Home » Business » Biz Commentary
Iconic Hero's fate: adapt or perish
By Ding Yining |
December 3, 2012, Monday
|
Print Edition
Print Edition
Shanghai Hero Group, one of the venerable old brand names in China, said it will sell 49 percent of the shares of subsidiary Shanghai Hero Pen Factory for 2.5 million yuan (US$396,825), according to a notice issued on the Shanghai United Assets and Equity Exchange.
The factory unit, founded in 1931, reported 2011 sales of 37.8 million yuan and a net loss of 5.2 million yuan. In the first 10 months of this year, it was still in the red, with a net loss of 8.2 million yuan and 22.6 million yuan of debt.
Many people can't help but feel some pity for the fallen fortunes of what was once a legendary brand. Hero pens were proudly used by several generations of Chinese leaders to ink important international agreements and government decrees.
Parent Hero Group said in an official statement last week that restructuring is underway to attract new investors and revitalize the business.
Subsidiary Hero Pen Ltd said it will focus on research and development following the restructuring, with emphasis on products with higher profit margins and a more global market strategy.
Time-hornored
Shanghai is home to at least a dozen time-honored brands that flourished since the 1930s or earlier but have gradually lost their luster in a changing consumer world. Many brands were squeezed out by the influx of overseas investment and brands that occurred since the 1990s.
Consumers became cognizant of multinational brands that were heavily advertised on television as fancy and chic.
I used Hero fountain pens before junior high school but gradually shifted to ballpoints because they were cheaper, more convenient and easier to come by.
A look at Hero's sales at China's largest online shopping mall, Taobao, came as a surprise to me.
One Taobao vendor sold nearly 20,000 Hero pens, one of the classic models, in a month. But the price was only 8 yuan apiece, which may explain Hero's decline into the red.
International brands such as Mont Blanc and Parker have opened retail outlets in prime Shanghai locations such as Nanjing Road W., while domestic pen brands are increasingly hard to find nowadays in department stores and large shopping malls.
Moreover, Mont Blanc has diversified its product range to include higher profit-margin fashion accessories. Domestic rivals, by contrast, look dull and uninteresting.
Hero pen no doubt retains a certain magic in the minds of older people. But it's young people today who drive retail sales, especially in the online realm.
Venerable brands like Shanghai Watch, Pechoin face cream and Warrior sneakers are finding that their famous names and long histories alone aren't enough to carry the day.
"These brands provide a source of nostalgia for those above 40, but they usually mean little to the younger generation," said Paul Zhou, founder and managing director at market research and brand consulting firm Illuminera Strategy.
"To catch up with the new generation of consumers, product innovation is a mandate in order to cater to rapidly changing consumer needs," he added.
In fact, innovation may be as important - or even more important - than mass advertising.
Advertising spending
Paris-based L'Oreal's advertising spending in China last year was around 12.5 billion yuan (excluding discount factors), while Shanghai-based Shanghai Jahwa United Co spent only about 835 million yuan advertising its personal care and cosmetics products, according to research firm CTR.
Yet Herborist, a sub-brand introduced by Jahwa, may be a successful example of how a company can "minimize the drag of the historic baggage of an old brand," Zhou said.
Herborist targets a different consumer base from older brands sold by Jahwa and ventures into the lucrative market of skincare products made from Chinese herbal medicine. The company also opened Chinese-style spa houses at the city's downtown area.
Tracking by research firm Sinomonitor's China Marketing and Media Study showed the brand has been steadily rising in popularity the past three years.
For the third quarter, Jahwa reported 118 million yuan of profit, a 62 percent increase from a year earlier. Sales also jumped 27 percent to 1.2 billion yuan.
Jahwa didn't provide sales figures for specific brands, but Herborist, set up by Jahwa in 1998, is now well recognized as one of the best domestic high-end personal care brands.
Jewelry maker Lao Feng Xiang Co is another example of old brands coping with new times. It has unveiled new product designs and introduced more comprehensive retail channels.
This year, its brand penetration rate ranked higher than even popular Hong Kong retailer Chou Tai Fook Jewellery, according to Sinomonitor, which surveyed 10,000 people in 12 major cities.
The Shanghai Commission of Commerce has been encouraging state-owned makes of venerable brands to attract outside investors and seek mergers or acquisitions to boost their market positions. Commission officials have also suggested that old brands explore franchising and e-shopping channels, or even expand into foreign markets to help raise brand awareness.
The glorious eras of the past don't have to be lost forever. They can be turned into the glorious prospects of the future if companies are nimble enough to move with the times and tune their products to changing consumer trends.
The factory unit, founded in 1931, reported 2011 sales of 37.8 million yuan and a net loss of 5.2 million yuan. In the first 10 months of this year, it was still in the red, with a net loss of 8.2 million yuan and 22.6 million yuan of debt.
Many people can't help but feel some pity for the fallen fortunes of what was once a legendary brand. Hero pens were proudly used by several generations of Chinese leaders to ink important international agreements and government decrees.
Parent Hero Group said in an official statement last week that restructuring is underway to attract new investors and revitalize the business.
Subsidiary Hero Pen Ltd said it will focus on research and development following the restructuring, with emphasis on products with higher profit margins and a more global market strategy.
Time-hornored
Shanghai is home to at least a dozen time-honored brands that flourished since the 1930s or earlier but have gradually lost their luster in a changing consumer world. Many brands were squeezed out by the influx of overseas investment and brands that occurred since the 1990s.
Consumers became cognizant of multinational brands that were heavily advertised on television as fancy and chic.
I used Hero fountain pens before junior high school but gradually shifted to ballpoints because they were cheaper, more convenient and easier to come by.
A look at Hero's sales at China's largest online shopping mall, Taobao, came as a surprise to me.
One Taobao vendor sold nearly 20,000 Hero pens, one of the classic models, in a month. But the price was only 8 yuan apiece, which may explain Hero's decline into the red.
International brands such as Mont Blanc and Parker have opened retail outlets in prime Shanghai locations such as Nanjing Road W., while domestic pen brands are increasingly hard to find nowadays in department stores and large shopping malls.
Moreover, Mont Blanc has diversified its product range to include higher profit-margin fashion accessories. Domestic rivals, by contrast, look dull and uninteresting.
Hero pen no doubt retains a certain magic in the minds of older people. But it's young people today who drive retail sales, especially in the online realm.
Venerable brands like Shanghai Watch, Pechoin face cream and Warrior sneakers are finding that their famous names and long histories alone aren't enough to carry the day.
"These brands provide a source of nostalgia for those above 40, but they usually mean little to the younger generation," said Paul Zhou, founder and managing director at market research and brand consulting firm Illuminera Strategy.
"To catch up with the new generation of consumers, product innovation is a mandate in order to cater to rapidly changing consumer needs," he added.
In fact, innovation may be as important - or even more important - than mass advertising.
Advertising spending
Paris-based L'Oreal's advertising spending in China last year was around 12.5 billion yuan (excluding discount factors), while Shanghai-based Shanghai Jahwa United Co spent only about 835 million yuan advertising its personal care and cosmetics products, according to research firm CTR.
Yet Herborist, a sub-brand introduced by Jahwa, may be a successful example of how a company can "minimize the drag of the historic baggage of an old brand," Zhou said.
Herborist targets a different consumer base from older brands sold by Jahwa and ventures into the lucrative market of skincare products made from Chinese herbal medicine. The company also opened Chinese-style spa houses at the city's downtown area.
Tracking by research firm Sinomonitor's China Marketing and Media Study showed the brand has been steadily rising in popularity the past three years.
For the third quarter, Jahwa reported 118 million yuan of profit, a 62 percent increase from a year earlier. Sales also jumped 27 percent to 1.2 billion yuan.
Jahwa didn't provide sales figures for specific brands, but Herborist, set up by Jahwa in 1998, is now well recognized as one of the best domestic high-end personal care brands.
Jewelry maker Lao Feng Xiang Co is another example of old brands coping with new times. It has unveiled new product designs and introduced more comprehensive retail channels.
This year, its brand penetration rate ranked higher than even popular Hong Kong retailer Chou Tai Fook Jewellery, according to Sinomonitor, which surveyed 10,000 people in 12 major cities.
The Shanghai Commission of Commerce has been encouraging state-owned makes of venerable brands to attract outside investors and seek mergers or acquisitions to boost their market positions. Commission officials have also suggested that old brands explore franchising and e-shopping channels, or even expand into foreign markets to help raise brand awareness.
The glorious eras of the past don't have to be lost forever. They can be turned into the glorious prospects of the future if companies are nimble enough to move with the times and tune their products to changing consumer trends.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
