Is CBA Sponsorship Really An Opportunity For Lining?

The Chinese men's basketball professional league tournament - CBA competition instant.

After a series of market failures, Lining At last, the company stopped swaying between professional sports and sports fashion, focusing on "returning to sports". But can sponsorship CBA really restore the decline of the sports company?

Lining Sports Products Co., Ltd. (Li Ning Co, Lining), which has been trapped for 4 years, is now trapped in the hope of taking the opportunity of sponsorship of CBA (Chinese men's Basketball League) to focus on the sports market.

In June 11th, Li Ning Co announced its business operation and financial status report at the HKEx and announced the signing of a memorandum of cooperation to become a CBA equipment sponsor. The agreement covers the five season of "2012 -2013" to "2016 -2017", but it does not disclose the specific amount of the sponsorship.

In the industry, there are two versions of the amount of the sponsorship contract: "50 million yuan per year, +2.5 billion yuan cash" and 5 years 2 billion yuan, regardless of which version, CBA's equipment sponsorship amount is more than ten times or even tens of times higher than that of Anta 3 years ago 60 million yuan.

With the east wind of the 2008 Beijing Olympic Games, the Li Ning Co reached a peak. In 2009, Lining's first business income in China surpassed Adidas and became the second brand in China's sportswear market after Nike. But in the following years, Lining's attempt to change the logo and enter the international market failed to achieve the desired results.

The "sky high" sponsorship of CBA accords with the requirements of Lining's return to sports, which is also an opportunity for Li Ning Co to redeem itself in declining performance. But whether success or failure needs time and market test.

Although the amount of sponsorship has not been set aside, Li Ning Co acknowledged in the announcement that the cost of brand marketing and promotion will increase substantially in the next five years, influenced by the amount and duration of sponsorship of the CBA contract. The Li Ning Co's 2011 annual performance report released in March 2012 showed that Lining's gross profit in 2011 was 4 billion 114 million yuan, while net profit was only 386 million yuan.

Obviously, Lining is not "not bad money". According to the relevant analysis reports provided by the Bank of America Merrill Lynch group and Morgan chase group, 2/3 of the sponsorship fees that Lining will soon invest in CBA will be achieved by terminating other sponsorship projects and reducing marketing activities, and the other 1/3 will be achieved by compressing the cost of labor and store rental.

What makes Li Ning Co willing to bid such a high price for CBA?

When explaining the reasons for sponsoring the CBA decision, Li Ning Co believes that basketball is one of the mainstream sports in China, especially for young consumer groups. Basketball market has huge capacity and rapid growth, and basketball has always been one of the most important business contributions of Li Ning Co.

　　 Basketball shoes Lining has always been selling the best products, and Lining has been looking for opportunities in the domestic market. Lining has been the equipment sponsor of NBL (National Basketball League, CBA's secondary League), and Lining has several signers in China. In 2011, when the contract between CBA and Anta was not yet finished, Lining signed a sponsorship contract with CBA's Shanghai Oriental shark team. The boss of this team is another legendary figure of Chinese sports, Yao Ming.

As a competitor, Anta has achieved great success in its brand and performance through its cooperation with CBA for seven years. In 2011, Anta Its operating income reached 8 billion 905 million yuan, while Lining's performance declined in 2011, and its annual revenue was 8 billion 929 million yuan. The two companies were almost equal. In terms of brand influence, Anta has also been greatly improved. Lining's "China's first sports brand" seems to be even challenged.

The achievements of the competitors in the basketball market have enabled Lining to see the opportunity that CBA can bring to the company. In order to consolidate the brand position and market share in China's basketball game, Lining chose to form an alliance with CBA, while CBA's effect on brand and performance was so obvious.

Bao Mingxiao, director of the sports and Social Sciences Research Center of the Institute of sports science of the State General Administration of sport, said that Li Ning Co's "high entry" is not wise.

"The current CBA and China's sports industry are in different cycles in 2004," Bao Mingxiao told reporters. The sporting goods industry has experienced rapid growth over the past decade and has entered the adjustment period. The downward trend of China's economy is also more obvious. The two cycles overlap together. Lining's involvement in CBA at this point of time is very risky.

Lining, former manager of the sports marketing department and Li Hongliang, director of Eastern retail marketing, doubts the authenticity of the sky high price figures. He believes that with the current Lining 8 billion yuan revenue scale, the total market investment is expected to be around 8%, that is, 650 million yuan, 400 million signed CBA, and the rest will not be dry.

Li Ning Co's actions also failed to win the recognition of investment banks and institutions. In June 13th, Bank of America Merrill Lynch indicated that Lining's profit forecast for 2012 and 2013 decreased by 37% and 36% respectively. According to the 2012 and 2013 forecast price earnings ratio 11.5 times, the target price was reduced from 47% to HK $4.7 from HK $8.8. The rating dropped from "neutral" to "running big market". JP Morgan lowered Lining's regular earnings test of 10% in 2012, maintaining a "reduction" rating, and the target price was reduced from 7 yuan to 4.5 yuan. {page_break}

Return to sports

Lining, who sponsored CBA at a high price, seems to have redefined its strategic focus. Until then, the biggest sporting goods company in China has been suffering from unclear positioning and chaotic strategy.

Benefiting from the marketing offensive of the 2008 Beijing Olympic Games, Li Ning Co has shown a good momentum of growth, and its first domestic sales in China surpassed Adidas. But from that time on, Lining began a great strategic transformation. These transformations include the layout of multiple brands, expansion to outdoor, table tennis, badminton and sports fashion, and badminton has been identified as the core category of Lining.

Too dispersed fronts did not bring good benefits, but increased operating costs. In the past three years, only the outdoor brand Aigle has benefited from the growth of the industry, showing signs of profit growth in Lining's brand.

In 2010, Lining released the new logo and slogan (let the change happen "Make The Change") and shifted the target consumer group to the "post-90s". According to the previous survey, 50% of Lining's consumers were 35 to 40 years old.

But this brand has not been successful so far.

There is no difference between the slogan "post-90's Lining" and "Queen 90's two". Who knows who Lining is after 90? Lining was able to continue the influence of Lining after 60 and 70, and then launch a brand for 90's, even if it was called Wang two, but it should be separated from Lining. If so, maybe we won't get caught up in today's situation. Financial commentator Liu Ge told reporters.

The Li Ning Co also hopes to build itself as a direct competitor to global brands such as Nike and Adidas and to raise the price of the product accordingly. Prior to Lining's market positioning, has been in the low-end and high-end between the "no man's land", low-end Anta, PEAK and other cheaper competitors, high-end Nike, Adidas and so on.

For Lining's high-end local brand, consumers are not buying it. Zhang Zhiyong, chief executive of Li Ning Co, also admitted that the price hike made Lining lose some loyal customers. Lining had to return to the cheap and cheap old road.

Lining also has little improvement in overseas markets where he has invested a lot of money. In 2008, Lining set up a R & D center in Portland, Oregon, which is also the location of Nike research and development base, which is not far from Nike headquarters. In 2010, Lining opened the first store in the R & D center of Portland, and a few months later, Lining worked with FootLocker, the largest sports brand dealer in the United States, to sell Lining sports shoes in the Champs store of his subsidiary.

The two basketball shoes launched by the Li Ning Co in the US market have been slow-moving. In the end, the original price can not be reduced from 99.99 US dollars to 9.99 dollars. The Lining shoes, which are sold at the end of the US sale and are specially designed for the US market, are mostly bought by Chinese buyers and have been returned to China's private sports shoes market.

A series of strategies failed to create opportunities for Lining's opponents. Lining's "imaginary enemies" Nike and Adidas are speeding up the expansion of the two or three line cities, which is Lining's dominant market. The competitors from local brands such as Anta, PEAK and so on rely on CBA sponsorship and deep cooperation with NBA to grow at a high speed.

"Lining did not maintain the continuity of his brand image." Lei Xiaoshan, general manager of China market research group, told reporters, "three years ago, when Lining was growing rapidly, its brand positioning lacked strategic vision. It first proposed to be the best brand in China, and later said it wanted to challenge Nike globally, and finally returned to the cheap line, which took place in three years.

Mr. Lining, chairman of the board, is also worried about these problems. At the annual meeting of the company in 2011, he pointed out the problem of the company: we must stop swaying between professional sports and sports fashion and concentrate on sports. He also proposed that resources should be collected from various sub brands and concentrated on Lining's core brand. Sponsorship of CBA is being seen as an important measure of this "return".

"In the past seven years, the main events have gone from basketball to running to badminton, COO has changed four, and the market has remained 1/4. Now I'm back, I hope everything is still in time. " Li Hongliang said.