FEET FIRST: Discarded weekly by millions of farmers in the UK, chicken feet and pig trotters could be worth millions if exported to China

Published in FOCUS magazine in March 2014.

China is one of the top ten biggest food and drink markets for the UK – and its growing fast. In the first half of 2013, exports from the UK to China grew 126 per cent, reaching £102 million. In December, British meat producers accompanied David Cameron as part of his trade visit to China in an effort to promote the sale of various meats, including
chicken feet and pig trotters – both Chinese delicacies.

Chicken feet are fried, seasoned and eaten as a snack, while Chinese eat pig trotters in a stew, braised, or on a stick. Exporting these products is already big business for the US, Brazil and Argentina; for the UK, the market potential is huge. Exporting pig trotters alone could provide UK farmers with an additional £7.5 million a year. This is dependent, however, on whether the relevant permits and regulations will allow such sales in China in the future – an on-going area of discussion.

As the world leader in breeding economical pigs, Britain is in a unique position. Their meat is considered high quality and British pigs eat less, grow faster, and reproduce more quickly than Chinese pigs. These factors make a British pig half the cost of its Chinese cousin.

Other countries have already used their low production costs to compete in the Chinese market. In 2012, China imported 231,700 tons of chicken feet, worth £214 million; in the first three quarters of 2013, 169,000 tons came from the US alone. In the United States, chicken feet are worth around two cents, but the Chinese can sell them for U$S0.42. The UK selling
chicken feet to China could add an extra 15 per cent of revenue, or £1.50, per chicken in profit, to the already £4.4 billion UK poultry industry.

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Diamond Deals

Published in FOCUS magazine in February 2014.

Today, China is the world’s second largest diamond market, tripling in size in the past five years to US$22.8 billion. Sotheby’s in Hong Kong was also recently host to the record-breaking purchase of a US$30.8 million white diamond. As with many luxury trends in China, at first the con- sumer base wants nothing less than what they perceive as ‘best in class’ items, but as the market matures, tastes become more sophisticated. Currently, Chinese are rivalling European and American preferences for mid-range diamonds. Having seen sales increased 31 per cent in the past three years, this range shows dramatic growth. Previous consumers focused on quality, specifically the diamonds’ clarity, but new consumers understand that high and low quality diamonds may not differ greatly in appearance. Last year, SI dia- monds (the rating Slightly Included, meaning with minor internal defects), which have the same level of clarity American consumers favour, accounted for 30 per cent of sales in China.

Domestically, to cash in on the less-than-premium diamond trend, a factory in China also plans to mass-produce synthetic diamonds, potentially manufacturing 480,000 carats of rough a year. Although many synthetics are for industrial purposes, they can expect to fetch 20 to 30 per cent of the price of natural diamonds. Although the factory intends to ensure buyers know the goods are lab-grown, those farther down the supply chain may not get the message.

Consumers and investors are also seeing these gems with more clarity; diamonds are not only a luxury, they are an investment. In the past, many saw gold as the best hedge against inflation, but countries often use gold to impact exchange rates, making diamond values less vulnerable to economic trends.

Many factors make diamonds a solid investment. For example, while high-end diamonds account for a small amount of produc- tion, lower quality diamonds can offer higher revenue. Additionally, experts predict diamond supply will grow at a compound annual rate of 2 per cent versus 5.1 per cent demand globally, which will put further pressure on prices. Investors attribute this to a decline in kimberlite, the host rock for diamonds, and the decrease in legendary miner and trader De Beers’ historic stock. In the past, stored gems have acted as a buffer when global diamond stocks have declined, creating more consistency in supply.

 

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Boating Bonanza

As published in FOCUS magazine in the November issue.

China’s economic slow-down saw a negative impact on most luxury industries, but yacht sales have grown hand over fist. from 2006 to 2011, the industry swelled 732 per cent. Last year, 3,000 yachts  were sold in china; by 2020, experts expect the numbers to hit 100,000. Seizing the opportunity, Chinese producers are stealing market share from more respected American, british and italian brands.

It’s a popular misconception that yachting is the province of the super rich. In Europe, 84 per cent of yachts are worth less than 50,000 euros. As Chinese income levels rise, demand for small- and medium-sized yachts will increase.

Domestic yacht production is still in its infancy, but over 75 mainland manufacturers have captured the profitable middle- and low-end market, with prices 20 to 50 per cent less than foreign brands. with lower prices, they also offer better, localized after-sale service; unlike with foreign firms, owners can maintain and repair their yachts domestically.

The mega-yacht level has a small pool of potential buyers, which means the ability to predict customisation preferences is advantageous. domestic manufacturers have a better understanding of local tastes. In addition, buyers who can afford to dock multiple vessels in different ports for different seasons.

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In China, Under Armour Looks to Brand the Workout Experience

As published on brandchannel.com on October 29, 2013.

Earlier this month, Under Armour introduced a completely different retail concept to the Chinese sporting apparel market—a market that has proven hard to crack even for the most seasoned retail veterans, including Nike and Adidas. But Under Armour’s new Shanghai retail theater experience aims to do much more than just sell clothes and sneakers.

Located in the Jing An Kerry Centre, the store features a 270-degree screen that covers 90 percent of the relatively small boutique, encapsulating store-goes in the sights, sounds and experiences of athletic training—a truly foreign concept in China and greater Asia.

In China, especially, working out is not a common activity. Seeing joggers is a rarity and oftentimes in the gym, Chinese are seen wearing jeans or leather shoes as opposed to sporting apparel. Sports participation is also low due to lack of time, the single child policy, and limited governmental support to popularize sports. But, there is still huge market potential; after the Beijing Olympic Games, there has been dramatic growth in sporting brands.

Still, the market has proven difficult, with Nike, Adidas, and others struggling to localize their retail approach to fit the unique needs of Chinese consumers, both young and old. In fact, Nike and Adidas have spent much of their time in the country with a hard focus on building a lifestyle brandaround young consumers, capitalizing on consumer trends towards creativity and self-expression. Still, Nike recently saw a three percent decline in its China sales while it experienced an increase in all other geographic locations.

So Under Armour, a brand built largely on its popular undergarments, is instead focusing on introducing the idea of athleticism to Chinese consumers, putting retail sales second. “You walk in the store going how do athletes train?” Under Armour CEO Kevin Plank explained in a press release. “In China they don’t exercise, so they’re going, why do I exercise? It’s a tutorial on why would I train.” Guests are greeted by a familiar, athletic face: Michael Phelps, who took home eight gold medals at the Beijing Olympics, serves as the store’s virtual host.

“Wherever we go around the globe, we will lead first with our story and bring the people into the best Under Armour experience possible before we ask them to try our performance apparel and footwear,” said Plank.

The company, which as experienced steady quarter-by-quarter growth over the years, saw a 26 percent increase in revenue in the third quarter ending Oct. 24, growing by over 20 percent for the sixteenth consecutive quarter, according to Seeking Alpha. Netting its highest revenues from apparel, followed by footwear and accessories, the retailer shows a lot of promise—that is if it can maintain its impressive growth rate.

In order to do so, the relatively new retailer is doubling down to turn its largely North American-based business into a global brand. Last year, of Under Armour’s $1.8 billion in revenue, less than 10 percent came from global sales, compared to Nike, where more than half of sales come from outside the US. Plank’s plan is to double overall and international revenues by 2016—a difficult goal, for sure, but one certainly in reach for the hard-nosed company. In fact, Plank says, by the end of the year, Under Armour will have more international offices than those in the US. Beyond China, the brand is especially focused on growth in Latin America, with upcoming opportunities in the 2014 World Cup and 2016 Summer Olympics in Brazil to help make in-roads.

Still, China plays a major role in Under Armour’s ability to become a global leader in sports retail. In the last two years, the brand has opened six stores on Mainland China and one in Taiwan and Hong Kong, and the fact that the company manufactures over 50 percent of its products in Asia makes it easy to distribute new designs quickly to the market as the company expands in the region in the future.

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