World domination is in hands of China
I’ve decamped to Melbourne, my second home, where I have been hanging out with the in-laws, avoiding the British winter and spending long, sun-filled days at the Australian Open.
I couldn’t get tickets for the great Andy Murray disappointment but I was courtside for the women’s final between Kim Clijsters and Li Na on Saturday night.
The tennis was gripping, but the real story was what you could not see on your TV screens. By my count, about 15% of the Rod Laver Arena was Chinese. Red flags flew all night and the Melbourne air was sporadically filled with enthusiastic chants in Mandarin. Tennis is still a low-profile sport in China but one with much potential thanks to early Chinese success from players like Na and a pre-existing love of sports like badminton and table tennis.
Despite its “limited appeal” in China, let’s remember what that means in the context of 1.3 billion people. The Chinese government estimates that barely 12 million people play tennis regularly. That may be a small number in China but bigger by some margin than the whole population of Belgium - the home country of Li’s victorious rival on Saturday. Imagine where that figure might be in a few years. And now imagine the potential for tennis brands if the sport really takes off in China.
This is much more than the start of the Chinese Year of the Rabbit, this is the beginning of the Chinese century. And as the sleeping giant awakes and its consumer population begins to evolve and mature we are only beginning to get a sense of the businesses and brands that will benefit most from the Chinese consumer revolution.
If you are lucky enough to be a leading global brand in a newly popular category in China, you cannot go wrong. Such is the size and potential of the market to come. Take, for example, the Chinese love for Kentucky Fried Chicken. The brand already operates 3,200 restaurants in the country and plans to quadruple that number in the years to come. Even with its existing base, KFC now derives more profit from its Chinese operations than it does from all its US restaurants - despite operating three times as many outlets in its home country.
This is much more than the start of the Chinese Year of the Rabbit, this is the beginning of the Chinese century
And the potential for further Chinese growth remains so huge that Yum, KFC’s parent company, is divesting several of its smaller US restaurant brands to focus money and resources growing KFC in China. In a statement about the sale, Yum said that it is “sharpening its long-term growth focus on building leading brands in every significant category in China.”
However, just as cultural and domestic palates favour KFC, they are less impressed with McDonald’s. The result? KFC is outselling McD’s three to one this year in the world’s biggest fast food market.
The Chinese sword is double edged. When China does not take to your brand, the implications can be just as huge as when it does. Just ask Google how it feels about being number two in the world’s biggest market for search. And let’s not forget, among all the hullabaloo about Twitter and Facebook back home, that neither is allowed to operate in China.
But perhaps China’s biggest marketing influence will be on luxury brands. The country’s insatiable desire for ultra-premium products combined with sky rocketing salaries and a love of status means that many luxury brands already count China as their biggest single market.
Despite the crisis of 2008 and the subsequent gloomy climate across London, New York and much of the Western world, China’s growing infatuation with luxury has ensured that all the major luxury goods companies are enjoying remarkable success.
LVMH, Gucci Group and our own Burberry have all recorded sensational results for 2010 and rumours continue to circulate that Prada will list on the stock market this year thanks to its unprecedented growth in China. Even more sensationally, the Italian luxury house is likely to float not in Milan, but in Hong Kong - another indication of China’s growing centrality in the world of luxe.
The only thing the Chinese love more than Western luxury is, unfortunately, Chinese brands. In a recent survey of Chinese consumers more than 50% of the top 100 brands preferred by the Chinese were domestic. And while the top 10 most desired brands included the usual suspects like Coca-Cola and Carrefour, it also featured brands that most British marketers have yet to encounter, such as Master Kong, Huiyuan and Tencent QQ.
History teaches us that while countries often begin their journey into consumer culture with consumption, the production and export of their domestic brands soon follows. Long before US brands dominated the British consciousness, our forefathers regarded the new colony as a market of enormous potential. And history is about to repeat itself. The Chinese century might have begun with a KFC banquet in Beijing, but it will end with Master Kong being consumed in Milton Keynes.