CHINA FRANCHISE NEWS
Vol. 2 , No.22 - December 28, 2001
TOPICS THIS ISSUE:
- Chinese Businesses Favor Franchised Chain Operations
- Kodak and Fuji Fighting for Digital Photo Development Market
- NFD Acquires Yoplait Franchise to Enter China Market
- Leading Traditional Medicine Producer to Set Up Hospital
- Petrol Stations to Open to Multinational Oil Giants
- Baleno Aims to Open 150 Outlets on the Mainland
Chinese Businesses Favor Franchised Chain Operations
The development potential of franchise chains in China is very promising, as more international commercial giants are expected to flood China upon its entry into the World Trade Organization (WTO).
Chain operations have existed in China for more than 10 years. In the past five years, the number of chain enterprises and stores has increased over 7 times. Meanwhile, contributions by chain enterprises to China's total retail sales increased from 0.72 percent in 1993 to 6.7 percent at the end of 2001. There are now 2,100 chain operations with 32,000 outlets, with an annual sales volume reaching 230 billion Yuan (US$27.7 billion).
Prospects of franchise chain operations in China will depend largely on the acceptance of this new form of business by Chinese enterprises.
A telephone survey of the managers of 320 large and medium-sized enterprises in Beijing, Shanghai, and Guangzhou by the Zero Survey Company showed that 33.2 per cent of the respondents think franchise chain operations suit Chinese enterprises, while 43 per cent believe retail is the most suitable sector to introduce franchise chain operations.
31.3% of the respondents think franchised chain operations have developed smoothly in China, while 34.6% think there is room for improvement. According to researchers, the opening of franchise chain operations, large department stores and supermarkets will be the three biggest development trends in the future.
(Source: Xinhua News)
Kodak and Fuji Fighting for Digital Photo Development Market
The fight between Kodak and Fuji concerning the digital photo development market in China has become even fiercer with the announcement of opening more photo development stores on both side.
Kodak announced yesterday that it is going to set up 120 more digital printing and development stores in big cities like Beijing, Shanghai, Guangzhou and Shenzhen. Before the end of next March, consumers who buy a certain type of Kodak cameras will get a coupon to develop 120 photos for free.
Reacting to Kodak's aggressive marketing, Fuji announced immediately its plans to open nearly 200 digital photo development stores in South-east China.
A market survey reveals that approximately 150,000 digital cameras are sold in China every year. With the increase in the consumption of digital cameras, digital photo development starts to eat up the market share of the traditional developing and printing business. It is anticipated that digital photo development will grow from 1% to 10% of the market share by the year 2004.
(Source: Xin Bao)
NFD Acquires Yoplait Franchise to Enter China Market
As an initial action to enter China market, the dairy products company, National Foods Ltd. (NFD) announced its intended acquisition of a Yoplait franchise for China, along with the current Yoplait business, from the Danish food trading group East Asiatic Company (EAC).
Yoplait's Chinese business, originally established in 1995 in Shanghai, has a production capability of 4000 tons of yogurt per year and records a sales income around US$ 10 million. National Foods said the purchase price combined with the cost of relocating and extending production facilities would total as much as $30 million. The acquisition will take effect in April 2003 after the relocation of the factory. NFD also expressed its plan to involve a local joint venture partner for the operation of the acquired business.
NFD was very pleased with the purchase. It was seen as part of the NFD's strategy to establish an international presence by acquiring regional Yoplait licenses. The company already holds Yoplait franchises in Australia, New Zealand, Singapore and Hong Kong, as well as the rights of first refusal for Indonesia and the Philippines.
(Source: AAP Company News)
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Leading Traditional Medicine Producer to Set Up Hospital
The 330-year-old Tongrentang, China's leading producer of traditional medicine, plans to establish its own hospital based on its chain stores across China.
The company, a royal drug firm that has been in existence for 330 years, has developed into a modern pharmaceutical group with a capital of more than three billion Yuan (361 million US dollars) with two listed companies. Ranking first among China's 50 largest traditional Chinese medicine producers, Tongrentang currently produces over 800 varieties of medicines, with its total sales value last year exceeding 2.5 billion Yuan.
The traditional hospital will be based on its chain stores scattered in Chinese cities. A senior engineer with Tongrentang, Mei Qun, said earlier this year that within three years the company will establish 100 chain stores throughout China to compete with pharmaceutical companies in other countries.
Tongrentang established "Tongrentang Clinic" in 1996 and thus created a unique business operation through a smart combination of its brand name, traditional medicine and well-known doctors.
(Source: Beijing Youth)
Petrol Stations to Open to Multinational Oil Giants
Sinopec has announced that it was going to establish joint ventures to run petrol stations in China with the world's three largest oil companies.
According to Sinopec Chairman Li Yizhong, joint ventures on 500 petrol stations with British Petroleum (BP) are to be set up in the first half of next year. Talks with Shell and Exxon-Mobil on similar ventures are also well on track. This would be the first time China officially allows foreign companies to enter the lucrative retail market for gasoline and diesel fuel, although some already run a handful of petrol stations by having acquired independently-owned stations.
The market pie is to be shared among these oil giants in different regions. BP will join the market in east China's Zhejiang Province, while Shell will do the same in neighboring Jiangsu Province. Exxon-Mobil will settle in east China's Fujian Province where it is about to launch a petrochemical complex with Sinopec.
Foreign companies are eager to enter China's retail market for refined oil, where the demand is growing at an annual rate of 4.5 per cent. But they will not be allowed to be fully engaged in the retail market until three years after China's entry of the World Trade Organization.
Government officials said Sinopec's joint ventures with foreign companies in the retail market for refined oil products are a "special case", considering the government's efforts to help Sinopec float on the world financial market.
(Source: Xinhua News)
Baleno Aims to Open 150 Outlets on the Mainland
Texwinca Holdings Ltd., the mother company of Baleno Group, has revised its target for new "Baleno" outlets in China upward from 100 to 150 this year, in view of the robust mainland economy.
Though Texwinca is principally engaged in the production and sales of dyed yarns and knitted fabrics, consumers in the mainland are more familiar with its "Baleno" casual wear. Continuing to focus its retail business on the mainland market, the company will open another 150 stores in its new fiscal year, which starts from October 1, 2001. Currently it owns "Baleno" outlets in 210 Chinese cities scattered in 30 provinces.
The company announced sales growth in all Chinese speaking regions, including the mainland, Taiwan, Singapore and Hong Kong. In the six months to September, the company reported a net profit of HK $ 270. 622 mil compared with HK $ 232.261 mil a year earlier, while sales grew to HK $ 2. 484 billion from HK $ 2.089 billion. In the first half, sales in the China market grew by 23% to HK $ 657.542 mil, while sales in Taiwan rose by 123% to HK $ 127.705 mil and sales in Hong Kong grew by 12 % to HK $ 143.69 mil. Sales in the newly developed Singapore market in the first half stood at HK $ 17.027 mil.
Texwinca expanded into the casual wear retailing by acquiring the brand of "Baleno" in 1996.
(Source: AFX - Asia)
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