When I first read about Pearl River Piano, it was a story about an acquisition of a famous German piano maker named Ritmüller that helped Pearl River to advance in the premium segment. Yet, there was a little problem: Ritmüller was supposed to be from the city of Göttingen and even though I had lived there for five years, I had never heard the name. So, I called an expert on the German music industry, and he hadn’t heard about the company either. Now I was intrigued, and did what professors do when the facts don’t fit: I dug into the archives. It turns out the real story is much more interesting.
In the archives, I found that Ritmüller piano factories were established in 1795, and had a strong run in the 19th century when they were one of the most prestigious brands in Germany. In fact, the man who later founded Steinway & Sons New York spent his apprentice years with Ritmüller. Yet the German brand went bankrupt in the financial crisis of 1929. On e-bay, historical pianos from the 17th and 18th century are for sale. Yet, in the current phone book of Göttingen, Ritmüller is a retailer of pianos, not a manufacturer. So, what did Pearl River Piano really buy? The brand seemed to be dead after 60 years without a new product, or was it just sleeping?
Subsequent to the acquisition of the rights to the brand name, Pearl River hired craftsmen and designers from Germany, developed new piano designs, and heavily invested in building the brand. Now, Ritmüller is Pearl River Piano’s premium brand for both the Chinese market (including one seen at CEIBS Shanghai Campus) and for several export markets.
Acquiring a ‘sleeping’ brand name – especially a name from a distant country that no one would have ever heard of in China – seems to be an expensive way to build a brand. Essentially all the investment in marketing and brand development still has to be incurred; almost like building from scratch. Yet, in China it is not rare. A case that has particularly intrigued me is Klaus Meyer, which advertises itself as existing “since 1924 in Solingen, Germany”. I had never heard about the brand before coming to China even though I am from Germany and my name is Klaus Meyer. So, what is going on? From the limited information on the website, I infer that similar to Ritmüller, the brand was inactive before it was acquired by a Chinese metal products manufacturer.
Even more ambitious are the plans of Beiqi Foton Motor which is working with a German team to re-create the Borgward brand of passenger cars. Founded by Carl Borgward, the brand was once known for its stylish designs and had risen to become Germany’s second largest car maker in the 1950s after VW, ahead of Mercedes, Audi and BMW. Yet, today few people under the age of fifty would have heard of the name. In 1961, Borgward was unable to pay its creditors and went bankrupt, one of the biggest industrial failures in Germany at the time.
The revival of the Borgward brand is led by a team of engineers including the founder’s grandson, Christian Borgward. The Germany-based start-up company is 100% owned by Fotun, a maker of light trucks based in Beijing (not to be confused with the Fosun Group, another active Chinese investor in Europe). The plan was to manufacture Borgward cars in China, and initially to target the Chinese market, then expand to Europe two years later. In September 2015, the first new Borgward car in over 60 years was presented at the international automotive exhibition in Frankfurt; the Borgward BX7 is designed to challenge the Audi Q5.
Why would a Chinese manufacturer buy an inactive German brand as a basis for a China growth strategy? First, in China, German names are associated with precision engineering and reliable quality, even if the product does not actually come from Germany and is not made by a German company. The German country-of-origin brand image is amazingly strong, considering that products from neighboring countries in my view often live up to comparable quality standards. Such a strong brand name obviously helps German manufacturers in China – but it also creates a strong responsibility not to undermine it (these days, some folks in VW are not especially popular among German exporters).
Second, Chinese companies usually face a major challenge when taking their business international as their company names are long-winding, and many of their brands sound funny in English translation. Yet, creating an international name is always a challenging exercise. Some hire expensive consultants to create artificial names that are supposed to express their values – while not conflicting with anyone’s legal titles, nor have any negative associations in any major language. B uying an inactive brand creates a shortcut to creating a brand from scratch: it communicates an ambition to pursue the values that the brand used to stand for – in the above cases that was craftsmanship and quality engineering. For example, the Ritmüller brand name communicates Pearl River’s ambition to manufacture pianos based on German traditions and meeting German quality standards.
Foreign sounding brand names are not new: think of Scandinavian-sounding Haagen-Dazs (a US company) or Italian-sounding Giordano (a Hong Kong company). In China, where foreign names are only weakly protected, it is common to find fictitious German names for technology products, French for fashion and cosmetics, or Italian for furniture. Yet,consumers are getting savvy, and ask for the authenticity of the brand. That’s where inactive brands come in: they offer not only the sound of a foreign name, but a connection to a specific tradition. Yet, to create an authentic brand, they need to be complemented by hiring experts from the respective country: Pearl River hired German piano-makers, whereas Borgward’s development team is based in Stuttgart, Germany and consists of engineers and executives who previously worked for top European manufacturers.
Thus, awaking a sleeping brand may signal a forceful entry in a new market segment. Yet, to be sustainable, such a strategy needs substantial investment to create a quality product and an authentic brand identity.
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