Hidden Secrets And Worries Behind Anta'S Huge Investment In "Going To Sea"

In April 9th, Lai Shixian, chief financial officer of Anta sports, was asked about the progress of the acquisition of AmerSports of Finland sporting goods group after attending the shareholders' meeting. He responded that the acquisition was relatively smooth, but there were still some procedures to be carried out. He said, "confidence (acquisition) brings profits to the company".

At this point, the acquisition of KUKA, which is regarded as beautiful by the outside world, is the end of the most important cross-border acquisition of Chinese enterprises.

It is understood that AmerSports owns many outdoor sports brands including outdoor equipment brand Arc'teryx (eulogy), mountain outdoor cross-country brand Salomon (Salomon), tennis equipment brand Wilson (Wilson) and sports watches, Suunto (song Tuo) and other sports brands.

Anta's "international stomach"

At present, Anta has already taken the lead in the domestic sports shoes and clothing brand.

Anta's 2018 performance report showed that its revenue reached 24 billion 100 million yuan (RMB) in the fiscal year, an increase of 44.4% over the same period, with a net profit of 4 billion 103 million yuan, an increase of 32.9% over the same period last year.

In addition to the operation of the domestic market, the implementation of cross-border acquisitions and internationalization strategy has also become one of the focuses of the market for Anta.

In September 2018, Anta launched the acquisition of Amer Sports of Finland sports group at a price of 37 billion 100 million yuan. It is known as the largest purchase of sports goods in China.

At the 2018 annual performance conference, Ding Shizhong, chairman of Anta group, said that the offer to AmerSports was an important step in Anta's internationalization. "Although the acquisition still needs some trading processes, I am confident of the acquisition because we have the ability and confidence to create more value for the global consumers."

It has always been a prudent choice for domestic sports brands to open up overseas markets. The main reason is that the potential of the Chinese market and the purchasing power of consumers have not been completely released.

According to the data released by China industrial information network, China's sports brand has grown by more than 40% per year, and has become one of the fastest growing subdivision industries. According to data from Euromonitor (Ou Rui International), China is the second largest market in the world after the United States, accounting for about 10.5%.

Itself in the gold market of the industry, and then go to the seemingly large but unfamiliar overseas market, which may mean uncontrollable risks for Chinese sports brand.

Lining's lessons were before us.

In 2009, after surpassing Adidas as the second largest sports brand in the domestic market, Lining indicated that he would surpass Nike in 5 years, become the first sports brand in China and enter the top five of the world market. However, since then, Lining's internationalization strategy has not only failed, but the back door has been lost.

Since 2011, the inventory of Li Ning Co has been seriously overloaded, and a lot of layoffs have been shut down. In 2012, Li Ning Co was replaced by Anta in the leading position in China.

In this regard, Lining himself has reconsidered, the expansion of that year led to the company's energy and resources failed to focus on the domestic market.

But at the same time, foreign sports brands have been putting pressure on the operation of domestic enterprises.

According to China industrial information network, from 2017 to 2018, the proportion of foreign brands accounted for 34.6% from 20 to 34.6%, and local brands dropped from 40.6% to 32.3%. The impact of overseas brands has led to intensified market competition, such as Lining, 361 degrees, XTEP, Hongxing Erke, PEAK, and so on. The market share declined by 0.6, 1.7, 2.5, 1.6, 1.3 and 1.9 percentage points from 2012 to 2017, respectively.

Therefore, internationalization, upgrading brand awareness and enterprise scale has become a problem that local enterprises have to consider.

Tang Xiaotang, an analyst at fashion industry research and consulting firm NoAgency, told the Times financial analysis that enterprises need to be internationalized to develop to a certain extent, so as to expand the scale of enterprises and, in turn, consolidate the existing market in China.

Ma Gang, an independent critic of shoe and clothing industry, told times finance that Anta wanted to achieve the goal of "running water" to reach 100 billion in 2025. It is the only way to get involved in a broader overseas market. In addition, the rich product category and brand extension also need to be realized through internationalization.

Worry about multi brand strategy

After the acquisition, Anta, FIlA (Fei Le), Descente (Desanto), KolonSport (long outdoors), Sprandi (Spandi) and Kingkow (Xiao Xiao cattle), will further expand their brand territory.

However, after more and more brands are in the bag, it is a challenge for Anta to make every brand in China and the international market have distinct consumers and markets, and not compete with its existing brands.

Take KolonSport (for example) and Salomon (Salomon) as an example. The former is positioned as a high-end fashion outdoor dress, and the latter is positioned as high-end outdoor apparel and professional off-road shoes.

But Ma Gang said that the key to brand management and integration lies in the adjustment of internal mechanism and the synergy of supply chain. "As a whole, the collaboration and division of labor between the various brands of Anta is more clear, and sales and marketing teams are doing their own work independently."

Tang Xiaotang shared the same view. He believes that eating Amer Sports, Anta is facing the "comprehensive governance capability" test is not arduous.

As an old sports company, AmerSports has more than 80% of its revenue from the market other than the Asia Pacific region. The completion of its acquisition will reduce Anta's dependence on the Chinese market and help Anta make use of AmerSports's sales channels and supply chain to enter a wider international market.

However, it must be noted that the growth of Amer Sports's performance is not significant.

In 2018, sales of Amer Sports in the world were relatively "weak", with a growth of only 4%. In addition, AmerSports's revenue scale is only slightly lower than Anta, but its profitability is far away. In the first half of 2018, the total revenue of Amer Sports was 26.78 billion euros (about 20 billion 291 million yuan), with a profit of 231 million euros (about 1 billion 750 million yuan). In the same period, Anta's revenue was 24 billion 100 million yuan, and its net profit reached 4 billion 100 million yuan.

A sports industry insider, who declined to be named, told Times financial analysis that spending huge sums of money on acquiring AmerSports would not boost Anta's performance in one or two years, or even risk its performance. In addition to the Chinese market, Anta's success in activating AmerSports's performance will affect its future direction. "After the acquisition of FILA in 2009, Anta took a full 10 years to improve its performance, and the previous experience of FILA is not necessarily a complete reference to AmerSports."

Acquisition of "foreign brands" has become a trend

All along, China's sporting goods enterprises want to rely on their own brands to enter the international market.

Although Lining continued to invest overseas, his international business only contributed less than 3% of its sales.

361 degrees has entered the international market since 2014, and there are thousands of sales outlets in Brazil, the United States and Europe respectively. But in 2018, its overseas business accounted for only 1.8% of its total income and was not yet profitable.

In this regard, Tang Xiaotang said that relying solely on its own brand, domestic sporting goods enterprises almost can not achieve internationalization in the short term. "Money pressure is small, but it takes a lot of time and cost, and it may also miss many opportunities, and the acceptance of overseas consumers is not always able to be cultivated," he said.

It may be that the private brand has hit the wall frequently, and the acquisition of "foreign brands" has become a "curve" policy for many sports brands to expand internationally.

In Ma Gang's view, with the development of enterprises, the mode of "industry + capital" has become the trend of expansion of some brands. He believes that "in the past, due to the lack of funds and scale, most brands adopted single brand expansion strategy, but now they can use money to exchange resources, so as to make up for their brand influence and high degree of deficiency in a short time."

In 2016, the precious birds sold the trademark operation rights of the US sports brand AND1 in 26 million US dollars; at the same time, 361 degrees and One WaySport of the Finland company set up a joint venture company to sell products under the One Way in Greater China; Lining also had the right to operate the Italy Sports brand Lotto (Le Tu), the French outdoor brand Aigle (Ai Gao) and the American dance and yoga wear brand Danskin.

Li Ling, vice president of Anta group, said in a media interview with finance and economics magazine in December 2018 that it was very difficult to open up the market to the US and Europe by Anta's main brand. The process of internationalization will go faster through acquisitions, covering the group business in Europe and the United States.

But at the same time, there are some risks in internationalization by means of overseas mergers and acquisitions.

Tang Xiaotang believes that although overseas mergers and acquisitions can make the share of overseas market grow rapidly, it can not enhance the international image of its own brand in a short time. In addition, enterprises in the process of mergers and acquisitions will also face a dilemma. "The price of big brands is high, the prospects of terminal brands are poor, and the risk of acquisition will be great. In the final analysis, there are few cases that domestic sports brands have formed a good scale and expanded after completing overseas mergers and acquisitions."