China 2016: INTRODUCTION | MARKET-DRIVEN BRANDS
Market-driven brands now exceed half of ranking value for first time
Market-driven brands comprise over half the brand value of the BrandZTM Top 100 Most Valuable Chinese Brands for the first time since the ranking was introduced in 2011. In addition, the China Top 10 is now evenly split between market-driven and state-owned brands.
These developments demonstrate how China’s economy is changing in fundamental ways as the government invites more market competition to enable private enterprises, encourage consumption, create wealth, and distribute it more equitably. The BrandZTM results also signify the growing importance of brands.
Since 1978, when Deng Xiaoping first introduced market reforms, Chinese consumers have experienced a government-driven economic transformation that created or improved products and services in most sectors of the economy. Today, Chinese consumers want more. The brand choices they make will help shape the country’s prosperity over the next period of economic change.
It is only around three years since Xi Jinping articulated the idea of rebalancing the economy. This process is not completed overnight, even in China, however the results of the BrandZTM China Top 100 indicate how extensively change is happening. Market-driven brands now comprise 51 percent of the BrandZTM China Top 100 brand value, compared with only 29 percent, in 2014.
Over those three years, the amount of BrandZTM China Top 100 value driven by State Owned Enterprises (SOEs) declined to 49 percent from 71 percent. Similarly, five of the Top 10 brands are market-driven in the 2016 BrandZTM China Top 100, compared with only two brands in 2014. And five of the Top 10 are SOEs, compared with eight three years ago. Perhaps more important than changes over the past three years, is the potential for even greater change throughout the BrandZTM China Top 100 ranking.
Value is still concentrated at the top of the ranking. The Top 10 produce 64 percent of the value. However, the value growth rate of the Top 10 is declining, while value growth rate is increasing dramatically throughout the rest of the ranking. The value of the BrandZTM China Top 10 increased by only 3 percent; but the brands ranked 11-to-50 rose 36 percent in brand value, and brands ranked 51- to-100 rose 34 percent.
Market-driven brands, which grew 22 percent in brand value, drove this distribution of value throughout the ranking, primarily. But Competitive SOEs grew 20 percent in brand value. Competitive SOEs are state- owned brands in consumer-facing categories, like food and dairy, where brand equity is an important success determinant. In contrast, Strategic SOEs grew only 3 percent in brand value. These brands, in categories like oil and gas, are closely aligned with the government and involved with policy implementation.
This contrast, between higher value/ slower growth brands toward the top of the ranking and lower value/faster growth brands toward the bottom, means that over time the BrandZTM China Top 100 should begin to resemble the BrandZTM Global Top 100 where the Top 10 account for only 35 percent of value, which is much more evenly distributed.
Implications for Brands
These results suggest that the Chinese market is more open to competition, but they do not say that success is assured. Challenging well-known, well- established SOEs still requires having a product or service that benefits the consumer in a Di erent and Meaningful way, along with investment to communicate those benefits and build Salience.
And SOEs, now under greater pressure, need to project more than Salience to remain competitive. SOEs also need to rebuild Di erence, which eroded over time because SOEs won with dominance, not Di erence. It is critical for SOEs to di erentiate now, in a rebalancing economy, with more competition from market- driven challengers.
These challengers have an important opportunity. Often fast-growing, energetic brands lower in the ranking, they receive less media and investor attention than the better-known, higher value brands. With communications and promotion investment these brands, with important stories to tell, could draw more attention from media, investors, and customers.