Bold Ambush Marketing from Li Ning

In the new China, where entrepreneurship is a national sport, Li Ning is golden.

The man who lit the flame at the opening ceremony of the Beijing Olympics was previously unknown to most in the West. But in China, he is celebrated both for winning six Olympic golds in gymnastics at the Los Angeles Games in 1984 and because he founded Chinese sportswear giant Li Ning Co. Ltd., a US$6-billion enterprise by some estimates.

You could say Li Ning is like Michael Jordan, Wayne Gretzky and Mohammad Ali rolled into one package, with a dash of publicity and business guru Sir Richard Branson thrown in for good measure.

Like those other sporting heroes, Li Ning's fame has long outlasted his athletic heyday and, like Jordan, whose fame launched several million Nike Air trainers, Li Ning has used his sporting prowess to great commercial gain.

Indeed, it is his business that may make Li Ning a global household name.

While Li Ning Co. currently generates less than 1% of its revenue outside of China, his gravity-defying lap at the opening ceremonies in Beijing -- he was raised by wires high above the crowd and circled the stadium with the flame until he reached the cauldron -- was witnessed by a global television audience of four billion people.

The stunt -- pulled off in the face of official Olympic sportswear sponsor Adidas -- was exactly the sort of publicity coup that Mr. Branson has used to further his Virgin brand. And like Branson, Li Ning has shown that he is not afraid of the global big boys. Nike's swoosh logo looks like a prototype for Li Ning's stylized "L" brand, and his "everything is possible" tag line echoes Adidas' "impossible is nothing" tag.

So far, the company has been content to battle those brands at home. But even before his massive Olympic exposure, which some are calling a master stroke of guerilla marketing, there were signs Li Ning goods were headed abroad.

In 2006, the company signed up NBA stars Shaquille O'Neal and Damon Jones to wear Li Ning shoes. And in the run-up to the Olympics, Li Ning announced it had signed merchandising deals with the Argentine and Spanish Olympic basketball teams. The company this week played down the controversy over photos of the Spanish team using their fingers to make their eyes look Chinese.

And earlier this month, the company announced it had signed an exclusive deal to distribute high-end Italian sportswear brand Lotto in China. Li Ning also owns the French outdoor brand Aigle, though it recently disposed of another Italian brand, Kappa, signed in 2002. As well, Li Ning's executives conducted a European investor roadshow earlier this year to generate interest from international investors.

Despite the overseas connections, it remains to be seen whether Canadian consumers -- or those in any other country outside China -- will pop down to the local mall any time soon and pick up a pair of Li Ning gym shorts.

Li Ning is focused on the domestic market, says Ken Ho, an analyst with HSBC in Hong Kong. The company has ambitious plans for 5,000 new stores in China by 2013, doubling the number of outlets it owns. As well, the company "would consider acquiring or co-operating with international brands rather than expansion overseas," Mr. Ho adds. China is reported to be the world's fastest-growing market for athletic wear, and the company is expected to more than triple its revenue in the next few years, according to HSBC's estimates.

But brands with international ties are considered by some Chinese consumers to be more valuable. In Hong Kong, Li Ning products are currently available only in lower-end malls, whereas Nike, Puma and Adidas reside in more upscale shopping locales. Even on the mainland, Li Ning still lags foreign competition with a 10% share of the domestic sportswear market, compared with 16% for Adidas and 17% for Nike.

Immediately after last week's Olympic opening ceremony, the Chinese company's stock leapt 3.5% on the Hong Kong Stock Exchange to HK$18.24 on Monday, Aug. 11, from HK$17.24 at the end of the previous week. The rise put an end to a recent slide that had seen Li Ning's stock decline by about a third between May and early July. Although that early Olympic gain was not followed by a sustained rally, HSBC's Mr. Ho is "overweight" on the company's stock, with a HK$29 target price.

Source: National Post