With Xi in Its Corner, the Nike of China Wants to Go Global
Anta President James Zheng says his company will be China’s dominant sportswear brand by 2025.
(Bloomberg Businessweek) -- Chinese President Xi Jinping is rarely seen wearing clothes with visible logos. So when a state television segment in 2017 showed him in the ski town of Zhangjiakou—a venue for the 2022 Winter Olympics—wearing the national team parka, investors were riveted by the insignia on his chest: the red logo of Anta Sports Products Ltd.
Was it just a show of support for the games? Or a tacit endorsement of Anta, China’s emerging challenger to Nike Inc. and Adidas AG? Investors have voted for the latter: Shares of the Fujian-based apparel company rose 8% over the next two days. Revenue is up 80% in the two and a half years since.
China is expected to surpass the U.S. this year as the world’s biggest consumer market, but it’s yet to mint a global consumer megabrand of its own. Western companies still dominate the $43 billion domestic sports apparel market, where Nike’s share is almost 23% and Adidas holds 20%. Anta is third, with 15%, and few consumers outside China have heard of it.
Anta President James Zheng says his company won’t stay back in the pack much longer, predicting it will be China’s dominant sportswear brand by 2025. The rest of the world will get to know it, too, he says. One reason: Two years ago, NBA star Klay Thompson agreed to a 10-year, $80 million extension of his endorsement deal with the company. Although Anta’s suspended wider collaboration with the league, its relationship with Thompson hasn’t been affected by the NBA’s current fracas in China, and the KT5, the latest version of Thompson’s signature sneaker for the brand, gets a high-profile American release this month.
Domestically, the company has ponied up to sponsor the Chinese Olympic team and the Beijing 2022 games. Zheng declines to say how much the sponsorship cost but calls it Anta’s most significant investment ever. “The next two years will solidify our ability to be No. 1 in China,” he says.
Revenue will rise at least 20% a year during this “crucial period,” Zheng says. It will also test his faith in the power of Western, aspirational marketing. “It’s not just designing and making a nice pair of shoes,” he says. “You have to communicate to consumers what your brand spirit is, your culture, your values.”
Chinese corporate history has plenty of examples of consumer companies that tried—and failed—to use nationalistic sentiment and celebrity to unseat global competitors. Apparel maker Li Ning Co. Ltd. paid to outfit the Chinese national gymnastics, diving, table tennis, and archery teams before the 2008 Beijing Olympics. The on-air presenters for national sports broadcaster CCTV-5 also wore its Li-Ning brand. And company founder Li Ning, a gymnast who became a mainland sports icon after winning six medals at the 1984 games, lit the torch during the opening ceremony. The company’s shares quickly jumped more than 3%.
Yet more than a decade later, sales of the Li-Ning brand and the share price of its parent have collapsed, dragged down by executive turnover and too-rapid expansion. Its share of the local market has stalled at about 6%, barely holding off insurgent Skechers USA Inc.
Pascal Martin, a partner in Hong Kong with OC&C Strategy Consultants, says Anta seems better positioned to challenge the Western sporting apparel giants because it’s building a family of brands with reach far beyond China. He says the company has been bolstered by its recent $5.2 billion acquisition of Finland’s Amer Sports Oyj, parent of ski brands Armada, Atomic, and Salomon, as well as high-end outdoor gear company Arc’teryx and equipment company Wilson. “Anta is heading towards the Winter Olympics in much better shape than Li-Ning was in 2008,” Martin says. “With the winter and outdoor sports brands, it’s very relevant. Anta’s already in a better position to leverage the sponsorship.”
The Amer Sports deal and an earlier licensing pact to sell sportswear and shoes from the Fila brand, whose retro, thick-soled “dad sneakers” are enjoying a global renaissance, are part of a strategy to become what Zheng describes as “the LVMH of the sports world.” (The French luxury group owns scores of brands, ranging from Louis Vuitton bags to Rihanna’s Fenty clothing line.) The strategy runs counter to those of Nike and Adidas, which have been selling off sub-brands. Anta also has been bolstering its balance sheet and building its in-house marketing expertise.
For Zheng, who ran Reebok’s China operations before taking the reins at Anta in 2008, the established brands give the company time to build the kind of emotional connection to consumers that Chinese brands have traditionally overlooked. When Anta picked up Filipino boxer-politician Manny Pacquiao in 2016 after Nike cut him loose, Zheng praised his strong will and self-discipline as an embodiment of the company’s “Fight On” and “Keep Working” slogans.
Anta also sponsors Chen Penbin, who, after becoming the first Chinese athlete to complete an ultramarathon on all seven continents, is training with the nation’s cross-country ski team before the 2022 Olympics. And Thompson, who makes regular trips to China, has built a large mainland following. In 2017 a clip of him losing an arm wrestling match to a slight female fan went viral.
In addition to the coming Olympic cycle, the three-year-running U.S.-China trade war has made many mainland consumers eager to support local brands of all kinds; the furor over the NBA’s Hong Kong tweet saga could fuel that trend. Smartphone maker Huawei Technologies Co. shot up the ranks of brands most loved by Chinese consumers after the U.S. government precipitated the arrest of Huawei’s chief financial officer in Canada.
Nike and Adidas won’t cede China easily. “Nike is a brand of China, for China, and the results continue to prove it,” Chief Executive Officer Mark Parker said on the company’s most recent quarterly earnings call, pointing to “double-digit growth in Greater China every quarter for more than five years.”
The foreign roots of Western brands remain a huge advantage. “For a big swath of the Chinese middle class, there is a cachet associated with Nike and Adidas that give them an edge,” says Chan Wai-Chan, a retail partner at consulting firm Oliver Wyman. “There is an emotional connection and history that those brands rely on—for example, in re-releasing old sneaker models from their archives.”
Chinese companies have very little history to sell. Anta was founded in 1991, the same year Nike released its sixth edition of Air Jordans, and Adidas was already into a full-on reboot of its venerable EQT shoe line. Yet OC&C’s Martin argues that operationally, that’s not all bad: “Nike and Adidas came early to China, but that legacy is difficult to change and evolve,” he says. “Anta understands the Chinese consumer, they understand the online ecosystem really well, they have the shortest supply chain.”
Even so, Zheng says it won’t be easy. “To have a product story become a brand story and have that brand story be charismatic and resonate with Westerners, that’s still challenging,” he says. “We’re going to need time, and luck.” —Rachel Chang and Haze Fan
To contact the editor responsible for this story: Janet Paskin at jpaskin@bloomberg.net, James Ellis
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With assistance from Bloomberg