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© DKSH Fisherman’s Friend Asia-Pacific Conference China – The Challenge Kevin Ding, Marketing Manager, DKSH China Jakarta, July 10, 2014
© DKSH Page 3 China is not one country but more like Europe Whichever dimension we look at, China is composed of several distinct markets: - Language / Dialect & Sub-culture - Economic Development - Habits / Needs Only 7% of retailer chains can be found in both provinces Population:1.3 bn Size:9,6 mn sq km City > 1 mn:166 Municipality cities4 Provinces28 Cities656 Country Towns1,642 Towns36,862 FMCG Retail Outlets3,6 mn Shanghai Population: 23,0 mn GDP per capita: RMB 82,560 Main language: Wu (Shanghainese) Behavior: Rich flavor food with a bit sweet; pay more for good product Guangdong Population: 104,3 mn GDP per capita: RMB 50,500 Main language: Cantonese Behavior: Light taste flavor and fresh food; More care about price Heilongjiang Population: 38,3 mn GDP per capita: RMB 32,600 Main language: Mandarin Behavior: Heavy flavor food; Gift rather than own consumption
© DKSH Page 4 FF Sales by Product / Channel / Region Sales in LoF Consumer demanding and channel importance is different region to region
© DKSH Page 5 FF strategies … Focus on key cities and appropriate key channels Different strategies upon the understanding of consumer and market needs region by region Tailor-made product and promotion for specific key accounts
© DKSH Page 7 Continuous new product innovation by competitors Over a thousand new product launched per year to attract young consumer Keen fighting for listing due to limited shelf space in store
© DKSH Page 8 Huge A&P investment by competitors Media Spending Unit: RMB Mil Data source: Nielsen(TV/MG/NP) CTR(RD) CODC(OOH) IResearch(Digital) Period: Y2011-Y2013 Brand Y2013 RankSpending% Wrigley's11,35124% Alpenliebe264112% Skittles355410% SK&F43697% Want 52995% Golden Crownstuff62605% Golden Throat72194% Eclairs % Chupa Chups % Halls % Others 1,35925% Total 5,548100% Heavy A&P spending by key competitors on both A-T-L and B-T-L
© DKSH Page 9 Keen competition from key international brands but produced locally Fisherman’s Friend was one of few “imported” brands positioned at “premium” segment Keen competition from local, regional, global brands … Data Source: IMS and AC Nielsen Retail Tracking 2012
© DKSH Page 10 FF strategies … Introduce new packaging (zip-lock pack) / flavor to attract new consumers Tactically invest on brand advertising with massive sampling to drive brand awareness e.g. regional bus body / LCD advertising Focus on key accounts via appealing in-store merchandising and promotions to attract consumer’s attention and trial
© DKSH Page 12 High trade cost High supply-chain cost and long lead time due to large geographical size of China Extremely high trading terms by MT channels along with their expansion in 3 rd and 4 th tier cities (new store opening, listing, etc….) 2.4 M stores located in 2,300 cities which need huge manpower investment for store maintenance Import Duty - Sugar - Sugar Free 10% 20% VAT17% Sub-wholesaler GM10% Retailer Ave. GM45% 1 GBP (ex-work) ≈ RMB 40 (RSP) 2,4 m + stores 2,287 cities
© DKSH Page 13 Other barriers Strict shelf life requirement by MT chains – 2/3 shelf life is the basic requirement while some key accounts even ask for ½ shelf life Chinese label regulation be more strict and still changed frequently without prior notice, rigid CIQ procedures
© DKSH Page 14 FF strategies … Focus on well developed 1 st and 2 nd tiers by direct selling to shorten the lead time and save the cost Expand to more 2 nd and 3 rd tier cities via local sub-wholesaler who can provide better after-service Focus investment on top 20 key accounts which can contribute 80% sales
© DKSH Page 15 DKSH Shanghai Limited 3 rd Floor, Tomson Commercial Building, 710 Dong Fang Road, Pudong Shanghai, People’s Republic of China Thank you for your attention.
© DKSH Page 16 Disclaimer Due care has been used in preparation of this presentation and DKSH makes every effort to provide accurate and up-to-date information. Nevertheless, this presentation may be subject to technical inaccuracies, information that is not up-to-date or typographical errors. DKSH does not assume liability for relevance, accuracy and completeness of the information provided. DKSH reserves the right to change, supplement, or delete some or all of the information on this presentation without notice. The layout, graphics and other contents in this presentation are protected by copyright law and should not be reproduced or used without DKSH’s written permission.
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