China has been on a buying spree of late, and not just for Swiss agribusiness giant Syngenta. ChemChina’s acquisition has been forced to share the headlines with a remarkable shopping binge by China’s top football clubs, with interesting implications for the country’s sports apparel manufacturers.
Teams in the China Super League (CSL) have spent nearly $300m on transfers during the current window, according to transfer tracking site Transfermarkt, including Jiangsu Suning’s big-money purchases of Brazilians Alex Teixeira and Ramires. The total bill exceeds that of England’s Premier League during its January window.
Big money has been flowing through Chinese professional football for years — not all of it legal — but the imprimatur of Xi Jinping has breathed new life into the Chinese game. This originates in an October 2014 decision by the State Council to expand the Chinese sports industry from Rmb400bn ($62.6bn) in 2014 to Rmb5tn in 2025. But the Chinese president also loves the game, hence a top-down policy that includes boosting the total number of elementary and middle schools that include football in their curriculum from roughly 5,000 at present to 20,000 by 2020 and 50,000 by 2025.
This policy, part of a broader push to boost the domestic sports industry, has clearly benefited international stars such as Alex Teixeira and Ramires, but global sportswear giants are also likely to cash in: China has been a boon for companies like Nike, which has defied widespread angst about the Chinese consumer slowdown with strong sales and profits in the country. In 2009, the Oregon-based company signed a $2bn, exclusive 10-year deal to provide equipment to the CSL. Its decision may be validated by signs that high-quality players — rather than just those on the cusp of retirement — are now willing to play in the Chinese league.
But smaller domestic brands are also set to benefit. Fujian province-based Anta may not have a seat at the sponsorship top table but it is positioning itself to benefit from a groundswell of football-related activity in lower-tier cities.
In a proprietary brand survey conducted by FT Confidential Research, a research service from the Financial Times, Anta was China’s third most popular sportswear provider, and scored particularly well among lower-income households. In third-tier cities, 11.3 per cent of respondents named Anta as one of the two sportswear brands they most frequently buy, on par with global giant Adidas. Among respondents with annual household income of under Rmb100,000, Anta was chosen by 11.4 per cent, more than chose the German brand.
This popularity pattern could be a boon: Anta is catering to the estimated 520m people living in China’s smaller cities. The selection of football boots sold online by Anta top out at Rmb239 a pair — Nike’s cheapest pair starts at Rmb279.
Anta’s football strategy is focused on the grass roots. It is investing in marketing and tie-ups with provincial governments and local football coaching programmes. In Jiangsu, the eastern province where the Brazilians now play, Anta has formed a strategic partnership with the provincial government sports administration to establish the Jiangsu Youth Soccer League, which is expected to hold 200,000 matches involving 1,000 elementary schools, as well as training camps and tournaments.
Nike and the big brands may have a lock on the commanding heights of international football, but there is still plenty of room for smaller players, such as Anta, in the lower leagues of the Chinese game. Investors recognise this: Anta shares are up 68 per cent over the past two years against a more than 40 per cent drop in those of domestic competitor Li Ning and an 11 per cent drop in the Hang Seng. Anta shares have also outperformed Nike’s by more than 10 percentage points over that period.
David Wilder is Principal, China at FT Confidential Research.
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