Canadian brands dodge flak in Huawei conflict

Despite the deep-freeze in Canada-China relations due to last December’s arrest of Huawei Technologies Co. Ltd. CFO Meng Wanzhou, fears that Chinese consumers may turn on Canadian brands appear to have been largely a false alarm.

That’s the assessment of a Metro Vancouver executive from one of the major non-Chinese players in China’s e-commerce and data analytics sector, after the company, WPIC Marketing + Technologies, tracked key data such as gross merchandise value (GMV) for Canadian clients in China since Meng’s Vancouver arrest 11 months ago.

“When things like this happen, you scratch your head a bit, then you realize the fact it is an event that’s out of your control, but it may require us to enact some control to prepare for it,” said WPIC president and co-founder Joseph Cooke, who now splits his time between Vancouver, the United States, China and Japan to expand his company’s operations.

“So we’ve been watching this specifically … and to this date, we still cannot find anything in the market that we need to alarm our Canadian portfolio about.”

The company, whose Canadian client list includes Lululemon Athletica (Nasdaq:LULU), Canada Goose Holdings Inc. (TSX:GOOS), Vancouver International Airport, Butchart Gardens and the governments of Canada and British Columbia, tracked the e-commerce GMV of Canadian brands in the fall of 2018, then this spring and again this fall. The data showed that Canadian brands’ e-commerce in China from spring to fall this year rose by 30.6% – in line with the 30% to 32% rate recorded year-over-year from fall 2018 (months prior to Meng’s arrest) to this October.

“On the ground where the rubber hits the road, it has been strong, and we haven’t seen a negative indicator,” Cooke said, adding that further digging into Chinese consumer sentiment also didn’t reveal any causes for concern.

“We don’t see any public inquiries about Canada-China relations inside China. We don’t see anything about our Canadian brands … associated with negative sentiments. So although the general macro-narrative suggests there may be a challenge, we are not seeing literally any change on purchases, revenue, brand sentiment, traffic or conversion – basically everything where the real consequences are.”

The data corresponds with several previous reports, such as that Canada Goose’s Beijing Sanlitun flagship store saw lineups when it opened late last year, within a month of Meng’s arrest and calls by Chinese media for a boycott of certain well-known Canadian brands.

Cooke also said that despite other reports of mainstream Canadian businesses showing a reluctance to enter the Chinese market, brands that are looking to enter China via e-commerce not only have continued their push into China, but may have done so at a faster pace than before the recent Ottawa-Beijing conflict.

“What we’ve seen in the last two and a half years out of North America is an increased demand – and it’s a more ready and aggressive demand – to go into China,” Cooke said. “In Canada in particular, we’ve seen more people looking for help to get into the market, a higher level of readiness to invest and a higher growth target strategy for brands. That has been steadily rising, and in the United States, those activities are even more aggressive.”

Part of the reason, Cooke said, was that many smaller companies interested in China originally depended heavily on government-organized trade missions to spearhead the move to establish beachfronts in the Chinese market. With many of these trade missions on hold due to ongoing tensions, it looks as if companies are turning to private facilitators like WPIC to make the move instead, Cooke said.

At the China International Import Expo in Shanghai earlier this month, U.S. companies outlined their ambitions in the Chinese market by putting up major display booths in a play to make inroads into China’s US$777 billion health-care industry. Participants included giants such as Boston Scientific Corp. (NYSE:BSX), Eli Lilly and Co. (NYSE:LLY) and Thermo Fisher Scientific Inc. (NYSE:TMO).

“U.S. firms remain committed to China and are confident that a simple switching of their clients in China to competitors from other countries does not happen,” said Andreas Schotter, associate international business professor at Western University’s Ivey Business School.

He added, however, that these same U.S. companies are still “concerned about changes in the long run, if the trade dispute and the associated uncertainties will remain.”

Cooke said that if Chinese consumers haven’t rejected Canadian brands because of recent geopolitical events, then it makes perfect sense that private companies, Canadian or otherwise, continue to chase China’s market. “Out of the U.S., we’ve talked to CEOs of American companies, and they look at what we look at,” he said.

“When you look at the size of market, it’s really hard to convince a CEO of a private company to not move on it.”