Now that the Olympics have ended everyone is talking about the “China” brand and how the Olympics will affect it worldwide. Many assume that Chinese brands that have been present at the event will have a great return in terms of brand awareness internationally.
We partly agree with this statement, as certainly having broadcasted national brands to an audience of million people is a great branding exercise, but we still believe that the brands that are going to benefit the most are the one that have invested beforehand into brand building in face of international competitors.
In fact, there are still a few but very pressing problems Chinese brands have to deal with before being able to take full advantage of the positive influence the Olympics are bringing about.
It is no news to say that the “Made in China” label is often associated with brands of poor quality and low value. Even though the Olympics showed a highly developed China, this moniker still weights on the locally born brands. Just think about the recent product recalls that have brought consumers to become even more skeptical about buying products manufactured in China. Not to mention the influence the current milk powder crisis will have on the “China Brand” both at home and abroad. Tsingtao, for instance, have had almost a fatal blown when the barley grown in China was found to be heavily polluted with pesticides making it unsuitable for use. Consumers only started to gain trust in the brand after Tsingtao began to import its barley.
Secondly, Chinese brands seem to have been relegated to niche markets and have failed to expand. Looking again at Tsingtao we can see that the brand has been in the US market for thirty years but has been unable to break out of a niche of only 0.04% of the market.
The problem here is that Chinese brands tend to lack of a definite brand identity.
In an effort to expand to a larger consumer market Tsingtao went through a major redesigning process in 2007 aimed at supporting more effectively the brand positioning. The new design revolved around the bottle label, thought to be more contemporary while still maintaining the signature pagoda medallion and red and green color pallet thought to be representative of the "Asian cool," or the fusion between time-honored traditions and the cool aspirational culture of the Western world.” Still, as the brand re-design have not been associated with a strong definition of what the brand stands for, Tsingtao still find itself stuck in a niche market.
Stressing the Chinese heritage cannot by itself differentiate the brand enough to make it successful in the long run. Furthermore, Tsingtao has very limited visibility outside of Chinese restaurants and grocery stores which make the search cost too high and reduces considerably the brand capacity of winning new brand loyalist. So what can make Tsingtao unique?
Tsingtao has something different than other Chinese beers: it was founded by a Germany company. Some suggest that the Chinese brewery could brand itself as a “Chinese German” beer thus borrowing from Germany’s strong reputation for beer. Though this may not be the be all and end all suggestion Tsingtao has to figure out what will differentiate itself from its competitors other than their Chinese heritage which so far has not proven to gain them a higher market share.
If Tsingtao doesn’t make enough of an example, look at Haier. By being associated with low quality refrigerators Haier is having difficulties breaking out of the low cost compact refrigerator segment targeted to college students. Haier has been selling low price and has not spent many efforts into building a strong international identity. Without brand recognition Haier is unable to enter the high end segment in America because it is all about brands in the upscale market. After all, it is just normal that those people buying a two-thousand dollar refrigerator would choose GE over the brand that makes low cost refrigerators. In a market where products look increasingly similar it is vital to have a strong brand to get your product off the shelves and into your customer’s homes. Haiers association of low quality products and their lack of strong marketing capabilities leave them a relegated market share.
As Chinese brands move from being low cost Original Equipment Manufactures (OEMs) to creating their own strong global brands they have realized the importance of brand building. However, creating strong, valuable brands will take a long time. Overcoming the association of cheap and poor quality can not be changed with the snap of fingers. Furthermore, as new companies or other countries start to capitalize on low production costs, Chinese brands realize that they can no longer use their low price advantage if they want long term success in the international market. After all there is more to a brand than just a cheap price tag.
“A product is something that is made in a factory; a brand is something that is bought by a customer” says Peter Schweitzer the president of J. Walter Thompson. China is used to manufacturing products for exports but as they start making more and more products for themselves they then can offer more than just a low price. A brand is not created by only using a low price advantage. The consumer who bases his purchasing decision only on the price is generally not loyal to the brand and most of the time does not even know the brand name.
The Road Ahead
Chinese companies have become successful by entering less developed markets first which helps gain brand awareness before entering mature markets. This allows companies to understand the international market in a less competitive environment and comprehend how their brand is perceived in different countries. Yin Tongyao, CEO of Chery, is very vigilant when going overseas. Tongyao’s philosophy is “We always start small. If this works, we’ll increase our investment. You always need a nurturing period if you want to take root in a local market, so I don’t expect exceptional sales in any country.” Building a brand is a very expensive and time consuming endeavor but it is vital for Chinese companies to invest.
The 2008 Beijing Olympics has been the opportunity for Chinese company’s to showcase their brands. For Instance, Beijing Urban Construction Group hopes for their 19 Olympic related facilities to have gained worldwide publicity causing foreign companies to come to them for new contracts.
Tsingtao has been the official domestic beer sponsor of the Olympics. This opportunity has gained Tsingtao tremendous awareness internationally but only time will tell if this will be enough for them to gain a stronger market share internationally. As Tsingtao’s brand campaign is heavily associated with Chinese culture they have planned that while watching the Olympics a bottle of Tsingtao was to be in hand. The Olympics have also marked their one hundred year old anniversary – lucky coincidence to make them able to display to the world their strong Chinese heritage and associate the brand with the Olympics values.
In the increasingly competitive global economy the role of the brand has never been greater. Chinese brands are learning how to position themselves internationally. By looking at Tsingtao, Chery, Haier, and the Beijing Urban Construction Group we see that these companies are successful by ensuring that their products sent overseas are of highest quality, starting small when entering markets overseas, creating brand designs that translate well over many different countries, and using their Chinese heritage in their brands image. It is no doubt that it will take Chinese companies time to gain brand recognition but by continuously managing and creating brands that are strongly differentiated, Chinese companies have a real good shot to become major players in the international market.
