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What is Li Ning - and why does the brand want to spend Rs.600 crore in India?
That's the brand's marketing budget in India over the next two years.
Ace shuttler, Kidambi Srikanth had to settle with a quarterfinal finish at the recently concluded Indonesia Masters, but the buzz around his Rs 35 crore endorsement deal is far from settled. The Guntur boy's four-year endorsement deal (up to Rs 7.5 crore a year) with Beijing headquartered sportswear and equipment brand - Li Ning - has set a new record for any non-cricket, non-Bollywood Indian brand ambassador. In fact, he is second only to India's cricket team captain, Virat Kohli in terms of the face value of a single endorsement deal among athletes in India. It is reported that Kohli has brands in his kitty which pay him Rs 10 crore a year.
If the rumours are true, then Li Ning is not done yet and is currently also negotiating a deal with Olympic Silver medallist, PV Sindhu. Industry experts suggest that it's going to surpass the Rs 35 crore Srikanth deal.
But why is Li Ning splashing cash in India?
"For Li Ning, India is the second biggest market after China and in the next six months we are going to come into India in a big way," says Mahender Kapoor, director, Sunlight Sports Pte, Li Ning's distribution partner in 21 markets across Asia, Australia and New Zealand. Apart from Li Ning, the Singapore-based Sunlight Sports, is also the multi-national exclusive distributor for McDavid, Shock Doctor, Kason, and DHS.
In India, Li Ning and Sunlight Sports have a joint venture where the latter looks after the brand's operations in the country. The JV is also associated with Meerut-based - Indo Rubber - to distribute badminton equipment in India. "Soon we will have a similar JV in Indonesia and Malaysia," informs Kapoor.
This is not Li Ning's first marketing blitzkrieg as it has already signed a multi-year deal with the Indian Olympic Association and was the official sponsor of the Indian contingent in the 2016 Olympics, the 2018 Commonwealth Games and the Jakarta Asian Games. Athletes will continue to sport the Chinese brand's logo in upcoming games too. Back in 2009, premier players like Chetan Anand, Arvind Bhatt, Anup Sridhar, Jwala Gutta, and Ashwini Ponappa switched from Yonex to Li Ning.
Mahendra Kapoor
"Badminton is not our only focus; Li Ning in China is like Nike around the world. It is a sportswear brand with apparel, footwear and other accessories in its catalogue and also manufactures badminton equipment. In India, our aggressive push at this stage is on Badminton and soon we will compete with Nike and Adidas in the sportswear category too," says Kapoor confidently.
Li Ning's turnover in China is $1.6 billion and the brand operates more than 6000 (exclusive as well as franchisee) stores in the country. In India, at this stage, 90 per cent of Li Ning's revenue comes from the sale of badminton equipment. "The rest of our offerings like running shoes etc. are only selling on Amazon as we are testing the waters to understand consumer demand and the opportunities in the market," informs Kapoor.
The badminton equipment industry in India is estimated to be around Rs 500 crore and is heavily dominated by Japanese giant Yonex, which enjoys close to 55 per cent market share. Li Ning is the second biggest player in India with 15 per cent market share, followed by Taiwan based Victor.
Li Ning is doing around Rs 70 crore at this stage while Yonex would be raking in Rs 250 crore and Victor would be around Rs 15 crore or more. "The three of us cater to the professional players while there are brands like Cosco and others which sell lower-end equipment," Kapoor states.
In two years, Li Ning wants to establish itself as a sportswear brand and Kapoor's target is to achieve a 90:10 ratio where only 10 per cent of the revenue comes from badminton and rest from the sportswear business.
The global badminton market would be around $800 million, "Yonex's turnover would be close to a billion dollars and if you omit Tennis, Golf and others from their revenue, it would be around $300 million from badminton. Li Ning is already doing around $180 million from badminton, then there is Victor which does about $150 million," says a senior executive in the sports equipment distribution business.
China is the biggest market followed by Japan and Korea. India is a distant fourth followed by Indonesia. "The European physique is not badminton-friendly. Yes, great players do come from European countries like Olympic Gold medallist and world champion Carolina Marin, for example. But, the number of people playing badminton in the whole of Spain would be less than the number of people who play in Bangalore. Because it is such a small sport in America and Europe, the size of the industry is so small and that is why we want to establish Li Ning as the Nike or Adidas. From July onwards, we will start setting up our exclusive stores in India and also announce partnerships with leading retail chains," says Kapoor.
As per Euromonitor Research, the sportswear market in India has grown from Rs 24,000 crore in 2014 to about Rs 45,000 crore in 2018. The strategic market research provider projects the Global Sports and Fitness clothing market to reach $231.7 billion by 2024.
"Active lifestyles are becoming very popular in India among all age groups and fitness apps are playing a vital role. Running shoes is a booming category in the country and female sportswear is the fastest growing segment in the fitness and athlete-wear industry. Also, with celebrities like Hrithik Roshan, Jacqueline Fernandes and Virat Kohli launching their own labels, there is intense competition," says an analyst from the firm.
Reebok, Adidas, Nike, and Puma dominate the market while Skechers is one of the fastest growing brands. "It is a segment where everyone is trying different things and nobody has really cracked it. Skechers have done very well and can emerge as the market leader soon; we too will follow a similar strategy in India. Our plan is to provide comfort at a good price," informs Kapoor.
The Li Ning-Sunlight Sports JV has set aside Rs 600 crore to spend on marketing over the next two years. "We have already announced a deal with Srikanth and we are on the verge of announcing another major one. From July, we will start promoting our non-badminton portfolio. I don't think we will touch cricket as a tool for marketing our products, be it IPL or World Cup, as I feel it is already very cluttered," says Kapoor.
Sources suggest that the brand got the top players for Rs 10 lakh a year each, which was 50 per cent more than what they used to get from Yonex. From Rs 10 lakh a year to Rs 7.5 crore shows the meteoric rise of brand badminton in India in the last decade. For now, it remains to be seen if Li Ning manages to do what Xiaomi did in the smartphone category.