linked in facebook twitter rss

  • Interbrand
  • Brandchannel

your chance!
your chance!
Franchising in China - A Dead Duck?


  Is China's film industry overexposed?   Is China's film industry overexposed?  Edward Young  
Is China's film industry overexposed? The two main rivals – America’s Eastman Kodak and Japan’s Fuji Film – are aggressively building up nationwide networks of branded developing shops, blanketing billboards with advertising, and dropping prices in an effort to outdo each other and win the hearts, minds and disposable income of China’s increasingly affluent emerging middle classes. At the Chinese New Year in February, more and more people took advantage of the government-mandated weeklong holiday to visit family and friends, and go sightseeing. For the photographic film industry, ‘tis the season to be merry, with film sales peaking. But it is also the season of the stiffest competition.
During last year’s Chinese New Year, Kodak and Fuji faced off in a full-scale brand war for one of China’s most lucrative markets. Overnight, advertisements for Fuji Film on Shanghai’s packed subway were pulled down and Kodak’s bright yellow ads were put up in their place. Within the week, five Fuji stores in the subway had been re-branded by Kodak. But, Fuji fought back, saturating two kilometers of Shanghai’s historic Bund with seven shops and dropping the price for a roll of film from Rmb19 (US$ 2.29) to Rmb13 (US$ 1.57) – below cost price according to industry analysts.

Kodak’s advance seems relentless. It opens three shops a day on average, with the total now topping 7,000, over double Fuji’s 3,300 stores across the mainland, Hong Kong and Macao. Both companies are going digital in an effort to offer “total photo solutions.” Kodak has already outfitted 1,000 of its stores with digital imaging services – just behind Fuji – and plans to double the number by the end of the year. Each store’s strong yellow or vibrant green delivers a bold brand statement.

China is a crucial market for the two firms. In 1995, China was Kodak’s 17th largest market. Today, it is second only to the US, and Daniel Carp, Chairman and CEO of Kodak, believes it will soon be number one. “In my career, it will be the biggest picture market in the world,” he told American network television in April. Currently consumption is only a fraction of that in the developed world: average annual film consumption in China is 0.1 per person compared to 3.2 films in the US or Japan. Clearly it is worth fighting for.

Japanese Konica and Belgo-German Agfa-Gevaert are also-rans in the China market, unable to muster the immense resources needed to establish their brands. “Our brand is a latecomer, so we don’t have any brand value,” admits Terence Ching, marketing manager at Agfa-Gevaert in Hong Kong. “We would need to spend lots of money to develop it.”

So far, Kodak has fought hardest. The company’s film was ranked the “best brand for consumers” in a national survey of over 40 consumer products. And although the American behemoth refuses to say exactly how successful it has been, the same survey conducted last year by state television broadcaster CCTV, estimated that Kodak’s share of the roll-film market is as high as 63 percent. Kodak says this is too high – that it is failing to take into consideration Lucky’s strength in rural areas – but even conservative estimates put Kodak’s share at 50 percent, with sales of about US$ 500 million in 2000 according to the Far Eastern Economic Review. And sales continue to grow, up a further 10 percent in 2001.

But Kodak’s dominance is not just a result of aggressive marketing. Part of its success derives from an unusual agreement it made in 1998 with the Chinese government in which Kodak took over and revamped China’s ailing state-run photographic industry in exchange for a lock-out clause preventing foreign competitors manufacturing film in China until the end of 2002. The US$ 1.2 billion gamble seems to have paid off handsomely, and since the agreement was signed, Kodak’s business has boomed, becoming profitable on an operating basis in China last year – three years ahead of schedule.

The deal secured a solid domestic manufacturing presence for Kodak in China, allowing it to bypass high import tariffs and maintain a steady film supply, untouched by the whims of China’s custom agents or anti-smuggling campaigns that have hit competitor’s “grey channel” supplies. Kodak film in China is among the cheapest in the world – crucial for notoriously cost-conscious Chinese consumers – but quality remains high, thanks to cutting-edge technology installed in Kodak’s mainland factories. Consistent quality is at the heart of Kodak’s brand image.

Despite Kodak’s manufacturing advantage, however, Fuji has managed to hold onto a third of the market with sales in fiscal year 2000 of US$ 204 million. As well as competing with Kodak in rushing to open branded outlets, Fuji spent HK$ 65 million in 2001 on advertising, hiring the faces of Asian superstars like Aaron Kwok, Miriam Yeung and Norika Fujiwara to promote the brand to young professionals (US$ 8.3M). It may also be considering moving some of its manufacturing to the mainland and recently opened an investment firm in Beijing to investigate the opportunities once Kodak’s lock-out agreement expires.

Domestic manufacturer Lucky does not have the budget to hire international pop stars and television personalities to promote its brand, but what it can depend upon is nationalist support. Last month, Lucky claimed 20 to 25 percent of the color film market (not the eight percent of the CCTV survey). “As a film-roll producer of the Chinese themselves, Lucky is called a national hero by fellow countrymen,” the China Business Times said in April. “In the future, the Chinese people will care more and more about this banner of national industry.”

Lucky is a branding case study in itself; the name and slogans have changed with political events. Established in 1958 under the slogan “Developing China’s own film is as important as building a rocket,” the film was re-branded “Friendship” during China’s alliance with the Soviet Union and again re-branded “Red for Every Generation” as the Cultural Revolution gained pace in 1967. Its latest incarnation, as the “Lucky” brand was adopted in 1985.

The company is again changing with the times. This time following in Fuji and Kodak’s footsteps with a huge expansion of branded shops. Lucky opened 2,600 specialized shops by the end of 2001, up from 1,700 in 2000. It is also pushing growth in rural areas where it is strongest and where most long-term growth will be. But, unless it comes to some sort of agreement with either Kodak or Fuji, it looks unlikely that it will be able to sustain its market share against the determined onslaught of these two global brands.

Kodak took a gamble in 1998 taking on China’s debt laden, outdated photographic film industry. It turned it around and brought a hugely successful global brand to China in the process. The effect has been to improve the quality of film on offer to Chinese consumers while competition from Lucky and Fuji has kept prices rock bottom. As its exclusive agreement with the government comes to a close, can the brand capital Kodak has worked so hard to build keep the cold winds of Fuji’s renewed assaults out of its Chinese fortress?    



Edward Young is a freelance journalist based in Beijing, China. He writes on Chinese business and economic issues and regularly contributes to international newspapers and magazines including the Financial Times.

 commenting closed Add Social Bookmark bookmark  print
 suggest topic  recommend ( 16 )  email

  brandchannel home archive   2013  |  2012  |  2011  |  2010  |  2009  |  2008  |  2007  |  2006  |  2005  |  2004  |  2003  | 2002  |  2001
Dec 30, 2002 Are Books Bound by Their Brand? -- Edwin Colyer
  Some authors have strong brands, but how many of us choose a book by its publisher?
Dec 16, 2002 Has Gen X Fallen Through the Cracks? -- Vivian Manning-Schaffel
  Generation Y appears preferable to Gen X for brand owners and advertisers pitching their wares. Should we mind the generation gap?
Dec 9, 2002 Can Small Businesses Sprout Big Brands? -- Edwin Colyer
  Small or large, every business has a brand, and the ability to use it to its advantage.
Dec 2, 2002 Anti-Globalists v. Big Brands: Who is Going to Win? -- Randall Frost
  Is there a win-win solution between the anti-globalists and big brands?
Nov 25, 2002 Milking the Organic Market -- Erin Speiser Ihde
  Organic brands are positioning themselves as an alternative for health-conscious, socially responsible consumers. The challenge? Milking a higher price.
Nov 18, 2002 Branding Drugs for a Market of One -- Edwin Colyer
  As pharmacogenomics surface on the horizon, how can pharmaceuticals market efficiently to tiny patient groups?
Nov 11, 2002 Can Japanese Brands Go Global? -- Randall Frost
  Why don't Japan's brands have a stronger presence outside of their local markets?
Nov 4, 2002 The Key to Branding (and Financial) Success -- Vincent Grimaldi de Puget
  How to make your brand rise above the background noise in spite of limited resources, and contribute to improving your company's bottom line.
Oct 28, 2002 Branding the Bush -- Ron Irwin
  Making a killing on eco-tourism.
Oct 21, 2002 Barbie Goes to Court -- Ed Meikle
  Barbie flexes her muscles in the wake of defamation.
Oct 14, 2002 Keep Your Brand Clean -- John Karolefski
  How to prove your innocence during a threat of guilty by association.
Oct 7, 2002 HELP WANTED: Top Talent Apply Within -- Dale Buss
  In lean times, companies depend even more on their most valuable brand champions: Employees.
Sep 30, 2002 Chefs Acquire a Taste for Branding -- Jocelyne Henri
  Creating a brand à la mode with France's pastry brands, Pierre Hermé, Dalloyau and Ladurée.
Sep 23, 2002 Putting Out the Fire: Managing Through Crisis -- David Liss
  Steering your brand through disaster.
Sep 16, 2002 Cutting Costs: Resource Management All in One Tool -- Fiona Harvey
  Is resource management resourceful thinking?
Sep 9, 2002 Fire Drill: Preparing for Crisis -- David Liss
  Are you ready to protect your brand when disaster strikes?
Sep 2, 2002 Can Dead Dot Coms Be Reincarnated? -- Brad Cook
  Is there value left in the dead brands of generically named dot coms such as pets, wine, and eToys.
Aug 26, 2002 Commodities: Branding the Basics -- Eric Mirabel
  How do we go about turning a commodity product or production capability into a new brand? We look at the Middle East, a transitioning market where manufacturers are branding commodities.
Aug 19, 2002 Brands in Toyland -- Ron Irwin
  Is branding in the toy world just child’s play? We look at how traditional brands like LEGO and Brio stand up to the dazzlingly high-tech competition.
Aug 12, 2002 Long Live the King -- John Karolefski
  Young and svelte, bloated and strung out, Elvis had universal appeal throughout his short lifespan. The king may be dead but apparently the brand lives on.
Aug 5, 2002 IBM Navigates the Biotech Maze -- Edwin Colyer
  IBM Global Services is expanding to a variety of areas like its recent acquisition of PwC Consulting. We look at how a brand like this penetrates the life sciences market.
Jul 29, 2002 Do Nonprofits Have Value? -- Robin Rusch
  As we unveil Interbrand's league tables of the world's most valuable brands for for-profit brands in 2002, we ask, Is there value in a nonprofit brand?
Jul 22, 2002 Trials and Tribulations of Global Naming -- Ed Meikle
  We look at recent trademarking issues from PricewaterhouseCoopers’ Monday to Philip Morris’s Altria and discuss the basic guidelines for domain name registration disputes.
Jul 15, 2002 Successful Start-ups Launch with a Brand -- David Liss
  Why do some start-up brands fail where others succeed? When should one begin to think about the brand in the entrepreneurial process?
Jul 8, 2002 Pushing Product: Is In-Store Promotion Effective? -- John Karolefski
  Is in-store marketing effective or just more clutter separating us from our favorite brand of ice cream?
Jul 1, 2002 Shopping Through a Recession: How Will Luxury Brands Survive? -- Dale Buss
  How are luxury brands faring in the aftermath of September 11 and the past year of recession?
Jun 24, 2002 Lawless Branding: Recent Developments in Trademark Law -- Ed Meikle
  This month’s trademark law developments: Sony loses Walkman to the masses in Austria and FIFA takes on ambush marketers in Latin America.
Jun 17, 2002 Prescribing a Global Identity -- Edwin Colyer
  The pharmaceutical industry has been wary of promoting big, international brands, but is it better to stay local or go global?
Jun 10, 2002 Positioning: The Missing Piece in the Tech Sector -- Rob Gelphman
  Brands in the tech sector need to work on their positioning.
Jun 3, 2002 The New CCO: Delivering Customer Care -- Dale Buss
  In a recession, suddenly everyone cares about attracting the customer. Enter the Chief Customer Officer.
May 27, 2002 Ambush Marketing Steals the Show -- Abram Sauer
  Competition is heating up as sponsoring brands of the World Cup and other global sporting events struggle with ambush marketing.
May 20, 2002 Time Release Branding -- Edwin Colyer
  New pharma needs to launch with a bang. But at which stage beyond molecule is it time to start the branding process?
May 13, 2002 The Sport of Naming -- John Karolefski
  Naming rights for sports stadiums may be big business but are they sound business?
May 6, 2002 Private Labels: Does Branding Matter? -- Robin Rusch
  Can private labels be considered brands? What threat do they pose to brand owners?
Apr 29, 2002 Multimedia Makes the Grade -- Kim Barnet
  Can the education industry learn how to harness multimedia to create new tools and improve its overall brand image?
Apr 22, 2002 Franchising in China: A Dead Duck? -- Edward Young
  The rush to franchise in China may be faster than the drive-through at McDonald's, but the results are not always favorable to the brand.
Apr 15, 2002 Bottled Water Floods the Market -- John Karolefski
  Megabrands Groupe Danone and Nestlé lead the bottled water market. But as new markets rise, so do the stakes. Who will win the latest water war?
Apr 8, 2002 Can Branding Save the World? -- Ron Irwin
  Ben & Jerry’s, Avon and Patagonia all engage in cause-related or values-led marketing. Is it a justifiable endeavor or just a feel-good makeover?
Apr 1, 2002 Can Gap Mend Its Brand? -- Vivian Manning-Schaffel
  At one time, Gap had the retail clothing market sewn up. Now it struggles against sister brands Banana Republic and Old Navy.
Mar 18, 2002 Offensive But Effective? -- Edwin Colyer
  Campaigns for brands like Benetton and FCUK certainly get our attention, but what are they doing for the brand?
Mar 11, 2002 Mortal Brands: Continuing the Legacy -- John Karolefski
  What happens to a brand when its spokesperson literally dies? As Wendy’s re-evaluates its strategy, we look to other branded icons for some hints.
Mar 4, 2002 Apple Shines: Brandchannel's 2001 Readers' Choice Award Results -- Robin Rusch
  What do Apple, Nokia, Volkswagen,, Absolut and Starbucks have in common? Brandchannel's 2001 Readers' Choice survey results are here.
Feb 25, 2002 Has Your Brand Become Generic? -- Stephen Gardner
  What happens when your brand name is part of the public domain? We look at names that have gone generic.
Feb 18, 2002 Zero Percent Brand Management? -- Dale Buss
  Are American automakers trailing behind their overseas counterparts when it comes to managing their brands?
Feb 11, 2002 Conquering New Grounds -- John Karolefski
  Starbucks serves up a fresh brew around the world, but are non-Americans ready to wake up to this powerful brand?
Feb 4, 2002 MTV: 360 Degrees 24/7 -- Vivian Manning-Schaffel
  With a reputation like MTV, the pressure to score high in new media is huge. Is MTV able to give its audience what it wants… online?
Jan 28, 2002 Penetrating the Birth Control Market -- Katherine Daniel
  From legislation to disease, contraception manufacturers focus the brand on mundane subjects and leave out the best part: the sex!
Jan 21, 2002 Brand Mobility: Telecom Operators Turn to Handsets -- Edwin Colyer
  Will cellular service brands eclipse the big cellphone brands? Don't hang up on Nokia, Ericsson and Samsung just yet.
Jan 14, 2002 Is Your Brand Everlasting? -- John Karolefski
  We check in on 2001's fallen icons and ask why some stay strong and prosper, while others wither and die.
Jan 7, 2002 Will Online Rx Get Easier to Swallow? -- Edwin Colyer
  As pharmaceuticals struggle to get doctors to take their medicine, they ignore the valuable branding resources available on the web.