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China's Urban Middle Class Moving from Price to Premium
USAgNet - 03/21/2017

BrandZ Top 100 Most Valuable Chinese Brands hit record levels in 2017, growing 6% to reach $557.1 billion in brand value. The WPP and Kantar Millward Brown study shows that technology, banks and telecom providers led category brand value contribution from the world's second-largest economy. Technology player Tencent remains China's most valuable brand, growing its brand value 29% to $106 billion.

As China pivots to a consumption-led economy, the most impressive performances have been posted by brands providing products and services for the urban middle classes. Education and travel agencies were the fastest-growing sectors, up 46%, although the much larger categories of technology and retail showed far higher increases in dollar terms, up 16% to $163.7 billion and 22% to $74.2 billion respectively.

The need to provide for the aspirations and growing sophistication of consumers in China has changed the competitive dynamic for many brands. Many have now reached the limits for penetration-led growth and are instead focusing on premiumization - the desire to access new, more distinct products and services - as a better way to attract wealthier, middle class consumers. The success of this strategy can be seen from Top 100 newcomer travel agency brand Caissa (no. 79), which has identified a niche market of travelers looking for a more refined experience.

Technology brands continued to lead the way, with Tencent strengthening its hold on the no. 1 spot thanks to the popularity of social media platform WeChat, while other sector players also performed strongly. Tencent was also one of three technology brands in the Top 20 Risers listing, reflecting the centrality of this category to Chinese life and their advanced adoption of consumer technology.

Alongside Tencent were Sina (no. 61) and NetEase (no. 31). Web portal Sina's initiatives in live video and self-broadcasting through its Weibo platform helped to build its following among young people and attract advertising revenue, driving a 43% rise in brand value to $900 million. NetEase, a maker of online and mobile games, and a major e-mail service supplier, grew 36% to $2.6 billion. Digital technology now plays a part in every facet of daily life and newcomers to the listing such as e-commerce brand VIP.com (no. 40) and fast-risers like Sina and NetEase reflect this.

While they continue to be large contributors to the overall brand value, sectors that are still dependent on the traditional economy such as banks, insurance, and oil and gas categories have declined 6% in value. The exceptions are alcohol and food and dairy, where marketing activities by individual brands helped curtail the overall decline. Several brands of baijiu, China's traditional rice wine, for example, expanded distribution and adjusted pricing and marketing to reach a broader audience. This allowed them to make up for a decline in sales after government measures to limit extravagance at official events reduced demand for alcohol, especially premium brands. Moutai increased 41% in value, entering the top 10 for the first time at no. 9.


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