Why Building Brands Will Just Get Tougher in China
SHANGHAI (AdAgeChina.com) -- Any guesses about what's been the top performing asset in China this year? It wasn't real estate. Or gold. Not hybrid cars. Not the stimulus-assisted consumer durables sector.
It was garlic. The price of the humble, pungent allium sativum has risen from RMB 0.15 (two cents) per kilogram over a year ago to more than 8 RMB ($1.17) today.
From coal mine bosses to real estate moguls, they're all hoarding it by the megaton. Even Morgan Stanley execs are getting into the act, by analyzing garlic sales in China.
The garlic farmers of Jinxiang, in Shandong province, the region that produces 70% of China's garlic exports, have turned into millionaires overnight. Garmin, a company that makes the GPS systems that have popped up on the dashboards of many new cars sold today in China, is still struggling to be known there.
What's the point of this comparison? Why would, and should, Chinese businessmen invest in building brands when they can get rich without having to, when their profit margins continue to rise by trading in and selling commodities?
Chinese businessmen and women have grown fabulously wealthy by focusing on business-to-business sales. Those of us in the marketing and communications business don't find that sexy.
Neither does the business media. Apple Computers is sexy, and not by coincidence, it lies at the top of the heap of the world's most desirable brands....not a company like Huawei or Zhong Xing Telecommunication Equipment Co., which most non-Mandarin speakers can't even pronounce correctly.
Huawei's founder and CEO, Ren Zhengfei, is the antithesis of Steve Jobs, but Mr. Ren's company is set to overtake Nokia Siemens Networks as the world's second-largest telecom hardware maker.
I doubt he would have the patience for a presentation on brand personality, preferring to leave that for western business executives to intellectualize over.
Mai Boilang, yet another hero unknown outside China, has transformed China International Marine Containers (CIMC) from a small company with 59 employees to the world's largest manufacturer of dry cargo and refrigerated containers in the last twenty years, simply by finding the opportunity in an export economy.
In the process, his company displaced the behemoth Japanese and Korean container companies from their leadership positions. Now CIMC does not sell to Generation X or Y consumers, or Yuppies or even to China's millions of office ladies that salivate over cosmetics and designer goods. CIMC is equally unsexy, but his company made $7.14 billion in 2007, dealing with exporters and shipping companies, before western appetites dried up. That's not small change.
So it is all down to the fundamental difference between what makes business move in the West versus what makes business move in China.
Chinese brand owners find themselves torn between a desire to follow their local heroes, nearly all of whom are making pots of money without really building brands, and western icons like Mr. Jobs or Procter & Gamble, or Coca-Cola or Google.
By suggesting that the latter model works better and not adapting our own business strategies by upping our business-to-business expertise, we might be jeopardizing our future survival in this market.
Kunal Sinha is the Shanghai-based executive director of discovery, Greater China at Ogilvy & Mather, where he oversees the consumer insight and knowledge management function across all divisions of the agency. He is also the author of China's Creative Imperative: How Creativity Is Transforming Society and Business in China.
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