It was once noted around China as home to quite a number of leading brands: Haier, Tsingtao Beer, Hisense and Aucma.

But now, Qingdao, the port city in the east of Shandong province, is seeing some of its glittering names fade - Tsingtao Beer is witnessing a declining market share, Haier`s business growth is slowing and once-giant household appliance maker Hisense is moving toward the real estate industry.

Tsingtao Beer: lost in the game

Tsingtao, Snow and Yanjing are the top-three Chinese beer brands. Among them, Tsingtao is the oldest and the first to be publicly listed.

It long had a dominant position in the market, with its overall share reaching as high as 10 percent in the mid-1970s.

Although Tsingtao is still one of the nation`s best-selling beers, its market share has declined greatly, thought to be less than 1 percent in 2006. Snow has surpassed Tsingtao to top the market with a sales volume of 5 million kiloliters.

Its fans are wondering what happened to Tsingtao.

In China, different regions have their own preferences for brands and flavors of beer, and it is often hard for a newcomer to make inroads.

To grow from a regional beer to a national brew, Tsingtao began in 1994 to aggressively acquire other local brewers around the nation. By the end of last October, the company had expanded its network to 50 production facilities at a cost of about 1 billion yuan.

But the efforts seem to have brought more trouble than benefit. Few of Tsingtao`s business partners are thought to have sound profitability. Possibly more importantly, conflicts in cultural integration make mutual cooperation difficult in developing new products and an efficient sales network.

Wrong brand positioning is another problem. Experts all believe that the high-end segment has the biggest untapped potential in China because it has the strongest growth rate in market share and the highest profitability, twice or even higher that of inexpensive beers.

But that segment is exactly what Tsingtao ignored. Most brands under Tsingtao are tailored to low-priced markets.

Tsingtao did try a different approach when the company signed a partnership agreement with the international giant Anheuser-Busch Co (AB) in 2002, with AB buying a 27 percent share in Tsingtao.

But the heady days soon came to an end. In 2004, Budweiser, AB`s flagship brand, partnered with Harbin Beer to help it shed its low-end image and reposition it into a mid- and high-end brand by lending a hand with techniques, management, sales and marketing.

"Isn`t that suggesting Tsingtao has to be a low-end brand? This is ridiculous," says a staff member of Tsingtao on condition of anonymity.

Tsingtao is now relying on its own efforts. The company has initiated a campaign to reduce its brands to fewer than 10, among which four, including Tsingtao and Hans, will be built into upper-market products and the others low priced.

Yet in the high-end sector, the competition will not be less fierce. Major foreign brands - South African Breweries, AB, Germany-based InBev, Carlsberg and more - are mainly targeting the top of the market.

Yet some experts and investors still take a shine to Tsingtao, considering the growth potential in China`s beer consumption market, the company`s partnership with AB and its 2008 Olympic sponsor position.

Haier: growing at a low speed

Today`s Haier is not yesterday`s anymore.

The company started business by selling refrigerators, and later expanded to washing machines, water heaters, mobile phones and small electric appliances.

In 1984, around the time the firm was established, Zhang Ruimin, Haier`s president, created a legend when he wielded a sledgehammer in front of his firm`s staff and smashed 76 refrigerators that failed to pass quality tests. Haier has since then been associated with high quality.

In the 1990s, Haier`s business continued to grow rapidly. In 2001, the company generated 60.2 billion yuan in sales revenue and its annual growth rate set a historical high of 48 percent.

But the index has continued falling since.

In 2005, it surprisingly tumbled from the previous year`s 26 percent growth to 0.2 percent, recovering a bit in 2006 up to 0.4 percent.

And 2005 was also the first year that the company`s revenue generated from the domestic market decreased compared to the previous year.

Zhang was quoted as saying the company`s revenue was expected to see little increase in 2007 when he was interviewed by the foreign media.

Whatever explanations corporate executives provide, there is an undeniable truth: Haier is on a low-speed growth roll.

In the domestic market, Haier is still a leading household appliance brand, but intense competition, price wars, rising raw materials and labor costs continue to squeeze profits.

The overseas market is also a hard sell. In 1998, Haier began expanding abroad and now has manufacturing facilities in the United States, Europe, the Middle East and the Asia-Pacific region.

The company`s overseas business has continued to grow, accounting for 15 percent of the total in 2004, and rising to 21.5 and 25 percent in 2005 and 2006.

But the proportion is much lower than that of Huawei, Lenovo and TCL, which stood at 65, 40 and 53 percent respectively in 2006.

Industry experts say Haier`s overseas growth came through aggressive expansion of its sales network, not due to strengths in product innovation and branding, which are key to competing with international peers.

Haier then shifted its sights to a new business. In June 2005, the company announced it would again enter the PC sector.

Local appliance makers have jumped on the PC bandwagon in recent years due to high saturation rates for appliances ranging from televisions to refrigerators and washing machines, but relatively low percentages of PCs in homes.

It was actually the third time that Haier forayed into the PC market, following efforts in 1998 and 2003 that both ended in failure.

This time, Haier seems to be better prepared. It partnered with appliance chains Gome and Suning in the first- and second-tier cities to sell PCs, and is expanding its sales network to an additional 100 stores a month. In third- and fourth-tier cities, Haier products are available in about 2,000 stores and the company has appointed 200,000 sales agents in rural areas, a segment that has the greatest untapped potential.

Haier is now building a 2.2 million sq m PC manufacturing facility in Kunshan, Jiangsu province.

Hisense: expanded property

Hisense was a brand that stood for only for household appliances, especially televisions, but that is no longer the case.

After its partnership with Kelon brought a range of problems, the company has moved into property development, which it believes shows promising prospects.

In September 2005, Hisense bought a 26.43 percent stake in Kelon, establishing HisenseKelon Electrical Holdings Co Ltd and becoming Kelon`s single largest shareholder.

Hisense aimed to give itself a leg up in the refrigerator and air conditioner sectors, which was Kelon`s strength. But the declining business performance in Kelon in the subsequent years has proven the investment to be a virtual failure - something over which Zhou Houjian, the company`s chairman, has himself several times expressed regret .

Industry analysts say integration of the two is the biggest headache and continues to be difficult due to Kelon`s poor corporate governance and structure.

Hisense Group was officially founded in 1994 as an outgrowth of its predecessor Qingdao Television Corp, a nationwide leader in making televisions, whose expertise and techniques were handed down and well kept.

Hisense led China`s television market for years, especially in the flat-screen television segment, due to continuing innovation. For three years ending in September 2007, the company ranked first in sales of flat-screen TVs.

Early in 1995, Zhou announced that Hisense had begun to dabble in the property business.

Despite public doubts, Hisense continued to develop its real estate arm and has expanded to cities around Shandong, including Qingdao, Jinan, Yantai and Weifang.

The annual growth rate in its property development since 2004 has been over 40 percent in both sales and profits. In 2006, Hisense real estate generated sales of 2.3 billion yuan, and it is expected to hit 4 billion yuan this year, according to its corporate website.

Compared with its overall business, the real estate sector is still tiny, accounting for 5.3 percent of the company`s 2006 sales of 43.5 billion yuan. But public statements from company continue to be upbeat.

In the past six months Hisense successfully bid for two prime parcels in Jinan, the provincial capital, from the local government.

The company attributes its growing property presence to the patience it learned in perfecting appliances.

"We expend the same strong efforts on developing a property as on a new household appliance."

In April 2002, Hisense real estate built a research and development center. By 2006, the center employed more than 80 industry experts.

(China Daily 01/14/2008 page10)