Contributing Member of the Consumer Goods & Services Councils

GLG News by this Author

Another frightening article about "mysterious" China...Take this one with a grain of salt

March 28, 2007

Analysis of:China's state-owned enterprises: Board governance and the Communist Party | www.mckinseyquarterly.com

McKinsey, to my great disappointment, recently put out this article on the "befuddling" and "invisible" power of the Communist Party branch committees (which are normally resident in large businesses) in China.

My response: It is nowhere near as complex as they make it seem, plus I have never seen any party committee within a business in China try to take anything more than token power. If you play it right, the existence of the party committees within your China business can be a big plus.

Buying Small to be Big in China

March 27, 2007

Analysis of:Buying small is beautiful for private equity in China | news.moneycentral.msn.com

 

• Carlyle has only themselves to blame for the troubles they have experienced with the widely-reported Xugong Construction Machinery company acquisition.
• There are a large number of PE firms eagerly eyeing China, and therein lies the source of one big problem: Too many buyers using the exact same strategy and going after the exact same few companies.
• Buying small is a better strategy which delivers two significant benefits.

Da Bao acquisition soap opera continues in China (Avon, J&J, now Unilever!)

March 22, 2007

Analysis of:Analyst says Dabao bid would make sense for Avon | www.msnbc.msn.com

Local media reports and Reuters are saying that Da Bao has placed their assets on a “equity exchange” sales board in Beijing and is looking for bids from others as well.

Dabao: Yes, it is a good idea for them.

Avon: Avon is already making a big mess in China, and I don’t think this will turn around anytime soon.

Unilever: A long story worthy of a separate post. Suffice it to say, Unilever is also underperforming in China due to their own mistakes.

J&J: Ahhhhh, just right!

As for the asking price: Not sure about what others think, but Dabao’s asking price of RMB 2.3 billion works out to 55 times annual profits, which in my book is very, very, very expensive.

Walmart - Trustmart China Acquisition Deal…Good Idea?

March 1, 2007

Analysis of:Wal-Mart takes another China step | www.rte.ie

 

Is this acquisition really such a good idea in light of the fact that Walmart is still having trouble with it’s overall strategy in China?

The style of Trustmart is very different from Walmart, so this will be a tough integration process.

Despite the announcements that claim the stores will remain separate, it seems more likely that they will be merged in terms of operations.

The new incoming CEO of Walmart China has acquisition experience, so that is good news, but can he fix the overall operations and marketing strategy of Walmart China?

China Acquisitions Require a Degree in Rocket Science?

February 26, 2007

Analysis of:U.S. leads pack in acquiring Chinese companies | www.reliableplant.com

 

• The United Kingdom and Singapore are leading the way in establishing a foothold in China’s rapidly expanding economy.
• With all of the frenzy about Internet and high tech companies, it is nice to see that many investors are wisely choosing to invest in good ol’ industrials and consumer staples…not sexy investments, but strong and stable performers.
• Of course, financials are pulling in most of the investment capital by value. I predict that these investors will face a very bumpy ride over the next few years as the many “dead bodies” in these Chinese banks float to the surface.
• “Complex regulatory regime and its multifaceted tax system”??? Come on…it’s not that difficult! It requires some knowledge and experience and a willingness to do things in a slightly different way, but it’s not rocket science!

Beiersdorf / Nivea Takes Promising Step Towards China Acquisition

February 26, 2007

Analysis of:Germany's Beiersdorf co-op with C-Bons in China's personal care market | en.ce.cn

 

• Nivea brand owner, Beiersdorf, announced the signing of a letter of intent with C-Bons.
• The plan appears to be to merge CBONS on-the-ground implementation strengths in China with Nivea’s branding skills.
• China-ROI predicts success with this combination, but a lot will hinge on the relationship that Nivea establishes with the “big boss” in C-Bons (Wu Yongnan, President of C-Bons).

The Smart Way to Milk the China Cow

November 14, 2006

Analysis of:China Dairy Sector Ripe for M&A's | www.21food.com

• The China dairy market is really flying now: 20% annual growth.
• Local companies currently have the lead due to their stronger implementation skills in this tricky market, both in production and distribution.
• But now they are reaching a plateau in terms of management skills, finances, and branding. This makes it an ideal time for western investors to enter the market to snap up some of the small to medium-sized local players.

Lessons for Walmart China?

October 19, 2006

Analysis of:Lessons from a global retailer: An interview with the president of Carrefour China | www.mckinseyquarterly.com

Tremendous success of Carrefour in Taiwan, followed by equally tremendous success of Carrefour in China proves it is not a matter of blind luck.

Really knowing and absorbing Chinese ways of thinking, and most importantly, modifying their standard approach are the two secrets to Carrefour's success in Taiwan and China.

Walmart China and Walmart HQ execs should carefully read this article line by line.

Give Walmart Some Credit For Trying

October 17, 2006

Analysis of:Wal-Mart Makes Big Buy in China | www.thestreet.com

You've got to give Walmart some credit for making such a big move in China. Clearly, their current strategy was not working well. (see my other posts on Walmart China).

But I have to wonder whether they will try to "Walmartize" Trustmart, or whether they will more wisely allow it to "Trustmartize" their China operations?

The price that Walmart paid sounds very high, but without any further financials, it is hard to say for sure.

Smart Acquisition Could Allow Office Depot to Profit from Staples' Mistakes in China

October 17, 2006

Analysis of:Office Depot Announces Acquisition of Majority Stake in Leading Office Products Supplier in China | www.mediarelations.officedepot.com

Staples previously also invested in a local company in China (OA365) and announced big plans to expand.

But then they "pulled a Walmart", and stubbornly refused to flex to match the local market ways.

Now they are struggling to find direction and gradually cutting back on their misdirected and heavy advertising campaign.

If Office Depot allows the locally acquired company to continue to run the business in a localized way (albeit with corporate oversight and governance), this could be a chance for Office Depot to capitalize on Staples' mistake in China.

Some doubts about Best Buy in China

October 3, 2006

Analysis of:Best Buy open its first retail outlet in China | www.thestreet.com

In order to succeed in China, Best Buy would be wise to avoid going toe to toe with the local players such as Gome.

To succeed in China, they must differentiate themselves from Gome, and focus on some area of the business in which they have a competitive advantage.

P&G PR Fiasco in China Leads to Exit of SK-II from the market

September 25, 2006

Analysis of:Procter & Gamble suspends sales of SK-II products in China, refunds continue | www.forbes.com

P&G has no good excuse for not being ready to handle this latest PR challenge.

Now they have a disaster on their hands and the brand has hastily exited from the market approximately 7 days after the story first broke.

This is a perfect example case of how NOT to handle PR in China.

A new type of investor has entered the China playing field

August 11, 2006

Analysis of:Goldman's Shuanghui deal hits snag | news.xinhuanet.com

New pure-financial players are now entering the China acquisition market. Given the complexities and peculiarities of the China business environment, it is not surprising that these deals and dealmakers are encountering a number of difficulties in the process of their first few experiences.

Yet these deals can be successful with the right amount of preliminary work and pre-discussion with the government. The biggest benefits from these deals will be reaped by investors that have a "business improvement strategy" for the acquired business.

New Chinese government regulations on acquisitions have recently been released.

 

Krispy Kreme Still Not In "Real China"

August 11, 2006

Analysis of:Krispy Kreme to Open 1st Shop in China | www.forbes.com

Testing a new concept in Hong Kong to determine if it will be viable in mainland China is complete nonsense.

Krispy Kreme will likely succeed in Hong Kong and fail in China.

In China, good coffee is not the point; Good marketing will be successful

August 11, 2006

Analysis of:Costa coffee to open 300 bars in China | www.guardian.co.uk

Starbucks' success in China is based on good marketing, not good coffee.

For Costa Coffee to be successful in China, they will need to execute their own unique cultural/lifestyle positioning as well as have excellent execution in operations.

This is a difficult business challenge in China.

Walmart China still is an open question

August 8, 2006

Analysis of:Wal-Mart Decides to Pull Out of Germany | www.nytimes.com

Wal-Mart started out with some problems in China but appears to be on an improved path now. But it is still an open question whether Wal-Mart's one-size-fits-all promotion strategy will be viable in promotion-crazy China.

Questions still remain about Wal-Mart's ability to adapt to different cultures.

Burger King Status and Outlook in China

August 7, 2006

Analysis of:Burger King Looks Overseas for Growth | www.easybourse.com

Burger King is just starting out in China after a fairly extensive effort to understand the market and modify recipes.

Initial steps look interesting, but the classic weaknesses of Burger King from the United States seem to be making their appearance in China as well.

Plans to jump into franchising in China may be overly optimistic.

Gap still asleep in China; Is it too late now?

August 7, 2006

Analysis of:First Gap Franchises Set for Far East | www.wwd.com

While Gap was focusing on the US market, their Chinese suppliers opened and developed successful branded stores in China under their own brand.

Is it too late for Gap to enter?

Avon's Troubles in China Will Continue Despite the Rosy Announcements

August 7, 2006

Analysis of:Revamping Plan Drives Down Avon Profit | www.nytimes.com

Avon has a strategic problem in China which was created, perhaps surprisingly to outsiders, by their overzealousness to follow instructions issued by the government five years ago.

Avon's recent positive-sounding announcements about being awarded the first new direct-selling license in China are misleading. More likely, this is just another case of Avon following the Chinese government's wishes to the detriment of their sales and bottom-line.

Business success in China requires a specialized set of skills that some companies seem to be able to muster, and some do not.

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