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Presented by: SMH International

China Initiative 2012 SUSTA State Fall Meeting December 1, 2011 @ Oklahoma. Presented by: SMH International. PART I China Market Overview. China Market Overview - Economy. Economy output: USD 5.01 trillion (Jan. – Sept., 2011) Conservative but stable growth

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Presented by: SMH International

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  1. China Initiative 2012 SUSTA State Fall Meeting December 1, 2011 @ Oklahoma Presented by: SMH International

  2. PART I China Market Overview

  3. China Market Overview - Economy • Economy output: USD 5.01 trillion • (Jan. – Sept., 2011) • Conservative but stable growth • CPI: 6.1% (Sept., 2011) • 14.3% (food category) • Sales of consumer commodities: • USD 2.04 trillion (Jan. – Sept., 2011) • Retail: 17% • HRI: 16.7%

  4. China Market Overview - Trading • In 2009, China trading value was largely affected by the economic recession. • Starting from late 2010, resilience was witnessed. • Total import value: USD 1.29 trillion (Jan. – Sept., 2011) • 26.7% China Import & Export Value (Jan. 08 – Sept. 11) (USD Billion)

  5. China Market Overview - Trading • U.S. continued to be the 2nd largest trading partner of China. • Stable share by trading value • Vibrant performance from emerging suppliers • Australia 38.3% • Brazil 38.3% • HK 32.9% • ASEAN surpassed Japan to gain the 3rd place in bilateral trading with China. • Challenge: FTA (Free Trading Agreement) • ASEAN: ZERO tariff for 10 countries • Chile: gradually lower the tariff to reach ZERO by 2015

  6. China Market Overview – U.S. Trading • Export value is continually on the rise with acceleration. • 2010 export value from U.S. to China achieved record high of USD 19.42 billion, a 36.3% growth. • The first 9 months of 2011 saw a total export value of USD 13.56 billion, higher than the scale of whole year in 2008.

  7. China Market Overview – U.S. Trading

  8. PART II Export to China

  9. Export to China – Major Ports • Coast Line: 32,000 km • World Rank: 4th • Regional Key Ports: • Northern: • Tianjin • Eastern: • Shanghai & Ningbo • Southern: • Guangzhou & Yantian • Hong Kong • Regional ports also have their own regulations.

  10. Export to China – Import Procedure

  11. Export to China – Documents Necessary documents for importation according to the requirement from Chinese laws and regulations Health Certificate Commercial Invoice Certificate of Origin Document for Clearance Packing List Bill of Lading Chinese Label

  12. Export to China – Label • A Chinese label is compulsory for the Customs Clearance in China. • Label needs to be registered with CIQ • Name/Brand • Ingredient list • Net contents and drained weight • Name and address of manufacturer & distributor • Production date and/or best before date + shelf life • Special storage conditions (if applicable) • Warnings in relation to consumption or storage (if applicable) • Both retail and bulk packages need to have Chinese labels on. • Latest regulation requires the Chinese label to be put on the products before shipment

  13. Export to China – Health Certificate Health certificate is most crucial for the clearance procedure in the Customs in China. For different products, different certificates are required: Ordinary Processed Food Health certificate issued by the state department of agriculture, better from USDA Dairy and with Dairy Ingredient U.S. company must obtain certificate from USDA for dairy and any other containing dairy ingredients A certificate from USDC is needed for any fish and seafood products exported to China. Seafood Plant and Plant-originated Phytosanitary certificate from USDA is required for any unprocessed plant or plant-originated products.

  14. O Poultry Pork Mineral Water U.S. Beef Wine Export to China – Sensitive Item Anti-dumping charge by Chinese government No “Lean Meat Powder” like Ractopamine or Clenbuterol A Certificate of Physical & Chemical Character Banned Invoice from Winery instead of Exporter etc.

  15. Export to China – Mark-up • U.S. enjoys the most-favored-nation (M.F.N) bound rate in trading with China. • A certificate of origin is required to enjoy this tariff. Mark-up Taxation A 10% for Miscellaneous Cost during Procedure Dutiable Price VAT: 13%/17% Tariff: M.F.N. Original Price Plus: Cost of Freight,Packaging, Insurance etc. Transactional Price by the Contact Margin for Distribution Importer:10% - 15% Sub-distributor: 20% - 30% Retailer: 30% - 35%

  16. Export to China – City of Focus City GDP Growth (USD billion) Shanghai 256.4 9.9% Beijing 209.4 10.2% Guangzhou 161.2 11.0% Shenzhen 144.5 12.0% Suzhou 139.3 13.0% Tianjin 138.4 17.4% Chongqing 120 17.1% Hangzhou 90.4 12.0% Wuxi 87.5 13.1% Qingdao 86.1 16.0% Foshan 85.7 14.0% Wuhan 83.8 14.7% Chengdu 83.6 16.0% Dalian 78.3 15.2% Ningbo 77.9 12.4% • Market for Entrance: • First-tier cities: Shanghai, Beijing, Guangzhou • Top 3 in GDP ranking • Consumer base • Early exposure • Mature market • Market for Expansion: • Emerging second-tier, satellite and inland China cities • Growing demand • Less explored • Purchasing power

  17. Export to China – Retail Channel 36.52% Food continued to be the largest category during daily expenditure of urban families • China is predicted to be the 3rd largest retail market with a capacity of USD 2 trillion by 2025. Food forms a strong pillar in the expenditure continuously. • The retail channel in China tends to be mature and diversified: • Domestic players:supermarkets, hypermarkets, convenience store • (regional coverage) • International players:hypermarkets • (scale of individual store, product variety)

  18. Export to China – Retail Channel • New operation: high-end gourmet stores • Existing players:City Shop, Ole’s, BHG Market Place, Jenny Lou’s, Jusco • City Super, BLT and etc. • Advantage: self-owned import license • source directly from overseas • easy access to the stores • save margin from importers and distributors

  19. Export to China – Foodservice Channel • Urbanization (over 50% urban residents in 2010) and a quicker life/work pace lead to more dinning out. • International events like Olympics and Expo boost foodservice development • Over 18 years’ double digit growth rate generated sales of USD 327 billion in 2010.

  20. Export to China – Foodservice Channel • More star-rated hotels and top restaurants • Four & five-star hotels: 7.7% (2009) ===> 18.7% (2010) Structure Optimization • No import license, limited direct sourcing from overseas • Require daily delivery of small quantities from local suppliers Purchasing Strategy • International players: 30% - 50% imported items • Imported category: meat, seafood, dairy, beverage and etc. Product Preferences

  21. Novelty Packaging Health Safety Price Export to China – Consumer Behavior Food safety issue gains the public attention Awareness rises towards the healthy benefits of food items 58.4% of the consumers prefer novel items. Price-sensitive, but largely reduced. Delicate, attractive Consumer Behavior

  22. PART III Market Plan 2012

  23. Market Plan 2012 – Trade Show May 9 – 11, 2012 @ Shanghai November 14 – 16, 2012 @ Shanghai Part A Food and Beverage Shows China Tradeshows Part B Seafood Shows November 6 – 8, 2012 @ Dalian September 11 – 13, 2012 @ Hong Kong

  24. Market Plan 2012 – Trade Mission • Venue: Hong Kong, Shenzhen & A Second-tier City • Timeline: June, 2012

  25. Market Plan 2012 – Retail Promotion • Interact with other events like SIAL and outbound trade mission • Buyer-seller introduction for product sourcing • Platform for the promotion of products sourced through SIAL and trade mission • Increase exposure of southern U.S. food products in China 5-10 Stores Decoration & Demo Authentic Southern U.S. Flavor October 2011 Chengdu/Ningbo Opening Ceremony Media PR

  26. Market Plan 2012 – HRI Campaign • Recommended menus from U.S. guest chef • Buyer introduction and meeting arrangement for U.S. product sourcing • Menu promotion in designated restaurants or cafés with unified decoration bearing U.S. identities • POSM design and production (menu, brochure, flyer, poster etc.) • Publicity through advertisement, media tasting/seminar, showcase etc. etc. • Onsite live demo and lecture given by Guest Chef from U.S. supported by SUSTA programs

  27. Market Plan 2012 – Market Report • 3 reports according to requirement from companies/activity managers • To provide a better understanding about the China market and the marketability of products with trader referrals January – December, 2012 China/HK

  28. Thank You !

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