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| Subject: |
CHINA BUSINESS
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| Period: |
December 1, 2014 to January 1, 2015
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| Geographies: |
Worldwide
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| Categories: |
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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A Bloomberg analysis of internal Walmart documents related to its business in China, as well as information gathered from employees, tell a tale of long-developing problems in the country, including questionable accounting, unauthorized sales practice and severe inventory problems. Some stores, for example, were booking sales when no merchandise left the shelves. Some stores were routinely making unauthorized bulk sales to other retailers. After years of crowing about its success in the region, the company finally admitted in August its operations in China have been in serious trouble. The revelation led to a management shake-up and cuts in staff.
"How Wal-Mart Made Its Crumbling China Business Look So Good for So Long", Bloomberg, December 12, 2014
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After a food safety scare at one of its Chinese suppliers, KFC has invited fried chicken lovers in the country – the biggest market for parent company Yum Brands -- to come and see for themselves that the restaurant chain maintains high standards of hygiene. The problem arose when a TV report alleged that workers at a KFC chicken supplier were adding expired meat to products. Customers can book a tour showing employee hand-washing, clean cooking oil, safe chicken raising practices, and use of purified water.
"KFC calls on Chinese diners to inspect its kitchen", Reuters, December 10, 2014
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Heinz announced the opening of a $70 million 80,000 square meter baby cereal factory in China’s Guangdong Province. The company says it’s the largest such factory in the world, and is the seventh Heinz manufacturing facility in the country. The state-of-the-art factory is a showcase of advanced technologies, including drum dryers, powder handling systems and packaging machinery from global companies like Andritz Gouda, GEA Group, and Bosch. The technologies will not only speed production, they will ensure the most stringent quality controls, the company said, completely isolating allergens, from raw material storage to the production process.
"Heinz Opens State-of-the-Art Infant Cereal Factory in China", News release, Heinz, December 02, 2014
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| Comment & Opinion |
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China overtook the United States to become the world's largest economy, according to the International Monetary Fund. Data from the IMF, in terms of national economic output in “real” terms of goods and services, China will produce $17.6 trillion in 2014, compared with $17.4 trillion for the US. In other words, China accounts for 16.5 percent of the global economy in terms of real purchasing power; the United States, 16.3 percent. Calculations by the IMF are based on purchasing-power parity, which measures a country's actual economic output rather than exchange rates fluctuations.
"It’s official: America is now No. 2", MarketWatch, December 04, 2014
Unilever CEO Paul Polman said he expects the world economy to improve in 2015. Despite the current slowdown, many emerging markets still have the potential for “healthy growth,” Polman said. A weaker economy in China, India, and Brazil drove Unilever sales down to its lowest levels in five years, according to the company. Polman said, however, his optimism was driven by the International Monetary Fund's forecast for a slightly higher global growth in 2015.
"Unilever upbeat on future growth in emerging markets", Independent Online, December 03, 2014
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McKinsey Quarterly, December 16, 2014
Caixin, November 04, 2014
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Dietary supplement maker Thorne Research announced it will work with the Mayo Clinic on a series of clinical trials to test the safety and efficacy of compounds from natural sources, plant extracts, and complex nutritional products that are "generally recognized as safe" (GRAS). The testing, to be conducted at the Mayo Clinic, will focus on supplements targeting conditions with significant human need, sports related performance, recovery and injury, and nutritional support for surgical care. Results will be used to develop supplements, medical foods, functional foods and botanical drugs. Thorne said it will also test formulations from traditional Chinese medicine.
"Thorne Research Announces Clinical Study Agreement with Mayo Clinic for Dietary Supplements", News release, Thorne research, December 16, 2014
Wal-Mart Stores Inc. said it will reduce its workforce in China by 250 jobs as part of the retailer's efforts to reorganize its business operations in the country. Also aimed at reducing costs and improving its revenue performance, the layoffs will affect 250 middle and lower-level employees, less than 1 percent of the country's workforce in China, and worked at the firm's corporate affairs and asset protection units. Wal-Mart currently operates 400 stores in the country and will open nine new stores and a new distribution center in China by end of 2015. Also, the company plans to build a $97.5 million shopping mall in the city of Zhuhai.
"Wal-Mart to Cut 250 Jobs in China", Wall Street Journal, December 01, 2014
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Korea Herald, December 01, 2014
Advertising Age, November 26, 2014
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| Marketing & Advertising |
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French skincare brand L'Occitane opened its online store on Alibaba Group Holding Ltd.'s shopping portal Tmall on December 1, 2014. Seeing its products already being sold on the ecommerce platform without its permission, L'Occitane decided to do the selling online to Chinese consumers itself. Many leading beauty and personal care brands opened their Tmall stores in 2014, encouraged by Alibaba's promise to remove unauthorized sellers of their products from its online platform once these brands opened their own branded stores. For example, after Burberry and Estee Lauder opened their stores, Alibaba removed all third-party sellers of their products.
"L’Occitane Launches Online Store on Alibaba’s Tmall Site", Wall Street Journal, December 05, 2014
South Korean cosmetics company AmorePacific is repositioning its flagship brand. After withdrawing the brand from Japan, the company also pulled the brand from its duty-free stores in South Korea except those at the Incheon International Airport. Launched in 2002, the brand carried the company's dream of competing with global luxury brands, such as Lancome and Estee Lauder. Although it had a relative success in the United States, the brand, however, failed to find market success in Japan and never attracted big-spending Chinese consumers.
"Global Luxury Skincare Brand AMORE PACIFIC Opens Shops in Hong Kong", Korea IT Times, December 02, 2014
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Advertising Age, November 07, 2014
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