China's No.1 Sportwear Corporate Anta, Not A Brand Producer But A Collector?

In 1991, Anta was founded in Jinjiang, Fujian, known as the "China Shoe Capital." After sixteen years of efforts, Anta went public on the Hong Kong Stock Exchange in 2007. In 2009, it became a TOP official partner of the Chinese Olympic Committee. In 2022, Anta Group's revenue exceeded CNY 50 billion for the first time, reaching CNY 53.65 billion, with a year-on-year growth of 8.8%. Since 2015, Anta's average annual compound growth rate has exceeded 25%. With this achievement, Anta has surpassed Nike China (CNY 51.422 billion), Li-Ning (CNY 28.503 billion), and Adidas China (CNY 23.597 billion) in revenue during the same period, making it the largest sportswear company in the domestic market.

In its path toward the international market, Anta is no different from other established enterprises. In addition to its main brand, Anta has acquired various professional sports brands globally, including Arc'teryx, DESCENTE, Kolon Sport, Salomon, Atomic, and others. From lifestyle and fashionable sports to professional sports, Anta's brand portfolio is continuously expanding. As of the end of 2022, Anta has a total of 9,603 Anta and Anta Kids stores worldwide, with approximately 7,200 operated through the DTC (Direct-to-Consumer) model. The DTC business, including both online and offline channels, accounts for 70% of the total.

Established for 32 years, Anta is still inexperienced in the global market

Anta's journey towards globalization can be traced back to 2009 when it acquired the trademark usage and operating rights of FILA in certain regions of China for CNY 325 million. This initial contact allowed Anta to experience the benefits of being financially capable. Over the following years, its acquisition portfolio expanded to include UK's sporty fashion shoe brand Sprandi, Japan's high-end sports brand Descente, South Korea's outdoor brand Kolon Sport, and Amer Sports, among others, covering various segments of the sportswear market. Through these acquisitions of international brands, Anta filled in the gaps in its sports product categories, establishing a brand matrix that ranges from mass-market to high-end, catering to adults and children, and offering a variety of products, thus achieving improvements in product quality and diversity.

However, cross-border acquisitions and brand matrices are never the cornerstones of a company's globalization strategy; at best, they serve as supplements and explorations. In 2021, in its 30s, Anta for the first time listed globalization as one of its strategic goals. To better implement its multi-brand and globalization strategies, in January 2023, Anta underwent its largest organizational adjustment since its founding. In terms of personnel changes, Ding Shizhong stepped down as CEO, and the position was handed over to former CFO Lai Shixian and former CEO of the Professional Sports Brand Group, Wu Yonghua. In the context of globalization, Anta established the Southeast Asia International Business Department and appointed Wang Huayou, the Group's Retail President, as the head, signaling its comprehensive entry into the Southeast Asian market.

As Anta advances towards globalization, it finds itself on the same starting line as other newly established brands in recent years. "Capital reserves" may be one of its few advantages or not.

As Anta's multi-channel layout works out, can FILA become Anta's "China Li-Ning"?

Anta's growth, including its main brand, has been driven by several factors, with the optimization of the DTC business being one of them. Currently, out of 9,603 Anta and Anta Kids stores, approximately 7,200 are operated through the DTC model, including other brands like FILA, which are also fully owned and operated by Anta. In recent years, with frequent closures of offline retail locations, online channels have become crucial for sportswear brands. In 2022, Anta's e-commerce business grew by 17.7%, and the overall online business revenue of the group increased by 30.7%, with its share rising from 28.6% at the end of 2021 to 34.3%. The combined DTC business, both online and offline, now accounts for 70% of the total revenue, which enhances Anta's ability to understand consumers across all channels and improves its market responsiveness.

DTC has been a significant trend in the global retail industry in recent years, with DTC brands like Allbirds, American Giant, and Bucketfeet emerging in the United States. Anta, with its grasp of the DTC model, shortened sales channels, and closer proximity to consumers, has gained advantages in international expansion, especially in entering emerging markets.

While looking at Anta's financial reports over the past 5 to 6 years, it becomes evident that FILA has been an important source of revenue and growth for the company. Unlike Li-Ning, which created its own trendy brand, Anta chose to leverage the brand image of FILA to explore the mid-to-high price segment during its pursuit of youthfulness, trendiness, and upscale positioning. Undoubtedly, Anta's management of FILA's operations in mainland China has been impressive, but besides revenue, what value does FILA hold for the Anta Group in the long term? If we look 10 years ahead, can the "adopted child" FILA enable Anta to maintain its position as China' NO. 1?

Firstly, brand operation is different from building a brand from scratch. Although Anta's management of FILA has been successful, it has not been able to create a young and trendy independent brand like China Li-Ning, which might put Anta at a disadvantage in capturing the mindshare of Generation Z and future consumers during its global expansion.

In 2022, FILA's share of Anta's total revenue declined to 40.1%, and its gross profit margin decreased by 4.1%, impacting the overall gross profit margin. The significant decline in FILA's performance was attributed to the impact of the pandemic on offline retail, increased discounting of FILA products, and the effects of innovation for FILA's high-end product upgrades. As FILA's growth slows down, Anta will need to balance the development of other major product matrices in its multi-brand strategy.

Focusing on refinement, Anta's global brand dream

Currently, the sportswear industry is showing a trend of segmentation. In 2022, footwear/apparel brands and equipment manufacturing, as well as the fitness/yoga sector, became the twin leaders in domestic sports product investment. Among them, Lululemon, starting with niche markets such as yoga pants, surpassed Adidas in global market value. Inspired by this, Anta also targeted the opportunities in China's segmented sports products market and made multiple bets through capital operations.

Looking at Anta's brand matrix, the main Anta brand focuses on mass-market professional sports, FILA positions itself in the mid-to-high-end casual fashion segment, Descente concentrates on the professional skiing field, Kolon Sport started with climbing apparel and equipment, and Amer Sports' brands are mainly concentrated in tennis, outdoor gear, hiking shoes, outdoor watches, and skiing equipment.

In its progressive exploration, Anta chose not to directly compete with traditional dominant brands but instead bet on the future through lower-risk acquisitions, catering to consumers' ever-changing demands. The benefits of this approach are evident in the collaboration with FILA. However, it also poses challenges. The acquired brands hardly contribute to enhancing Anta's brand strength, and consumers do not associate these brands with Anta when choosing their sports products.

While capitalizing on the multiple brand effect to strengthen the overall business, Anta's own brand voice is being overshadowed. Many buyers are unaware that FILA's operations in China belong to Anta, and a similar lack of awareness exists among consumers of brands like Arc'teryx and Wilson. If Anta cannot establish the reputation of its own brands, the short-term growth driven by the multiple-brand effect may not be sustainable. Li-Ning's experience as a pioneer also suggests that a multiple-brand strategy is not a one-size-fits-all solution for every stage of business development.

Technology R&D, supply chain transformation, can adherence to ESG principles pave the way for Anta's globalization?

Globally, the sportswear industry is facing environmental pressures second only to the petrochemical industry. In recent years, sports brands have been striving for development while exploring the path of ESG transformation. Since 2015, Anta has disclosed its ESG practices and achievements for eight consecutive years. In 2021, Anta became a signatory member of the United Nations Global Compact and established a Sustainable Development Committee, aiming to achieve carbon neutrality 10 years ahead of the target year (2050).

In 2022, Anta joined hands with partners to launch sustainable development and supply chain transformation projects in the textile industry, promoting energy-saving and emission reduction work among 15 fabric and 5 mesh suppliers, as well as implementing energy-saving and emission reduction plans in its own operational facilities, using renewable resources. Environmentally-friendly materials and technologies, such as space leather and recycled nylon fabrics, have been applied to products like Anta's products.

Anta has disclosed its ESG practices and achievements for eight consecutive years

Taking the example of eco-friendly recycled nylon material REPREVE, it is derived from industrial waste such as waste silk, scraps, and trimmings during nylon production. It avoids the use of petroleum resources and undergoes special processing, resulting in an energy saving of approximately 44%. The production of one ton of such material emits only about 50% of the carbon dioxide equivalent of regular nylon.

Anta's forward-looking vision in sustainable development is an important strategic move. It is well known that overseas markets, especially in Europe and America, highly value companies with green attributes, including both regulatory aspects and consumer preferences. By proactively addressing sustainable development, Anta can enter the international market, tell a universal brand story, accumulate resources, and gain recognition from the younger generation who emphasize individuality.

Acquisitive Globalization, Anta's Challenging Path to Internationalization

For Chinese sports brands, the strategy of starting with their own brands, establishing a strong foothold in the local market, and then acquiring international brands to fill gaps in professional or high-end markets and open up global markets has become a common practice. Acquisitive internationalization has also been the chosen path for Anta.

In 2009, Anta Sports acquired the trademark and operating rights of FILA in certain regions of China, and more than a decade later, FILA has become one of the pillars of Anta Sports' performance. During this period, Anta Sports also acquired numerous international brands such as Descente, Kolon, and Amer Sports, which the company refers to as the third growth curve. However, looking at the revenue structure, it appears that Anta's rapid acquisitions mainly involve selling international brands' products in the Chinese market to gain market share, rather than truly expanding internationally. In this sense, Anta can be seen as an active promoter of using tactical diligence to compensate for strategic laziness.

Based on the 2021 financial report, nearly 93% of Anta's revenue comes from the Anta brand and FILA, while other brands contribute a total of CNY 3.49 billion, mainly from the Japanese sports brand Descente and the Korean outdoor brand Kolon. Like FILA, these two brands are also represented by Anta only in China, limiting their influence to the domestic market.

In 2019, Anta acquired Amer Sports, the parent company of Descente, for CNY 36 billion. Although the acquisition includes Amer Sports' global business, it has not yet brought considerable overseas income to Anta. Amer Sports incurred a loss of nearly CNY 1 billion in 2019, CNY 600 million in 2020, and further reduced the loss to CNY 8.1 million in 2021. Despite moving in a positive direction, for a financially strong and mature company like Anta, the first phase of its global exploration can only be considered as a significant learning experience.

In recent years, Anta's overseas expansion has been accelerating. The company has begun the process of acquiring FILA's overseas operating rights and has already obtained FILA's operating rights in several Southeast Asian countries, including Singapore. Judging from Anta's current layout, Amer Sports may become the main force responsible for conquering overseas markets. Amer Sports' main markets are overseas, and it owns multiple top global brands, such as Salomon, Arc'teryx, and Wilson. Leveraging Amer Sports' accumulated experience, Anta may be able to enter markets outside of China and expedite its globalization efforts. However, everything is still in the exploratory stage, and as competition extends globally, overcoming giants like Adidas and Nike may prove to be even more challenging for Anta.

Can Anta ascend to a higher level in the next decade to close the gap between Anta and the leading brands?

Chinese sports apparel brands began their international expansion in the early 21st century. Initially, they focused on establishing distribution channels and representative offices in other countries, and later the trend shifted toward acquisitions. Anta has successively acquired brands like FILA, Descente, and Amer Sports, expanding its product portfolio and brand recognition. However, in terms of internationalization, Anta still remains in a relatively weaker position. While Anta has its own brand matrix and operational efficiency advantages, when its business units are compared individually with Nike, it still falls short of its competitors.

In terms of R&D investment, although Anta has increased its investment in professional sports in recent years, the gap with international brands remains significant. From 2019 to 2021, Anta's R&D expenses were CNY 780 million, CNY 888 million, and CNY 1.135 billion, accounting for 2.3%, 2.5%, and 2.3% of its revenue, respectively. In comparison, Nike and Adidas spend 5%-10% of their annual revenue on R&D.

Looking at global revenue data, in 2022, Anta's revenue was CNY  53.651 billion, while Nike's global revenue was about CNY 352.4 billion, more than six times that of Anta. Focusing on their respective main brands, Anta's main brand generated annual revenue of CNY 27.72 billion, with a year-on-year growth of 15.5%, while Nike's main brand generated approximately CNY 335.2 billion in revenue, around 12 times that of Anta's main brand.

Nike's leading position in the international market is built on a balanced global layout. Compared to Anta, whose core market is in China, Nike's battlefield is much broader, with four major international markets: North America, Europe, the Middle East and Africa, Greater China and Asia Pacific, and Latin America. By balancing revenue from different regions, Nike has a strong risk resistance. Although Nike's revenue in China has shown a downward trend in recent years, with a 10% year-on-year decline in Q3 of the 2023 fiscal year, its revenue has increased in the other three major markets (North America, Europe, the Middle East, and Africa, and Asia Pacific and Latin America) to a varying extent, resulting in a 14% year-on-year increase in total revenue. As for Chinese sports apparel brands led by Anta, the challenge of diversifying their business and balancing risks has been discussed frequently but has not shown significant progress.

Anta's path to internationalization still requires a strong catch-up effort. When discussing internationalization dimensions, Zhang Qing, founder of the Key-Solution Sports Consulting Company, mentioned that analysis can be done from three perspectives: corporate internationalization, brand internationalization, and market internationalization. Anta has done well in the internationalization of business philosophy and talent structure. However, the market tends to focus on the latter two aspects, especially the market internationalization that can be directly measured by numbers, which is currently a weak point for Anta. In 2022, Anta did not disclose foreign business revenue data, but compared to the respective 1.77% and 1.8% proportions for Li-Ning and 361' international businesses during the same period, it can be assumed that Anta's international business may not be significant.

Anta's founder, Ding Shizhong, once said, "We don't want to be China's Nike but the World's Anta." According to the Global Sports and Fitness Apparel Market Trends and Analysis report released by Research And Markets, the global sportswear market is expected to reach USD 193.9 billion by 2026, with a compound annual growth rate of 4.5% compared to 2022. The sports goods market presents significant development potential both in terms of industry size and annual compound growth rate, but the challenge lies in the continuous intensification of industry competition, which has shifted from quantity and price to areas such as new technologies and high added value.

As China's leading sports brand, Anta still faces a considerable gap in technology R&D and brand value compared to top international brands. Can Anta rise to the challenge and achieve Ding Shizhong's vision in the next decade or so? This is a major issue for Anta. Although Anta has successfully integrated international brands like FILA, its accumulation and preparation time in internationalization are not very long. Whether it can truly achieve internationalization through the synergistic effect after acquisitions is also a significant challenge for Anta.

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