Chinas Retail Industry

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					Food from Britain



Presentation to   China Roadshow




        Venue     Lincolnshire
          Date    22nd May 2007
      Speaker     John Vernon, UKTI
Exports of food and drink from the UK 2005
By value, millions of British Pounds


      1. Ireland                             1,875.57
      2. France                              1,255.22
      3. USA                                 894.56
      4. Spain                               846.72
      5. Germany                             597.10
      6. Netherlands                         446.89
      7. Italy                               379.42
      8. Belgium                             339.43
      9. South Korea                         180.42
      10. Canada                             165.56
Exports of food and drink from the UK 2005
By value, millions of British Pounds


      11. Denmark                            160.32
      12. Japan                              156.37
      13. Greece                             152.93
      14. Sweden                             145.29
      15. Portugal                           141.10
      16. Australia                          125.72
      17. Taiwan                             116.48
      18. China                              96.41
      19. South Africa                       96.25
      20. Russia                             95.13
Fastest growing per capita consumption of food & drink from the UK
Top 20 (% change 2005 vs. 2004)

      USA
       Sweden
       Australia
         Kuwait
           Germany
               Ireland
                South Africa
                   Cyprus
                       Turkey
                                 Hungary
                                  Hong Kong
                                   New Zealand
                                    Czech Republic
                                    Korea, South
                                     Taiwan
                                           Singapore
                                               Poland
                                                        Saudi Arabia
                                                           Venezuela
                                                                             China
                                                                                     India

 0%             10%             20%          30%            40%        50%   60%             70%
Top 5 product sector exports to China


1. Spirits                              £47.6m +85%


2. Frozen fish                          £31.3m +72%


3. Sugar                                £3.4m +63%

4. Crustaceans                          £1.9m +237%

5. Wine                                 £1.0m +243%
 Retail formats: Grocery retail sales by format

               Mini Market
                  13%
   Convenience
      stores
       3%
Supermarkets
    6%




                                                  Traditional
                                                   formats
                                                     68%
                    Hypermarkets
                        10%
Source: IGD
Features to be aware of or look out for..



 •   Hypermarkets:
      – Two floors
      – Inside shopping centres
      – High staffing levels
      – “Retail-tainment”
Features to be aware of or look out for..

•   Hypermarkets:
     – Two floors
     – Inside shopping centres
     – High staffing levels
     – “Retail-tainment”
•   Supermarkets
     – Dominated by domestic retailers
     – Carrefour: Champion (6 in Beijing)
•   Convenience stores
     – Focus on chilled drinks, snacks, cigarettes, RTE dishes
International Retailers
International retailers


 •   Present since early 1990s
 •   Growth of hypermarkets
 •   Change of location and ownership rules in December 2004
 •   Currently present in the market:
      – Auchan (Fr)
      – Carrefour (Fr)
      – Ito-Yokado (Jpn)
      – Metro (De)
      – Tesco (UK)
      – Wal-Mart (US)
Retail sales of international retailers in China – 2003/4



            1,400     1,285

            1,200

            1,000

              800               707       683      681
$ million
                                                           539
              600

              400
                                                                    205
              200

                0
                    Carrefour Wal-Mart   Metro   Auchan   Tesco     Ito-
                                                                  Yokado

Source: IGD
International Retailer Profiles: Carrefour


Formats         Carrefour hypermarkets
                (Champion supermarkets)
                Dia discount stores
                72 stores in total
Estd in China   December 1995

Latest       New store openings to concentrate on hypermarket and
developments discount store brands
Approach to     Strong price commitment, cheaper than rivals.
market          Focus on foreign (Western) products, merchandised
                separately.

Private label   Yes: No. 1 and Carrefour since 2004
International Retailer Profiles: Wal-Mart


Formats         Supercenter hypermarkets
                Neighborhood Market supermarkets
                Sam’s Club cash & carry
                47 stores in total
Estd in China   1996

Latest       Plans to open more supercenters in Shanghai, Beijing and
developments second/third tier cities.
Approach to     EDLP, price promotions, Retail-tainment.
market
Private label   Yes: Equate, Great Value and Simply Basic since 2003/4
International Retailer Profiles: Metro


Formats         29 Metro cash & carry stores

Estd in China   1996 [Jiangjiang Group]

Latest       Plans to take c&c format into developing regions.
developments
Approach to     Main customer base: restaurants and hotels. “Junior”
market          format is most common.

Private label   Plans to introduce in near future.
International Retailer Profiles: Auchan


Formats         9 hypermarkets

Estd in China   1999
                Acquired 65% stake in RT Mart (Taiwan) in 2001
Latest       New store openings in primary and secondary cities
developments
Approach to     Strong price commitment and promotions on price.
market
Private label   Yes: Pouce, Auchan and First Price since 2003
International Retailer Profiles: Tesco/Hymall


Formats         39 Hymall hypermarkets

Estd in China   July 2004 – 50% stake in Hymall (Tsing Hsin group)

Latest       New store openings
developments
Approach to     EDLP, price promotions, fresh food/market style
market
Private label   Not as yet.
International Retailer Profiles: Ito Yokado


Formats         5 Ito-Yokado hypermarkets
                100 7-Eleven/Dairy Farm convenience stores
Estd in China   1996

Latest       New store openings: hypermarkets and convenience
developments stores. Plans to introduce supermarket format in Beijing.
Approach to     Strong customer service, mix of
market          Chinese/Japanese/Western product offering.

Private label   Not as yet.
International Retailer Profiles: Others


•   Lawson, Family Mart (Jpn) – both present in Shanghai
•   E-Mart (S Korea) – Shanghai
•   Lotus (Thai)
•   Trust-Mart, RT Mart (Taiwan)
Domestic Retailers
Domestic Retailers


•   Dominant: numbers of stores, turnover
•   Reacted and developed in face of international competition: sink or
    swim
•   In decline:
     – State owned retailers
     – Traditional wet markets
Domestic Retailers: The Bailian Group


•   Merger between state-owned Shanghai Hualian and Shanghai
    Lianhua, 2003.
•   4 members in the Group:
     – Shanghai No. 1 Department Store
     – Shanghai Lianhua
         • Century Lianhua hypermarkets
         • Lianhua supermarkets
         • Quik convenience stores
     – Shanghai Hualian Co Ltd
     – Lianhua Group
•   Both companies still operating as separate entities
•   Lianhua JV with Dia stores to come to an end.
Domestic Retailers: Wu Mart


 •   Established in 1994
 •   Strong presence in Beijing
 •   Wu-Mart private label range
 •   Hypermarkets: Retail-tainment,
     local product focus
 •   Developed by acquiring state-
     owned enterprises
Grocery retailing in Shanghai
Shanghai


•   Main players in Shanghai:
     – Carrefour, Hymall, Auchan, Metro, RT Mart, Lotus, Trust Mart, E-
       Mart, Lianhua, Hualian
•   Wal-Mart established its first Supercenter in 2005
•   Convenience stores industry in Shanghai is most developed in
    China with over 3,500 stores:
     – Quik, Alldays, Kedi, Shanghai Buddies, Mei, Lawson’s, 21st
       Century, C-Store
The Future
The future


                     •   Shopping malls: bigger and bigger
                     •   More hypermarkets and
                         supermarkets in primary cities
                     •   Growth of stores in second tier
                         cities - pioneers
                     •   New formats
                     •   Multi format strategy (Carrefour)



South China Mall,
Guangdong province
Foodservice
Foodservice in China


•   Fast food
     – Yum Brands (KFC, Pizza Hut, Taco Bell)
     – McDonalds
     – Import 5-10% of food (including french fries)

•   Hotels
     – International 5*: 30-50% of food imported
     – Largest chain: Jiangjiang
     – Target: Executive chefs and purchasing managers




Source: USDA
Foodservice in China


•   Restaurants
     – More Chinese restaurants using imported products
     – Esp. Shanghai – 380 specialising in foreign food in Shanghai

•   Institutional
     – Eurest, Gate Gourmet, Sodexho
     – International schools: 25 in Shanghai
     – Airline catering: up to 50% of food is imported for international
        flights.




Source: USDA
What is working?


•   Categories



•   Brands



•   Packaging



•   Appeal to the consumer
    Case study: Morning Foods, China
•   Brand support
•   UK origin
•   Company history and prestige
•   Long-standing local relationship
•   Moving success forward…
    Routes to market: Consider the options
•   Via UK consolidator

•   Via local distributor

•   Joint venture/acquisition
     – Transfer production skills
     – Finish product locally

•   (For China) via Hong Kong??
Routes to market: Other considerations


•   Product suitability

•   Target markets

•   Listing fees

•   Tariffs

•   Margin expectations

•   Product registration process?
Summary


•   Further research and investigation is key…
•   …as is careful selection of partners in the markets

•   Consider starting with Shanghai
•   Find your niche
•   Take a long-term view
Contact at Food from Britain


Emma Walters
Development Markets Manager

ewalters@foodfrombritain.co.uk
020 7468 8569

				
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