China, 2020 and the big brand migration

By Debbie Meltzer

Debbie Meltzer, CanimpactIt’s April 30th 2020. I clicked on the Millward Brown Top 100 Brands chart to find at least 24 of the brands were Chinese owned.  Back in 2010 there were seven.

How did the world’s largest manufacturing sweat-shop emerge to own so many prestigious global brands? What did they do to change the landscape within one decade? What happened to the demise of so many western brands that took decades to build? And what could western owned brands have done to protect themselves from the onslaught?

Back to 2010… Home grown Chinese brands like China Mobile, ICBC and Baidu are flexing their muscle, churning out shiny new logos and elbowing out their western counterparts.  Meanwhile Volvo, Rolls Royce, Hummer… are being snapped up by Chinese corporations.

Chinese newspapers recently reported, the decision to acquire western brands is partly a product of the Barbie phenomenon: In China Daily, noted UBS Bank economist Dong Tao explained why; “The busty plastic doll is sold for $20, but the Chinese manufacturer earns only 35 cents from that. The lesson the Chinese have learned: The big money is in owning the brand, not just making it for foreign companies”.

A huge boost of encouragement also comes from the Chinese government; “Think Big” is the message they have been touting for over a decade. It is this message and their strategic foresight, to diversify the economy by expanding overseas, which is beginning to engineer a tirade of brand success stories. “Owning global brands is achievable” is the marketing mantra bellowing out of the Chinese foreign trade sector. And the Chinese manufacturing sector is listening; it’s slowly but surely learning to abandon manufacturing traditions for the sake of sexing up their own brands.

China does not need to venture far and wide to begin nurturing their home grown brands – a massive local consumer market is ripe and ready for worship. What’s more, the manufacturing sector and their new breed of disciples are quickly realizing they no longer need to imitate the west.

Brand futurist Martin Lindstrom, during a recent visit to China, cited his own observations (   about the fast track changes in the Chinese brand landscape;

” For one thing, a consumer market that is rapidly maturing, and, with ever more access to all things Western, there is a desire not just to emulate, but to dominate. No surprises then, that China is teeming with marketing, branding, product design, you-name-it experts, whose contributions to Chinese brand development will be something to witness in say, three to five years …”

The Chinese would like to believe brands that Chinese consumers can ill-afford, but western ones can, will make a huge global splash. Maybe so, but it will come at a price, may be even a backlash, especially if western economies continue to hemorrhage from their financial woes. In fact, with the next dip prominently looming on the horizon, Chinese brands could face an unfriendly consumer market.

So are we yet to see a Chinese Gucci, Mercedes Benz or Apple capture real market share soon? Not that soon. But the game is changing and major western brands will need to prepare for major market disruptions in the way brands were built over the past 100 years.

According to this year’s Top 100 Most Valuable Global Brands survey, 13 of the world’s leading 100 brands are from emerging countries, compared with just one four years ago. Some experts believe companies from emerging markets are succeeding because they are learning how to harness new Internet marketing opportunities.

In China’s case I don’t buy that. It’s just a tad over simplistic. Sure it helps to accelerate the penetration rate. But what seems more likely is; the Chinese are slowly but surely absorbing western style marketing practices and tying it in with Chinese strategic foresight – a tradition that encourages long term investment. Chinese patriotism also plays a big part:

Fuelled by the understanding that most brands are locally manufactured anyway, Chinese consumers are ensuring foreign brands will always be second choice. The question is: How long will it take for the west to wake up and what can western economies do about it?

I propose learning from the Chinese for once: Instead of just shipping knowledge, know-how and top designers to their shores, we can learn from their uncanny ability to practice strategic foresight.  We can learn from their ability to plan long term – even 100 years ahead and we can learn from their patriotic fervor to maintain Chinese interests.

Considering the latter – we can build strong consumer groups that encourage domestic purchases and we can do more to protect our local brands from grey market practices.