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| Subject: |
CHINA BUSINESS
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| Period: |
August 1, 2013 to September 1, 2013
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Worldwide
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Comment & Opinion or Companies, Organizations or Consumers or Controversies & Disputes or Deals, M&A, JVs, Licensing or Earnings Release or Finance, Economics, Tax or Innovation & New Ideas or Legal, Legislation, Regulation, Policy or Market News or Marketing & Advertising or Other or People & Personalities or Press Release or Products & Brands or Research, Studies, Advice or Supply Chain or Trends
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Contents
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Stevia producer GLG Lifetech announced it is working with state-owned China National Cereals, Oils, and Foodstuffs Corporation, the largest food company in China, on three major healthy food and beverage formulation projects. Two of the projects cover dairy products for the COFCO Mengniu Dairy business unit and one involves the company's China Foods subsidiary, according to GLG investor relations head Stuart Wooldridge. China's government is concerned about the increase in number of obese people in the country to more than 200 million, while those diagnosed with diabetes have reached 90 million. As part of its deal with COFCO's Nutrition and Health Research Institute, GLG will supply stevia ingredients and technologies and help the Chinese company develop products with zero or reduced sugar content.
"GLG Lifetech works with China’s largest food company to tackle obesity, diabetes epidemic with stevia", Nutraingredients USA, August 15, 2013
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Tea manufacturers and retailers have a key opportunity to increase sales through premiumization and a deeper understating of the evolving preferences of consumers, according to researcher Euromonitor. Tea is by far the most consumed beverage in the world, far outpacing water, coffee, carbonated drinks, etc., especially in China, India and Pakistan. But that high level of consumption is not really reflected in sales, which at $40.7 billion a year lag far behind coffee at $75.7 bullion and carbonate drinks at $183 billion. Consumer tea preferences are changing: they are switching from unpackaged tea bought in open-air marketplaces to branded teas sold in stores. And the fact that tea is appealing both in brewed and bottled form makes it “ripe for customization and premiumization in all channels” – and a “huge amount” of long-term growth.
"Dual Opportunities for Tea in Retail and Foodservice", Euromonitor International, August 13, 2013
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British supermarket chain Tesco has abandoned attempts to make a profit by itself in China, and is pursuing a partnership with China Resources Enterprise Ltd. Retail analysts say the move by Tesco is an acknowledgement that it -- like other foreign retailers -- had a tough time negotiating with suppliers in a “fast-growing but tricky market”. CRE has an intimate knowledge of local customers and an established supplier and distribution infrastructure. The joint venture would have sales of $15.6 billion, with CRE and Tesco’s interests pegged at 80 percent and 20 percent respectively. Tesco would merge its 131 stores with CRE's Vanguard unit, which operates 2,986 mainly hypermarkets or supermarkets across China and Hong Kong.
"After nine years, Tesco gives up on cracking China alone", Reuters, August 09, 2013
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L’Oréal Luxe’s beauty care brands, Kiehl’s, Biotherm, Helena Rubinstein, and Yves Saint Laurent, are seeing growing sales in China and other emerging markets in the Asia-Pacific region. First introduced in May 2006 at the Hong Kong International Airport, Kiehl’s is expected to become one of the top 3 skincare brands in the region soon despite its limited distribution, the company said. After a period of revaluation and redevelopment, the Helena Rubinstein brand of skincare products was re-launched by L’Oréal Luxe. Biotherm has also been transformed as a brand, supported by the “Beauty From The Deep” rebranding campaign. Also, the company revamped and repositioned its Yves Saint Laurent brand in China and other markets in the region.
"L’Oréal Luxe's developing brands advance in Asia Pacific", The Moodie Report, August 08, 2013
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State-owned retailer China Resources Enterprises Ltd. said it may join Tesco PLC to bid for billionaire Li Ka-shing's ParknShop retail chain in Hong Kong. CRE plans to raise debt and may consider selling non-core assets to fund a purchase of the Hong Kong retailer, chief financial officer Frank Lai said. In August 2013, CRE announced a joint venture deal with Tesco, which will merge the companies' retail operations in China. Hutchison is reportedly seeking $3 billion to $4 billion for ParknShop, which had 33 percent of the Hong Kong grocery market in 2012, according to market research firm Euromonitor.
"China Resources May Join Tesco to Bid for Li’s ParknShop", Bloomberg , August 22, 2013
JD.com, formerly called 360buy.com and one of China’s largest online retailers, plans to expand its international business unit JD.com Global in the United States. With more than 100 million registered users and 20,000 suppliers, JD.com has seen transactions on its website grow between 100 percent and 350 percent each year to reach $9.8 billion in 2012. JD.com vice president and general manager of global business development Shi Tao visited Seattle, Washington, and met with the local business community at a reception organized by the Washington State China Chamber of Commerce. JD.com has six fulfillment centers with 71 warehouses in 27 cities and almost 1,000 delivery stations and 300 pickup stations in China as of May 2013.
"Move over Amazon, JD.com is coming to town", China Daily, August 16, 2013
Unilever Foundation ambassadors and Unilever employees Dana Buchanan and Carlos Castillo Cano came to China to visit Save the Children’s projects in the country. China is one of the five countries where Unilever is supporting the nonprofit group’s Every One global campaign to prevent preventable deaths of children and their mothers. Among the projects visited by Buchanan, who is a senior manager from Australia, and Cano, a customer development executive from Spain, are a community health center and a kindergarten in Shanghai.
"Unilever Foundation Ambassadors visit China with Save the Children", Unilever, July 31, 2013
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Advertising Age, August 18, 2013
Kantar World Panel and Bain & Company, July 30, 2013
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| Deals, M&A, JVs, Licensing |
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L’Oréal said it plans to acquire Magic Holdings, the largest manufacturer of facial masks in China and owner of the MG brand. A relatively young company, Magic Holdings has been growing at an amazing pace for its first five years of operations. L’Oréal's acquisition of Magic Holdings follows the French cosmetics company's acquisition of Mininurse in 2003 and Yue-Sai in 2004. These acquisitions have expanded L’Oréal's production capacities and demographic and socioeconomic market reach.
"Unmasking Great Potential: L’Oréal Announces the Acquisition of China’s Magic Holdings", Kline Blog, August 28, 2013
UK-based retailer Tesco said it plans to transfer its 131 stores and shopping malls in China to a joint venture with state-owned China Resources Enterprise. Tesco will hold a 20 percent stake in the joint venture, which would have combined sales of about £10 billion annually. CRE will receive 80 percent of the joint venture in return for its 3,000 Vanguard stores across China and Hong Kong. China’s economic slowdown and stiff competition have made it hard for some international retailers to make money in the country. Earlier in 2013, German retailer Metro announced its plan to close its consumer electronics business in the country. In 2012, Home Depot closed its seven big box stores in China.
"Big retailer finds China market is tough", CNN Money, August 09, 2013
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China's government is pushing for a consolidation of the country's infant formula industry by reducing the number of domestic manufacturers to 3–5 companies with revenues of more than CNY 50 billion by 2018. Citing sources in the Ministry of Industry and Information Technology, the China Securities Journal reported the government is supporting merger and acquisition deals in the sector, aiming for the top 10 domestic brands to grab an 80 percent share of infant formula sales in the country. Chinese consumer confidence in locally manufactured infant formula was seriously affected by the 2008 scandal involving melamine-contaminated products.
"CHINA: Beijing "wants 3-5 formula manufacturers" in consolidation push", Just-food.com, August 16, 2013
Wal-Mart Stores Inc. is considering a bid for Hutchison Whampoa Ltd.'s ParknShop supermarket company in Hong Kong. Valued at $4 billion, the proposed sale has generated interest from various corporate and private equity buyers, including Aeon Co. Ltd. from Japan, China Resources Enterprise Ltd., and Wesfarmers Ltd. and Woolworths Ltd. from Australia. Wal-Mart, which in 2012 announced plans to open 100 new stores in China over the next three years, is reportedly working with a bank as it studies its options for the Hong Kong-based supermarket business.
"Wal-Mart weighs bid for Li's Hong Kong supermarket chain: sources", Reuters, August 07, 2013
Farmers in China’s grain basket, the rainy central province of Hunan, continue to battle with industrial waste water that is contaminating the water needed to grow crops. Rural China's descent toward becoming a toxic wasteland is a result of two trends: expansion of polluting industries into rural regions far from population areas, and heavy use of chemical fertilizers. Researchers report that between eight percent and 20 percent of the country’s arable land – between 25 and 60 million acres – could be tainted by heavy metals. According to The Wall Street Journal, a five percent loss in arable land would be a disaster, severely reducing the 296 million acres currently needed to sustain the population.
"China's Bad Earth", The Wall Street Journal, July 27, 2013
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Bloomberg/Businessweek, August 22, 2013
Advertising Age, August 18, 2013
McKinsey Quarterly, July 31, 2013
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In 2013, the natural personal care markets in China and Japan are growing, with the Chinese market posting a growth of almost 25 percent and Japan seeing growth of about 5 percent, according to market research firm Kline. In China, the market growth is driven by the culture-driven popularity of traditional Chinese medicine, increase in transparency in product safety and health-related issues, and rising levels of disposable income. Although natural products account for a smaller portion of Japan’s personal care market, the segment is seeing strong sales increases in natural shampoos, conditioners, and personal cleansing products. Products that are truly natural are showing higher growth rates than those of their merely natural-inspired counterparts.
"Natural Personal Care Markets Flourishing in China and Japan", Kline Blogs, August 22, 2013
Instant tea accounts for 38 percent of China's $9.6 billion retail tea market, according to market research firm Euromonitor International. In 2002, instant tea contributed only 4 percent to total sales in the country, but has grown $22 billion in the last 10 years. China accounts for 93 percent of the world's total instant tea sales. Unlike in other markets, however, China's instant tea sales are driven by the milk tea trend. Pushed by young consumers' demand for sweet tea products, the milk tea trend began in cafés and street stalls and kiosks that serve milk and bubble teas. The market grew by $143.6 million in 2007–2012, the study showed.
"Instant Milk Tea in China Rides Youth Culture Wave", Euromonitor International, August 22, 2013
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Holmes Report , August 19, 2013
China.org.cn, August 06, 2013
Millward Brown, July 25, 2013
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| Trends |
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China’s ecommerce market is forecast to overtake that of the United States in 2013, according to management consulting firm Bain and Co. Data from the company’s latest report showed China’s online retail segment has grown an average rate of 71 percent from 2009 to 2012, compared with 13 percent in America. Its total size is forecast to reach 3.3 trillion yuan, or $539.07 billion, by 2015. Total spending by Chinese consumers on online shopping reached $212.4 billion in 2012, compared with $228.7 billion in the United States. Chinese companies, including Haier Electronics Group and Suning Commerce Group, have seen their online sales grow faster than conventional sales.
"Chinese shoppers set to become world leaders online", Reuters, August 28, 2013
UK-based Tesco PLC, along with the world’s other leading retailers, is finding out how difficult it is to penetrate China’s retail market. Foreign-owned retailers, including Carrefour SA and Wal-Mart Stores, Inc., began coming in to China in the early 1990s, seeking to grab their shares of the market whose growth is being driven by the rising middle class. Recently, Tesco announced its plan to merge its China operations with the state-owned China Resources Enterprise Ltd. Combining Tesco’s 131 supermarkets, hypermarkets, and shopping malls in China with CRE’s nearly 3,000 stores, the deal marks a major decline in Tesco’s business after nine years of operating independently in the country.
"Not such a super market for the overseas giants", China Daily, August 19, 2013
Real output rates in the so-called “BRIC” countries – Brazil, Russia, India and China – are slowing as the labor forces grow older and smaller, and production capacities have become strained. But that doesn’t mean the BRICs are becoming less relevant to the global economy, according to Euromonitor. On the contrary, they represent 41.3 percent of the total global population in 2013 and 20.2 percent of total global GDP (expected to rise to 23.8 percent of total global GDP by 2020). This year consumer expenditure in the BRICs will account for 15.8 percent of total global consumer expenditure, which in real terms this will rise to 19.7 percent of total global expenditure by 2020. In fact, the market researcher says, “[the BRICs] will continue to offer opportunities to investors in the long term”.
"The BRICs are More Important than Ever to the Global Economy", Euromonitor International, August 02, 2013
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Mintel Blog, July 08, 2013
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