CHINA FRANCHISE NEWS
Vol. 2 , No.18 - October 24, 2001
TOPICS THIS ISSUE:
- Wall's Ice Cream Opening up Chain Stores in Beijing and Shanghai
- 500 KFC Restaurants in China
- China Travel Intl Seeking Mainland Takeover Opportunities
- Foreign Drug Retailers Allowed to Enter Chinese Market in 2003
- SCMP Declines Comment on Retail Business Withdrawal Reports
- Foreign Brands Enjoying Popularity in China
Wall's Ice Cream Opening up Chain Stores in Beijing and Shanghai
Wall's Ice Cream is expanding into the retail business in China by opening up Wall's ice cream bars in Beijing and Shanghai.
Wall's Ice Cream, the flagship of Unilever's frozen foods chain, went through an active period of development this summer. Besides introducing over 30 kinds of ice cream into the Chinese market and increasing this year's advertisement expenses to ten times the amount spent last year, Wall's Ice Cream opened up its first ice cream bar in Beijing in March. Another four will be opened in Shanghai this October.
Mr. Kong Peng Tao, Chairman for the Frozen Foods Sector of Unilever China announced a 60% increase in its sales income in Beijing and a 200% increase in Shanghai compared with last summer.
"The future competitor of Wall's chains might be McDonald's," Mr. Kong confidently reported.
(Source: Sina.com)
500 KFC Restaurants in China
Last Friday it was announced that there are now more than five hundred KFC chain stores in China.
J. Samuel Su, president of Tricon China, of the U.S.-based Tricon Global Restaurants Inc, said that more than 99 percent of the Chinese KFC branches make substantial profits and that they are planning to exploit the fast food industry market even more in the future.
Su also said that the potential of the Chinese market is still growing, due to the successful bid for the 2008 Olympic Games and the approaching entry in the World Trade Organization.
Since 1987, when the first KFC restaurant was opening in Beijing, an estimated 240,000 tons of chicken has been processed by the fast food giant in China alone.
In the past year, RMB 300 million (US $34.88 million) has been used to open some 100 KFC stores in northern and western Chinese cities.
The local economies are also benefiting from the recent expansive efforts of Tricon. Chinese KFC restaurants spent an estimated RMB 800 million (US $93.02 million) purchasing raw materials from local sources in the year 2000 alone.
(Source: China Daily)
China Travel Intl Seeking Mainland Takeover Opportunities
China Travel International Investment Hong Kong Ltd, is preparing to expand into Mainland China.
Chairman Che Shujian announced that the company's section China Travel International Ltd. has obtained a travel operation license for the PRC and is now looking to acquire travel agencies in China.
Zhang Xue Wu, chairman of China Travel International Ltd., said that mainland operations will begin by the end of this year with the starting point in Beijing. He also said that the company will use different channels of expansion. "China Travel International Ltd can by itself establish new branches in different parts of China, it can cooperate with different travel agencies or it can take over other travel agencies," he said.
Wu admitted they are confident about their expectations about China. He believes the growth of the mainland economy, entry into the WTO and the restructuring being done due to the Olympic Games in 2008 will all contribute to their market prospects.
He also noted that "last year Chinese citizens spent RMB 317.5 billion in traveling on the mainland, up 12.10% from last year."..
Managing Director Zhen Zhujing said the recent attacks on the United States have affected their business very little because foreign tourists only account for 9.55% of the group's revenue.
Zhen also noted that competition with the mainland government-controlled China Travel Service is not a large concern. He said "competition is normal in any business sector, but there will not be unhealthy competition."
(Source: AFX-Asia)
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Foreign Drug Retailers Allowed to Enter Chinese Market in 2003
Beginning January 1, 2003, foreign drug retailers will be permitted to sell their goods in the retail market of China.
The head of the Division of Economic Operation under the State Economic and Trade Commission, Li Hong, trials have been performed in a number of cities, including Shanghai and Beijing, in which drugstores were established to open up the drug retail sales market.
Presently, for foreign drug retailers to enter the market, two requirements must be fulfilled. A foreign drug retailer must have over US $2 billion in assets three years before the application or US $200 million in assets one year before the application and must set up a joint venture with a Chinese company.
The requirements for a Chinese partner to enter a joint venture in the pharmaceutical industry is that they must have RMB 300 million in assets three years before the application or RMB 50 million in assets one year before the application. It is also encouraged that the Chinese party of a joint venture commercial enterprise related to wholesale activity invests over 50%.
Li Hong believes this will mean that the cost of drugs on the market will drop and more people will have access. It is estimated that 40% of the total cost of medicine in China is spent on marketing.
Presently, Chinese wholesalers and retail sales enterprises in the medicine industry are preparing for the challenges set out by the nearing entry of China into the WTO.
Joint stock companies have been formed, by the establishing of alliances, mergers or share control. Sales methods such as agency distribution, general agency distribution and general sales agency systems have all been used.
(Source: BBC News)
SCMP Declines Comment on Retail Business Withdrawal Reports
Although rumours have spread, claiming that it is pulling out of the retail business, SCMP is declining to comment.
Local media has reported that SCMP (Holdings) is planning to withdraw from the retail business due to the economic downturn and is exploring the sale of its retail assets, such as the Health Plus and the Daily Stop chain stores.
When asked about the rumours, a SCMP Holdings spokesperson was quoted as saying that "The company does not comment on market speculation."
(Source AFX-Asia)
Foreign Brands Enjoying Popularity in China
The enthusiasm with which Chinese nationals purchase foreign goods at the Wal-mart Shenzhen branch, in the south province of Guangzhou is symbolic of the zeal with which both consumers and manufacturers approach the market in China.
It is quite easy to see the increasing popularity of foreign products in China. When asked about his buying habits, Zhong, a 30-something white-collar worker, says "if they aren't too expensive, we try to buy as many imported products as possible. The quality is much more reliable than domestic brands."
As China bids farewell to leaders from over 20 Asia-Pacific countries, the Chinese masses are choosing well-known brand names such as Tide, Kellogg's, McCormicks, Starbucks and Motorola.
Although many investors are excited about entering the largest and fastest-growing country in the world, some firms are still cautious as they realize money is hard to earn in China. The vast majority of Chinese people still do not have enough money to buy foreign products. Furthermore, analysts predict that even after China's entry into the WTO, the communist government will still regulate the economy and practice favoritism, hampering the transition to a market economy.
With over US $32 billion of direct investment in the first three quarters of this year alone, China has already become the largest market for motorcycles, mobile phones, soybeans, air conditioners, elevators and light bulbs. This year it became the second largest market for personal computers and is expected to become the largest market for beer in 3 years. Chainstores such as KFC, McDonalds and Kodak, have hundreds of outlets nationwide. Last year, China became Kodak's second largest market.
However, counterfeiting is still a major concern for many MNCs. In many local markets throughout China, such as "Silk Alley" just behind the U.S. Embassy in Beijing, genuine products are the exception to the thousands of counterfeit Nike shoes, North Face Jackets and Calvin Klein undergarments. Although 11 million motorcycles were sold in China last year, Japanese manufacturers estimate that 50 to 70 percent of the "Yamahas" and "Hondas" on the street are in fact counterfeits illegitimately built in Chinese factories.
In Shanghai, at the APEC conference, U.S. trade officials and chief executives passed off these problems as kinks that would be worked out within time.
(Source: The Washington Post)
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