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Ubiquitous China. The Pentwater/Ludington/Muskegon Edition.

Posted in China Business

Many years ago, a friend of mine came to me with a plan to start a blog on how China impacts American’s lives, both knowingly and, more often, unknowingly.  His blog would discuss China’s influence on American politics, economics, culture, food, media, etc.  I liked the idea and suggested he name his blog “Ubiquitous China.”  He loved the name but never started the blog.  I thought of that blog today upon reflecting on my recently completed summer vacation in Pentwater, Michigan.

If I were a good writer, now would be the time wax poetic about the Lake Michigan lakeshore.  But since I am not, I will merely “steal” a few paragraphs on Pentwater from a lawyer who covered this same turf (literally) — Kevin Lacroix, in his D&O Diary Post, Summer Time:

One of the many gifts my wife brought to our marriage was a generations-long family tradition of spending summers in Pentwater, Michigan. If I were, like a true Michigander, to hold up the back of my left hand as a map of Michigan’s mitten-shaped lower peninsula, I would point to the outside knuckle at the base of my little finger, to show where Pentwater is located, on the eastern side of Lake Michigan, between Muskegon and Ludington.

Pentwater was established in the years after the Civil War as a lumbering and furniture making center. There is still some manufacturing in town, but now the lovingly maintained Victorian homes from that earlier time are mostly occupied by retirees. The village’s main street runs parallel to the Lake Michigan shoreline, and perpendicular to Pentwater Lake, which connects to the big lake through a channel.

All true for me as well.

Pentwater has all of 857 people.  Ludington, around 20 miles North, has a few families over 8,000 people and Muskegon, about 45 miles South, has almost 40,000 people.  The big things to do in Pentwater are to hike the state and national parks, ride the dunes, swim in Lake Michigan, race go-carts, play miniature golf, eat great corn, and eat great cherries, all of which we do every time we are there. And if you are there at the right time you can go to the town’s “big” Homecoming parade and then watch the fireworks from the beach.

Which is my segue to China.

We were there at the “right time” this year and the fireworks were shockingly good.  How can a town of 857 people afford such great fireworks?  China.  Without knowing a thing about the price of fireworks, I know enough to know (based on a conversation a few years ago with a fireworks guy on an airplane) that fireworks from China are (or at least were) continually getting better and cheaper.  So obviously China reaches even into places like Pentwater.

China also reaches to Ludington, where we go to get groceries at either Meijer’s or Wal-Mart, either of which probably qualify as the largest store to which I have ever been, and both of which are, of course, stocked with clothing, electronics, food, and pretty much everything else from China.

But it is Muskegon that spurred me to write this post.  Good “ole” Muskegon.

Cause one day, I ventured far from Pentwater to meet an old China-based friend of mine, Kurt Braybrook.  Kurt has been living in Shanghai for around 20 years, providing business consultancy services to mostly American companies trying to figure out China.  Kurt grew up in Grand Rapids, Michigan — the truly big city in the area with nearly 200,000 people.  As a side-note, when I was growing up in Kalamazoo, Michigan, which is around 45 miles south of Grand Rapids, we would refer to it as “The Big GR,” probably 95% sarcastically and 5% reverentially.

Kurt left Grand Rapids for China right after college and he has been there ever since, which standing alone, makes him an expert on China changes during that time.  When Kurt and I realized that there would be only around 100 miles separating us this summer, we determined that we had to meet up and we chose Muskegon for that.  After extensive consultations with my foodie younger brother, I picked lunch at Mia & Grace.

Before I get to my conversation with Kurt, I want to tell you a little about Mia & Grace and the conversation I had with the server when I ordered.  Mia & Grace calls itself a “farm to table restaurant” and it is.  Most importantly, the food there is absolutely excellent.  But when I walked up to order, the very polite and ernest young server asked me if I had been there before, and when I told her that I had not, she went into the following spiel:

Well, then you should know that we are a farm to table restaurant and what that means is that everything is local and slow cooked so please be prepared to wait.

Impressed by her earnestness, and being the nice guy that I am, I bit my tongue and resisted my usual comeback to this sort of thing, which is usually something like the following:

I’m going to be ordering a Diet Coke and I just want to make sure that everything in that is local. It is right?  And what about the salt?  I didn’t realize that was being mined locally these days.  Oh, and are you saying that none of your spices come from outside the area either?

But instead, I simply ordered a baked pretzel, a shrimp po’ boy (there is no way the shrimp could have been local) a chocolate chip cookie (no way the cocoa that went into the chocolate could have been local) and my proverbial Diet Coke, or as I say in China.  And again, I want to emphasize that the food was great.

But here’s the thing. How much of today’s emphasis on local foods is a reaction to China?  I think a lot and I say that because the rise in that emphasis corresponds pretty closely with the rise in food imports from China.  What do you-all think about this?  Has the influx in Chinese products (not just food) coming to America influenced the rise in localism and even the increasing desire among young people to be farmers?  Ludington and Muskegon and Grand Rapids all have super high quality and well known local breweries. My home town of Kalamazoo produces Bell’s Beer, considered by many to be the best in the US. Is the turn to craft breweries and craft distilleries in the US also a reaction to China?  At least in part?  I never took a single sociology class, so I’m qualified to say that I think it is.

Kurt and I had a nice lunch and then we took a long walk around Muskegon, talking about China nearly the whole time.  Though our conversation ran the gamut of China topics, we probably spent the most time on the following:

1.  The changeover in China opportunities from manufacturing to sales.  Kurt talked of how his client mix has been gradually shifting from manufacturers to product sellers and how his training and background in advertising and public relations were helping him with this.  I talked of how my law firm had been seeing the same thing for years.  We talked extensively on how American companies — food companies in particular — were not doing enough to sell to the Chinese market.   A few days later, Kurt emailed me to say that he had snared a new China client: a large, Michigan fruit company looking to sell its fruit products to China. We also talked of how difficult it is for foreigners seeking to start their own retail enterprises in China and of how licensing the product or selling through a distributor is oftentimes a better way to go.  We then talked about how many consultants and lawyers do not like giving this advice becuase the money they make from a distribution or licensing relationship will be less than what can be made by helping to set up a WFOE in China.  We also discussed how American companies need to be wary of getting won over by someone in China seeking to sell their product nationwide and of how that seldom makes sense. Kurt told me of a large food company for whom he worked a few years ago that insisted on going with one distributor for all of China and signed a long-term agreement to that effect. That food company’s sales in the few China cities with which their distributor has familiarity/contacts/expertise, are going fine, but they are languishing everywhere else.

2.  It is getting tougher on foreign businesses seeking to do business in China.  China’s rules and regulations are getting more serious and, more importantly, enforcement against foreign companies has greatly increased.  This, along with other areas of rising costs, means the cost of doing business in China has gone way up for most foreign companies.   Therefore, doing business with China should, if possible, be favored over doing business in China.  For more on this, check out China Is Getting Tougher On Foreign Business. Stay Flexible And It Will Be Just Fine.… and Doing Business In China Just Got Even Tougher.

For more on doing business with China by way of a distribution contract, check out the following:

3.  We also talked of how Chinese manufacturing has improved and become more professional and of how more and more Chinese manufacturers are starting to “get it.”  Those Chinese manufacturers that realize product quality and customer relationships matter are gaining business at the expense of those that continue to churn out junk.  I told him of how five or six years ago, about 30% of Chinese manufacturers would refuse to sign OEM manufacturing contracts with our clients, but that we had not received any such rejection in about two years. We agreed that Chinese manufacturers now realize that written contracts benefit both parties.  For more on this, check out The New Role Of Written Contracts For Product Purchases In China and The New Era In China Product Supplier Relationships Requires New Contracts.

4.  We discussed how Chinese investment in the United States is slowly increasing, and of how as it becomes clearer that China’s formerly breakneck economic growth is not going to be returning, we both see that investment increasing even more.  Kurt talked of how so many Chinese people he knows have bought or are looking to buy real estate in the United States and of how there is considerable interest in Michigan (even Detroit) properties.  He said that a large downtown office building in Grand Rapids is said to be owned by Chinese investors.

So what do you-all think?  How has China already influenced the US and what influences do you see going forward?

 

  • Joel Silverstein

    I do not think that finding capable distributors is all that straight forward either. Many time for retail businesses, it takes a few years to figure out the right economic model and most Chinese licensees/franchisees are too short term oriented to be that patient. Direct stores may be the only way to start the market entry process effectively.