Internet service company Tencent has become the most valuable Chinese brand for the first time, according to the BrandZ Top Most Valuable Chinese Brands 2015.
The valuation was carried out by Millward Brown Vermeer in conjunction with WPP. It combines financial data from Bloomberg and Kantar Worldpanel, with consumer opinions gathered from interviews with 23,000 Chinese consumers in 2014.
Tencent is now worth $66.1bn, according to the report, an impressive 95% increase in brand value since last year.
The total brand value of the top 100 Chinese Brands is $464.2bn, a rise of 59% since the ranking launched in 2011. This growth has outpaced that of the BrandZ Top 100 Most Valuable Global Brands (+41%), and has also surpassed the most valuable brands in Brazil (which fell 40% in value from 2011-2014) and Latin America (which have grown only 3% since the LatAm ranking launched in 2012).
Newly-listed online retailer Alibaba has entered the ranking in second place and has a brand value of $59.7bn. Both Alibaba and Tencent have overtaken long-time leader China Mobile, which had held the top spot since the ranking launched in 2011.
Brands from private enterprises – also known as ‘market-driven’ brands – dominate in terms of value growth, rising 97% since 2013, while SOEs, or state owned enterprises, declined 9%.
Whereas five years ago the top five brands were all SOEs, three of this year’s top five – Tencent, Alibaba and Baidu – are all market-driven. Together, the three represent around half (48%) of the value of the top 10, led by Tencent.
Retail, cars, technology are the fastest growing categories
Retail was the fastest growing category, with a remarkable increase of 3,827% due to the inclusion of new entrant Alibaba.
If Alibaba’s value contribution is removed, the category still grew by 64%. The car category grew 141% in value after new entrant Great Wall enjoyed success with its SUV sales, and technology increased its value by 78%, driven by consumers’ positive response to the creativity and innovation of brands in the category.
Meanwhile, lower economic growth in China and government policy changes contributed to a decline in seven categories including alcohol, apparel and financial institutions.
Five-year trends
Now in its fifth year, the BrandZ ranking of China’s most valuable brands shows evidence of a long-term trend: the rise of ‘market-driven’ brands and the relative slowdown among SOEs.
Looking at the top 50 brands over the past five years, the brand value of those that are market-driven has grown 278%, compared with 6% for SOEs. Currently, the total value of the top 100 is roughly evenly split between market-driven brands (47%) and SOEs (53%).
While SOEs remain key contributors to the ranking, and play key roles in China’s broader economy, their performance highlights the increasing competition SOEs currently face in the Chinese market.
Other key trends to be noted in the report include the convergence of technology and retail. Retailers are now adopting more technology as consumer’s shopping behaviour changes, partnering with tech brands to deliver digitalised products and services, mobile payment solutions and online to offline commerce solutions.
The growing global presence of Chinese brands is also hard to ignore. Two brands derived over half of their revenue from outside China in 2014: technology company Lenovo (+62%) and ZTE, the telecom equipment maker (+53%).
Innovation and creativity is flourishing. Brands are responding to increasing market competition, and the rising demand for innovation from Chinese consumers who are more sophisticated and better informed.
David Roth, chief executive EMEA and Asia at The Store, WPP’s global retail practice, said: “2015 marks the fifth year of the BrandZ China ranking, giving us a clear insight into how brands have strengthened during an extremely dynamic period. Those which have grown in value have constantly innovated, based on a sound understanding of rapidly evolving technology and consumer behaviour.
“Investment in brand, innovation and connecting with consumers will now be the critical success factors for brands operating in increasingly competitive categories.”
Doreen Wang, global head of BrandZ at Millward Brown, added: “Consumers increasingly accept Chinese brands because they see them as meaningful and dynamic, not only because they’re well-known.
“The big question now is what brands must do to be accepted in international markets. Success will depend on understanding consumers’ behavior and needs, integrating technology to improve the brand experience and playing on China’s unique identity to offer meaningful points of differentiation,” she added.
