The Next Frontier: Exploring New Opportunities in China

Transcription

1 The Next Frontier: Exploring New Opportunities in China The coming challenges for Latin American companies Gonzalo Mena C. Managing Partner China Fruit Solutions Santiago, November 9th, 2016

2 Today, China faces a new normal marked by important adjustments at country level

3 85 years ago 35 years ago New York, USA The coming challenges for Latin Today Tokyo, Japan

4 25 years ago 25 years ago The coming challenges for Latin Beijing Today Shanghai

5 Habits change because of westernization is a latent issue in main Chinese cities

6 Although the slowdown, China is growing more than the world Historic and forecasted GDP growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% % Source: World Bank World China USA Chile Peru Forecast

7 Consumption power is also raising in China every year GPD per capita, PPP $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $ World China USA Chile Peru Forecast Source: World Bank

8 The market and fresh fruit business is being affected by 4 main factors High competence by new origins and suppliers Oversupply and inadequate quality by channel Consumption and price tolerance given by the real customer Value chain shortening

9 Summary of allowed fruits for China by main countries The coming challenges for Latin Product CL PE AUS NZ USA CAN MEX TUR SA FRA ITA SPA Cherries Blueberries Grapes Apples Kiwis Plums Avocados Nectarines Pears Citrus Pomegran. Berries Mangoes Almonds In shell Walnuts Shelled Walnuts Prunes Raisins CL: Chile PE: Peru AUS: Australia NZ: New Zealand USA: United States CAN: Canada MEX: Mexico TUR: Turkey SA: South Africa FRA: France ITA: Italy SPA: Spain : in negotiation Source: CNFSOL, Oct 2016

10 US$ / Kg The coming challenges for Latin Chilean cherries season : an example where high volume, bad quality and real consumption affected the business Tons x $8.0 $7.1 $6.6 $6.4 12% 173% El crecimiento en volumen $9.0de un $8.0 62% para 7.7 los envíos a CN+HK $8.0 esta temporada contrasta 6.8 con los $7.0 retornos a productor, $6.0 evidenciando $4.9 que existe un $ problema latente en el mercado 107% $3.0 $ $1.0 $ $8.9 47% 88% -12% $10.0 $4.0 Volume Avg Price For Chilean cherries, season has been the worst in the market until now

11 The value chain has changed very fast in the last 5 years, making a big pressure and cutting the revenues of middle parties Traditional value chain Big importers Street sellers Family stores Small and medium size growers Medium and big size exporters Wholesalers Wet markets Shopper Brokers y traders Secondary wholesale markets Upcoming value chain Supermarkets Specialized stores Medium and big size growersexporters Big importers Online stores Shopper Wholesalers Supermarkets

12 China today: challenges and opportunities

13 Wholesale markets

14 Main wholesale markets for western fruits Cities Dili Market Harbin Shenyang Beijing Xinfadi Market Shanghai Chengdu Chongqing Huizhan Market Jiangnan Market Guangzhou

15 Shanghai Huizhan wholesale market

16 Beijing Xinfadi wholesale market

17 2nd tier city wholesale market: Chongqing

18 3rd tier city wholesale market: Dezhou

19 3rd tier city wholesale market: Dezhou

20 Retail The coming challenges for Latin

21 Although there have been many improvements on site, main retail stores haven t been able to lead on fresh fruits category

22 Premium supermarkets have targeted the quality, freshness and small portions to present a high level value proposal City Shop Olé Pines City Super

23 Price and value proposal comparison Red Globe Grapes Massive supermarket Premium supermarket Tesco US$5,4/kg Olé US$11,5/kg

24 Price and value proposal comparison Hayward Kiwi Massive supermarket Premium supermarket Tesco US$3,5/kg Olé US$5,5/kg

25 Price and value proposal comparison Angeleno Plums Massive supermarket Premium supermarket Carrefour US$9,5/kg Olé US$14/kg

26 Price and value proposal comparison Gala Apples Massive supermarket Premium supermarket Tesco US$6,4/kg Olé US$8,2/kg

27 Price and value proposal comparison Bing Cherries Massive supermarket Premium supermarket Carrefour US$32/kg Olé US$75/kg

28 Fruit chain stores have a rich value proposal with good quality fruit and prices lower than traditional retail stores

29 Local fruit has taken leadership thorough strong marketing campaigns and high quality appearance to conquest the Chinese consumer

30 Proliferation of e-commerce represents a great opportunity, but also a big challenge to fulfill the shopper requirements and preferences Plataformas e- commerce transversales Plataformas e- commerce especializadas Supermercados tradicionales E-commerce de fruta fresca Compañías logísticas

31 5 tips to improve the business with China

32 1 Identify the weak points in your actual business situation with China What we expect Why? What usually happens

33 2 Review your commercial strategy to improve your revenue Commercial strategy sections Commercial strategy components Environment analysis Segments and target customers Strategic plan Prices and sales conditions Brands and positioning Definitions Tactic plan Key performance indicators Sales & distribution channels Products, atributes and formats

34 3 Supply premium and constant quality to position brands Mid & high-end Chinese shopper is willing to pay for high quality imported fruits Make Glocal brands : Global quality, local positioning If the product doesn t meet the requested standards, do not send it to China Use targeted tools to reach shoppers: retail promotions, WeChat marketing, cross-sell So-so quality or like Premium is unuseful and destroy confidence with wholesalers The market always passes the bill, sooner or later, but it happens

35 Avg Selling Price [US$ / Kg+ The coming challenges for Latin 4 Use more information instead of speculation to take better decisions 35 Historic prices for cherries in Chinese wholesale markets CNY 2015 CNY 2016 CNY Source: China Fruit Solutions + Agronometrics

36 Price per 5KG Box [RMB] The coming challenges for Latin Chilean cherries selling prices comparison in Chinese wholesale market 1,400 1,200 1, CNY 2016 CNY 2015 CNY CNY Week Source: China Fruit Solutions + Agronometrics

37 Chilean cherries selling prices comparison between Guangzhou and Shanghai markets [US/Kg] Source: China Fruit Solutions + Agronometrics

38 5 Have local presence in China with experienced people Allows to bring after-sales support, local data review and on-site follow-up to enhance the results of the fruit business in China. Reduces the complexity in selection, management and evaluation of customers. Allows to have local eyes and hands in the market to avoid brand cannibalization between wholesalers. Allows to search, find, evaluate and pilot new business models, customers and distribution channels following the local trends. Local and deep knowledge of the market is extremely relevant to develop the right products for their shoppers Learning curve in China is quite long and expensive, expert support will help you to improve the business results

39 The Next Frontier: Exploring New Opportunities in China The coming challenges for Latin American companies Gonzalo Mena C. Managing Partner China Fruit Solutions (+56) gonzalomenac Santiago, November 9th, 2016