Global Economics

Don't Know Li-Ning? Ask Shaq


The Beijing sportswear company is giving Nike and Adidas a run for the money on the mainland, and its stock is up close to 300% over the past year

Not many people outside of China have heard of Li-Ning, but in the country's fast-growing sportswear market, the Beijng company is proving a serious competitor for the likes of giants Nike (NKE) and Adidas (ADSG.DE). While those two behemoths still dominate among Chinese consumers, Li-Ning is in third place, with market share just below the roughly 17% to 18% that Nike and Adidas have. That makes Li-Ning the top Chinese sportswear brand, slightly ahead of domestic rival Anta (2020.BE). The Hong Kong-listed Li-Ning has turned in a strong first half year: Sales are up 39.2%, to $255 million, and net profits surged 52.6%, to $26.4 million. The stock price is up almost 300% over the past year.

While Li-Ning only came in 15th in the BusinessWeek/Interbrand survey (BusinessWeek.com, 10/8/07) when it came to familiarity, it was rated 13th when marketing executives were asked which Chinese brands best serve "as an ambassador for China." (Fujian province-based Anta was not included among the 28 Chinese brands surveyed.)

That put it ahead of car company Chery—rated a top brand that is "already serious and recognizable"—as well as telecom equipment maker ZTE, auto companies Geely and Brilliance, and air conditioner manufacturers Midea and Gree, all rated as "contenders," and expected to become top brands over the next three to five years.

Teaming With NBA Stars

No doubt one reason for that good rating on "ambassadorship" is Li-Ning's successful marketing and branding efforts, mainly focused on sports sponsorship. Li-Ning spends about 17% of revenues on marketing annually, more than most Chinese companies. National Basketball Assn.'s Miami Heat center Shaquille O'Neal is the brand's top star, after having signed a five-year agreement in August, 2006.

While Li-Ning shoes aren't available in the U.S., the company figures that an alliance with Shaq helps to lure the growing number of NBA fans in China who follow the league. Li-Ning also has signed Damon Jones, a guard with the Cleveland Cavaliers. And while the company doesn't have Chinese superstar Yao Ming in its stable, it has signed Yao's Houston Rockets teammate, forward Chuck Hayes. And on Sept. 24, Li-Ning announced it will also sponsor top tennis player Ivan Ljubicic, the Croatian who was ranked No. 3 on the Association of Tennis Professionals tour last year and is now No. 12.

The Olympics figure prominently in Li-Ning's past and future. The Beijing sports company was founded in 1989 by former Olympics gold winner gymnast Li Ning, winner of three gold medals at the Los Angeles Olympics in 1984. Li, 44, continues to serve as chairman as well as head of business development, while 39-year-old Guanghua School of Management MBA holder Zhang Zhiyong now is CEO and runs the company's operations.

Riding the Wave of the Beijing Olympics

Investors include CDH China Holdings, a Beijing-based private-equity firm, and GIC Special Investments, the Singaporean government fund. Li-Ning now is counting on next year's 2008 Beijing Olympics to drive its branding efforts (BusinessWeek.com, 3/14/05). The company is sponsoring the medal-winning Chinese table tennis, diving, gymnastics, and shooting teams. And on June 7, 2007, Li-Ning and the Spanish government announced the company would be the official sportswear provider for the Spanish Olympic delegation at next year's games.

The year-long run up to the world's biggest sporting event clearly is key for Li-Ning. The company plans to add 700 new retail outlets in 2007 to its existing 4,300, and by the opening of the Olympics next August Li-Ning will have 5,600 outlets spread across the mainland. Those include directly-managed shops, concession counters, and franchised outlets. And in April it rolled out a new, lower-end sports brand, Z-do, including shoes, apparel, and sports accessories that retail from around $13 to $40, or about half the cost of its flagship Li-Ning products. Rounding out its brand offerings are products for its joint venture with French outdoor sports brand Aigle that the two companies launched in 2005.

While the Interbrand survey showed more international executives view Chinese brands as "cheap" and "a good value" than any other qualities, "youthful," "dynamic," and "smart" were the next three adjectives cited, all arguably well-suited for a sporting goods company. Indeed, the survey also showed that sporting goods, along with electronics, mobile phones, and automotive, was one of 10 categories where overseas marketing executives predict within five years "a Chinese brand will be a leader outside of China."

Credit Suisse Group (CSGN) analyst Catherine Lim cites in an Aug. 20 research report Li-Ning's "current portfolio of three brands, strong product development and research capabilities, and continued enforcement of control over its franchisee distribution channel and supply chain management," in giving China's sports player an "outperform" rating. Expect to hear a lot more from the nation's scrappy domestic sports brand in the coming year before the world's biggest sporting event opens in Beijing.


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