The World’s Third Largest Sportswear Company May Surprise You | China Decoded, BoF Professional

The origin story of China’s Anta Sports is well-known in its homeland. It’s a rags-to-riches tale of epic proportions, starring founder and chairman, Ding Shizhong.

In 1986, Ding, a high school dropout from a small town in the southern province of Fujian, borrowed 10,000 yuan ($1,500 at current exchange) from his father and purchased 600 pairs of shoes from a relative’s factory. He took his inventory north to Beijing and sold the lot, returning to his hometown to invest the profits in setting up his own factory to manufacture shoes for international brands.

Not content with making shoes with other company’s logos on them — or the lower margins associated with them — Ding made what was an unusual move at the time. In 1991, he set out to build a brand of his own and called it Anta. In the years since, Ding hasn’t been shy about making his ambitions for that brand clear, often repeating the mantra that he was not looking to build “the Nike of China,” but rather to create “the Anta of the world”.

“To be honest, the dream for us at that time was focused on being China’s number one; we said in 2015 we aim to have revenue over 100 billion yuan ($15.36 billion) by 2025,” explained Anta Group’s chief operating officer Chen Ke.

At the time of writing, with a market cap hovering around HK$325 billion ($41.85 billion), Ding’s company is among the world’s largest sportswear groups, behind only market leader Nike (market cap $218.38 billion) and Adidas ($54.23 billion) having overtaken Lululemon ($40.96 billion), Puma ($12.9 billion) and Under Armour ($9.71 billion), as well as its fiercest local rival, Li Ning (HK$119.6 billion, or $15.4 billion at current exchange).

Ding was not looking to build ‘the Nike of China’, but rather to create ‘the Anta of the world’.

Since Ding built the business almost entirely on the domestic market, Anta has understandably flown under the radar of international attention, but in China too, people are astonished when they hear Anta Sports is the world’s third-largest sportswear company.

“I was surprised to learn that fact,” said Yi Kejie, content manager at China Marketing Insights. “Anta used to be, in most Chinese consumers’ minds, a brand that targeted third and fourth tier cities and even lower [but] now…I think the brand image is definitely improving and changing.”

The company is the beneficiary of numerous consumer and economic trends favourable to Chinese sportswear companies in the wake of the Covid-19 pandemic, including China’s own consumer rebound and the guochao trend among patriotic younger consumers who are more open to buying local brands over international competitors. The global focus on fitness and health is also proving a boon for sportswear makers of all stripes.

All this means the value of China’s already considerable sportswear pie is growing. According to Euromonitor data for 2019 (the most recent available) the retail value of the sportswear market in China reached 316.6 billion yuan ($48.6 billion) with products from Nike accounting for 22.9 percent of sales, Adidas boasting a 20.4 percent share and Anta coming in third with 16.4 percent of the market.

For the year ending December 31, Anta’s annual report, which included group brands except those under the Amer Sports umbrella, said revenue was up 4.7 percent to 35 billion yuan ($5.37 billion), gross profit rose 10.7 percent and operating profit increased 5.3 percent on the year.

By comparison, in 2020, Li Ning saw its revenue increase 4.2 percent year-on-year to 14.46 billion yuan ($2.22 billion), with net profit increasing on a comparative basis by 34.2 percent to 1.7 billion yuan ($261 million). At Nike, which announced its fiscal third-quarter results last week, sales shot up 51 percent in Greater China.

In our minds, as Chinese consumers, I think Nike ranks first.

This points to a significant problem for China’s largest homegrown sportswear player. Though it has made significant headway in restructuring and rejuvenating its business in order to reach more consumers in China, its international and domestic rivals have also made great strides.

“In our minds, as Chinese consumers, I think Nike ranks first‚” Yi Kejie said. The American brand’s premium positioning is reflected in price. Nike sneakers in China have a starting price of around 400 yuan ($60), with newly released models often priced over 1,000 yuan ($153), whereas Anta’s own brand adult sneakers command a price between 200 and 400 yuan ($30 to $60).

“I see so many KOLs (influencers, known as ‘key opinion leaders’) and content creators posting photos on Xiaohongshu of Nike clothes and this winter, if you are walking down the street in China, you see so many people wearing Nike’s jacket with the very big swoosh at the front. It appeals a lot to younger consumers.”

Achieving Ding’s goal of Anta becoming number one in China will require steely ambition. To overtake Adidas, Anta needs to make some impressive progress. To reel in Nike, however, would be a mammoth task, but it’s also one that seems more plausible in light of the ongoing controversy that has erupted this week in China that has seen social media users vociferously object to western brands that have disavowed the use of cotton sourced from the Xinjiang region in their supply chains.

The fallout has seen Nike brand ambassadors Wang Yibo and Tan Songyun publicly end their affiliation with the US sportswear giant and China’s biggest sneaker resale site, Dewu, known as Poizen in English, announce it had removed all Nike products indefinitely from its platform.

In the face of this backlash against its international rivals, Anta doubled-down on winning favour with domestic consumers by announcing it had cut ties with the Better Cotton Initiative (BCI), which has said it would stop sourcing cotton from Xinjiang.

No-one yet knows what the long-term impact of this controversy will be, but even before it exploded this week, Anta executives were in the midst of executing a long-term transformation plan, which, to date, has seen some pretty impressive results.

Divergent Strategies for the Same Challenge

Before international sportswear giants took direct aim at the China market, local players, including Anta, Li Ning, Peak and 361°, dominated a market that was largely interested in mass market, value for money offerings.

But resting for too long on their laurels, these brands were quickly overtaken by foreign rivals that outclassed them with slick branding and marketing campaigns, and came to be seen by Chinese consumers as a higher-quality, higher-tech, more modern and fashionable choice than their local high street brands.

Refusing to change means death…So, there was no hesitation to make a change.

By 2012, these local players, including Anta, were in quite desperate straits, being forced to consolidate their points-of-sale and deal with a glut of inventory. It seemed as though they had fallen hopelessly behind as their consumers marched on.

“Refusing to change means death…So, there was no hesitation to make a change,” Ding Shizhong told local media outlets a few years later.

The two leading Chinese players, in Anta and Li Ning, went on to do something few expected at the time. They reversed their fortunes in rather spectacular fashion, but took vastly divergent paths to get there.

Li Ning was founded in 1990 by the brand’s namesake, a gold medal-winning Olympic gymnast, to provide other aspiring Chinese athletes with a national brand. Though it had this valuable association and heritage, it needed a revamp.

Outside an Anta Sports store | Source: Shutterstock

Executives at Li Ning took what CMB International research analyst and vice president, Walter Woo, described as the “much more difficult” option of remaking its own brand, investing in its design and fashion credentials, as well as splashy international outings at fashion weeks in New York and Paris designed to further boost its image at home.

The brand’s transformation also included a pivot to more direct to customer retail, and product development that doubled down on performance, functionality and design.

“A lot of companies are trying to be higher-end [to capitalise on the country’s middle class consumer upgrade trend and higher profit margins, but] it’s hard for Chinese companies to achieve that … [Li Ning] somehow succeeded at doing that,” Woo said.

Anta decided to go a different way. Instead of upgrading its main brand, it would expand beyond its lower-tier base of value-driven consumers by acquiring other brands with different market propositions.

The first acquisition was Fila’s China business, bought from Belle International in 2009 when the Italian brand, founded in 1911, was at a low ebb (the global entity was purchased by its subsidiary, Fila Korea, Inc in 2005). Fila’s fortunes have since reversed dramatically, particularly in China, where it has seen sales grow 18.1 percent in 2020, riding a years-long streetwear trend that has gripped post-90s and post-00s consumers here.

“If we depend on our Anta main brand [alone] becoming China’s top sportswear group, [that] would be very difficult, so we decided to pursue the multi-brand strategy with Fila and other brands,” Chen explained.

The diversification of Anta’s brand portfolio continued over the next decade, with the addition of Kolon Sport, Descente and others, before its biggest acquisition to date, the $5.2 billion purchase of Amer Sports, and its sub-portfolio of brands, including Salomon, Arc’teryx and Wilson, in 2019.

As of 2020, Anta Group boasted 25 brands, many of which take aim at tier one and two city consumers looking for mid- to high-end sportswear, while the Anta brand continued to cater to lower-tier city consumers. This multi-brand strategy was a key pillar of its growth, but not the only one.

Building a Modern Business

Around the same time that it went on an acquisition spree, Anta also invested heavily in research and development, improving the quality and technicality of fabrications for its flagship Anta brand. The group reportedly amassed 1,400 innovation patents and entered into a long-term sponsorship of China’s Olympic team, so that the name Anta would remain top-of-mind for Chinese consumers considering their next sportswear purchase.

Anta Store in Johor Bahru, Malaysia. Shutterstock.

According to Chen Ke, this focus on upgrading the functionality of Anta’s products has been key because the “mass market still needs mainstream brands …. [They will buy Anta] as long as the product is good and it’s a well-known brand,” he said.

E-commerce has been key to achieve this. Chen says that as early as 2015 Anta had an omnichannel first mentality that has resulted in group e-commerce sales of more than 10 billion yuan ($1.54 billion) over 2020.

Its physical retail network also remains formidable, with 9,922 Anta branded stores and an additional 2,006 Fila stores. In comparison, Li Ning has a retail network of 6,225 points of sale, Nike has a 7,000-strong retail network across Greater China and Adidas has around 12,000 outlets.

The acquisition of Amer Sports in 2019, as well as conjecture the group might be a potential buyer for the Reebok brand that Adidas has been vocal about wanting to offload, naturally leads to questions about Anta’s global ambitions.

According to Chen, the appeal of Amer Sports was both about its brands’ potential in the China market and Anta’s ambitions to grow its presence globally. The acquisition has given Anta a taste of running an international company.

“The development in China is very good, after China, our big dream is to go global,” Chen said. “For us, it’s a new [focus], but we are confident it will be successful.”

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