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Natalie: Li Ning Grabs at Badminton Dreams
Chinese sports brand enterprise Li Ning (2331.HK) tapped into the badminton market when it announced this week that it had wholly acquired Kason Sports (Hong Kong) for RMB 165 million. According to Li Ning's five-year plan ending 2013, the company hopes to shrink the ratio of "Li Ning" brand revenue from 95% of total revenues to less than 80%. While this acquisition may help realize this long-term goal, it's not expected to have much material impact in the short term.
The popularity of badminton in China – a survey by the General Administration of Sports suggests that badminton is the second ranking sport in terms of participation in China – could mean good things for Li Ning and its new subsidiary, but problems with competition and integration loom. Although Li Ning has the benefit of taking up badminton before its main competitors, company data places Kason third in China's badminton market in 2008 with about 12% of the market, compared with 20% for Japan's Yonex and 14% for Taiwan's Victor.
Finding it difficult to compete with popular Nike (NYSE:NKE) and Adidas brands and cheaper 361 and Anta products, Li Ning is right in trying to explore new markets. However, whether it can manage the new brand smoothly remains to be seen.
Li Ning gave up on the Kappa brand in 2005, two years before its five-year distribution license ended. Kappa brought the company 2004 revenue of RMB 100 million, before being taken over by China Dongxiang and booking China revenues of RMB 2.8 billion in 2008.
The current success of Kappa in China indicates a problem with Li Ning brand management, and I hope Li Ning has learned enough from its experience to avoid making Kason another Kappa.
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Natalie Zhu covers the retail industry.
