Presented by: SMH International

China Initiative 2012China Initiative 2012SUSTA State Fall MeetingSUSTA State Fall Meeting

December 1, 2011 @ OklahomaDecember 1, 2011 @ Oklahoma

PART IPART I China Market OverviewChina Market Overview

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%

China Market Overview - Trading

China Import & Export Value (Jan. 08 China Import & Export Value (Jan. 08 –– Sept. 11) Sept. 11)(USD Billion)(USD Billion)

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 Market Overview - Trading

U.S. continued to be the 2nd largest trading partner of China.

Stable share by trading value Vibrant performance from

emerging suppliersAustralia 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

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.

China Market Overview – U.S. Trading

TOP 10 U.S. Consumer Oriented Product Category

USD Million Change2009 2010

Dairy Products 136.9 236.7 73%

Processed Fruit & Vegetables 130.5 166.3 27%

Tree Nuts 142.7 144.7 1%

Red Meats, FR/CH/FR 41.4 137.4 232%

Poultry Meat 400.9 102.2 -74%

Fresh Fruit 55.4 80 45%

Red Meats, Prep/Pres 25.4 58.2 129%

Snack Foods 23.9 35.3 48%

Wine and Beer 25 35 40%

Fruit & Vegetable Juices 16.7 15.6 -6%

PART IIPART II Export to ChinaExport to China

Export to China – Major Ports

Coast Line: 32,000 km World Rank: 4th Regional Key Ports:

Northern: Tianjin Eastern: Shanghai & NingboSouthern: Guangzhou & YantianHong Kong

Regional ports also have their own regulations.

Export to China – Import Procedure

Export to China – Documents

Certificate of Origin

Health Certificate

Necessary documents for importation according to the requirement from Chinese laws and regulations

Commercial Invoice

Packing List Bill of Lading

Chinese Label

Document for

Clearance

Export to China – Label

• 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)

A Chinese label is compulsory for the Customs Clearance in China.

Label needs to be registered with CIQ

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

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:

Health certificate issued by the state department of agriculture, better from USDA

Ordinary Processed Food

Dairy and with Dairy Ingredient

Seafood

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.

Plant and Plant-originated

Phytosanitary certificate from USDA is required for any unprocessed plant or plant-originated products.

Export to China – Sensitive Item

OMineral Water

PoultryPork

U.S. Beef

Wine

No “Lean Meat Powder” like Ractopamine or Clenbuterol

A Certificate of Physical & Chemical Character

Anti-dumping charge by Chinese government

Banned

Invoice from Winery instead of Exporter etc.

Original Price

Dutiable Price

Mark-up

Transactional Price by the Contact

Plus: Cost of Freight, Packaging, Insurance etc.

Taxation

VAT: 13%/17%Tariff: M.F.N.

A 10% for Miscellaneous Cost during Procedure

Margin for DistributionImporter: 10% - 15%Sub-distributor: 20% - 30%Retailer: 30% - 35%

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.

Export to China – City of Focus

City GDP Growth (USD billion)1.Shanghai 256.4 9.9%2.Beijing 209.4 10.2%3.Guangzhou 161.2 11.0%4.Shenzhen 144.5 12.0%5.Suzhou 139.3 13.0%6.Tianjin 138.4 17.4%7.Chongqing 120 17.1%8.Hangzhou 90.4 12.0%9.Wuxi 87.5 13.1%10.Qingdao 86.1 16.0%11.Foshan 85.7 14.0%12.Wuhan 83.8 14.7%13.Chengdu 83.6 16.0%14.Dalian 78.3 15.2%15.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

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)

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

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.

Export to China – Foodservice Channel

More star-rated hotels and top restaurants Four & five-star hotels: 7.7% (2009) ===> 18.7% (2010)

Structure Optimization

Purchasing Strategy

Product Preferences

No import license, limited direct sourcing from overseas Require daily delivery of small quantities from local suppliers

International players: 30% - 50% imported items Imported category: meat, seafood, dairy, beverage and etc.

Export to China – Consumer Behavior

Safety

Price

Packaging

Novelty

Health

Awareness rises towards the healthy benefits of food items

58.4% of the consumers prefer novel items.

Food safety issue gains the public attention

Price-sensitive, but largely reduced.

Delicate, attractive

Consumer Behavior

PART IIIPART III Market Plan 2012Market Plan 2012

Market Plan 2012 – Trade Show

May 9 – 11, 2012 @ Shanghai

November 14 – 16, 2012@ Shanghai

Part BPart BSeafood ShowsSeafood Shows

November 6 – 8, 2012@ Dalian

September 11 – 13, 2012@ Hong Kong

Part A Part A Food and Beverage ShowsFood and Beverage Shows

China TradeshowsChina Tradeshows

Market Plan 2012 – Trade Mission

Venue: Hong Kong, Shenzhen & A Second-tier City Timeline: June, 2012

Market Plan 2012 – Retail Promotion

5-10 Stores Decoration & Demo

OpeningCeremony

Media PR

Authentic Southern U.S. Flavor

October 2011Chengdu/Ningbo

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

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

January – December, 2012

China/HK

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