CHINA FRANCHISE NEWS
Vol. 3 , No. 6 - April 23, 2002
TOPICS THIS ISSUE:
- China Resources Enterprise Ltd. Expanding Retail Distribution Activities
- German Metro Opens Membership Supermarket In Tianjin
- China's Retail Sales Rising 10 Percent
- Beijing Developing Chain Store Commerce And Logistics
- Nestle Launches New Products In China Ice-cream Market
- Hertz Drives Into China
- Sanyuan Plans To Sell McDonald's Shares
China Resources Enterprise Ltd. Expanding Retail Distribution Activities
Though retail currently accounts for only a very small portion of the company's turnover, China Resources Enterprise Ltd. plans to develop its retail distribution sector into a substantial part of its activities in the next 3 to 5 years by investing HK 5 billion into the sector.
Frank Ning, chairman of China Resources, believes that the retail sector holds opportunities for rapid growth due to the retail sales prospects in China. The investment plan will likely include acquisitions of Vanguard department stores and establishing other independent stores.
According to Mr. Ning, China Resources hopes to become the largest retailer of consumer goods in China.
China Resources expects to achieve an annual retail turnover of RMB 50 billion in the next year, compared with only RMB 4 billion in 2001. It hopes to accomplish this through natural growth, acquisitions, and a general increase in revenues and pre-tax profit from the China retail market.
(Source: AFX News Limited)
German Metro Opens Membership Supermarket In Tianjin
With China' accession to the World Trade Organization (WTO), German Metro, the world's third largest retailer after Wal-Mart and Carrefour, is stepping up its business operations in China. Recently, German Metro opened a membership supermarket in the northern China port city of Tianjin and plans to set up 50 more chain stores in China within the next 3 to 5 years.
According to Jean-luc Tuzec, president of Metro's China operations, their decision to open the store is of great significance and will lead to a large increase in retail business in northern China this year.
Current statistics show that seventy percent of the world's top 50 retailers have begun operations in China and already over 300 overseas-funded retail companies are doing business with local partners, introducing some US$ 2 billion dollars into the domestic retail market.
Since China's accession to the WTO, the retail market has been gradually opened and unprecedented preferential policies have been offered to overseas investors. Fang Aiqing, an official with the State Economic and Trade Commission, said that the open door strategy has entered a new era after the issuing of the Catalogue for the Guidance of Industries for Foreign Investment in May this year.
The race for the multinational retail giants to open stores in China has intensified with the last store opening by German Metro. On the eve of China's entry into the WTO, US based Wal-Mart announced that it would open another eight stores in China while Carrefour, based in France, already has a total of 27 chain stores in China.
In addition, international retail groups are further intensifying their purchasing networks. In 2001, Wal-Mart spent US$ 10.3 billion dollars purchasing Chinese products while Carrefour spent US$ 3.5 billion. Wal-Mart moved its global procurement headquarters to the Southern China city of Shenzhen. Aware that China is the largest purchasing base in Asia, Carrefour plans to double the amount of goods purchased in China by 2003.
With more and more foreign investors joining the China retail market, domestic retail enterprises are facing greater challenges. In a recent move countering the powerful international competition, 13 domestic enterprises merged to establish one large commercial chain store group.
(Source: Xinhua Economic News Service)
China's Retail Sales Rising 10 Percent
Huang Hai, trade department director of the State Economic and Trade Commission, announced that China's retail sales will grow by 9.8 percent this year to reach a total of RMB 4.13 trillion (US$ 499 billion) by year end, the Shenzhen Securities Times reported.
Urban retail sales are estimated to grow by 10.8 percent from the previous year to RMB 2.61 trillion, while rural retail sales will grow by 7.8 percent to RMB 1.52 trillion. Huang also said that the consumer price index is expected to grow 0.5 percent this year while the retail price index will drop 1.5 percent and the production material price index will fall 1.5 percent.
(Source: Agence France Press & AFX News Limited)
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Beijing Developing Chain Store Commerce And Logistics
The Beijing Municipal Commission of Commerce recently stated in a news release that the capital city intends to develop chain store commerce and logistics in the next eight years.
It is expected that, by the year 2010, an efficient online logistics network will be established in Beijing, consisting of 17 different logistics centers. The proposed network will not only cover the entire Beijing area, but will also greatly impact the Baohai Economic Rim. According to commission sources, Beijing will begin to build a terminal base for logistics in the south of the city and accelerate the construction of another logistics port at Shibalidian in the southeast in an attempt to support commercial development plans.
Statistics show that 1.25 million people in Beijing work in the commercial sector, accounting for 20 percent of the city's work force. In 2001, the commercial sector earned more than RMB 160 billion (US$ 19.28 billion) in sales and RMB 10 billion (US$ 1.21 billion) in pre-tax profits last year.
(Source: BBC Worldwide Monitoring)
Nestle Launches New Products In China Ice-cream Market
According to a plan unveiled by the Swiss-based food manufacturer last week, 90 percent of Nestle's ice-cream products on the China market will be revamped and the Tianjin ice-cream plant will launch 28 new products, specially designed to suit Chinese consumers' tastes.
Ken Donaldson, director of the ice-cream division of Nestle's China operations, said "I believe Nestle will lead the Chinese ice-cream market in the near future." He further expressed confidence that the Chinese ice-cream market will grow steadily alongside the nation's rapid economic growth."
Besides the Tianjin ice-cream plant, Nestle has ice-cream manufacturing bases in Guangzhou, Shanghai and Hong Kong. Nestle's turnover for ice-cream alone reached 3.8 billion Swiss francs (US$ 2.2 billion) last year, 9 percent of the total world market. However, Nestle still faces tough competition from both foreign and local rivals in the Chinese ice-cream market.
Industry figures show that the Chinese ice-cream market amounts to roughly 1 billion liters per year, with a per capita ice-cream consumption less than one liter per year, compared with 6 to 7 liters in Europe and 12 liters in the United States. Currently, there are more than 4000 ice-cream producers in China with two-thirds of the Chinese ice-cream market controlled by small local ice-cream producers. Among them, the Inner Mongolia-based Yili Group is one of the largest domestic ice-cream companies in China, distributing more than 2,000 iceboxes to retailers throughout China this year.
Another large ice-cream producer, Unilever's Walls, which controls 17 percent of the world ice-cream market, has also released a plan to develop and promote new ice-cream products in China this year with investments involving RMB 150 million (US$ 18.1 million), up from RMB 100 million (US $12 million) last year. According to Wall's China operations, more than 60 ice-cream products will be sold in China, with the majority of them new varieties.
Analysts expect that soon the powerful competition from large companies will force many smaller local ice-cream producers to either go bankrupt or merge with larger companies.
(Source: China Daily)
Hertz Drives Into China
After signing a licensing agreement with China National Automobile Anhua, Hertz will be the first large-scale international car rental company to begin operations in China, with offices in Beijing, Shanghai and Guangzhou.
Anhua will be the licensee of Hertz in China. Customers without a Chinese national driver's license will be able to rent or lease chauffeur-driven cars with 48 hours of advance notice. The company will have offices in the center of each of the three cities and one at Beijing airport.
(Source: Financial Times)
Sanyuan Plans To Sell McDonald's Shares
Beijing Sanyuan Foods Co is planning to sell 150 million Class-A RMB-denominated McDonald's shares to domestic investors in order to finance further business expansion.
There are more than 410 McDonald's outlets in China. Sanyuan owns 50 percent of almost a third of the McDonald's outlets in China, with 81 of them in Beijing and 55 in the southern province of Guangdong. Analysts estimate that Sanyuan will be able to collect up to RMB 400 million (US$ 48 million) from the offering.
Sanyuan also has 9 dairy production plants. In Beijing, over 70 percent of the packaged fresh milk is supplied by Sanyuan. In the first half of the year 2001 alone, Sanyuan posted profits of HK$32 million.
Beijing Enterprises Holding Ltd., a Hong Kong listed company and an investing arm of the Beijing government, is the parent company of Sanyuan. Beijing Enterprises' brewing and telecommunications equipment units are now facing lower profit margins. According to Fan Cheuk, an analyst at ABN Amro Asia Ltd., who has a "reduce" rating on the company stock, "Sanyuan has been Beijing Enterprises' growth unit. The spin off won't trigger a re-rating on the company's stock."
Beijing Enterprises applied to list Sanyuan shares on the Shanghai Stock Exchange and is now offering to sell Sanyuan shares. According to China securities regulations, domestic share sales are limited to no more than 20 times earnings.
(Source: North Asia News)
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