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Hungry PUMA
By DING QINGFEN (China Daily)
Updated: 2007-09-24 07:18
Gobbling up a bigger share of the Chinese market is at the heart of PUMA
AG's global expansion plans. And the company is also geared up for a turf
battle with rivals Nike and adidas in the lead-up to the 2008 Olympics.
In early September, Jochen Zeitz, PUMA's chairman and chief executive
officer, flew from Germany to Beijing to announce PUMA's marketing plan
for next year's Games.
Early next year, the company will launch PUMA Runway collection,
especially tailored for the Beijing Olympics, and will provide the
collection to 18 teams from Africa.
Of course, this is only a fraction of the company's aggressive China
expansion plan.
"In the long-term, China will be PUMA's largest market (in terms of
revenue) in the Asia-Pacific region and in the top three around the
world," says Zeitz, who refuses to comment on the sportswear
manufacturer's financial figures in China.
Besides Olympic marketing initiatives to strengthen brand image among
local consumers, Zeitz says PUMA plans to build up a larger retailing
network of around 1,200 stores in China by 2007, up from the 700 stores
today. The number of stores is expected to increase to 1,600 by 2008.
"PUMA's investment in China will be much more in the years ahead," Zeitz
says.
The local expansion plan comes after PUMA last year kicked off the fourth
phase of its worldwide "long-term oriented" business plan, which started
back in 1993 under Zeitz's leadership.
PUMA is clear about its expectations of Phase IV, or "company expansion",
which will be implemented between 2006 and 2009 in three different stages.
Category expansion is one of those stages. PUMA's categories will be
extended from soccer, running and motor sports into golf, swimwear and
sailing.
The other two stages are non-PUMA brand expansion and regional expansion.
Because of its large population and growing pocket books of urban
residents, PUMA is betting on success in China.
"There is tremendous potential in the Chinese market for us to earn more
share," Zeitz says.
PUMA expects Phase IV initiatives to boost its sales revenue, which is
expected to climb to 4 billion euors from 2.37 billion euors in 2006.
"Asia, especially China, will be the major contributor," Zeitz says.
A sporting lifestyle
For PUMA, the world's third-largest sportswear brand, earning a stronger
foothold in China won't come easy. It will have to fight against market
dominators Nike and adidas while fending off competition from Chinese
rivals, Lining and Anta.
Despite the Olympic marketing initiatives, PUMA has been lagging behind
the others in terms of leveraging.
Adidas spent huge to become an official partner of the Beijing Games;
Nike has signed sponsorship agreements with Chinese basketball, track and
field team and swimming teams; and Anta has long been involved in an
Olympic-oriented advertising campaign.
However, Zeitz believes PUMA is following a different route in
positioning and marketing itself: "We want to become the most desirable
sport-lifestyle company," he says.
Zeitz expects the idea of sport-lifestyle, which combines lifestyle and
fashion into sports value, could separate PUMA from the sports-oriented
brands, including Nike, Adidas and their Chinese peers.
"For the public, sport should not be what it used to be. It is not only
running, jumping or swimming. We could figure it out in a broader sense,"
Zeitz says.
"PUMA's customers include anybody who lives an active sport lifestyle,
who cares for individuality and who has a stylish and fashionable mind."
The recent friendly takeover by French retailing and luxury giant PPR
will likely provide PUMA with a shortcut to enrich the fashion and
lifestyle attribute of its brand.
In April, PPR snapped up a 27 percent share of PUMA for $1.88 billion,
and in July, PPR took a controlling stake (62.1 percent) of the company
at a price of 330 eruos per share.
"PPR is very supportive of our strategy," Zeitz says. "They are
considered a long-term investor. They are not only a financial
shareholder, they also provide valuable input. They are strategic
shareholder having expertise in areas such as retailing and fashion
world."
Local flavor
Zeitz's biggest concern about the Chinese market is how the company can
remain relevant to consumers.
"We must make sure our products, marketing and retail store designs are
in line with local tastes, so there can be qualitative growth in the
business."
Although the CEO says PUMA has local designs for Chinese consumers, PUMA
has only local distributors on the mainland and a branch in Hong Kong.
Its rivals adidas and Nike treat the local market more seriously.
In 1980, Nike set up a representative office in Beijing and in 1996 it
established a wholly-owned subsidiary in Shanghai and two branch offices
in Beijing and Guangzhou.
Besides its local offices, in 2005 Adidas launched Asia's first research
and development center in Shanghai.
But Zeitz says now is the starting point for PUMA's local strategy.
"There is more news to come."
Iconic leadership
Zeitz was appointed CEO in 1993 when PUMA was largely a dead brand. Since
then he has successively engineered a comeback, with market
capitalization up more than tenfold in 2006.
Zeitz has been crowned "Strategist of the Year" by Financial Times
Germany for three consecutive years.
The past 14 years has witnessed PUMA's worldwide restructuring under
Zeitz's leadership.
In Phase I of the plan, from 1993 to 1997, PUMA recorded its profit since
1986 and marked four-year profit growth.
In Phase II, ending in 2001, PUMA managed to position itself as a brand
that mixes the influences of sport, lifestyle and fashion, boosting its
research and development spending from two percent to four percent, and
marketing from 10 to 15 percent.
From 2002 to 2006, PUMA took the Phase III efforts, which increased its
brand desirability and turned the business into sustainable profits.
(China Daily 09/24/2007 page6)
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