In the early morning of Zhejiang in the winter, hundreds of cross-country runners are gearing up for a 30-kilometer mountain road that has climbed nearly two kilometers. The reporter participated in a cross-country run in December last year and felt the heat of outdoor sports in China. The temperature is less than ten degrees. Everyone only compresses the compulsory equipment such as underwear, water bag and cross-country running shoes. The total price of the seemingly streamlined equipment can easily exceed 5,000 yuan.
On March 21st, a white-collar worker in Shanghai who likes outdoor sports told reporters that he started cross-country running in June last year. By the end of last year, he had completed 8 cross-country races and 2 half-marathon races, which cost nearly 20,000 yuan. Set up equipment.
Outdoor sports, including trail running, are very "burning money". Some netizens have roughly calculated the cost of running off-road equipment. The most affordable ones are more than two thousand yuan (yuan, the same below), the middle level of five thousand, local-level players Thousands of equipment are available. The third-grade consumption of the basic equipment of the marathon is roughly 500, 2,000 and 4,000. The seemingly astounding up-front investment is to ensure safety. Someone has joked that the marathon tactics are to maintain the target pace, and the trailing tactics are "live back."
China's outdoor market is growing rapidly
The sense of smell of capital has always been sensitive, and now local giants have taken a fancy to this market segment. After more than half a year, Anta finally won the Amer Sports (Amer Sports), the total purchase price of 4.6 billion euros, the main revenue of Amalfi is derived from very "burning money" "Outdoor sports goods, its brands include Canada's luxury outdoor equipment brand Arc'teryx (Arc's Anthology) French mountain outdoor off-road brand Salomon (Salmon).
On March 12, Anta announced that a consortium consisting of ANTA Sports, Fangyuan Capital, Anamered Investments and Tencent has successfully completed a voluntary offer to acquire all the shares of Amadea's issued and outstanding shares. Payment will be completed around March 29th.
Coincidentally, another local giant has recently announced a plan to introduce overseas brands. Xtep announced on March 4 that it has established a joint venture with Wolverine World Wide (WWW US) to design, market and distribute in mainland China and Hong Kong and Macau. Two brands, Merrell and Saucony, the former is the American outdoor brand for hiking shoes, and the latter is the American running shoe brand. The two sides will invest 155 million yuan (total 310 million yuan).
"We have made relevant estimates that China's outdoor market is expected to grow to 40 billion to 50 billion yuan by 2025. This market has two characteristics. First, high growth, the growth rate is expected to reach double digits in the next few years; It is extremely fragmented. On the one hand, the status quo of local brand operation is not satisfactory. Foreign brands have not formed a leading position in the Chinese market, and the market accounts for 9%-10%.” Roland Berger Management Consulting Co., Ltd. Senior Partner and Greater China Chen Ke, vice president of the district, said on the 13th century economic report on March 13.
Sneakers are gradually subdivided
So why does Anta do this merger? According to the announcement issued by Anta, first of all, the Amalfi diversified brand portfolio is in line with Anta’s multi-brand strategy. Anta believes that some of its brands have great potential in the world and in China, and the acquisition It will further enhance the Group's ability to expand as the world's leading sporting goods company in China and abroad.
“After rising per capita income in China, the characteristics of sports goods consumption are the subdivision of demand. Simply put, in the early days, everyone may only have a pair of 'sports shoes', playing, wearing, and wearing These needs are now increasingly segmented, requiring different functions of sports shoes to meet different scenarios, and even there are sports shoes with fashion needs." Chen Ke said.
As a local sports goods giant, Anta and Xtep have the need to further expand the brand and category layout.
“The competition between local brands is becoming increasingly fierce, and the market of international brands is sinking and squeezing them. Then, through the agency and even the acquisition of overseas brands, the middle and high-end market will be covered. Another dimension is the supplement of the sub-categories. Brands are more of running shoes and basketball shoes. It is difficult to build a professional brand in the minds of consumers. Then you can supplement the coverage of the sub-areas by grafting multiple brands.” Chen Ke said.
Anta has tasted the "sweetness" of multi-brand strategy. The Anta 2018 performance report released on February 26 showed that the annual revenue was 24.1 billion yuan, a year-on-year increase of 44.4%, and the net profit was 4.1 billion yuan, a year-on-year increase of 32.9%. Among them, the Italian sports brand FILA has become the most important growth point of the group after it was acquired by Anta in 2009. In 2018, the retail sales of other brand products represented by FILA reached 85%-90%. In the earnings report released this time, Anta has defined FILA as the Group's second major brand. In addition to FILA, Anta also has the China business of sporting goods such as Sprandi in the UK, DESENTE in Japan and KOLON in Korea.
Then look at Amalfi, which has trail running shoes, alpine skiing equipment, ultra-high-end outdoor clothing, cross-country skiing equipment, tennis, snowboarding, sports watches and commercial fitness machines. From the perspective of specific revenue structure, the income of outdoor sports products has always been a big head, staying at around 60%.
“The growth rate of the sportswear market, which is mainly sports and leisure, has gradually slowed down to 5% or less in the past few years, but the segment of professional sportswear (including shoes) has grown at a rate of more than 20% in the past few years. It is likely to accelerate growth.” Zhou Hao, global partner of Bain’s global partner and M&A business, told the 21st Century Business Herald.
How hot is China's national sports? The 2018 Marathon Annual Report released by the Chinese Association of Athletics on March 11 shows that as of the end of 2018, there were 1,581 marathon and related sports events in China, with a total of 5.83 million participants. Different prefecture-level cities have held different forms of marathon competitions. In 2018, the total annual consumption of the Chinese marathon reached 17.8 billion. The total consumption driven by the annual competition reached 28.8 billion. The total annual output of the industry reached 74.6 billion, an increase of 7%.
Local network helps overseas brand expansion
"For overseas brands, some markets in Europe and the United States are actually doing stock market, and even some markets are still shrinking, and China is a huge dividend market." Chen Ke said.
AMD's 2018 revenue was 2.678 billion euros (about 20 billion yuan). From the perspective of its distribution market, the main contribution comes from Europe and the United States, and the Asia-Pacific region is only about 14%.
For these overseas brands, although they have already come to the Chinese market, due to lack of localization and lack of “existence”, through cooperation with local partners, they can rely on channel network and marketing to achieve better in the Chinese market. expansion.
For example, Saucony, introduced by Xtep, despite the title of “Four Running Shoes”, did not perform well after entering the Chinese market in 2015. It was once speculated that Saucony would follow the footsteps of Brooks, another big running shoe brand, and withdraw from the domestic market.
Xtep's 2018 performance report shows that in 2018, it sponsored 42 marathons and runners and became the most popular local sports brand in the marathon. At present, Xtep's market share in running shoes is about 10%-20%.
At the performance meeting held on March 12th, Xtep Group executives said that this year the joint venture company will set up a team to carry out product research and development and channel construction. Xtep can take advantage of local resources. On the one hand, it is an e-commerce channel, and another plan is to be in the Mainland next year. In the second-tier cities, Hong Kong and Macao, the flagship stores of the above brands will be opened. In the next three years, each brand will open 30-50 new stores, which will have a scale effect.
Anta's global ambition
Compared with Xtep, Anta is clearly more ambitious in the next game.
“Anta has developed to the present, although it has successfully promoted to one of the world’s largest sports brand companies, but the sales are mainly from the Chinese market. It is still a local Chinese company, then the next step is to think about how to achieve globalization through the acquisition of Asia. Muffin helped Anta achieve a global layout. I think this is a bigger appeal for Anta's transaction." Chen Ke said.
At the time when the transaction first surfaced in September last year, investors expressed doubts about the stock price. On the one hand, it was a potential financial pressure. At the time, Anta said that it had joined hands with Fangyuan Capital to issue an acquisition intention to Amalfi, and the later transaction structure was adjusted to Anta Sports holds 58%, Fangyuan Capital and Anamered Investments (owned by Chul Wilson, founder of Lululemon) each accounting for 21%. Tencent participated through Fangyuan Capital.
On the other hand, it is doubtful whether Anta can control this step of globalization.
“On the one hand, the market is worried that such a big deal will affect Anta’s short-term financial performance. In addition, Anta has not or has not proved its global operational management experience. So the trading structure was adjusted later, and Chip Wilson or Tencent was invited. Also, you can increase the success rate of the transaction." Chen Ke said.
Chen Ke believes that the current overseas acquisitions of Chinese enterprises are generally started from financial, strategic and weak operational controls. For Anta, what can be done is to make Amafen's original international market superior, and on the other hand, to capture the huge dividend in the Chinese market, which is a more imaginative market.
According to an analysis released by Galaxy International Securities, the above transaction structure is better than expected, and the financing costs of Anta and the joint venture company are quite low. However, due to the huge amount of foreign exchange involved, Anta’s financial situation will still face rising financing costs, rising debt ratios and increased volatility in earnings. In addition, given that Amalfi will continue to operate independently, it is expected that Amalfi's core earnings will not change significantly in the short time after the completion of the acquisition. Anta's management expects the deal to have synergies, such as better terms with suppliers and distributors, but these agreements are not expected to be realized in the short term. We also believe that Anta needs time to help Amadea accelerate its development in China.
“For cross-border M&A transactions, it is necessary to clarify the value-added points of the transaction at the initial stage, whether it is to enhance income or synergy. For Anta’s transaction, in the face of huge market demand potential, the product will be brought into an almost new brand. The market, I think the greater significance of this transaction is that it can play a role in enhancing revenue.” Yuan Yongtai, managing partner of Ernst & Young Central China Financial Trading Counseling, told the 21st Century Business Herald on March 14.
In fact, Xtep also revealed similar ambitions. Xing Shuibo, chairman of Xtep Group, recently said that Xtep is searching for overseas acquisition targets, seeking to expand its business from running shoes to other niche areas of the sports industry, targeting outdoor sports, water and ice sports. Potential areas such as.
According to media reports, Anta Sports Chairman and CEO Ding Shizhong said in his internal letter: "I have been thinking about what this means to the company? Recently, many people have asked me, Anta Group is now developing very healthy, days. Can live very comfortably, why bother?"
It is said that Haruki Murakami, who is obsessed with horse racing, decided to start triathlon to find more fun after the first completion of the 100-kilometer marathon. The spirit of sports may be to constantly challenge yourself and surpass yourself.