I found myself in the US in the dying days of the last era, the one pre Covid. As is the way with conversations that take place contemporaneously with a memorable event, one that I had with a couple of investors in Dallas in late February 2020 has stuck in my mind. They had heard it said that brand development was a more difficult process in Asia than it is in the developed markets. And that this was particularly the case in China.
I begged to differ. Some brands in the west are certainly much more powerful than in Asia but then they have had a hefty head start. But the potential for Asian companies to close that gap is clear to see. So too in China. As well as the big PRC eCommerce companies, we discussed two of our other Chinese holdings – Li Ning and Proya Cosmetics – both of which are building impressive brand awareness.
I was intrigued to know where my audience had picked up this notion. They were discrete but the idea had been suggested to them by a US fund manager who specialised in brands. Funny that. Reminiscent of the view that you can only be a successful investor in China if you are Chinese – another inexactitude perpetrated by certain fund managers with a vested interest and “boots on the ground”.
This year marks the 100th anniversary of China’s most powerful brand – the Chinese Communist Party – begins today. As celebrations begin today, I thought it might be worth revisiting the concept of brand loyalty and examine how this is progressing.
It seems clear that our confidence in the accelerating power of Chinese brands is being justified as several Chinese product lines begin to threaten the household names produced by more established Western companies. A recent article in the Financial Times (https://www.ft.com/content/25ab5f9f-0cf9-4c2b-aed6-990aff95c34c) highlighted online sales during the last Singles’ Day: Genki Forest quenching more thirst than Coca Cola, Babycare changing more babies than Pampers and Perfect Diary painting more faces than Maybelline. Even Three Squirrels (a snack food business) remembered where they had buried their nuts at the expense of Nestle. The results from other eCommerce jamborees have been similar.
There are signs that plentiful venture capital allied to fast moving supply chains is aiding the process in favour of the local producers. Pricing clearly plays a part as does patriotism in giving the “Made in China” slogan a boost in sales (we wrote about this last year Made in China 2025).
We continue to hold Li Ning and Proya but several of our other stocks also benefit from growing brand awareness.
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A version of this article was published in International Investment
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