Getting Your Consumer Product Into China.
Silk Road International has an excellent post on importing consumer products into China. The post is entitled, "Q & A about Importing into China," and it starts out discussing why importing Western product into China is so rife with opportunity. To grossly summarize, more and more Chinese will pay for the better quality and higher prestige Western goods offer.
The post then provides a very helpful discussion on the difficulties of importing product into China and then doles out the following tips:
• Read Xiao Lu’s book [Elite China] —no matter what you’re importing. [Bottom Line: Know the market]
• Find a trust-worthy partner. Take the time (months) to do DD on this one. This one person, more than anything else you do, could sink/steal/make your business.
• Pick one region or one domestic distributor to start out with. China’s big, don’t get greedy.
• Build some serious guanxi with the port and regional officials that you’re going to be using.
• Plan on staying in the market for at leat two CNY holidays to see if you can really make it—remember, 40% of all annual luxury sales happen over this vacation.
If what I am seeing among my law firm's clients is a trend, the trend is definitely to move product into China, particularly food products. And Silk Road International is definitely right about how it is not easy. I am working right now with a number of American food companies who are in the process of starting to export US food products into China and they are all going about it in the following, pretty much similar way:
1. They spent nearly a year figuring out where to "invade" China and who to use for that invasion.
2. They are starting out in one China region, and they hooked up with distributors in the respective regions who knows and understands their particular product and knows and understands the particular region. Most seem to start in either Guangdong Province or in the Shanghai area.
3. If their products are successful in China, they plan to produce their products in China, at least eventually.
4. They were very careful to register their trademarks in China, essentially before they went there. For more on why this is important, check out, "China Trademarks -- Do You Feel Lucky? Do You?"
5. They worked out and signed comprehensive distribution contracts (in Chinese) with their Chinese distributors. With help from their Chinese distributors, they have boned up on China's food and distribution laws.
I mention food companies because I see that as even tougher than non-food consumer products.
What do you think? Of what else should those bringing products into China be aware? I would particularly love to hear from those of you who with direct experience with bringing consumer products into China.
Comments
There are two opportunities for law firms in China these days. As you mention Dan, the US, EU etc. firms who are fleeing their declining local markets for greener pastures in the burgeoning China market will pay handsomely in order to get placement into the China market.
The second will come after purchase and use occurs. Opportunity will flood litigation firms from products that are not designed for the Chinese market but are being forced in because of declining economic patterns across the globe.
From the bacteria in beef to baby diapers that cause rashes and appliances that are not compatible with grid and access parameters. Products designed for consumers in the west have entirely different constraints for the market they are targeting.
Posted by: Bourgogne | February 22, 2009 7:13 PM
Regarding Bourgogne's comment, I saw recently on Chinese TV (not sure which channel, however it was broadcast into Shenzhen) about a Chinese man suing Coca-Cola for not labeling the caffeine content on it's products sold in China. The plaintiff asserted that the caffeine content is listed for Western or at least U.S. markets but not China. This fellow sounds like an up and coming "predator" lawyer. Long live the Rule of Law!
Posted by: Brad | February 22, 2009 10:09 PM
• Build some serious guanxi with the port and regional officials that you’re going to be using.
The word "guanxi" makes me cringe every time I see it or hear it.
A better approach would be to make sure your product is legal, make sure your operations are conducted legally, make your case as to why your product is good for the Chinese consumer, and be able to show precisely how it would be profitable for Chinese distributors and retailers. Also make a comprehensive assessment of how it will impact local Chinese competitors in your market segment, and keep an watchful eye out for those most likely to copy your product. That means visiting stores and looking at shelves. Don't be surprised when you see your product has disappeared from store shelves (or at least moved to a back corner) and replaced by a knockoff brand. Have a plan. Don't leave everything up to your distributors.
Posted by: robert | February 22, 2009 10:19 PM
Food exporters need to review their product's formula to ensure that all food additives and ingredients meet Chinese regulations. They should also check to ensure that the Chinese-language labeling and any nutritional or other claims (e.g. high fiber) meet relevant regulations.
China is currently in the middle-end stage of a four month on the use of non-food substances (e.g. melamine) and misuse of food additives, particularly in foreign foods. What effect this announced "crackdown" is actually having on the ground is another issue.
Other regulatory restrictions apply to cosmetics, food packaging materials, medicines (OTC or prescription), pesticides, chemicals, etc.
Posted by: JT | February 25, 2009 12:35 AM