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From China, a Plan to Topple One of America’s Most Dominant Brands

September 24th, 2009 Leave a comment Go to comments

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Every list of America’s most valuable brands includes the same parade of names, year after year – Coca-Cola, McDonalds, Disney, Google. Every year, these lists also ignore what could be the single most dominant brand of all. This brand is known by everyone in America, enjoys a higher market share than any of those on the list, and is able to charge a price premium as much as 300% above its competitors. The brand? Crayola Crayons

That’s right, that most humble and low-tech of children’s toys. No one outside the company knows Crayola’s exact market share. A good estimate is at least 80% of the US crayon market. Maybe higher. In other words, Crayola is dominant enough not just to warrant an anti-trust investigation, but to be broken up as a monopoly. 

Of course, I’m partly joking here – about the anti-trust part, not about the market share. Heaven forbid the US Department of Justice should ever decide to police kids toys. But, Crayola really is astoundingly powerful and dominant in its market. It enjoys, according to the company’s own research, 99% brand recognition in the US. Its name is not only synonymous with crayons, but has more or less shut down any lower-cost competitor from grabbing much of its market share. How it does this is also something of a miracle, since as far as I can tell, they do comparatively little advertising to sustain this. In other words, they are not only the most dominant brand, they are also the thriftiest, in terms of how much is spent each year sustaining that position in parents’ minds and kids’ playrooms. 

We don’t know exactly how big Crayola is, or any other fact about its financial performance, because it’s a private company. In fact, even more impenetrably, it’s a private company inside a private company. Binney & Smith, the original manufacturer, was sold to famously-secretive Hallmark in 1984. It’s all educated guesswork. 

But, I’m lucky to know a Chinese boss whose guesswork is far more educated than most. David Zhan is boss and majority shareholder of Wingart, a manufacturer of children’s art supplies based in Shenzhen. David is one of the smartest, savviest and most delightful businesspeople I know. Wingart is also one of my very favorite companies – though they are not a client, nor an especially large and fast-growing SME. But, Wingart is exceptionally well-run and focused, with well-made and well-designed products, as well as the most kaleidoscopically colorful assembly line I’ve ever seen. 

Wingart makes crayons. They are better than Crayola’s. That’s not David’s pride speaking, but the results of some side-by-side testing done by one of the larger American art supply companies. I personally have no doubt this is true. I’ve seen Wingart’s crayon production. Not only are they better, but they are much cheaper too. 

Still, it’s almost impossible for Wingart to gain any ground on Crayola. Wingart mainly sells under other companies’ brand names in the US, including Palmers, KrazyArt and Elmer’s. They have good distribution for many of their products at Wal-Mart and Target. But, not crayons. Wal-Mart would like to start selling Wingart’s crayons – not just, presumably, because they are better than Crayola. But, Wal-Mart, famously, does not like to be reliant on a single brand, a single supplier, for any of the products it carries. 

For the time being, Wingart’s factory is too small to produce crayons in the quantity Wal-Mart requires. This should change within a year or so, when Wingart moves to a new and larger factory about two hours from Shenzhen. Then, perhaps for the first time ever, Crayola will begin to face some real competition. I can’t wait. I think Wingart has a realistic chance to build a crayon business, worldwide, that will compete in size with Crayola, which is pretty much a US-dependent company. 

I have a lot of admiration for Crayola – not so much the crayons, but the fact that a 106 year-old brand could be so predominant in its market, and enjoy such unrivaled – and largely uncelebrated — supremacy for so long. But, I’d still like to see Wingart knock them down a few notches, or more. Crayola has it too good for too long.  American kids deserve the best crayons – as, for that matter,  do European, Chinese and other kids on the planet.

  1. September 26th, 2009 at 09:39 | #1

    I’m not buying your thesis, at all, and I speak from experience. Unless Wingart crayons have gotten a lot better since my youngest of two kids stopped using crayons (maybe three years ago), they are not nearly as good as Crayola’s. They come in crappy boxes, they are dry, they break more easily, they do not sharpen as well, their colors are not nearly as good nor as varied nor as well defined, and they simply do not write as well. And again, unless everything has changed in the last few years, everyone knows this and that is why Crayola dominates. Lastly, you completely ignore that when it comes to young kids and a product like this, parents are going to be wary as hell to buy something that is made in China AND is Chinese. Ask a parent which crayon they want to see their four year old put in their mouth, a Crayola or one from China? We all know the answer to that one. Also, I can still remember a number of crayon recalls from China involving lead. Now I have no idea if any were from this particular company, but if I were a parent standing at a Target with my four year old looking at Crayons, I would pay the extra 10 cents rather than do the research to check up on the safety/lead content of the Chinese brand. And might it not be possible that is what Wal-Mart is thinking as well.

    No, I do not see Crayola giving up much market share over the next few years.

  2. LongTian
    October 20th, 2009 at 21:54 | #2

    I completely agree with Dan. Brand recognition includes much more than you covered. It involves a sort of relationship with the product and company, and a trust that is built up over many years. Crayola has never violated that trust in any way. It doesn’t matter which crayon is cheaper. It doesn’t matter which has more colors. Parents buy products that they trust. Why? Because the first thing on their minds when they are buying products for their children isn’t price, or color, or even what the child wants. I can tell you that without even doing any market analysis, the number one issue for parents is the safety of their children, and regardless of any one particular factory’s safety record, China is currently at the bottom of the global barrel concerning product quality and safety. All of this aside, would you really want to be the ONLY child in your 2nd grade class who DIDN’T have Crayola brand crayons, but instead had Chinese ones? Children will say, “But Mom! Nobody else at school has to use these crappy ones!” That’s just the way the child market works. Parents would bet their life savings on brands such as Lego, Fisher Price, etc. because they trust them and believe in their commitments to the safety of children and of product quality, and because they have known them since they were children.

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