China’s retail market,” added Mr. Black. Li Ning, by comparison, "has developed a brand that some people are now choosing over global competitive brands.

"Above-the-line marketing was less important for Anta in the past and branding will continue to be a challenge for them. Tier-three cities are relatively fragmented, which means they’ll have to fight battles again and again in relatively small markets, while dealing with other local brands trying to do the same thing.”

To combat rising competition from global players, and even other local brands like Gaoermei, Anta is investing in marketing and product development, while fine-tuning its distribution and production capabilities.

Anta’s plan, said Mr. Xu, “is to provide the same level of technology and international design [as Nike and Adidas] at a more affordable price in tier two and tier three cities, where Nike has distribution trouble. And compared to Li Ning, we control our own distribution [rather than outsourcing it to other companies] so we can control costs better.”

Anta spent $4.7 million on R&D last year, leading to products like the moisture-absorbing “A-Cool” line. The company invested over $5 million just on advertising time on CCTV 5, the state broadcaster’s national sports channel.

The branding effort is led by Mr. Xu, 32, who joined Anta nearly one year ago. Born in Anhui province, Mr. Xu studied British and American literature at Xiamen University before taking on client service positions at ad agencies including Grey, TBWA and McCann Erickson.

The company created a state-of-the-art “shoe lab” as an R&D facility in 2005. The lab has collected foot measurements and other data about hundreds of Chinese professional athletes, many of whom wear shoes specially tailored for them by Anta.

"We put that data into production for normal shoes,” said Mr. Xu. “We’re very proud of the fact that we can make shoes with a perfect fit for Chinese feet.”

Anta has also set up four design centers in Beijing, Guangzhou, Jinjiang and Seoul, the capital of neighboring South Korea. Staff includes several Japanese designers who worked for Reebook in China until Adidas acquired that company. Connections with Korea and Japan are vital for fashion brands, because both countries are breeding grounds for youth trends across Asia, including China.

Early last year, Anta appointed JWT, Nike’s agency in China until the U.S. company switched to Wieden + Kennedy in late 2005. Armed with JWT’s sportswear experience, Anta stepped up its advertising with stronger visual ads. It has also linked the brand with hip sports like basketball and volleyball and extreme sports, using alliances with the China Basketball Association and the country’s volleyball leagues, instead of more traditional but staid games like table tennis.

In December 2006, Anta tapped into China’s growing interest in sports with a campaign during the Asian Games using the Queen hit, “We are the champions.” Anta first started using the song as a campaign theme in September 2006 in a two-year deal with EMI Music worth about $90,000. And like nearly every marketer in China, Anta is trying to connect its brand with the 2008 Olympic Games in Beijing, which is spurring growth in China’s sportswear category overall.

“We want to encourage our consumers to be stronger, faster and quicker, and will try to do a lot of public relations activities and advertising this year to combine the spirit of our brand with the spirit of the Olympics,” said Mr. Xu.

The company is also preparing an initial public offering in Hong Kong to fund further expansion, which will probably take place later this year. The company also believes a public listing will help it establish an international-standard operating and management system and improve its access to overseas markets. Anta products already are sold in other parts of Asia, such as Singapore, the Philippines and Malaysia as well as in emerging markets like Russia and other countries in eastern Europe. About 10% of Anta's sales come from markets outside China.

“Globally, there are two famous brands, Nike and Adidas, and behind them are two strong sports countries, the U.S. and Germany,” said Mr. Xu, who, like many Chinese, sees parallels between the aims of his company and his country. "Our vision is to be a top ten global brand. We believe that if a brand really wants to be bigger and stronger, the country behind you is very important. Like our brand, Chinese athletes all come from poor families in the countryside, but they work hard and have made achievements.

“We’re looking to eventually acquire an existing western brand," he added. "That’s an easy way to go overseas. But our strategy is to grow first in Asian countries like India, Thailand, Vietnam and the Philippines, which have a similar culture, and they don’t have existing tier two brands to compete with.”

The company has big plans for international growth. Assuming, of course, Anta can continue to compete against the global rivals expanding quickly on its home court.
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