Trends in the Chinese Gold Jewellery Market

Transcription

1 Trends in the Chinese Gold Jewellery Market Speech by LBMA Conference Mumbai November Assumption 2 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. LBMA Precious Metals Conference

2 Key Jewellery Trends in China 3 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. Key Jewellery Trends in China - ONE 4 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. LBMA Precious Metals Conference

3 volume (tonnes) Amount (100 mil) Key Jewellery Trends in China - ONE 5 1. A more liberalized gold market SGE Annual Trading Volume & Amount , In December 1 st 2006, SGE had a record daily trade volume, tonnes. Key Jewellery Trends in China - TWO 6 2. A faster growing economy 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. LBMA Precious Metals Conference

4 Key Jewellery Trends in China - TWO 7 2. A faster growing economy 2nd Tier Market - Chengdu Key Jewellery Trends in China - TWO 8 2. A faster growing economy 2nd Tier Market - Nanjing LBMA Precious Metals Conference

5 Key Jewellery Trends in China - TWO 9 2. A faster growing economy 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. Key Jewellery Trends in China - TWO A faster growing economy 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. LBMA Precious Metals Conference

6 Key Jewellery Trends in China - THREE 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 Key Jewellery Trends in China - THREE A more consolidated manufacturing base Company Name Bai Tai (+40 retailers in 40 cities) Top Gold Jewellery Manufacturers in China No. of Employees 2005 Gold Off-take 2006 Gold Off-take 2007 Gold Offtake (Est d) Yuehao Jinye Gold Dragon Cui Lu AnShenghua Tongxin Lu, Miracle (Shangdong) Ri Yue (Jejian) Cui Hua (Shenyang) - TOTAL y-o-y% change 16.60% 21.82% LBMA Precious Metals Conference

7 Key Jewellery Trends in China - THREE A more consolidated manufacturing base Shenzhen Manufacturing Base workshop Key Jewellery Trends in China - THREE A more consolidated manufacturing base Shenzhen Manufacturing Base workshop LBMA Precious Metals Conference

8 Key Jewellery Trends in China - THREE A more consolidated manufacturing base Wholesale Centre 16 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. LBMA Precious Metals Conference

9 17 Examples of modern shopping malls 18 Jewellery counters at modern shopping malls HK Brands LBMA Precious Metals Conference

10 19 Independent Jewellery Stores China Brands LFX and Ming in Shanghai 20 National Brands & Regional Brands from China LBMA Precious Metals Conference

11 21 International Jewellery Brands in China 22 Hong Kong Jewellery Brands in China LBMA Precious Metals Conference

12 23 Hong Kong Jewellery Brands in China 24 Hong Kong Jewellery Brands in China LBMA Precious Metals Conference

13 25 Leather Goods and Cosmetics 26 Watch and Mobile Phones LBMA Precious Metals Conference

14 27 Jewellery from International Famous Brands 28 Jewellery from International Famous Brands LBMA Precious Metals Conference

15 29 Jewellery from International Famous Brands 30 Jewellery from International Famous Brands LBMA Precious Metals Conference

16 31 Jewellery from International Famous Brands Key Jewellery Trends in China - FIVE A Very Competitive Media Scene 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 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 LBMA Precious Metals Conference

17 Key Jewellery Trends in China - FIVE A Very Competitive Media Scene Key Jewellery Trends in China - FIVE 34 RMB (Mil.) 5. A Very Competitive Media Scene 450, ,000 Data Source: ACNielsen Adquest , , , , , , ,000 50, ,678 22% 261,444 21% 198,762 32% 139,473 43% 100,404 80,233 39% 50,979 25% 57% LBMA Precious Metals Conference

18 RMB( 000) Session 3a Key Jewellery Trends in China - FIVE 35 2,000, A Very Competitive Media Scene Jewelry Category Spending Trend 53% 1,500,000 1,000, ,000 40% 893,664 1,249,521 1,914, category spending increased dramatically compared with last 2 years Data Source: 2004 ~ 2006 AC Nielsen Key Jewellery Trends in China - SIX A More Individualistic, Younger & Affluence Consumers Base 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 pricesensitive to gold price hike. LBMA Precious Metals Conference

19 Key Jewellery Trends in China - SIX A More Individualistic, Younger & Affluence Consumers Base 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 Key Jewellery Trends in China - SEVEN A Better Product Offer K-gold and Only Gold Jewellery i. For both K-gold (18K) product and Only Gold (24K) Elite Collections, ii. However, traditional 24K gold demand is still dominating. LBMA Precious Metals Conference

20 Key Jewellery Trends in China - SEVEN A Better Product Offer K-gold Jewellery Key Jewellery Trends in China - SEVEN A Better Product Offer K-gold Jewellery LBMA Precious Metals Conference

21 Key Jewellery Trends in China - SEVEN A Better Product Offer Only Gold Jewellery Key Jewellery Trends in China - SEVEN A Better Product Offer Only Gold Jewellery LBMA Precious Metals Conference

22 Key Jewellery Trends in China - SEVEN 43 Retail environment and products 10 years ago Gold Jewellery in 1998 Key Jewellery Trends in China - SEVEN 44 Retail environment and products NOW Only Gold & K-gold 2007 LBMA Precious Metals Conference

23 Conclusion 45 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. All Jewellery Categories Consumption 46 Jewellery Consumption in China Unit: tonnes Gold Total (tonnes) Pure Gold (increase in absolute tonnage) Gold Split K-gold (increase in both absolute tonnage and market share) Platinum Total (tonnes) Palladium Total (tonnes) Silver Total (tonnes) Diamond Total in value (US$)2.13 billion 1.24 billion 1.37 billion 1.3 billion 1.56 billion Chinese Source: China Jewellery Association/GFMS GDP Y-on-Y (%) 10.2% 9.0% 9.5% 9.9% 10.70% Growth LBMA Precious Metals Conference

24 China - Total Gold/PT/PD Consumption 47 Tonnes Platinum Gold Palladium Source: Johnson Matthey and GFMS London 48 LBMA Precious Metals Conference