Category Archives: 4 Selling & Marketing in China

China Food Industry: “Give them the Guts”

Excerpt from an interview to David Caselli, CEO New Zealand China Direct Ltd, a New Zealand owned WFOE importing and distributing food and beverages into the Chinese market.

Key Message on the Opportunities in the Food Business in China:
Although there are undeniable opportunities in the high end segment, the real breakthrough will be accessing the mass market with meat/fish & seafood derivative products and low end cuts that do not create value back home but are processed here into highly appreciated products in China.

Excerpts from the interview
“The average wage in China keeps rising and consequently massive parts of the Chinese community will be able to switch into eating more protein. It does not mean they are going to eat caviar and lobster … what they will be doing is eating more fresh meat instead of cabbage. So the biggest opportunity for us is not to sell high end lamb cuts but to sell a lamb derivative product that fits the market for the 9$ /day people… It is relatively easy to sell lamb to Western restaurants. The real challenge for us is to find out how to create products that use New Zealand lamb in Chinese dishes in Chinese restaurants. There are 20 million people in Shanghai and 400.000 foreigners. I’d rather sell to the 20 million than to the half million.

New Zealand meat industry sells some 500 million dollars a year of low end lamb cuts to China. Here it goes to a couple of provinces where they create a lamb roll (press it, add some duck fat…) which the Chinese mass eats. We have a whole lot of protein types that we don’t extract value from so the real opportunity is to unlock the value that works in China out of them.

Same holds true for other products. Seafood, for example, is there an opportunity to sell what we do not use but is appreciated here? There is also a mass market for fish frames, just heads, tails and bones. They process it and convert that into something useful.

Back in New Zealand we don’t understand the Chinese well enough to be able to identify what those products are (both in meat and fish). We need producers to get into thinking what are the uses and applications of the whole animal in China. Don’t get me wrong, they’ve probably been thinking about this for decades… what they’ve probably not done is come here and stay long enough to find the answer.”

Do you share his views?

Selling to Chinese Clients as a Service Provider?

I always ask my interviewees what is their customer profile. Often they would like to have better access to Chinese clients but seem to be getting mainly foreign companies. Vladimir Djurovic owns LabBrand, a company providing naming, research and branding services. This is how he explains this fact:

“Multinationals are our best customer because they understand what we do, we do not need to convince them from scratch. It is not easy to get Chinese clients. They are more concerned about size and reputation because they have less knowledge of what they are purchasing. They will go for the big safe choice”

That conversation made me wonder if entrepreneurs and SMEs providing this type of services (branding, research, consulting…) in China are having the same issues. What is your experience out there?

Marketing to Seniors in China

Yesterday I attended a business lunch hosted by AmCham Shanghai where the guest speaker, Tom Doctoroff, JWT´s North Asia Director and Greater China CEO, delivered a presentation about strategies for marketing to seniors in China. So, if the elderly population is your target, you will find bellow some themes/communication strategies that could help you reach them.

From the perpspective of the “possibilites of me”
1. “Olden is Golden”
Strengthen their roll in society by celebrating seniors´ wisdom

2. “Forever Young”
Shift communication from worry-based protection (currently overused) to life-enhacing liberation

3. “Reward”
Provide permission to bite into the forbidden fruit (they are savers! so feel guilty about spending)
3.a. “Justify the treat”
3.b. “Timeless Value, Timeless Joy” (Old fashioned values as a way to provide future happiness)

From the perspective of “reinforcement of we” (important in a culture like China where individualism is not encouraged)
4. “Tighten Family Bonding”
Reinforce the ties that bind the clan, basic building block of society
4.a.”Lubricate inter-generational communication”
4.b.”Let Grandparents Raise the Cherished Dumplings”

5. “New Friends, New Communities”
Where the brand establishes new platforms for social bonding

6.”Forge China Pride”
Empower the mature to continue building a glorious nation.

If you are interested in reading further about this topic, you can also read Doctoroff’s post titled “China’s Senior Market: Grey Today, Golden Tomorrow” where he explains in further detail all these themes.

“Business Excellence” … It Pays Back: 3 Tips from m97 Art Gallery in Shanghai, China

What is your key to success? This is a question I always raised when I interview entrepreneurs, and m97 Gallery in Shanghai was not an exception. They never mentioned “excellence”, but it was the word that kept coming to my mind while reading my notes from the interview.

I’m not going to quote here any literature about business excellence, a lot has been written in the last 30 years since Tom Peters started applying this concept in the business world. But I will translate m97 Gallery’s experience into 3 tips that, to me, mean “business excellence” no matter if you find it written like this in a book or not.
(You can also read the article about how they started business in China here)

1. Ensure quality in every detail you can see.
“From day one, we were clear that ensuring quality in every single detail was essential. Sometimes you visit galleries and see the artwork information displayed in a sticker on the wall or artworks poorly mounted or displayed. We knew ours could not look like that and we made a point of looking after every small detail.”

2. … and [ensure quality] in those details that nobody can see, but will “come back to haunt you” if you neglect them.
“We initially had problems finding acid-free materials for printing and mounting artworks. This is a fundamental issue, as photography will deteriorate if not taken care properly… All materials you use must be acid-free.
Collectors had told us this was a big problem in this market…
As we were not able to find what we required here we started importing directly from Europe. We believe the problem at that time was that nobody was demanding this type of material [acid-free]…and as a matter of fact, our suppliers are sourcing them for us now“

3. Always keep in mind what is important to your stakeholders.
“We have built a quality reputation, quality that you can feel even at first sight. Artists and collectors acknowledge that”
“In the world of art galleries and dealers, trust is a key component of the relationship. If you care about the artists, you are devoted to promoting them, you are not just there for the money, they recognize your devotion and that drives good artists to you….”

Listening to the Consumer Feedback… from Rural China

I’ve just read a post that I need to recommend. It has made me laugh… and it has also reminded me of the power of innovation and the business opportunities hidden at the “bottom of the pyramid”[1].

Have you ever heard about a washing machine that can wash potatoes as well as clothes? Or about rodent-proof refrigerators? The post “Domestic Innovation to Meet the Needs of China’s Rural Consumers” at The China Observer will tell you about Haier (Chinese household appliance manufacturer and one of the biggest producers in the world) and its success innovating to meet China’s rural customer needs.

[1] Bottom of the Pyramid: I’m borrowing this concept from the book “The Fortune at the Bottom of the Pyramid” by C.K. Prahalad (Wharton School Publishing). This book elaborates on the entrepreneurial capabilities and the buying power of the poorer- and the possibility of making profits while helping them.

Selling Wine in China … and Getting Paid! 5 Tips from the Experts.

Ruby Red Fine Wine has been successfully selling imported wines to the Chinese market since the end of 2005. This post captures insights from two of its founding partners Simon Zhou and Kylie Bisman. Simon is responsible for sales, purchasing and tastings (he was described to me by somebody else as a “wine walking encyclopedia”) and Kylie specializes in marketing and design.

1. Distribution Channels: Be consistent with your business model.
Ruby Red Fine Wines specializes in boutique wines, Burgundy and Bordeaux.  Their sales split comes from three main channels: 40% distributors, 40% private customers, 20% restaurants.
“From the beginning, we made a conscious decision not to go to supermarkets. Several reasons led us to it. First, the wineries we buy from tend to be small (we specialize in high quality boutique production wineries) so they don’t produce the volumes a supermarket may need. Secondly, supermarkets are harder to do: entry fees, storage fees, charges for out of stock … the amount of capital required is much higher especially if you go to big chains”

2. Geographical Market Coverage: Be where your customers are!
Around 75% imported wine consumption comes from urban areas. And some sources estimate half of that consumption to come from Shanghai area itself. It is not strange so, that Ruby Red Fine Wines decided to set base in Shanghai. They also have a small office in Hangzhou and cover 40 other cities through distributors.

3. Sales Promotion: Different Strategies for Different Channels.
Distributors:
Kylie: “We do a lot of work for our distributors, Simon constantly travels visiting them, does training for them …”
Simon: “We have a team of account managers to look after distribution clients. We cannot treat China as one country. Each region is almost like a small country with very different local culture and needs. We work hard on understanding the needs of each distributor and help them develop their market. The key for us is to find solutions to help their growth.”

Private Consumer: Education! We’ve done thousands of tastings since we started! (my previous post about Ruby Red Fine Wine describes their keys to success promoting their business to consumers. You can read the article here).
“We do not have a shop… and we never meant to have one. We have the perfect spot (cellar) where wine is not too hot in summer and not too cold in winter.  And we run a lot of our events there. It’s quite normal for people to come and find us on the weekend, come and have a drink, come for an event…”

Restaurants:
“Restaurant is a difficult topic to generalize as we work a wide variety of them from large 5 star hotels to small cafes. Each of them has different clienteles and we cannot apply the same strategies.  There are however some common promotional activity like volume discount, table cards and by the glass trail offer”

4. Criteria for Distributor & Restaurant Selection
Distributors: “In most cases, it is the other way around, we have been doing a lot of work on education and events, this really helped us with our reputation, and most of our distributors find us. We, of course, want to work with long term vision distributors that work to develop the market rather than try to make a quick buck.”

Restaurants: “We tend to work with restaurant that view wine is an integrated part of the dining experience. Since we have wines from all price ranges, we can work with wide range of restaurants”.

5. Ensuring you Get Paid in China (an issue which tends to come high in the worries of all entrepreneurs)
Distributors: “We are very careful. We deal with a lot of distributors and they make up the bulk of our income. If we don’t know them they don’t get any credit. And it takes a long time of working together before we extend credit to our distributors… Initially it is always payment upfront and then we send the wine. Once you get the relationship working and a bit of guanxi , you know who you are dealing with and you understand your chances of getting paid… We never got hit by a distributor, we were always careful… “

Private Customers: “Direct consumers pay upfront… that’s the best business. They come into our cellar and they pay, or we deliver and they pay the delivery guy… “

Restaurants: “This is probably where we are more likely to be hit. But I would say that is also the rule around the world. You are dealing with a restaurant and then they go out of business, and that’s the problem…. In general, we have been quite lucky but every few months we have a restaurant that just disappears… and we try very hard, we have 3 people in our accounts team and they are constantly chasing to get our money. “

Selling a “Hot License” to the Chinese Retail: A Door-Opening Strategy

If you are Spanish, jump into a taxi in China and your taxi driver happens to know anything about your country there are two things he is more likely to mention: Julio Iglesias or Real Madrid. So, how would you feel if you had secured a contract to sell “Real Madrid” products in China?

Ecstasy is probably what entrepreneurs David Caro and German Torrado from Orienta 7 have been feeling for some time now. Just one year back they managed to become commercial partners with the company that has been licensed to market Real Madrid branded Food and Beverage (F&B) products in Asia. Today, they are ready to launch their product range in China’s main retail chains. This post captures some of the key strategic decisions they made and details about the project development and launch.

#1. “The Aha Moment”: Licensing as a Tool to Gain Instant Recognition with Consumers.
We are both Spanish and Spain is where our best network is, so our Food & Beverage (F&B) business focuses on Spanish products. The problem we face in a country like China is that, even products that are very famous back home are unknown here.
It is difficult to find exporters who understand and are ready to commit to the big promotional efforts required to open distribution channels here. And these channels are also difficult to open if the products or brands are not already well known here… So we needed to find an option that could deliver the sales required to start knocking retailers’ door, but that would not burden us with a huge promotional investment… And that is when the opportunity to sell “licensed” products came up.

#2. “The Battlefield”: We all wanted that License!
Exit Brand Management is the company that has been licensed to market Real Madrid branded Food and Beverage (F&B) products in Asia.  For us it was a real victory to become their commercial partners because we were competing with bigger players than us. But our networking and our credentials as entrepreneurs gave us the opportunity to see the deal come true.

#3. All about the Contract: Contract Duration, Product Categories and Geographical Scope.
We have signed a contract for F&B and Cosmetic for five years. The products that we will be initially launching are: a) impulse products: chewing gum, chips, frozen tea and cereal snacks and b) other F&B products: instant coffee, chocolate biscuits, Danish cookies, healthy biscuits, noodles and ice-cream.
The geographical scope of our contract is Greater China, Japan, Korea and Vietnam, but China will be the first country where we launch.

#4. Product Development: A China Business.
This project has been completely developed in China.
Sourcing:
During the last year, we have identified suppliers for all the categories we are going to be launching. We have obviously been directly involved in all the product development and the quality control process.
Design & Packaging Development:
We have also developed all design and packaging in China. We commissioned the job to a local design agency. They initially had a bit of trouble capturing the brand identity and what we were expecting from them, but we also got very involved on the design & packaging development and we believe the results are really good.

#5. An Unexpected Delay: Intellectual Property Protection in China.
Chinese Government has become very careful with all IP issues. We did not expect it, but we had to go through a lot of paperwork to prove that not only could we make use of the license but that every individual player also approved it.

#6. “Hot Licenses”: A Distribution Channel “Door-Opening” Strategy
Thanks to the Real Madrid License, one of the most famous “Spanish brands”, we have been able to negotiate the launch of a robust F&B portfolio in the main retail chains and convenience store: Carrefour, Wal-Mart, Lianhua, Family Mart, C-Store… This would have not been possible for us without such a strong brand.

#7. The Launch:
a. Coming Soon…. In main Supermarkets and Retail Chains!
June 2010 will be the launch time for our impulse range in all those supermarkets: chewing gum, chips, frozen tea and cereal snacks. In September, we will extend the launch to other F&B categories: instant coffee, chocolate biscuits, Danish cookies and Healthy biscuits. And we have new categories like instant noodles or ice-cream in the pipeline for next year.

b. Promotional Events.
We believe the launch timing is perfect. There will be a lot of interest and news around soccer, as the World Cup kicks off on June 11th.
Real Madrid team is also coming to China in August so that will be the best possible promotion for our products.

c. Promotional Strategy: Channel Oriented.
The promotional strategy will also be adapted to the different retail environments. Wal-Mart will have a “Real Madrid area” (not huge, as we don’t launch full range at once). Convenience Stores on the other have some space limitations that prevent that type of merchandising.

#8. The Secret Weapon: “Consumer Motivator” vs. Brand.
One of the reasons why we are so confident about this project is the product itself. It is not just Real Madrid branded, but it also portrays the main players. In China, we believe the “consumer motivator” or opinion leader is even more important than the brand, and having players like Raul or Ronaldo recommending your product in the Chinese market is going to be a sure hit.

#9. The Road Ahead: Capitalizing on Distribution for other products they represent.
This project has been a huge investment for us during the last year. We have gone through all the process of securing the deal, developing sourcing and products and negotiating with retail… our own money backing all that and no income so far. But we believe it has been worth all our efforts. We could have never developed the type of relationships we now have with retail chains without this brand. Our plans for the future are to capitalize on this work so that the rest of our business (non Real Madrid F&B business) can also enjoy access to this distribution channels.

Selling Imported Wine to the Chinese Consumer

China is changing fast, and the way Chinese consumer is approaching wine consumption seems to be evolving too. Ruby Red Fine Wine is successfully bringing imported boutique wines and reputed premium brand names to the Chinese tables. This post captures consumer insights from an interview to New Zealand entrepreneur Kylie Bisman whom, together with partners Simon Zhou, Joe Zhou and Vivian Wang, set up Ruby Red Fine Wine at the end of 2005.

Consumption Patterns are Changing.
We came to China at a very exciting time when suddenly wine started sparkling interest. People begun to realize that you could enjoy in wine these wonderful tastes and aromas, that wine could go really well with different types of food and that you could really make it a sociable occasion.

We are Mainly Selling to the Chinese Consumer, not to the Expat Community.
The majority of our customers are Chinese people interested in wine. Some of them already know about wine, but there are a lot of others who really want to learn about it. There’s a big interest out there.

Shanghai is different from the rest if China.
Our business in based in Shanghai but we also cover 40 other cities through distributors. I must say Shanghai consumer is definitely different from the rest of China. They are a little bit more adventurous and inquisitive, and that’s probably why a boutique wine type of business like ours is working so well here.

… but not that different!
Having said that, there is still quite a difference between the consumption patterns of our Chinese and Expat clientele. Chinese consumers tend to ask for two things: French wine and red wine. So, although our Shanghai consumers are willing to try new things, they are still more likely to go for French red wines. Our expat consumers may, on the other hand, be more likely to go for New World wines (unless they’re French!) and will include white wines in their selection.

The keys to our success selling to Chinese consumers:
#1 Education, Education, Education!
We’ve run thousands of tasting events since we started. Some of those run publicly and are announced in our website, but we also run a lot of corporate events for Chinese companies (banks, technology companies, companies that see wine tastings as a nice team building exercise with a fun and educational twist for their staff). Afterwards, we keep in touch with these people. We email our offers and news updates to them.
Now we are starting to see the fruits of our educational activity when people come to us saying: what new stuff have you got? They want to know more. They want to try new things, new flavours, new wine regions…it’s such an exciting time to be here… we feel we are helping to influence the palate of the Chinese consumer.

#2 Having the right portfolio.
At the beginning we would buy exclusively what we liked, focusing only on small production boutique wineries from New Zealand, Australia, France and Spain. We quickly learnt how tough taking an unknown brand is and we obviously realized there was a huge demand for the premium well established brands. So in addition to our boutique winery portfolio, we now have become Burgundy specialist and we have a very good offering of Bordeaux wines.  We also offer a feature available through very few companies in China, the possibility of purchasing “Bordeaux en primeur wine” (1).
Ultimately, the most important thing for us is quality.

(1) En primeur is a method of purchasing wines while they are in a barrel, offering the opportunity to invest in a particular wine before it is bottled