Chinese restaurant chains and consumer electronic brands may soon compete in the international marketplace, according to a new report from Bernstein Research and Interbrand.
There is a paucity of global options for quick, cheap, consistent Chinese fast food, the report said, which will underpin demand for restaurant brands like Kungfu Fast Food, Da Niang Dumpling, and GLL Wontons.
"The lack of a global Chinese restaurant brand is not for lack of a market: Chinese is among the most broadly appealing cuisines in the world (second only to Italian). Instead the challenge has been a logistical one, as Chinese food defies efforts to systematize the cooking process," the report said.
These three are the only chains that seem to have cracked the code on consistent production, Bernstein analysts noted. Da Niang Dumpling is the only one with international branches due to its franchised model that leverages local area expertise.
In the tech space, analysts expect Lenovo and Huawei to emerge as world-class brands in the next few years due to valuable intellectual property portfolios and global distribution networks that they have successful monetized. While Xiaomi is a high-profile name among investors, Bernstein says its weak global infrastructure and China-specific service offerings will keep it from becoming a global player.
Meanwhile, China's internet sector is enjoying global recognition thanks to Alibaba's initial public offering (IPO), but the most attractive opportunities for firms still remain domestic, the report said.
Automobiles and luxury goods face heritage issues that will make it difficult for them to compete internationally, Bernstein Research said.
Automakers tend to suffer domestically since they are perceived as inferior to their international peers across a number of dimensions, including product, dealer service and customer image, a 2014 Nielsen survey showed.
"The technical accomplishments of Chinese automakers have been limited so far and their collective market share keeps falling. Despite state-owned enterprises (SOEs) starting their own brands and independent companies also entering the market, few have reached critical mass," Bernstein Research said.
While there are no truly convincing examples of a successful automobile brand, Bernstein believes Great Wall Motor is the best pick in the current market, as its reputation for robustness, value for money and principles of anti-corruption and independence resonate well with consumers.
Domestic apparel and jewelry brands in the luxury space are also less desired than those of European heritage. "Chinese luxury brands are mainly positioned towards the accessible end of the market while European brands are distributed across all segments of the luxury market," the report said.
Issues facing brands
Despite China's critical importance as a consumer market, it lacks a basket of competitive domestic brands. Beyond the likes of Alibaba, it's difficult to identify major Chinese brands, according the report.
"Branding is a complex area and many Chinese companies still have work to do. But the good news is that Chinese brands are shifting away from imitation and focusing more intently on innovation. Chinese brands have become more self-confident about what they can do. They no longer feel as though they have to follow others or borrow interest, at least in the top quartile of more sophisticated clients," said Leslie Butterfield, chief strategy officer of Interbrand.
Brand building is now a priority for firms following orders from President Xi Jinping. In a speech in August, he quoted comments originally made by the revolutionary Deng Xiaoping: "We should have our own flagship products and establish our own world-renowned brands, or we will be bullied by others."