The NBA Finals are under way in North America and the enthusiasm in China has been palpable. Basketball is hugely popular in China and the appearance of Toronto Raptors player Jeremy Lin in the second game added enthusiasm. Jeremey is the son of Taiwanese immigrants and has been adopted as ‘one of our own’ by the China fan base.
The growth in the popularity of basketball has not been through chance, but rather a carefully developed plan by the NBA to reach out to the 1.4bn population. 1994 was the first year that the Finals were screened live in China, but the viewing figures exploded in 2002 when Yao Ming signed for the Houston Rockets. It was estimated that more than 200 million people in China watched his first game against an LA Lakers team that included the legendary Shaquille O’Neal.
The popularity of basketball has been developed through a 2014 partnership between the NBA and the Ministry of Education of China to incorporate fitness and development programs in schools throughout the country. This initiative ties in with the objectives of President Xi Jinping to develop a national plan for improving the nation’s fitness, with the aim of having over 400 million people regularly embracing physical exercise by 2020.
Whilst the players and the teams dominate the sporting headlines there is also fierce competition between the sports brands who want to capitalize on the market opportunity, including the Chinese brands Li Ning and Anta Sports. The company Li Ning was founded by the eponymous Chinese Olympic gymnast and has been a sponsor of various NBA players, arguably the most popular being Dwyane Wade, who had a successful career with Miami Heat and wore the Way of Wade (WOW) shoe. Note the Li Ning ‘swoosh’ logo on the right shoe below!
Aubrey are currently investors in Li Ning and the growth outlook has been supported by the company’s successful product development and category expansion, including the more fashion-oriented apparel and shoes. Anta has also enjoyed domestic success but relied more on an acquisition model through the FILA brand and recently completed the purchase of the Amer group of brands as part of a consortium. Nike and Adidas are prominent in the major cities and will remain aspirational throughout wider China, but consumers are price conscious and we believe the quality of product, and improved brand awareness of Li Ning in particular, will continue to support our growth expectations.
The Chinese consumer is not blind to the media headlines on the tariff dispute, but as the photo from the Nike store in Shanghai illustrates consumer enthusiasm for sporting brands and team loyalty can conquer politics.
Product sales are one of the obvious beneficiaries of increasing exercise and sports enthusiasm. However, as we have seen in the US and Europe in particular, the opportunity for additional industry development such as media, gym membership, and nutritional products is significant.
Unsurprisingly in China, media is the obvious winner with the ubiquitous use of mobile handsets being well documented. Tencent signed a deal with the NBA in 2015 to provide game highlights, along with additional content and services, to their 900mn daily users. Another of the social media giants, Weibo, has a similar deal for their 400mn daily users.
Whilst the Government enthusiasm for improved healthcare and exercise may seem an obvious driver of consumer behavior, we would argue that this adoption reflects the stage of economic development with consumption now contributing over 55% of country growth. The wider population has increasingly voiced concerns on issues such as pollution through social media, and continues to buy health supplements and vitamin products, and embracing exercise is another extension of this regard for wellbeing. Be aware, the athleisure apparel style and essential yoga mat accessory will be a common sight in urban China soon.
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