trends in the chinese gold jewellery market - · pdf filesession 3a albert cheng lbma...
TRANSCRIPT
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 1
1www.gold.org
Trends in the Chinese Gold Jewellery Market
Speech by Albert Cheng
LBMA Conference
Mumbai
19-20 November 2007
2Assumption
• I will use the opening of the
Shanghai Gold Exchange on Oct 30, 2002
as the bench mark year;
• hence the SEVEN trends represent
the happenings in the past five years.
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 2
3Key Jewellery Trends in China
1. A more “liberalized” gold market
2. A faster growing economy
3. A more consolidated manufacturing base
4. A keener competitive operating retail scene
5. A very competitive media scene
6. A more individualistic, younger and affluence
consumers base emerged at major urban centres
7. A better product offer in both K-gold (18K) product
and “Only Gold” (24K) Elite Collections.
4Key Jewellery Trends in China - ONE
1. A more “liberalized” gold market
i. Set up on Oct 30, 2002
ii. 153 members:
-22 financial members,
-122 general members and
-9 principal members
iii. Among them there are
-18 commercial banks,
-39 gold producers,
jewellery
manufacturers /
retailers;
-95 other legal entities.
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 3
5Key Jewellery Trends in China - ONE
In December 1st 2006, SGE had a record daily trade volume, 13.03 tonnes.
SGE Annual Trading Volume & Amount
4 2 .4 9
4 70 .6 9
6 6 5.3
9 0 6 .4
1,2 4 9 .6 0
3 7.3 8
4 9 179 5.2 3
10 6 9 .76
19 4 7.51
0200400600800
100012001400
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
volu
me (
ton
nes)
0
500
1000
1500
2000
2500
Am
ou
nt
(100 m
il)
1. A more “liberalized” gold market
6Key Jewellery Trends in China - TWO
i. The key factors jetting
up demand for gold
jewellery is the
increasing wealth in key
urban centres.
ii. However, in the past
years, it has spread to
second-tier cities;
iii. We also saw a trend of
non-jewellery sector
money investing in the
jewellery business.
2. A faster growing economy
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 4
7Key Jewellery Trends in China - TWO
2. A faster growing economy
2nd Tier Market - Chengdu
8Key Jewellery Trends in China - TWO
2. A faster growing economy
2nd Tier Market - Nanjing
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 5
9Key Jewellery Trends in China - TWO
Others Investment from overseas
• ENZO - its parent company is Lorenzo which is a listed company in NASDAQ.
• Supported by its mother company’s, ENZO grows very fast in China after it enters Chinese market. Only in Shanghai, ENZO has eight stores and counter at shopping.
• It also set up a large-size factory in Shenzhen with both jewelry design and manufacturing. The factory has more than 3000 workers and produces more than 2 million pieces of jewellery every year.
2. A faster growing economy
10Key Jewellery Trends in China - TWO
Others Investment within China
• Local retail giants like LaoMiao and Laofengxiang are affiliated to listed companies from Shanghai stock market.
• Financial support brings them enough investment to build on their brand image as well as distribution channel development.
2. A faster growing economy
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 6
11Key Jewellery Trends in China - THREE
3. A more consolidated manufacturing base
Pure gold manufacturers in Shenzhen produce 70% of gold
jewellery in China.
-Members of “Shenzhen Gold Jewellery Association :
230 (approx.)
-Top 10 manufacturers : 7 in Shenzhen and 3 in other
regions.
-Smaller manufacturers in Guangdong & Fujian
Province : 1,500
-Family-sized and miniature workshops : 10,000 in
Guangdong Province
12Key Jewellery Trends in China - THREE
Company Name No. of
Employees
2005 Gold
Off-take
2006 Gold
Off-take
2007 Gold Off-
take (Est’d)
Bai Tai
(+40 retailers in 40 cities)
- - -
Yuehao - - -
Jinye - - -
Gold Dragon - - -
Cui Lu - - -
AnShenghua - - -
Tongxin - - -
Lu, Miracle (Shangdong) - - -
Ri Yue (Jejian) - - -
Cui Hua (Shenyang) -
TOTAL 132.09 154.02 187.62
y-o-y% change 16.60% 21.82%
3. A more consolidated manufacturing base
Top Gold Jewellery Manufacturers in China
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 7
13Key Jewellery Trends in China - THREE
Shenzhen – Manufacturing
Base workshop
3. A more consolidated manufacturing base
14Key Jewellery Trends in China - THREE
3. A more consolidated manufacturing base
Shenzhen – Manufacturing
Base workshop
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 8
15Key Jewellery Trends in China - THREE
3. A more consolidated manufacturing base
Wholesale Centre
16Key Jewellery Trends in China - FOUR
i. Keener competitive operating retail scene, we saw jewellery stores /counters mushrooming at modern shopping malls/ department stores;
ii. Some local regional retail brands with multiple stores started to emerge,
iii. in terms of number of stores nationally, retail brands from Hong Kong still dominate the scene.
iv. Competition also comes from other consumer goods such as cosmetics, fashion, etc…
v. Even big and international designers’ brand are promoting jewellery lines.
4. A Keener Competitive Operating Retail Scene
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 9
17Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Examples of modern shopping malls
18Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery counters at modern shopping malls – HK Brands
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 10
19Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Independent Jewellery Stores – China Brands – LFX and Ming in Shanghai
20Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
National Brands & Regional Brands from China
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 11
21Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
International Jewellery Brands in China
22Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Hong Kong Jewellery Brands in China
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 12
23Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Hong Kong Jewellery Brands in China
24Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Hong Kong Jewellery Brands in China
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 13
25Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Leather Goods and Cosmetics
26Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Watch and Mobile Phones
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 14
27Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery from
International Famous
Brands
28Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery from
International Famous
Brands
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 15
29Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery from
International
Famous Brands
30Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery from
International
Famous Brands
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 16
31Key Jewellery Trends in China - FOUR
4. A Keener Competitive Operating Retail Scene
Jewellery from
International
Famous Brands
32Key Jewellery Trends in China - FIVE
i. China is the third biggest
market in the world by media
spending and the yearly growth
is around 20%.
ii. Female goods market has grown
fast (25% to 45% within latest 2
years).
iii. Jewellery category media
spending increased sharply
(2006 reached around 2 billion
RMB, increased by 53%
compared with 2005, and
doubled 2004’s spending),
making it more expensive to
market gold jewellery
5. A Very Competitive Media Scene
iv. Thanks to collective
efforts of WGC, DTC, and PGI,
all major retail and
manufacturers trade are now
have better understanding of
marketing, however, cost of
doing business is much higher
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 17
33Key Jewellery Trends in China - FIVE
5. A Very Competitive Media Scene
34
50,979
80,233100,404
139,473
198,762
261,444
315,678
386,646
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
1999 2000 2001 2002 2003 2004 2005 2006
57%
25%
39%
43%
32%
21%
Data Source: ACNielsen Adquest 1999-2006
RMB (Mil.)
22%
5. A Very Competitive Media Scene
Key Jewellery Trends in China - FIVE
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 18
35Key Jewellery Trends in China - FIVE
893,664
1,249,521
1,914,540
0
500,000
1,000,000
1,500,000
2,000,000
2004 2005 2006
RMB(‘000)
Data Source: 2004 ~ 2006 AC Nielsen
2006 category
spending
increased
dramatically
compared with
last 2 years
53%
40%
5. A Very Competitive Media Scene
Jewelry Category Spending Trend
36Key Jewellery Trends in China - SIX
i. Emerged at major urban centres
and is spreading from coastal area
to inlands, spending on jewellery
increased obviously and has
became the new hot spot of
consumption market.
ii. There are much more occasions
for jewellery show- off as society
circle developed. These groups of
consumers are also less price-
sensitive to gold price hike.
6. A More Individualistic, Younger & Affluence Consumers Base
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 19
37Key Jewellery Trends in China - SIX
i. Party animal group
emerging in key urban
centres
ii. They are looking for
stylish entertainment for
fun and to fulfill their
fantasy as well as to
show-off their fashion
taste.
iii. More exciting night life
opportunities available
iv. Wearing jewellery as
accessory help to express
their personal statement
6. A More Individualistic, Younger & Affluence Consumers Base
38Key Jewellery Trends in China - SEVEN
i. For both K-gold (18K)
product and “Only Gold”
(24K) Elite Collections,
ii. However, traditional 24K
gold demand is still
dominating.
7. A Better Product Offer – K-gold and Only Gold Jewellery
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 20
39Key Jewellery Trends in China - SEVEN
7. A Better Product Offer – K-gold Jewellery
40Key Jewellery Trends in China - SEVEN
7. A Better Product Offer – K-gold Jewellery
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 21
41Key Jewellery Trends in China - SEVEN
7. A Better Product Offer – Only Gold Jewellery
42Key Jewellery Trends in China - SEVEN
7. A Better Product Offer – Only Gold Jewellery
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 22
43Key Jewellery Trends in China - SEVEN
Retail environment and products 10 years ago
Gold Jewellery in 1998
44Key Jewellery Trends in China - SEVEN
Only Gold & K-gold 2007
Retail environment and products NOW
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 23
45Conclusion
• China gold production will becomes number 2 in the world
this year and soon, China gold demand will take over US to
become the number two consumption country in the world.
• Foreign jewellery retailers from Europe, Middle East and
India is looking into entering the China market
• Local export-oriented jewellery manufacturers will
gradually shift some of their resources locally
• Tough competitions will continue and at all facets
• Chinese consumers are spoiled with choices making
marketing gold jewellery a more difficult job.
• Winner will take all. Scale decides.
46All Jewellery Categories Consumption
Source: China Jewellery Association/GFMS
Jewellery Consumption in China
Unit: tonnes
2002 2003 2004 2005 2006
Gold Total (tonnes) 199.6 201.1 224.1 241.4 244.7
Pure Gold (increase
in absolute tonnage)195.6 191.0 198.3 205.2 200.7
K-gold (increase in
both absolute
tonnage and market
share)
4.0 10.1 25.8 36.2 44.1
Platinum Total (tonnes) 45.7 37.3 29.0 28.0 25.0
Palladium Total (tonnes) 7.62 7.8 15.9 38.6 27.6
Silver Total (tonnes) 250.0 320.0 400.0 450.0 460.0
Diamond Total in value (US$)2.13 billion 1.24 billion 1.37 billion 1.3 billion 1.56 billion
Chinese
GDP
Growth
Y-on-Y (%) 10.2% 9.0% 9.5% 9.9% 10.70%
Gold Split
Session 3a Albert Cheng
LBMA Precious Metals Conference 2007 24
47China - Total Gold/PT/PD Consumption
3.1 6.2 10.89 18.7 26.4 34.2 40.4 47 38 30 28 25
326
297.5
373.9
279.3
225212.5 205.6 203.9 207.6
234253 259.6
0
50
100
150
200
250
300
350
400
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Platinum Gold Palladium
Tonnes
Source: Johnson Matthey and GFMS London
48