An advertiment for Haier Group on a street in Tokyo. Chinese companies are making efforts to build their brands globally. [Photo / Provided to China Daily]

Vice-chairman predicts strong growth in China as middle class expands

Three decades ago, French businessman Serge Dumont was among the first foreigners to start a career in China at a time when many outsiders considered it to be a land of mystery, having been largely closed to the world for many years.

The vice-chairman of Omnicom Group Inc, a multinational advertising and marketing communications company, Dumont demonstrated his knowledge of China's transformation from a mostly rural country into a commercial giant through a great grasp of figures.

Omnicom and Publicis Groupe SA announced a merger plan on July 28, which would create the world's largest advertising conglomerate.

"When I first came to China in 1979 there were about 200 million people living in cities. Since then, we've added 500 million people, which is equivalent to the combined population of the United States, the United Kingdom, Italy and France," he told China Daily in June at the Fortune Global Forum in Chengdu.

"By 2027, there will be 1 billion people living in Chinese cities - one in every eight persons worldwide."

Supported by the ongoing urbanization process, Dumont said China is becoming the second-largest advertising market, overtaking Japan, as the country unleashes the purchasing power of its expanding middle class.

"People's living standards will rise, along with disposable incomes. As incomes grow, so will China's advertising market," he added.

It's something Omnicom's business development in the nation has witnessed firsthand. As a strategic holding company, Omnicom managed three global advertising agency networks - BBDO, DDB and TBWA, numerous leading national advertising agencies, a global network of more than 175 marketing services companies and a media group - Omnicom Media Group. It was serving more than 5,000 clients in more than 100 nations and regions globally by last week.

In China, it follows the global expansion model of organic growth supplemented by mergers and acquisitions. The acquisition of NIM Digital Co Ltd, a Chinese agency specializing in media planning and buying, search, as well as digital production, was one of Omnicom's most important investments in 2012 among its 14 acquisitions globally. On average, Omnicom has made one acquisition annually over the past few years.

Omnicom was the second-largest advertising group worldwide. Its sales revenue amounted to $14.2 billion in 2012, up 2.5 percent from the year before. About 48 percent of the US-based company's 2012 revenues came from overseas markets, including China.

"The Chinese market is booming for all international advertising companies, including Omnicom's archrival British WPP Plc and its current partner French Publicis Groupe," said Ji Taichuan, an analyst with domestic brokerage China Investment Consulting Co Ltd.

He said these ad giants have maintained double-digit growth in terms of sales revenue in China over the past decade. "The biggest growth potential (in China's advertising market) is with mobile," Dumont said.