Olympic Games: Boost for Chinese Sporting Goods Brands

The Chinese government is consciously supporting the deal: last year it presented an ambitious plan according to which the Chinese sports sector is to grow to five trillion yuan, the equivalent of almost 700 billion euros, by 2025. That would be 70 percent more than in 2019. This would make up more than three percent of China’s gross domestic product forecast by the IMF for 2025.

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For years, the state leadership has been trying to encourage the increasingly obese Chinese population to exercise more. People’s health is “an important part of building a modestly prosperous society,” said President Xi Jinping. By 2025, at least one in three Chinese should exercise regularly. According to experts, people in China’s smaller megacities from the second and third tier in particular still have some catching up to do.

So far, factories for sneakers, sportswear and balls have provided a large part of the sales in the sports industry – from which foreign manufacturers such as Adidas in particular have benefited. If China’s state economic planners have their way, in future the local population should not only buy more Chinese sportswear and fitness equipment, but also attend sports courses and fitness studios.

This should not only make the Chinese fitter, but also trim the growth of the Chinese economy with their money. Because stronger domestic consumption makes the country less dependent on exports and debt-financed infrastructure investments. The Chinese are currently investing significantly less in their fitness than US consumers.

The Chinese market is becoming more difficult for Adidas and Co

Despite the targeted growth, the market for non-Chinese sporting goods manufacturers has become more difficult. Last spring, China’s state media and social media users had at times called for a boycott of certain Western brands. The sustainability-oriented industry association “Better Cotton Initiative” had announced that it no longer wanted to source cotton from the western Chinese province of Xinjiang due to the human rights situation. As a result, sales of members of the initiative such as Adidas and Puma fell significantly in the Chinese market.

However, the concrete consequences for the 2021 financial year will only become apparent when Adidas presents its figures at the beginning of March. For the coming years, the world number two had set itself the goal of achieving a double-digit increase in China every year and conquering further market shares in the process. China is thus still the most important growth region for the brand.

However, the western corporations on the Chinese market are increasingly facing competition from domestic sporting goods manufacturers such as Anta and Lining. Above all, Anta trusts industry expert Jost to play an important role on the world markets in the future. The company has risen from being a contract manufacturer to become the third most valuable sporting goods manufacturer in the world, measured by market capitalization.

According to Jost, the brand itself is not particularly positively charged. However, the Chinese group has significantly strengthened itself with the takeover of the Finnish Amer Sports Group.

Anta is omnipresent in the coverage of the Olympics on Chinese state television. Even the moderators wear the logo of the Olympic sponsor as a pin. IOC President Thomas Bach shows up with a coat from the Chinese outfitter.

And the Canadian outdoor brand Arc’teryx, which President Xi kept warm at the opening ceremony, has also been part of Anta since 2019. Atomic, Salomon, Wilson and Peak have also been part of the brand portfolio since the Amer takeover.

Chinese sporting goods manufacturers are gaining market share

Industry expert Jost recalls that when he first came to China in the early 1990s, the Chinese suppliers hardly played a role. But now Adidas, Nike and Co. have to take their domestic competition very seriously. “Chinese providers will continue to make progress in the coming years,” Jost is convinced.

However, according to Jost, this is happening under conditions that are sometimes questionable in terms of human rights. After Western fashion brands criticized the production conditions in Xinjiang, which has now largely died down, Anta announced that she would continue to “buy and use cotton from China”.

Before that, Anta was China’s leading domestic sportswear brand. However, the company’s commitment to cotton from Xinjiang has brought additional demand. The company has gained market share, especially compared to Adidas. In mid-January, it increased its profit forecast for 2021. A record increase of “no less than 35 percent” compared to the previous year is expected. In an earlier financial report, customers’ increased interest in domestic brands was cited as the reason for the positive sales development.

For a successful international expansion, however, the Chinese group would have to hire western top managers in order to be able to better understand and serve the world markets, believes industry expert Jost. However, global growth is not one of the core goals of the current corporate strategy, which will run until the middle of next year.

Despite all the problems, Jost also believes that Adidas, Nike and Puma can continue to play a leading role in the Chinese market. The brands are still strong. “I’m not worried about that much.” But the competition with Chinese providers is becoming even more intense.

Nevertheless, foreign manufacturers are increasing their involvement in the Chinese market. In the run-up to the Olympic Games, winter sports brands in particular have expanded their presence in China. The Munich-based luxury sports brand Bogner founded a joint venture with the large Chinese clothing chain Bosideng in December. Together, the companies want to set up digital sales in China and open around 80 stores over the next five years.

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