Sponsorship deals with foreign leagues, athletes key to branding for Chinese sports companies

Chinese sports companies focus on sponsorships

BEIJING — The newest sponsor of women’s tennis is a half-billion dollar sporting goods maker that virtually no one outside of China has ever heard of.

Peak, which announces its five-year deal with the Sony Ericsson WTA Tour this week, is the latest cash-flush Chinese company to form a partnership with well-known foreign athletes, teams and leagues.

As with other such deals, the focus is on boosting brand image at home. In fact, shoes and other products from companies such as Peak, Li Ning, Anta and Xtep can hardly be found for sale outside the country.

The brands are targeting the burgeoning Chinese middle class, which has a growing interest in leisure activities and plenty of pocket money. The idea is that Chinese consumers will think more favorably about domestic brands and their international status when they see established foreign stars wearing the products.

“Right now we’re learning from Nike. We hope one day we can catch up and surpass Nike, of course that is our goal,” said 33-year-old Peak CEO Jim Xu. “But we’re different because we know China better than Nike, we have products that are better suited to the Chinese market … We can give consumers another choice.”

The Chinese sporting goods market is worth $6 billion and expected to grow 14 percent a year, according to the China Sporting Goods Federation. While Nike remains the market leader, homegrown brands are catching up, appealing in particular to consumers in smaller cities with modern looks at prices a fraction of those of the foreign competition.

China’s 1.3 billion potential fans are also irresistible to sports leagues and sponsorship deals give them a local partner in the market. The WTA points out there are 130 million Chinese interested in tennis and 10 million recreational players — double the number of those in France, an established market.

Even those figures belie the market’s potential. Despite the success of Chinese players such as Li Na and Zheng Jie, tennis is still a relatively new sport here. Audiences too are somewhat raw: During the 2008 Olympics in Beijing, local fans breached tennis etiquette by cheering during long rallies and sighing loudly over faults.

“We’ll suffer through the pains of having new tennis fans doing those sorts of things, I’d much sooner take a whole lot of young, new, energetic tennis fans over no fans,” WTA Tour President David Shoemaker said.

The strategy of boosting brand image through sponsorship of foreign athletes began in China with Li Ning, which signed its first top-level star, Shaquille O’Neal, in 2006. The company, founded by the Olympic gold medal-winning gymnast of the same name, now sponsors far-flung teams such as the Swedish Olympic delegation and the Spanish and Argentinian basketball squads — countries where its products generally aren’t available.

Anta sponsors athletes including top women’s tennis players Zheng and Jelena Jankovic, while Xtep has a partnership with Birmingham City in the English Premier League.

So far, the Chinese have been conservative and signed only established players in hopes of maximizing their investments.

“(The Chinese brands) want to minimize the risk as much as possible because this is new territory for them and they don’t want to get caught looking bad,” said Terry Rhoads, a former Nike executive who runs Zou Marketing, a sports marketing company in Shanghai.

Underscoring their underdog position, China’s most famous athlete, the NBA’s Yao Ming, has a sponsorship deal with Reebok.

Peak, known primarily for its basketball shoes, trails behind Li Ning and Anta in this cluttered market but has been making inroads, opening 1,027 new stores last year and seeing total revenue rise 51 percent to $456 million.

Already the official sponsor of the NBA in China, it boasts individual deals with 12 NBA players, including Jason Kidd and Ron Artest.

Peak’s deal with the WTA Tour is worth seven figures annually and includes cooperation on tennis festivals in China, a player apparel program, and revenue-sharing on a cobranded apparel line. Xu said it was part of an expansion strategy for 2010 that would include sales in other parts of Asia and North America.

“We just want to extend our brand name from basketball to tennis,” he said. “China is our top market. Signing deals with international sports competitions is to attain our goal of becoming more global and more professional. But of course the primary impact will be on the Chinese market and then the global market.”

The deal taps into an educated, high-income demographic with a game that has lifestyle and fashion angles, said Chris Renner, president of sports marketing firm Helios Partners China. It also gives Peak a new avenue for growth in the competitive market.

“It’s like trying to barge your way into a fancy club, there’s no seats left and you have to find a nice seat that fits. And the WTA is a nice one, it’s one of the few left out there that has prestige, fashion. It has a nice demographic and it gives you a nice story to tell,” Renner said.

Nevertheless, the challenges for Peak are stiff, according to interviews with shoppers in central Beijing.

“It’s an OK brand. A very common Chinese brand,” said a 26-year-old student surnamed Fang, who refused to give his full name as is common among media-shy Chinese. “It’s not comparable with Nike.”