Chapter 4 Status of China’s Advertising Market
4.3 Foreign & Domestic Famous Brands in China
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4.2 Advertising Expenditure of Enterprises
The advertising expenditure of enterprises in China is concentrated on the top companies, and the very top company, Procter & Gamble, increases its expenditure and leaps ahead of other companies in China.
According to the statistics of CTR, Procter & Gamble doubled its expenditure to US$1,085 million in 2006, which set the company in the top position in the list of biggest advertisers in China between 2004 and 2007. The next company was Uniliver with an expenditure of US$446 million, which was far less than Procter & Gamble.
Three companies, including Stone Group Holdings, the Lafang Group and the Arche Group exited from the list, and were replaced by the Harbin Pharma Group, Shanghai GBT, the Hayao Group and Coca-Cola. Half of the list of the top advertisers in China is made up of foreign companies, and even though the domestic Harbin pharmaceutical group took second place, the scale of its investment was two times less than the foreign company, Proctor & Gamble (Table 4-3).
4.3 Foreign & Domestic Famous Brands in China
In 1987, the Trademark Office of China identified the first foreign well-known trademark, Pizza Hut, and two years later, the first Chinese well-known trademark, Tong Ren Tang (同仁堂), the trademark of a manufacturer of Chinese medicine, was identified long before the regulation for trademark law was implemented in 1993 (Li, 2005).14Although Chinese enterprises are aware of the importance of brands, since the initial implementation, approximately 15% of domestic well-known trademarks
14 Tong Ren Tang (同仁堂) is a Chinese pharmaceutical company founded in 1669. It is now the largest producer of traditional Chinese medicine (TCM). The company is headquartered in Beijing, and is engaged in both manufacturing and retail sales, operating drug stores predominantly in Northeast China.
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have been registered in foreign countries, with more than 100 cases involving cosmetics, beverages, household appliances, clothing, culture, etc. Chinese officials issued a warning to domestic enterprises in 2005 to remind them to take active measures to prevent this obstacle in future international trading (Xinhua Net, 2005).
Table 4-3: China’s Major Advertisers by Expenditure:2004-2007
Advertiser
Source: CTR and Advertising Age (2006)
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After more and more sophisticated Chinese enterprises’ brands began to participate in the advertising market, the value of different brands was estimated by different standards with different results. For example, in 2006, when Business Week initiated the first annual ranking of Chinese brands, with the emphasis on brand contribution to business performance, the brand of China Mobile took a great leap forward from other brands in China at that time. In addition, the top 20 brands listed by Business Week included 6 Financial, 4 Telecom, 3 Alcohol, 2 Technologies, Properties, 1 retail, transport and electronic domestic companies. The brand of China Mobile generated RMB 283 billion, the Bank of China took second place with 82 billion, and the China Construction Bank took the third with RMB 68 billion (Table 4-4).
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Table 4-4: Best Domestic Brands in China:2006
Rank Company Industrial
Sector
Band’s Values (RMB Million) 1 China Mobile Telecom 283,000
2 Bank of China Financial 82,000 3 China Construction Bank Financial 68,000 4 China Telecom Telecom 32,000 5 China Life Financial 32,000 6 Ping An Financial 13,000 7 China Merchants Bank Financial 13,000
8 Moutai Alcohol 10,500
9 Bank of Communication Financial 7,400
10 Lenovo Technology 6,100
11 Netease Technology 4,500
12 Gome Retail 3,800
13 ZTE Telecom 3,400
14 Wuliangyi Alcohol 2,700
15 Air China Transport 2,600
16 ChangYu Alcohol 2,300
17 Vanke Property 1,600
18 Gree Electronics 1,500
19 CNC Telecom 1,200
20 China Overseas Property Property 1,000
Source:Business Week (2007)
Although local brands have great value, foreign brands continue to expand their value in major markets in China and perform as well as domestic brands. In China’s most modern and densely populated city, Shanghai, foreign brands accounted for 54.8% of best-selling brands in 2006, an increase of 2.2 % from 2005, the year the market share of domestic brands dropped to 45.2%, and the gap between domestic and foreign brands tended to widen (H.K. Trade Develop Council, 2006). The 25 most valuable brands in China listed by Fortune Magazine comprised 18 foreign brands and 7 domestic brands. BMW, Microsoft, Intel, Benz, Coca Cola, and IBM were the top 6
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on the list, and these were followed by Haier, Wuliangye and Kweichou, the top 3 valuable brands in Shanghai (Table 4-5). Some foreign brands have achieved the highest degree of identification by winning the greater favor of Chinese consumers, and in China, the top 3 identified enterprises are IBM, Volkswagen and Coca-Cola (China Today, 2004).
Table 4-5: Most Valuable Brands in China
Rank Brand Rank Brand Rank Brand Rank Brand Rank Brand
1 BMW 6 IBM 11 Moutai* 16 Motorola 21 Tsingtao
Beer*
2 Microsoft 7 Haier* 12 Airbus 17 Walmart 22 Pepsi
3 Intel 8 Nokia 13 Porsche 18 Boeing 23 Siemens
4 Benz 9 Wuliangye* 14 Audi 19 Google 24 Sony
5 CocaCola 10 Kweichow* 15 Lenovo* 20 Tongrentang* 25
Nike &
General Motors Note: * Domestic Brands. Source: Fortune (2006)
4.4 Top Advertising Media in China
The report of “China’s advertising industry top 10 selection” revealed in 2006 that CCTV (央視), Hunan Satellite TV (湖南衛視), Anhui Satellite TV (安徽衛視), Oriental TV (東方衛視), Focus Media (分眾傳媒), Narrow Ad (窄告網), Sohu (搜 狐), TOM outdoors, HTC Media (華鐵世紀), and Sina (新浪) comprised the top 10 advertising media in 2005 (CCW, 2006). In 2008, TV maintained its absolute superiority by demonstrating a 76% advertising market share, and print media advertisings comprehensively increased, especially in terms of newspaper advertisings revenue, which reversed from negative growth to 19%, magazine
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advertising grew more than 23% compared with 2007. However, the slowing trend of radio advertising showed an increase of only 7%. Apart from these positive situations, the overall amount was invested in outdoor media to accelerate the decline in its year-on-year negative growth of 10% (CTR Market Research, 2009). The top three foreign advertisers pooled their resources of more than RMB 500 million on TV commercials, and the top domestic advertiser, China Telecom, focused its advertising budget on newspapers, TV and out of home commercials (Table 4-6).