china’s 1.3 billion consumers: cashing in on the china miracle

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10/29/22 NRA Show May 17, 2008 Chi cago 1 China’s 1.3 Billion Consumers: Cashing In on the China Miracle Presented by LaVerne E. Brabant Director Agricultural Trade Office U.S. Embassy Beijing, China

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Page 1: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

04/10/23 NRA Show May 17, 2008 Chicago 1

China’s 1.3 Billion Consumers: Cashing In on the China Miracle

Presented by LaVerne E. Brabant

Director Agricultural Trade Office

U.S. Embassy Beijing, China

Page 5: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

04/10/23 NRA Show May 17, 2008 Chicago 5

China’s Agriculture in Context

Agriculture 11%

Services39.5%

Industry 49.5%

Services32 % Agriculture

43%

Industry 25 %

Source: CIA, World Fact Book

Annual GDP Breakdown of the Labor Force

vs.

Page 6: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Did You Know?

$150 Billion China’s HRI sector is valued at $150 Billion. China is the world’s second largest economy,

surpassed only by the US. By 2030, estimates indicate China will be

ranked 1st. It is already the world’s largest recipient of

Foreign Direct Investment (FDI).

Page 8: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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International Events Set the Stage for Food Products and Food Service

Beijing expects nearly 600,000 international as well as more than a million domestic visitors during the Olympics.

Over 30,000 official Olympic hotel rooms in prime locations at 122 three to five star hotels.

More than 10 thousand local chefs in Beijing will be trained to serve during Beijing Olympics.

Large impact on the Olympic host cities: Tianjin, Qingdao, Qinhuangdao, Shanghai and Hong Kong.

Page 9: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Olympics: China’s Show Timeto the World

Page 10: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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International Events Set the Stage for Food Products and Food Service

Experts predict the 2010 Expo will bring the largest-ever tourism boom to the Shanghai area.

During the 6 month Expo, China has 70 million Chinese visitors are expected to trigger a tourism boom in East China.

Industry experts predict interest in China as a travel destination will only increase after the Olympics and Expo.

Page 12: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Top

You will hear these terms:Innovative Chinese CuisineContemporary CuisineFusion ChineseModern Chinese Cuisine

Jasmine Restaurant in

Beijing

Dining in Beijing, Shanghai, and Guangzhou is at or near international levels.

Hotel dining and local stand-alone restaurants are joined by internationally known players.

Page 13: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Top A mix of Asian and international cuisine is available at China’s highest-end establishments. With Chinese and Fusion cuisine in the clear lead.

Page 14: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - TopChefs say:

“Our goal is to discover great traditional and new cuisine through remarkably attentive service and an unintimidating environment that takes guest’s taste buds on an exciting culinary journey.”

“We are creating modern Chinese cuisine with more varieties of food products.”

“Imported food products give us more space for creating innovative Chinese fusion cuisine.”

Page 15: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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So What Do You Think Is Modern Chinese Cuisine?

The Old Meets the Modern

Page 16: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Mid

Places most Americans would recognize have made a name for themselves.

In China, there is a KFC opening daily.

Page 17: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Mid

American QSRs have been successful in China -- with some local modifications.

Page 18: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Mid

Yum! Brands Inc. China Division is the largest food service establishment in China.

As of March, Yum! has over 2,100 KFC’s, over 350 Pizza Hut’s with 60 that deliver.

Yum! Brands Inc. China Division generated over $3 Billion revenue in 2007.

Page 19: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Restaurants - Low Lower end local food service still attracts a strong customer base.

In smaller cities, low-end or snack restaurants are popular.

Health and safety standards are lacking at the low end, but increasingly customers seek clean, efficient, safe alternatives.

Page 20: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Evolving Food Service Sector

18.55

24.78

22.31

30.31

0

5

10

15

20

25

30

35

Bill

ion

RM

B

2005 2006

Revenue from Meals, Chain Catering Enterprises

Others

Cafe

Tea Shop

Fast Food

Restaurant

Source: China Statistical Yearbook, 2007

HRI is one of China’s most dynamic sectors with rapid growth of dining industry revenues.

This sector covers the entire spectrum from food stalls, cafeterias to world-class gourmet

restaurants.

Page 21: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Evolving Food Service Sector

International melting pots: Beijing, Shanghai or Guangzhou.

Food Culture vs. Lifestyle: Demand for restaurants, cafes, bars or fast food establishments.

International players join the local hotel dinning and stand-alone restaurants.

Page 22: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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New and Modern Restaurants Where Western Cuisine Meets the East

Chef Too: Best Restaurant of the Year

SALT: Best Restaurant of the Year

LAN Club: Best For Impressing Visitors

Page 23: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Catering Catering to the Masses…

Double digit growth in the Catering sector over the past 15 years.

Up to 40% of HRI revenues come from institutional food service.

Working lunches, student meals, office and factory worker catering services, travelers, conferences, exhibitions and other public and private events make up this large and growing segment.

Page 24: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…

Lifestyle Shift from Occasional Eating Out to More Casual Gatherings

Dining plays an important role in Chinese culture for business, holidays and personal celebrations.

Rising disposable income plays an important role at nearly double digit growth yearly and should continue robust growth.

Page 25: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…

Chain Food Service Outlets Are Moving Into the Fast Lane

Chain operators are currently developing rapidly, generating greater revenues from economies of scale compared to single outlets.

Independent players will face fiercer competition with more chain establishments.

Page 26: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…American Chains Have Had Great Success in China’s Market

Top 10 Chained Fast Food Brands in China

Rank Brand Company

1 KFC Yum! Brands Inc

2 McDonald's McDonald's Corp

3 Dicos Ting Hsin International Group

4 Café De Coral Café de Coral Holdings Ltd.

5 Ajisen Ajisen Ramen Chain6 Malan Lamian Malan Lamian Fast Food Chian Co. Ltd.

7 Daniang Dumpling Jiangshu Grand Mother Dumplings

8 Laobian Dumplings Shenyang Laobian Dumplings Co. Ltd.9 Haagen-Dazs General Mills Inc

10 Mian Dian Wang Shenzhen Mian Dian Wang Foodservice Co LtdSource: Euromonitor International 2007

Page 27: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…Food Safety and Hygiene is Becoming More Important

Chinese consumers have a long tradition (obsession) with flavor and food hygiene and safety been given less attention in the past.

People are becoming increasingly concerned about reliable food quality with over 95% Chinese consumers saying food safety is a “very important” factor.

The increasing concern over food quality is becoming a key driver for food service establishments to differentiate themselves from the competitors.

Page 28: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…

Increased health and nutrition consciousness demand for healthier food and beverage products.

Calorie counting, controlled portions, and low-fat alternatives are very popular, particularly in urban areas.

‘Light’ and ‘healthy’ options sell well.

Page 29: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…Raising Capital to Grow with the Market It is rare to see Chinese food service companies

go public as most are very small and somewhat independent in scope and style.

Private or family type business lack of capital and management skills.

Going public will raise capital from equity markets to contribute expansion nationally or internationally, as well as to build stronger brands.

Page 30: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Chinese Food Services Establishing Global Presence

Quanjude (Group) Co Ltd, China's oldest Peking duck restaurant chain with 144 years history went to public on Shenzhen Stock Exchange in 2007.

The company’s net profit attributable to equity holders was $9 million in 2007.

After the first went public food service company, others are ready to follow: Dong Lai Shun, Zhen Gong Fu, South Beauty, and many more…

Page 31: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…Growing Demand for Diverse Cuisine

Rising frequency of eating away from home, local consumers are increasingly keen to explore and try new tastes.

More food service operators are offering wider choices of cuisine.

Western cuisines are becoming more popular.

Page 32: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trends…Dining environment plays an important role

Chinese are ready to pay more for the right place with the right atmosphere.

New concept restaurants with innovative ideas and themes are emerging and should continue to rise. Including:

Natural organic food (e.g. Element Fresh in Shanghai), Story-themed restaurant (e.g. Allen Club in Chengdu), Home style (e.g. Grandma’s Kitchen in Beijing).

Page 33: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Changing Lifestyles in Urban Cities

Page 34: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Is China RICH or POOR? Globalized or Culturally Isolated? Urban or Rural? A

Good Market or a Hopeless One?

The Answer is…. YES!

China Is Many Markets!

Page 35: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China is Many Markets - Urban

Although 65% of China’s population still lives in rural areas and farm on less than 1 acre per family, China is urbanizing at a rapid pace.

Urban population expands around 10% annually. Urban Chinese generally enjoy first world living standards.

Page 36: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China is Many Markets - Modern In urban China, traditional structures and infrastructure co-exist with the modern.

Consumers are comfortable with modern / western commercial settings and expect modern amenities in hotels and restaurants.

Page 37: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China is Many Markets - Luxury Despite 50 years of

austerity campaigns, in the last decade China has become the world’s #3 market for luxury goods (only behind the US and Japan).

China spends 1.3 billion dollars on luxury goods annually.

China is expected to be the world’s largest luxury goods market by 2020.

Page 38: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China is Many Markets - Age China’s oldest generation

survived occupation, civil war, famine, and political oppression, while China’s youth have 10 years of consecutive double-digit GDP growth.

As a result, attitudes toward consumption, credit, international brands and products vary widely by generation.

Page 39: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets Markets are highly fragmented: language, culture, and

tastes vary widely by region.

Generational distinctions are prominent. Young consumers (under 30) are increasingly affluent and more adventurous than their elders.

The expanding middle class (300 million by 2011) can afford imported food products but has different preferences than the super-rich.

Average Chinese consumers are still very price sensitive – still, China will become the world’s second-largest luxury goods market by 2015.

Page 40: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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It is Important to Clearly Define a Target Market in China as Opposed to

Marketing to “1.3 billion Consumers”!

Page 41: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Let’s Take a Look at the Following Market Segments :

Regional Distinctions

Emerging City Markets

The Middle Class

Page 42: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Regional Tastes

What do Chinese Eat? A critical question for

restaurateurs looking to enter the China market.

American ‘Chinese Food’ does not provide a very nuanced understanding of Chinese cuisine or the Chinese palate.

Fortune Cookies were invented in the US and cannot be found in China.

Page 43: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Regional Tastes

Lamb, beef, pork, noodles dominate Northern cuisine. Central China loves spicy stir-fry and rice with most

meals. People from coastal areas often prefer simple, fresh

dishes and seafood. Western Chinese diets more closely resemble Indian

and Middle Eastern style cuisine.

Page 44: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Emerging Cities

Kunming

Chengdu

Chongqing

Wuhan

Xi’an

Shenzhen

Xiamen

QingdaoTianjin

Dalian

Shenyang

Harbin

HangzhouNingbo

Nanjing

Page 45: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Emerging Cities

China is home to over 100 cities with populations over 1 million.

Disposable income in emerging cities grew more than 10% in 2007 with GDP growth above 16%.

Emerging or ‘second-tier’ cities already home to most of China’s new middle class.

Page 46: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Emerging Cities

Beijing, Shanghai,

Guangzhou3%

Our 14 ECM9%

Other88%

China’s Population Distribution

In fact, the cities most Americans have heard of, such as: Beijing, Shanghai, and Guangzhou, account for only 3% of China’s population.

Page 47: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Emerging Cities

0%

5%

10%

15%

20%

25%

Chong

qing

Harbin

Tianjin

Wuh

an

Qingda

oXi

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Shen

yang

Hangz

hou

Nanjin

g

Dalian

Ningbo

Kunm

ing

Shen

zhen

Xiam

en

Avera

ge

In research focusing on 14 key emerging cities, GDP growth averaged over 16% -- far above China’s unprecedented 11.4% overall growth.

Page 48: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Emerging Cities

Beijing Shanghai Guangzhou

28%

ECM56%

Other16%

The 14 emerging cities in our research account for 56% of China’s total food imports.

They represent only 9% of the population.

For businesspeople looking for the “next China miracle,” this may just be it!

Food Imports by Destination CityFood Imports by Destination City

Page 49: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Evolving Middle-Class

Chinese Academy of Social Sciences estimate nearly 50% of all city dwellers in China are now “middle class,” a figure expected to reach 300 million by 2011.

Concentration of wealth among young professionals means China will have one of the youngest middle classes in the world.

Page 50: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Evolving Middle-Class

Young market:

Chinese growing affluence is concentrated among the 25-44 age group. In the West, wealth is greatest among those aged 45-51.

Page 51: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Key CityA City BCD/Tgts

Total Consumption (RMB) % of Urban Population

As the middle class expands, China is anticipated to become the world’s 2nd largest consumer market by 2014.

Source: Nielsen | Retail Index

108 billion 158 billion

844 billion RMB!

181 billion8

Assuming consumers in second and third tier cities reach the same consumption level as key city

residents, this is China’s projected consumption:

Potential Consumption (RMB)

83.4 billion

16

76

China’s Many Markets: Evolving Middle Class

Page 52: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China’s Many Markets: Evolving Middle Class

0

50

100

150

200

250

Million h

ouse

hold

s w

/re

al P

PP inco

mes

ove

r $2

0,00

0/yr

Source: Global Insight’s Global Consumer Markets Service

WTO Accession

Expanding Rapidly

Page 53: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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By 2020, 100 million Chinese will travel abroad each year, bringing home international tastes and wants...

Source: China National Tourism Administration (CNTA) World Tourism Association (WTO)

100

34312920

50

0

10

20

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2010 2020

(estimated by WTO)

(estimated by WTO)

Outbound Traveller Numbers

China’s Market Trends – Exposure

Page 54: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China Market Trends – Status and Aspiration After years of poverty & isolation, China is eager to join

the modern world.

Purchasing imported products and being able to afford these products confers “face” to consumers.

American - western lifestyle and therefore, US products, hold powerful promise for Chinese.

More Chinese are traveling, working, and studying abroad, bringing back international tastes and ideas.

Page 55: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Price and Brand Loyalty

Will only purchase local brands even if more

expensive

Look at local brands first, ultimately quality of product

most important in my price range

Look at foreign brands first, ultimately quality of product most

important in my price range

Will only purchase foreign brands even if more expensive

Nielsen Online survey

Focus on brand and quality are key priorities for Chinese consumers. Significant segment prefer foreign brands.

Page 56: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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China Market Trends- Branding

Chinese shoppers regularly pay a premium to give ‘name-brand’ food products as gifts. For holiday celebrations or banquets for guests, no expense is spared, including dining out.

By 2015 China will become world’s 2nd largest luxury goods market.

Although China’s middle class is still relatively price sensitive, the wealthy exhibit one of the world’s highest degrees of brand affinity.

Brand Consciousness is high in East Asia, and China is no exception:

Page 57: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Branding and Re-Branding

McDonalds is a classy venue for college students to take a date. Pizza Hut is decidedly upscale family dining.

Hooters has effectively re-positioned itself for entry into the China market with a more culturally appropriate take on its original theme.

Sizzler established a strong and well-known brand in Taiwan, which it is now extending to the Mainland.

Tabasco is strongly associated with Italian foods like spaghetti in Taiwan and Japan.

Perceptions of your brand can and should be redefined for the China market:

Page 58: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Direct Imports Less than a decade ago most imported products flowing

into mainland China arrived via Hong Kong.

Transit times by truck to Beijing take 4 days from Hong Kong and from Shanghai to China’s far western provinces 6 days.

Economic and policy liberalization as well as infrastructure improvements

Increasing levels of ‘direct imports’ enter China via Shanghai, Dalian, Tianjin, and other ports, improving transport times and increasing market access for and information about the diverse variety of food and agricultural products consumed in China.

Page 59: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Direct Imports: Port FacilitiesDalian Port

Shanghai Port

Qingdao Port

Page 60: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Direct Imports US consolidators fill orders for China-based distributors,

and also fill direct orders for restaurants and hotels, US consolidator efficiency is considered a major advantage for US exporters.

Hong Kong distributors, who frequently make use of the gray channel. Many have a large network of offices or affiliates inside China, but basically provide the equivalent of 3rd party logistics services.

Cash ‘n Carry Outlets, such as Metro or Wal-mart that target commercial customers like restaurateurs for purchase of bulk supplies – able to reach the restaurant food service trade directly.

Page 61: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Distribution Flow Chart

US SU PPLIERS

US Consolidators

Beijing, Guangdong and Shanghai - based Distributors

Secondary Wholesalers

Cash ‘n Carry Stores

Hotels, Restaurants, Fast Food Operators, I nstitutional Food

China Customs & Quarantine (Normally handled from Chinese side)

Direct Imports

Page 62: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Improving Logistics and Cold Chain Facilities

Distribution improvements have been realized in major markets such as Beijing, Shanghai and Guangzhou.

Improved expressways, ports and cold chain infrastructure continue to expedite transportation and delivery.

Page 63: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Improving Logistics and Cold Chain Facilities

Expanded warehousing, improving importer-local agent networks in Emerging City Markets increasingly enables distributors to keep key items in stock, despite long transoceanic shipment lead times.

Page 64: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Making Your Ways to China

Entering China’s market can be incredibly rewarding, but it requires hard work.

Selling/distributing your product requires face-to-face contact, special efforts to educate the entire value chain, with attention to distribution details.

Even good distributors in China lack marketing experience and it can also be difficult to get them to focus on promoting your product among the hundreds or even thousands they may carry.

Page 65: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Entry Strategy

Marketing, Sales and Education: Introducing your product and persuading them to use it is only the beginning. Chinese distributors and chefs are often interested in imported products, but usually lack proper handling and preparation knowledge.

This can extend even to very basic products, like

condensed canned soup or ingredients, etc. and strong educational effort is required.

Page 66: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Entry Strategy

Selecting a Distribution Channel: At the same time, it is also important to make sure that your distribution channel can provide a consistent supply for your customers.

Often, the first question buyers ask about a new

product is, “Can I order it now?” This can be and often is a bit of a chicken-and-egg syndrome for a new supplier in the China market, but an important consideration nonetheless.

Page 67: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trade Shows – Your Stepping StonesFood Hotel China FHC show is one

of the largest food show in China.

FHC holds twice a year in Beijing and Shanghai.

Page 68: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Trade Shows – Your Stepping Stones

SIAL SIAL show is one of the largest

food show in China, it holds once a year in Shanghai.

SIAL China 2007, held in Shanghai from May 10-12, broke new ground in terms of U.S. presence. With 43 U.S. companies exhibiting, it was the largest U.S. pavilion ever at a China show.

Page 69: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Competitors

Food imports account for some 24% of the total value of China’s Food & Beverage sector – as such, the imported food market is very competitive with suppliers from around the world battling for China market share.

Page 70: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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CompetitorsProduct Category 2006

Imports ($million)

3-Yr Avg. Import Growth

Import Tariff Rate

Key Constraints on Market Development

Red Meats Fr/Ch/Fz 223 -20.4% 12 – 25%

Competition from other import sources (Australia), limited capacity for handling fresh imports, growing competition from domestic product, BSE restrictions on U.S. beef, drug residues in U.S. pork.

Processed Fr. & Veg. 867 21.6% 5 – 30%

Competition from Asian countries with similar tastes; rapid development of domestic industry.

Poultry Meat 463 40.8%20%(specific duties are applied to broiler cuts)

Import quotas, sanitary barriers, and competition from other exporting countries.

Wine & Beer 166 26.6%Bottled:14%Bulk: 20%

Fierce competition from Old World and other New World wine exporting countries.

Page 71: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Competitors

Dairy Products 579 11.1% 6 – 20%

Competition from New Zealand and Australia.

Fresh Fruit 512 7.7% 10 - 30%

Competition from domestic products. U.S.’ advantage is in special varieties.

Tree Nuts 118 1.1% 0 – 25%

Competition from low-price, low quality exporters; counterfeits.

Fruit & Veg. Juices 99 21.4% 7.5 – 30%

Competition from other exporting countries.

Breakfast Cereals 10 16.3% 20 – 30%

Breakfast cereals are still a novelty in China.

Page 72: China’s 1.3 Billion Consumers: Cashing In on the China Miracle

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Competitors

Cheese 38 23.5% 12-15%

Strong competition from New Zealand and Europe.

Nursery Products and Cut Flowers 70 13.76% 0-23%

Lack of phyto protocols, lack of approved import quarantine facilities.

Salmon 337 38.2% 10 – 14%

Cost and competition from other exporters, esp. Norway.

Groundfish & flatfish 1,704 16.98% 10%Limited supplies

Crustaceans 316 -2.34% 5 – 19.2%Limited supplies.

Note: All data are derived from Global Trade Atlas. Commodity groupings are based on FAS BICO report categories.

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CompetitorsTop Products and Competitors

Oranges New Zealand, South Africa

Grapes Chile

Apples Chile, New Zealand

Cherries New Zealand

Lemons and Limes New Zealand

Red Meat (f/c/f)Canada, Denmark, New Zealand, Australia

Currently beef and related products from the U.S. are not allowed in China

Breakfast Cereal United Kingdom, Australia, Korea

Cheese New Zealand, Australia, EU

Frozen Processed Products Canada, New Zealand

Frozen Corn Australia, EU

Dairy (not incl. cheese) New Zealand, Australia, France

Poultry Brazil

Tree Nuts Russia, Korea (chestnuts), Iran (pistachios), Mongolia

Premium Chocolate Switzerland, Belgium, Italy, France

Premium Ice Cream France, New Zealand

Seafood Russia, North Korea, Canada, Norway, Japan

Wine Chile, France, Australia, Italy

Ginseng Canada, Korea

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Let’s take a closer look at China’s Hotel industry

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Evolving Hotel Sector China is currently the world’s 4th most popular travel

destination. An estimated 130 million international visitors will visit

China this year, which may bump China to 3rd place. China is expected to become the world’s #1 travel destination by the year 2020.

Chinese are traveling more than ever inside their own country due to more vacation days and increased disposable income.

“Golden Weeks” of national holidays in Spring and Fall produce a quarter of China’s annual $40 Billion in tourism revenue.

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New Hotels in Beijing to Open Prior to the Olympics

Park Hyatt

JW Marriott

Westin

Mandarin Oriental

Sofitel

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New Hotels in Beijing to Open Prior to the Olympics

330 meters tall, 73 stories and 300,000 square meters of floor space.

It is the tallest building in the capital composed of office levels, a five-star hotel, restaurant level and convention center.

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Evolving Hotel Sector – TourismChina will become the world’s top tourist destination within 12 years, with 210 million international visitors annually.

91

109120 124

0

20

40

60

80

100

120

140

Inbound Tourists

Millio

n A

rriv

als

2003 2004 2005 2006 2020

210 Million

2007

130 Million

World Tourism Organization Estimates

China Growth in Inbound Tourism

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Evolving Hotel Sector Development China’s National Tourism Admin. reports there

are more than 13,000 star-rated hotels in China.

International hotel chains, both luxury and budget, have a growing presence in China and are identified with quality. From Super 8 to Ritz Carlton, hotels are scrambling to construct in time for the 2008 Olympics.

Many Chinese hotels are state-owned or operated, however, market pressures are forcing better quality and improved management.

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Hotel Development, Beijing

2656

404

2962

473

3569

490

0

100

200

300

400

500

600

5 Star 4 Star 3 Star and Below

Hotel Grade

Num

ber

of H

otel

s

35% increase

23% increase

21% increase

2005

2004

2003

Beijing has seen a 35% increase in the number of 5 star hotels in preparation for the Olympics

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Food Safety: The Problem Over 95% Chinese consumers consider food safety as a “very

important” factor.

Rapid Development of Agricultural Production, Distribution, Purchasing, and Food Consumption Patterns Require Investment and Evolution of China’s Food Safety System.

China Introduces Significant Changes in Regulatory Responsibilities.

New Draft Food Law Close to Completion.

Keep in Mind: China Safely Feeds 1.3 Billion People Daily.

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Food Safety: U.S. Government Action

Agreements by USDA and HHS on Agriculture and Food Safety.

Increased Cooperation on Food Safety and SPS Trade Issues.

Training and Exchanges Focusing on Adoption of International Standards: USDA Trained Over 300 Chinese Regulators in 2007.

Greater USDA Focus on Market Access for US Products Exported to China.

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Problems: IPR

Although China continues to make efforts to strengthen its legal framework and amend its intellectual property rights (IPR) laws and regulations to comply with WTO obligations, U.S. agriculture and food products still face serious IPR infringement problems.

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IPR: The Problem

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Examples of IPR Infringement Issues:

“Stickering” and labeling domestic and third-country products with U.S. identification such as California Table Grapes, California Pistachios, U.S. Wheat Flour, Washington Apples, Wisconsin Ginseng, etc., is widespread.

False branding and packaging of domestic and third-country products with U.S. identification such as Sunkist Citrus, Sun-Maid Raisins, Napa Valley Wine.

Counterfeiting or mixing of domestic or third country products with U.S. food and beverages including poultry, beef and pork.

Unauthorized sale-use of U.S. PVP protected plant materials and germplasum.

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Protecting Your IPRThe most effective deterrent to piracy is to

properly register:

Patents Trademarks Plant varieties Geographical indicators Food labels And other such IPR at home, in China, and third-

country markets.

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China’s 1.3 Billion Consumers: Cashing In on the China Miracle

Summary

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Thank You!

ATO Beijing

Tel: (86-10) 8529-6418

email: [email protected]

OAA Beijing

Tel: (86-10) 6532-1953

email: [email protected]

APHIS

Tel: (86-10) 6532-3212

email: [email protected]

ATO Chengdu

Tel: (86-28) 8526-8668

email: [email protected]

ATO Guangzhou

Tel: (86-20) 8666-0821

email: [email protected]

ATO Shanghai

Tel: (86-21) 6279-8622

email: [email protected]

ATO Shenyang

Tel: (86-24) 2322-1198

FAS China Contacts