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Private brands ready for takeoff in China

Zhang Xin
Updated: Jan 28,2015 8:02 AM     China Daily

The combined brand value of Chinese enterprises rose significantly last year with growth being driven by market-driven brands or private companies without government backing, rather than State-owned enterprises, said a survey.

Market-driven Chinese brands almost doubled in value in 2014 from a year ago, while SOEs saw their share fall by 9 percent, said the 2015 BrandZ™ Top 100 Most Valuable Chinese Brands, released by global communications group WPP and global brand agency Millward Brown, in Beijing on Jan 27.

“However, SOEs continue to remain significant contributors to the overall ranking and still play a key role in China’s broader economy. At the same time, their performance highlights the increasing competition from the private sector in China,” said Doreen Wang, global head of BrandZ, Millward Brown.

Though e-commerce giant Alibaba, whose IPO raised a record $25 billion, was responsible for most of the brand value growth, market-driven brands still posted growth of about 43.5 percent after excluding Alibaba’s contribution, she said.

Market-driven brands account for 47 percent of the total value of the BrandZ China Top 100, up from 29 percent a year ago, said the report. The SOE proportion of the China Top 100 total value, however, declined to 53 percent from 71 percent a year ago.

Chirantan Ray, deputy managing director at Millward Brown, said: “Compared with State-owned companies, those driven by the market shift more swiftly to the demands of the consumers, both at home and abroad. The disproportionate growth rate of market-driven brands suggests that Chinese brand owners are increasingly getting accomplished in building valuable brands.”

Chinese brands have also come of age, he said. Internet giant Tencent was ranked No 1 among market-driven brands, after its brand value more than doubled in a year, Online retailer Alibaba was ranked No 2.

“The rise of Tencent and the strong performance of Alibaba reflect the strong brand value growth of the market driven brands, compared with SOEs,” said Ray.

Both Tencent and Alibaba leapfrogged longtime leader China Mobile, which had held the top spot since the ranking was launched in 2011.

“Consumers worldwide have been increasingly accepting Chinese brands, because they see them as meaningful and dynamic and not just because they are well-known,” said Wang from Millward Brown.

“Five years ago the top 5 brands were all SOEs, whereas three of this year’s top 5-Tencent, Alibaba and Baidu-are market-driven, and together the three represent around half (48 percent) of the value of the top 10, led by Tencent which nearly doubled in value in the past year alone.”

BrandZ is the world’s largest brand equity database conducted by Millward Brown, the world’s second-largest market research organization based in New York.

Millward Brown began the project five years ago with a ranking of the top 50 most valuable Chinese Brands, and expanded to 100 brands last year to more fully examine the rapid emergence of China’s valuable brands across 21 categories of products and services.

The report also said that between 2011 and 2015, market-driven brands in the BrandZ Top 50 Most Valuable Chinese Brands appreciated 278 percent in value, while the brand value of SOEs grew just 6 percent.

The disparity illustrates a global trend reshaping many national economies, said the report. The difference in China is that these large cap corporations are government-owned or controlled, and within this ownership structure, SOEs have recognized the imperative of effective brand building for sustained success in China’s rapidly evolving economy, it said.

According to Ray, the 2015 ranking also illustrates a rapid rise in the brand value of technology and tech-related retail brands.

Technology companies have become brand powerhouses, and as a result the technology category has now surpassed financial institutions as the highest value category, with $106.9 billion, contributing 23 percent of the top 100’s total value, according to the report.

“The technology brands, Tencent, Alibaba and Baidu, which are also market-driven brands, comprise almost half the value of the top 10,” he said. “In the 2014 BrandZ China Top 100, market-driven brands made up only about one fifth of the top 10 brand value.”

Due to the value growth of these three market-driven brands, 70 percent of the total brand value of the BrandZ China Top 100 2015 is concentrated in the top 10, which increased 28 percent year-on-year, according to the report.

The combined value of the three technology brands, Tencent, Alibaba and Baidu, produced over one-third of the total value of the BrandZ Top 10 Most Valuable Chinese Brands 2015, it said.

Although the debut of Alibaba in the BrandZ China Top 100 influenced the sharp year-on-year rise in the technology category value, the value of technology brands has increased steadily over the past five years compared to other categories.

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