Looking back at 2009, the promotion of bike culture in China came from many global and local channels. The Danish Expo Pavilion plans to offer 1500 bikes to be used during the Shanghai 2010 Expo, Alley Cat races in both Shanghai and Beijing and a future race in Guangzhou united bike enthusiasts in urban environments. Bike culture amongst Chinese youth was further empowered by initiatives in Shanghai including the Good to Shanghai – 01Cool Bike program and a local government initiative in Minhang providing free bikes to university students. Youth magazines, such as URBN and 1626, began to recognize the fashionable and hip nature of local fixed gear bike products and riders, publishing multiple articles over the past year on the fixed gear bike culture in China. In addition, we saw online and offline bike groups popping up all over China promoting fixed gear bike culture. Even the Shanghai Government chimed in with their expressed desire to create more biking lanes in Shanghai that focus on getting commuters with the last 3 kilometers of their destination–often the most troublesome and inconvenient for public transportation. Looking back at the steps being taken to promote bike culture in China, it’s safe to say a movement has begun.

Local Shanghai Bike enthusiast and co-founder of Shanghai’s People’s Bike, Karl Ke also has noticed a renewed focus on China’s bike movement.

“Basically, I think people more and more fancy riding a bike, based on four key areas: 1) the government began extensive promotion of environmental protection concepts. 2) More and more Western media are promoting the concept of bike riding and healthy living, which is a cool thing for young riders. 3) More people want to escape from depression and immerse themselves in city life. Cycling is one of the most effective and easy ways to escape and control things in one’s daily life. 4) Fixed gear is simple and close to the concept of extreme sports, but has its own unparalleled noble temperament.”

As with most trends, it’s the early adopters that create the initial first steps that lead to an entire movement. For biking culture in China, we turn to the introduction and spread of fixed gear bikes as a blueprint on where this overall movement is headed and how organizations and environmental groups can capitalize. The global popularity of fixed gear bikes is a storied one from the velodrome to the streets of New York and San Francisco. These brake-less bikes, with a fixed gear hub, making biking both dangerous and exhilarating, came across the oceans and spread into fashion circles in Japan, Hong Kong and Australia. 2008 and 2009 marked their arrival into China. But could such brake-less devices catch on with local riders throughout China?

We asked Ethan, a fixed gear bike rider in Dalian his views on the advancement of this movement in China.

“The young people riding Fixed Gears through the concrete jungle general think Fixed Gear represents a way of life and an attitude that is simple. There’s no compromise; it’s a free cultural product. Different from other extreme sports such as skateboarding, Fixed Gear is quickly popular in China. The key reason is the popularization of the network, and it includes the development of exchanging online information and e-commerce (Most of the Fixed Gear parts are sold through the internet because they are rare and hard to locate in China.)”

These youth values of freedom, self-expression, and simplicity have been some of the most prominent in 2009 and we don’t see this changing in the coming years. In addition, environmental protection is another value we have seen emerging over the past year. As we have written previously, events such as Copenhagen, the movie 2012, and also the daily reality within most cities, has led to an increased focus on small changes youth can make in their daily lives to help the environment. As the government and organizations (in Shanghai, especially related to the 2010 Expo) continue to focus on the environment, we believe biking will become an important way for youth to take action.

People’s Bike co-founder, Tyler Bowa agrees with a renewed community and government involvement.

“The bicycle in China has a much maligned status as one of the lowliest methods of transport and is excluded from its roles as tool for exercise, competition and leisure. This stigma makes the sport prime for revitalization.  The overwhelming growth of youth riders in China within the last year has exceeded 100 times that of 2008.  I expect by 2012 to see a major shift not only in the youth trend, but also in the reaction and support from the Chinese community and government.”

In addition, customizable options on fixed gear bikes allow youth to re-engage with biking culture in China.  Bikes have obviously been the fabric of society for many years but youth will value a new take on the device. While some within the new Chinese consumer space may look down on bikes and biking as a representation of a lower class in society, alternative (and more expensive) options such as highly customizable bikes align with youth desire for trendy and personalized objects.

Over the next few years, look for the following areas to grow and expand the bike movement into more regions of Chinese culture:

Local online and offline bike movements.

As the bike movement speeds forward, look for more and more bike-interest groups to rise online and offline. A perfect example is Shanghai’s People’s Bike.

Founded by Canadian native Tyler Bowa and Shanghai local Karl Ke, these guys are on a mission to be the hub for all things “bike” in China. Through the bilingual site and their extensive foreign and local rider networks, they plan weekly rides, races, and have recently stared a movie project called Jhong.

“Jhong seeks to promote the idea that cycling is not merely a form of transportation, but also an exciting sport and a tool of cultural exchange. Based in Shanghai and using peoplesbike.com as a catalyst, they hope to expand on an already growing network of cycling enthusiasts throughout China through direct contact, mutual interaction, and, of course, bike rides.”

Support from non-profit initiatives and government programs

It takes a single order from the National Chinese Government in Beijing to change both public and local government mindsets. Beijing simply needs to focus their eye on improving bike culture in China for this movement to really take off.

Local initiatives such as Good to Shanghai – 01Cool Bike, led by passionate biking enthusiast Susan Evans, are working with local governments, Chinese bike companies and Chinese university students to promote bike culture in cities throughout China. Susan is planning many bike events throughout China to coincide with Shanghai’s 2010 Expo as well as global environmental initiatives.

Stay tuned for more and also lets us know your thoughts on biking in China.

The Beer Market: Consolidation and Competition

Unlike the US market for beer, which has been steadily dropping in prominence over the last 5 years, China’s beer market stands as the world’s most lively.

China is now the world’s largest producer and consumer of beer. China’s Snow Beer is now the world’s largest brewer by volume and the market share leader in China. Tsingtao is a close second and is rapidly innovating its product line up. Yanjing, a local producer, is third. SABmiller and ABinBEV are in the hot pursuit with their foreign brands, domestic purchases and controlling stakes in other breweries. (SABmiller owns 49% of Snow).

But there are over 300 beer producers in China! While the heavy hitters listed above control more than 60% of the entire market, small local producers continue to dominate away from China’s Tier 1 and Tier 2 cities.

Enter consolidation. As beer’s biggest players continue to eye the China market, they will look to buy up these smaller producers and increase their reach deeper across China. Awhile back, Harbin Brewery and Sedrin were gobbled up by what is now ABinBev.

If consolidation is one key trend to watch, increasing competition is certainly the second most important trend. While China’s beer market may wow potential investors with its size, this is a hard place to succeed. China’s beer is cheap. As one industry expert explained, a keg of Snow sells for about US$ 35. But most of that value is from the steel in the keg. The liquid inside, the actual beer, composes only a tiny fraction of the cost of the filled keg. Snow thrives off its volumes and must be the biggest in the world in order to survive with its razor thin margins. Budweiser, considered a premium brand, sells for about 1 USD. Again, small margins.

With these thin profits, beer companies have to be creative to differentiate themselves, attract new customers and convince people to spend a little more and avoid the cheap bottles on the shelf.

Two examples of this trend are Carlsberg and Suntory. Both are clearly targeting the younger generations in an attempt to bring in new drinkers with a more premium product.

Carlsberg’s campaigns attempt to speak to China’s post 80s generation with their overt displays of attitude and cool. Suntory, with its Mix flavored drinks, is trying to convince China’s female population, a segment not too keen to drink bitter and calorie rich beer, to try their new fruity creations. Many other brands are sponsporing music concerts and younger events to try to attract these drinkers. (China’s official drinkage age is 18.)

These are pretty smart strategies. As our internal research demonstrates, China’s younger drinkers prefer beer. Of course, beer is also incredibly cheap and always available in this segment’s favorite locations: Karaoke joints, restaurants and streetside eateries and clubs.

As consolidation takes over China and competition heats up, enoVate will surely be here to deliver insights and strategy for all of you interested in China’s beer.

China’s Wine and Spirits: “The Budding Yuppie Phase”

While China’s beer market faces a future of intense consolidation and competition, the spirits market in China is, in the words of one industry expert, in the Budding Yuppie Phase.

This contact was referring to alcohol consumption in China’s Tier 1 and Tier 2 cities and the drinking habits of China’s middle and upper class citizens in these cities. While even premium beers (excluding imports) remain relatively cheap in China, the wine and spirits market is in a completely different phase.

“Budding,” refers to the almost adolescent stage of growth in the market. Wines, vodkas, whiskeys, rums, etc are all rather new to China. Only recently have Chinese in big cities started to consume these products but their consumption has skyrocketed in the last few years and will continue to grow.

By yuppie, we refer to consumers’ tastes for brands. Consumers are not yet “mature” and concerned with finding eccentric niche brands. Chinese consumers are not looking to locate a Pinot Noir to convince their friends of their knowledge of wine. Instead, many Chinese are just looking for well-known international wine and spirits brands and buying them to display their wealth. After all, as many who have experienced long Chinese banquets know, those bottles of French wine aren’t for appreciation. Many times they will just be chugged alongside Baijiu and beer.

Chinese consumers are buying Scotch in such large quantities that they even caused a supply scare last year. Research suggests that Chinese consumers are doing so because Scotch is world renowned and perceived as a symbol of status. The most famous premium vodkas also do well in China because of their brand awareness.

Have you strolled around Shanghai or Beijing recently?

If so, you would notice the explosion in wines.  Chinese consumers in tier 1 cities are buying up all the foreign wines they can. Again, most consumers want to display their wealth or impress guests, friends or coworkers. Tea is meant for appreciation, not wine.

We are not neglecting the importance of China’s domestic wines. Baijiu will of course, still be an important drink for banquets and business. Other Chinese wines (huangjiu, etc) will also continue to be consumed at family gatherings, at restaurants and at the dinner table. We at enoVate are not ignoring these products, we only worry that their brands are losing their resonance with China’s youth and thus may have a hard future in a saturated market.

We at enoVate thoroughly enjoyed our time analyzing the alcohol market. Should you need any of your own tailor help within this industry, contact us at matt@enovatechina.com.

中国的酒肯定有历史，可是中国酒的设计现在还在历史中迷失我想：这里面有附庸风雅的成分；有官僚礼品的原因；有不敢离开固有历史的僵化；有市场眼光的低 下；有保守求稳的设计思维；有不求上进的懒惰… … 看看日本的设计，让我们那么多光辉的岁月转化成真正令人敬佩的力量才是正经事.

Chinese wine certainly has a long history, but the design of Chinese wines has been lost in this history. I think the reasons are: the need to be elegant; that wine is a sort of bureaucratic gift for officials; the fear of moving away from a rigid history; a low perception of the alcohol market; conservative design thinking and uninspired, lazy design.

We should take a look at the design of Japanese wines. What we should do is turn our glorious years of history into a truly admirable design.

Yup. Harbin beer, a smooth lager, is China’s oldest brew. It beat out Tsingtao by three years! A quick surview of enoVate’s Chinese staff suggests that this tidbit is common knowledge in the Middle Kingdom. Regardless, this beer is worth learning about.

Harbin Brewery was founded in 1900 by Russians in the northeastern city of Harbin to supply beer to Russians working on the Trans-Manchurian Railway Project. Later, a group of Chinese and Czech’s took it over. During WW2, the brewery again reverted back to Russian hands when Soviets took it over. Eventually, in 1950, the brewery was taken over by the Chinese State.

Earlier this decade, after a prolonged battle with SAB Miller, Anheuser-Busch (now ABinBEV) finally bought the company and now controls it outright.

Despite its long history, Harbin beer isn’t, in fact, a major player on the China domestic scene. It is not in the top 10 of beers in China and so doesn’t control even 1.5 percent of the beer market. Even in Shanghai, it can be hard to find a bottle of Harbin.

But ABinBev is looking to change that. The company hopes to reach 187 different markets in the Mainland this year (most outside of the North, it’s traditional power market) and 200 by 2010, up from 157 markets in 2008. The beer is now available in the US and many other markets and, as new reports flowing out of the company affirm, they are looking to make a national Chinese brand to compete with Tsingtao.

Good luck Harbin beer!

这些酒标是开放前普遍存在的，我们看到的是历史，虽然不是很酷，也不是很优雅，可是这里面分明有着国人的精神：多样化的自信，这句话可能比较可笑，一个封闭的国家怎么可能多样化？可以的，虽然比较狭隘，你看这些酒的原料，有葡萄，大米，高粱，谷子，但更有猕猴桃、桂花、樱桃、桂圆、苹果、橘子这些我们现在都少见的口味，这是一种多元，再就是设计样式也是多样的，字体和图形元素丰富，表达的也很准确，至少当时的设计师对自己的设计是很自信的，可以看的出来。

我们已经进步了，已经成长了，然而，在快速拔高的同时，我们的设计是不是也在沦为含混不清的定位？是不是也在混沌中迷茫着，这些酒标在提醒着我们，也许，好跟不好一直在伴时间轮番轰炸我们的认知，当时认为好的，改革开放后觉得好土，现在迷茫了，又觉得里面有很多不错和经典的… … 我怀念那种些自信涌动的过往。

These wine labels were commonplace before China’s opening up. What we’re seeing is history. It’s not cool or elegant but it clearly has the spirit of our countrymen: the confidence of diversity. This phrase is quite funny, how can a closed country have diversity? Despite being slightly narrow, it can. Just look at the ingredients of these wines, there’s grape, rice, sorghum, millet, and even more rarely seen these days are Chinese gooseberry, sweet-smelling osmanthus, cherry, longan, apple and tangerine flavours. This multifaceted nature is also in the diversified types of design. The abundance of the type and image elements are expressed very precisely, at the very least we can see the confidence the designers had in their designs.

We’ve advanced and matured, but despite this, in a time of high speed and high stakes, can it be that our designs have been reduced to an indistinct and unclear level? Are we just gazing on through the chaos? Perhaps what these wine labels remind us is that good and bad are always there to shape our cognition through thick and thin. These wine labels for example, back then I thought they were good but after the opening up I felt they were uncouth. In today’s haze, I once again feel they are well done and classic…I cherish these turbulent ups and downs of self-confidence.

There are numerous reasons for cosmetics prime placement on the first floor of all department stores, but foremost among them is cosmetic’s sheer market power. Estimates suggest that the cosmetics market in China will still grow 11% in 2009, just 1% less than 2008’s rate. Clearly, these goods are recession-proof.

In China, the cosmetics industry is not only resilient, but also huge. This author has estimated its size from anywhere between a $5 and $10 billion dollar industry in 2008. Why the range in figures? Different definitions. Viewing the segment from a legal perspective, many would include shampoo, hair dyes and deodorant in the definition of cosmetics. Many others cap their inclusions at just skin care, perfumes, lipsticks, fingernail polishes, eye and facial makeup preparations, items most consumers consider “cosmetics” or the “beauty market.”

At least in China, skin care products are certainly the force behind these figures. In the Mainland, skin care accounts for an incredible 80% of the beauty industry’s product share. Colorful facial makeup, in China, does not command the same attention it does abroad. As anyone who has lived in China understands, skin is big business here.

As with many other markets in the Mainland, the cosmetics market is also highly segmented. P&G and its Olay brand control the biggest share of the market. L’Oreal is a close second with about 10% of the entire market and made a cool $1 billion in revenues in 2008. After these two powerhouses, we see Estee Lauder, Shiseido, China’s Jahwa, Avon and others. But, according to sources, the top 20 cosmetic manufacturers hold only about 50% market share. That means there are hundreds of local brands out there that we won’t have space to detail here

Don’t assume that we are only talking about women consumers. Men’s skincare is a growing segment with cosmetics. L’Oreal reported that men’s products now contribute almost 12 percent of L’Oreal’s sales revenue in China and this figure is expected to dramatically increase. It’s pretty hard to avoid Biotherm ads nowadays and many brands report that their men’s business is their fastest growing segment.

And how are Chinese getting these goods. In fact, the distribution network is fairly similar to other nations’ markets. Specialty retailers and departments stores are the first stops for premium and mass premium cosmetics. Supermarkets, grocery stores and pharmacy chains (Watson’s in particular) provide mostly mass market and a few more premium products.

China, though, remains unique for two reasons: Taobao and direct selling. As enoVate blog readers will know, Taobao is a force to be reckoned with. As our own contacts have told us, many cosmetic brands worry about Taobao. Chinese consumers are smart. Many visit department stores to sample cosmetics and then buy them off Taobao at home and for a discount. Other customers use brands’ websites to do their own research but then Ctrl T over to Taobao.

Direct sellers themselves haven’t yet found the pot o gold in China. In Taiwan, 1 in 4 buy their cosmetics from direct sellers. In China, the figure is 1 in 20. The Chinese government very early on made clear is dislike of these “unscrupulous multilevel marketers” and banned direct selling until 2006. Mary Kay, the first “direct seller” to enter the China market, originally created a network of retail stores. After the lifting of the ban, Mary Kay, Avon and others have reignited their direct selling activities and continue to expand. enoVate will certainly keep an eye on these developments.

From men’s cosmetics to Taobao’s growing clout, enoVate will continue to keep abreast of these cosmetic trends!

One day, as I drank coke, I suddenly thought of 非常可乐(Future cola, a local soft drink brand). Then I was thinking about how they lost their market share in tier one and tier two cities. Originally, these markets were saturated with Future Cola advertisements, a strategy that made many of us believe that a local brand might finally able to stand out in this industry. But what happened?

Another local fast food brand “德克士” (Dicos) was about to breakthrough but was soon almost squeezed to death by KFC and McDonald’s. In the end, they were able to win market share only in tier three and tier four cities.

However there are still some Chinese brands like “真功夫”（real kung fu） and “老娘舅” （Lao Niangjiu）that are finding their way to success. These brand wars don’t just occur in the food and soft drink industries. Let’s look at some other brand and their stores in China.

NIKE and ADIDAS, two brands that now combined control at least half of China’s sportswear and trendy shoes markets. Yet they have both expended an immense amount of time and resources to wrest this share.

You can find that colors of their shoes are not the same as what they sell overseas. A lot of Chinese people complain colors and design are different here, but you have to admit that they sell pretty good, the reason is simple , trends at abroad do not comply with Chinese market. Therefore, most of people work for their china design team are locals, I believe this is also happened in other countries.

China, as one of the biggest export bases in the world and its the population and consumption trends provide an always enticing market for all foreign brands. Millions each year are spent on manpower and resources to research the China market and its consumers. In general, China’s mindsets are different than their western counterparts, so much of this research is a good idea. And China is a complex place with huge differences in geographies, wage levels and spending habits. Shanghai is China’s poster child city of wealth and cosmopolitan flair so many brands enter the market first there and then move to other locales.

Generation differences are especially difficult to address in China’s market. It’s a hard work for brands to win the hearts of young consumers! Like the Italian brand Diesel. Diesel is a far from a luxury brand abroad, but it quickly became a top brand in Hong Kong and mainland. Actually I really admire the company or agency that helped them improve their brand image. This company helped Diesel appear on the first ten pages of magazines next to brands like LV and Boss and some of the world’s most expensive brands. This work has directly helped elevate the brand’s image. Such tactics may not work for every brand. There are some foreign brands that have failed in china because they went the wrong direction with the brands.

Therefore, in China, the brands will be like an old Chinese saying: 近朱者赤近墨者黑（one takes the color of one’s companions). Trends in foreign countries is like China’s national policy: sustainable development. But in any case they should sit in the right seat .

Below Ren uses his interest in fashion as a starting point to briefly discuss brand entry into a Chinese market. Scroll down for a translation.

建设有中国特色的潮流文化
去年好友推荐我看LOOKBOOK，当时我对这样的街拍网站产生了很大的兴趣，我看过的街拍网站也不少，像JAPAN STREET STYLE，就是十分不错的网站。而LOOKBOOK成功在独创的品牌归类系统以及和投票系统，让这个网站变得即具有品牌文化推广性更不失大众参与性。当时就想到什么时候这个网站出个中文版或者推广到中国来就好了，毕竟在这个网站上面的中国人实在是比较稀有。
今年在好朋友的推下我看了她们做的网站（voguemate），我发现这个网站和我刚说过的LOOKBOOK有惊人的相似处，而且人气还蛮高的。他们也承认有借鉴。其实我觉得这个并没有什么不对，毕竟借鉴和抄袭只是一线之差。
回到这次的主题上，在中国这个大环境，因为市场的需要以及人们心里的需要，对新事物和新文化的需求量还是很大的。如果外来文化不愿被同化，就会有一股相似的东西出现。你说google应该用什么方法可以对付占有那么强大的中国市场的百度（baidu）呢，再如ebay在中国哪怕砸几亿广告也许也不能把当时借鉴他的淘宝（taobao）给压下去吧。肯德基也十分郁闷自己怎么会有一个中国姐妹呢？
中国的潮流及中国的文化，就是有这种强大的同化力量。所以lookbook还来不及看清楚中国人的穿着就被voguemate给抢占了江山。如果你是一个国外的知名品牌推广人，你会如何?还是眼睁睁等待长的像自己的兄弟莫名奇妙的出现在中国。

Building Cool Culture With Chinese Characteristics

Last year, my friend recommended Lookbook to me, I was really into street shoot websites then, I have seen a lot of street shoot websites, like the very cool Japan Street Style, but Lookbook has been successful because of its classifying and voting system. This also makes the website famous for its brand promotion and public participation. At the time I hoped they’d come to China or start a Chinese version, as it is sad that I barely saw any Chinese members at such a good site.

One of my good friends told me to check out the website (Voguemate) they created and I found out it is was a lot like Lookbook. They are also very popular. They agree that they use Lookbook for reference. Actually every designer (including clothing, architecture, graphics, furniture) knows that there is only a small gap between referencing and copying.

Back to the topic, as there is a massive desire in China from both market and people for new things, if foreign brands aren’t willing to adapt, then similar products will appear. How should Google deal with Baidu who owns such a huge market share in China? Ebay spent hundreds of millions for advertisement, yet it still cannot compete with Taobao and KFC is very confusing; how is it that it has a Chinese sister?

Chinese trends and Chinese culture have this strong power to adapt. Therefore, Voguemate seized the market while Lookbook was still figuring out Chinese style. If you are a well-known foreign brand promoter, what will you do? Will you also wait too long until your brand’s ‘brother’ suddenly appears?

In the past few years, many companies have started to sell their products direct to the cutsomer via online shopping platforms such as Taobao. With the increase of sales, some companies have created their own brand, like 歌瑞尔（Gainreel）, 麦包包（M baobao）.

歌瑞尔（Gainreel）is a clothing company located at Guangdong, it used to be a OEM factory with one thousand employees and 3 billion RMB in annual sales. They provided OEM manufacturing services to 40 well-known european underwear brands. Since marketing online at Taobao, their product has become more and more popular. No longer manufacturing for foreign brands but creating their own.

“M Baobao” is an OEM luggage manufacturer. Due to a slow down in foreign trade as a result of the financial crisis, they decided to create their own brand 麦包包（M baobao）. Like Gainreel, they chose to use the Taobao supply chain, which effectively saved the company from bankruptcy.

Foreign companies such as Uniqlo, P&G and Dell are now also joining the competition. Uniqlo started to work with taobao around April 2009. Due to the slow increase in expanding their retail stores, Uniqlo decided to cooperate with taobao in order to first increase their (online)sales and help their branding in china.

Ten days after launching their Online shop store, their sales were the highest ranked at Taobao. That month the sales on their Taobao store were equivalent to an average Uniqlo retail store. Moreover, the hot sale online does not affect the income of real stores at all. Besides the taobao store, Uniqlo have also establisehd a shopping platform at their official website which uses Taobao’s payment and maintenance system.