Fun with Data – China Brand Value

Fun with Data – China Brand Value
​

Chinese brands are often maligned outside of the mainland as offering low quality goods that undercut ‘quality’ global products.  They are further  criticized for being produced under government subsidy support that reduces their financial profitability burden, giving them a competitive edge, yet consumers seem to crave goods produced in China.  China’s manufacturing value is the highest globally and China’s vast workforce is also the largest in the world, however when one evaluates the top brands globally[1], China has only one company in the top 10 in 2024and none in 2023.


[1] Kantar Survey 2023-2024, Interbrands Survey 2023 - 2024

For many years China has been known as the world’s OEM/ODM and has paid considerable attention to building that manufacturing base and far less attention to branding.  While in some circumstances “Made in China” is considered a negative, that logo also tends to indicate potentially lower priced goods, manufactured at low cost and highly competitive on a price basis.  However, for many goods, the quality issue is almost immaterial and price is the driver.  Would there be a quality issue that would push consumers to a higher cost product when it comes to plastic tableware or fast food giveaway toys?  Likely not, but that shorter-term manufacturing focus on cost over brand has kept China from capturing global brand awareness.
There is also the perception that products made in China are ‘junk’ or dangerous, a perception fostered by competitors who cite recalls and poor quality products.  As the quality issue is subjective, we focus on recalls to get a better understanding of the validity of the claim.  We accessed global and country-by-country recall data for the years 2015 to 2022, however comparing country-by-country recalls makes little sense without considering the manufacturing value of the country, so we matched that data to each country’s manufacturing value.  While China might have more recalls/year than Germany, China’s manufacturing value is 5.7x that of Germany, so we adjust the yearly recall number to each country’s manufacturing value.  This generates an adjusted value that reflects a more realistic view of product recalls.  From that perspective, China ranks below Turkey and roughly equal to both France and the UK over the 5 years between 2018 and 2022, debunking the recall myth.

---

Figure 1 - Consumer Product Recalls - Adjusted for Manufacturing Value - By Country - Source: SCMR LLC, CIA Worlds Factbook, The Global Economy

China does have other issues that have prevented the country from developing global brands, one of which is a lack of cultural identity.  China’s authoritarian government and the positions it presents and represents to the outside world are dominant when compared to the country’s cultural history and only in the last few decades has the government acknowledged the richness and longevity of China’s cultural history.  When compared to countries like South Korea, where music, film, and television have developed into a distinctive style, China is better known for food than its culture or lifestyle.  This shallow view of China limits its perception as a driving force in the consumer world and only in the past few years have Chinese consumer companies become known globally.  Some of these companies are both large and have been in business for many years, however once they breech the shores of China, they have to compete with the iconic brands shone above.  We have no doubt they will do so successfully over time, but while everyone in China knows Apple (AAPL) or McDonalds (MCD), few in the US are familiar with Tencent (700.HK or Alibaba (BABA).  When comparing sales for the last 12 months of the top 5 global consumer companies and the top 5 consumer companies in China, it is easy to see that the lack of sales outside of the Chinese mainland is a  major factor

The US market is an important one for consumer companies, with between 35% (Samsung) and 61% (Amazon) of sales[1] coming from the region for the top global retail companies in the lists.  Chinese top 5 list members’ home country sales range between 55% and 97%, but trade and geopolitical issues continue to block Chinese consumer companies from accessing the US markets, while many of the global top 5 are already well established in China.  Chinese consumer companies continue to reach outside of China to gain continued growth, but are forced to limit exposure in the US, pushing them to establish footholds in other regions where they can develop recognition without the barriers they see in the US.  If they are successful in developing those ties, they will have ample opportunity to expand and begin to compete more globally.  It will be a bit more difficult without the US market, but Chinese companies are resolute in building their brands wherever they can.  A strong global economy would make that process easier, while the lack of governmental support for off-mainland business is an offset, but we expect if the US remains blocked, as we expect it will, the Chinese government will join the battle a little more aggressively to capture global share and standing.


[1] Can include US and other countries in North America.