SUMMER 2OOO

THE mLL sdRtET JoURNAL.@ 2000 Dow lones & Company,Inc. All Rights Reserued.

NO. 115A

ja::,

.'!., TRADEROIITES TO

GHINA

HO WOULDN'T WANI to

i.u.tt ittit market: 1'3 billion

".oniu, elo*ing household in'

Some and ontY slim market Pen-

.;dl; bv ionsumer-Productfirms. The inarket, of course' ls

ciliii"-trt. most lucrative sPot

,: ''::ron the planet in the coming years'

: "-'ii6 potentiat is incredible' .Aith9ugn

" , mosi diriiui. ttil opt for the security of gov'

i=;' ffi;#i;ni, anoul zrE' are looking to start

i .:, fil,ii: .i''i'i uuli*" - "ng^lt, HI3'"lt"T:, :', ; gt'.xJt-J['tr llT"tf'H."T6t{iq.6rui1fti il;fi;illttnet.r.eallv ttl:lti.?1t'lic*:

Iti": #iv'$ff;iiriJn'out ot t'l uiuion c-hi-

. 'iit,i u:re'tnierntt users' but that'number ts' il;;.i;A to:umP to 2o million bY 2oo3'

"^"1*ni **iii tegistation to permanently nor-

*uritJtlie ieiilions witiLchina headed to-

' wardfinalpassagetnCongress' alO!nt11;

ff l':iTfl :l'a'll}3;r,ru;'$:if, *f'ff gll'ii

be sreater than ever'"""ffi'no;tu better put 0n y'ur boxin-g

"rn i.s. tor Crrina can seem more like a spar-

iil';i,tU,l*#-[?X'i,1f,ilTlliyi9j**ii,'v*'tt need to understand your cus-

ilffiii i"i tirt"t they.-want' You must also

lii,..ittl""tst a sigriificant amount of time

ii'l"ii,i"iio *cnit6r sales' marketing and

litffi"tt". Besides the Chinese govern-

ii".'tii iiJliil v;ur sreatest competition will

tOO . BY LaurelDelaneY

come from other Asian countries' such 'as

;iffi ffi'g";nd iui*"n, not-necessarilv

iiffi r"J"i pti*te'sector companies'mL^ *nrr'ai rn" pvnorr to China is so hugeTne market for export to

tirut'ioi tinii,riiitv ta^Lt I'll focus on one in-

duiiti-iood products - since tle- ll?Igcedustry-biilil ffi;ior'i iPqnqs ubo3!

? Fl'd;iiiffiffi;;n food' sut much of the

iOui.* iun be translated to other

consumer goods'"""ii.iet "

Iook at how to get

started.DO THE MATH: Annual.m'come Per caPita for rest'rtents of China's 10 malor

"iti.i wat equal to $2,6?0

in 1999, uP from $2'490.in

1997. With disPosable tn-

come so low, savry mar-

xel1ns in cnina must include

const-ant consumer testing ano

.xneiimentation to ensure that

it?ii:u"tiiJieo consumers willcioose vour Product''t'rrt." ivplcat customer. oJ

-1-'ctrineie dripermarxet or hypermar: , ,- - -;i'il1;ft;i and usuallY female'

-nas

lli*;fmlru''.'#,::ff '.".1$m:,|ift;i;i ;;iii Chil;t bne-cma'per-ramlv p-ot-

i.i. tnu-;ritu. emperor" is particularly pre-

;iir;.'i.il;i; iuuion, pareirts are willing to

;i.,;-i;ilh;f their disposable income on

their children.

.. ...i,

HOW AND WHERE TO'DTITER: The

i.lil"itv tttut.gv ror food products-the

tigs,il"^Ji"eiq g*l'ry: .11',.il: -9Hl'9'"?

irringnii t..ttern seaboard)' Beijing qnrne

ffiihT*d Guangzhou (in the south)- T,nerg

il;;;;;40;ih6r imP-ortant cities' but You

*r*i.tuiiittt yourseif in the Big Three be'

i,jt.i"r*c t" 1-5s 1s5s-dsveloned areas''"'"d;il;[t; ilnina tvpicatlv-travel in this

..orilti.., U.S. exporter to'Hong Kong.or

L'rH;;ifi;tter/'distributor to local dis'

iiinutor to tocal retailer'Navigating this system without- a Chi-

r.r.'iirl?iuili6r wno lirows trre complex' un'

;;tlil;;;fil;* is almost imPossible' ro

iTiffiiiffi -'-'fi

lff Hri'#l;li'.','T'x:

hflxH+,tr#f, tlilrt*:1";.ir**61;ff;blfth.d tiliitinationals that handle- non'

iililpi,T*"g tild"cts' Distributors - pr e f er

.

to

;;i;lifi bompanies that visit frequentlv

;fti;;;'il;ierstanding of thg *"tlg!:,.'-""NJii, .iitinit in a trade show' easlly

t."rifiriitirin'iit! u's' Agriculture Depart'

ket eweitd rmall

'q':

'F* t, f

fr+ri!,:

i-i

two years'developing a product for the Chi.nese market.

ThO Chinese tend to like their foods lesssweet, disliking anything with a .honev;scent or taste. Northern Chinese prefer salivsnack prolucts, while Soutndrners tikircreamy-sweet flavors. In general, the Chi_nese enjoy strong flavors.

., *."9 of course price matters. Although_the Chinese prefer the superior packasing"ofWestern products, which l;ive tn'e impresi'ionof .top quality, they stilt demand bursii;prices. The market with the biggest poteitiali_s for products that retail for t"eis tffin bt.;0:Consider cookies and batery items, cinOv.fresh fruit, snack foods, iorn ifrbien-6r. canned), frozen french fries, nonalcoholicbeverages and milk powder.THE PAYMENT PRbBLEM: The best wayto secure payment from any overseas cus-tomer is to ask for funds in advance. Havinsyour customer open an irrevocable letter oTcredit, preferably confirmed, is another ex-cellentTray to guarantee payment.

Unfortunately, both oi these widelv usedmethods of paymOnt on internationat translactlons create prob'lems for companies doingbusiness in China. Cultural factors, tne iegijframework and the bureaucracy make ii acomplicated matter.

Sc, you must work through authorizedagents who are appointed Uy tne eovern_ment and who work within a retationstrinknown as guanfi, which can Oe snaOv. daiyou avoid getting taken? Sorry, nut ttreieGno foolproof approach.

But you can improve your chances bvcommunicating clearly with your customeiand your bank on matters of payment. It isideal ifyour bank has branch ,irir., i" 6rii"iso.they can provide on-the-spot assistince.Ask your U.S. bank if they hive .*prri.n.uwith the Chinese bank th-at wiil nairOfe tnupryspegtilg transaction, and if they cinvouchJor that bank's reputation and profes_slonallsm, especially in their dealings withU.S. compani-es.

-

.Even in the best-case scenario, expect towait for payment: Chinese supermarkets re_qrdre 60-to-90-days' credit bn mosi nui-chases, and some chains will deiaypaymenteven longer. iilF

.i;

. MS. DEI,ANEY RUNS GLOBAL TRADESOURcE, LrD,, A CHIcAco-BAsED cLoBAL td,{RIrnTTNg

. CONSULTING AND WEB CONTENT PRO!,IDINGrrRM. SHE TEACIDS AT LoyoLA UNrvnnstry ruCHTcAGo AND cAN BE REAcIIED ATBREAKAWAY@WSJ,coM

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***I*', a*raibhi*6*s*.

STAY FLEXIBLE: you will need to modifvyour products to suit the Chinese palate and

also to appeal tothe eye. Eyen Wal-Mart tailored itsproduct line to fitlocal tastes by of-fering live snakesand barbecued pi-geons. Expect atrial-and-error

period; it isnot uncom-mon for a

packaged-food'manufacturer to ,

spend up. to

ment at www-fas.usda.gov (click on ,,Marketj:e!oTs" and then ,,Attache Reports,'). Theu.s._uommerce Department, U.S. Commer-clat service or the American Consulate Gen_eral (in certain major cities, such as Sh;;;_hai and Beijing) cah atsoheip. ----"o

.Then,. promote, promot6, promote. In_

vestment in local marketing is ciucial. point_of-purchase merchandisers and samnlinsare the most effective ways to Oevetop s'ateilI,'0r specialty and snack foods, you shouldconsider promoting heavily Auring tn; Chi-nese "Golden period," which lastifrom fallIo spring and includes National Day, NewYear's Day and Spring Festival. Giii:sivi;;ll^1ullg1uw dunng_this time, and lrixurylfood sales are brisk.-Shoppers also like inn"o-vallve products for gifts, and as treats fortnelr pampered children.

Think you're going to short_circuit theprocess? Remember that most supermart<eiiar€ not allowed to import foodstuifs Oirectiy,?1t,must

g.o througlr an approved importei.Anct even that can be tough, since importedfood-generaily has a tess tian rz ot ifrfiefaiJshelf space in Chinese stores, which tvnicallvonly stock about 3,000 to 5,000 aiffere"n^iprod-

lyls -comnared with 20,000 in the ave^ragb

u.s. supermarket.