Global Traders January-Febuary ’14
A BREADTH OF FRESH AIR
If you doubted Peter Mann’s entrepreneurism based on his inability to meet demand in China, he’d do what he does best: clear the air. The man(n) behind Oransi—a Texas-based, four-person startup launched in 2009—began sending his air purifiers to China in the summer of 2013, and simply misjudged the market for his product in the smog-smuggered mainland. By how much? The 500 units he sent across the Pacific sold out in just three days. What’s more, they were snapped up by families at a premium retail rate of between $2,000 and $3,000.
Back to clearing the air.
First off, China is a tough market to judge—and if you don’t buy that then check out our sidebar “Even Major Shippers Shoot From the Hip in the Wild East” to see how major corporations are faring. The bigger issue for Mann, a U.S. Navy veteran who likens the opportunity for air-care products in China to the height of the dot-com era, was something we can all applaud him for—his decision to manufacture in the U.S. over China, despite a 20 percent cost hike.
“One disadvantage to manufacturing in the U.S.,” he says, “is that the lead times tend to be higher so it is more difficult to react as quickly as they do in China.” It’s a fair explanation of why, when that most coveted of business challenges hit—excess demand—reaction was seemingly slow to materialize. That and the fact that Mann had eschewed the high-costs but quick turnarounds of expedited air freight in favor of leveraging cargo containers sailing back to China, available, Mann says, 40 percent to 60 percent cheaper because they would otherwise be empty.
Solving the challenge is all in hand, however. “To manage it well we have to get to where we have good sales forecasts and can build to a plan,” says Mann. With a better idea of what to expect out in the Wild East—quick: trademark that—he can turn his attention toward longer-term issues such as planning for and hedging against copy cats. For that the plan is simple: He says Oransi must “build our products in such a way, and with the highest level components, that it would be difficult to copy and match performance.”
SETTLING IN THE NEWEST FRONTIER EVEN MAJOR SHIPPERS SHOOT FROM THE HIP IN THE WILD EAST
If your first venture into China isn’t an unmitigated success, you would be forgiven. The fact is that even some of the biggest and most-recognizable global brands are always adjusting to the ever-changing consumer trends in the unpredictable country. Here are five companies that found varied results in China last year.
Mattel’s ‘Violin Soloist’ Barbie is hitting the right notes with Chinese mothers eager to emphasize education for their children, a desire left wanting by the iconic American doll’s “Fashion Design” Barbie play set. In hopes that its icon status catches on in China, Mattel has introduced a more basic, affordable Barbie—one without joints and a trimmed-up price tag of just $13. And after closing its flagship six-story Shanghai store in 2011, the company says its sales have tripled since 2010.
Chinese consumers are finding KFC’s claims of safe poultry a little hard to swallow. Its same-store sales for China fell 16 percent in 2013, though they did bounce back just 1 percent in November. Clipping the Colonel’s wings was a Shanghai Food and Drug Administration investigation into its food safety which ultimately declined to fine or bring a case against the Yum Brand Inc.-owned chain, though it did recommend a strengthened supply chain. KFC says it will add new menu items and revamp its marketing to reestablish its place in the country’s fast-food pecking order.
Ford Motor Company plans to accelerate its sales in China and globally by adding a modified Mustang for overseas buyers. By shifting its focus abroad, the motor giant hopes to offset sagging U.S. Mustang sales that dipped as much as 8 percent from 2012 to 2013, from an already-low “high” of just 82,995 sold in 2012, according to the Wall Street Journal. The China-bound “Pony” looks to regain relevance by revamping its technology package with push-button start and adjustable driving modes.
Smithfield Foods finally found the key to growing exports in China: Sell your business to a Chinese company. In September 2013, the pork producer finalized a $4.7 deal with Shuanghui International Holdings Ltd, and plans are underway to use Shanghui’s distribution network to quickly ramp up shipments from the U.S. to China. And there’s no time to waste, with demand soaring from that much-talked about growing Chinese middle class. Someone tell Randolph and Mortimer Duke that we’re bullish on pork-belly futures.
Hershey Co. is working to sweeten its position in the Chinese “Mmm…” market. In June of last year it rolled out its first new product in 30 years, a condensed-milk candy for Chinese consumers. Under the brand Lancaster, the confectioner introduced its milk candy to three Chinese cities and so liked its results that it now plans to produce country-specific sweets for India and Brazil. But it’s China craving isn’t satisfied: In December it agreed to purchase Shanghai Golden Monkey Food Joint Stock Co. for nearly $500 million and assume control of its production.
U.S. Wet Corn Exports Rose for the Third Consecutive Year