Month: December 2011

Nestle SA Acquires Stake in Yinlu

Nestle SA just finished acquiring a 60% stake in China’s Yinlu Foods Group, the company recently said in a statement.  After the acquisition, Chairman of Yinlu, Chen Qingyuan, will stay in charge of the join company in Xiamen.

The deal is still waiting for final approval from local governments that include governments in Fujian, Shandong and Hubei, but it has already received the approval from the Chinese Minister of Commerce.

The companies have announced that they plan to invest 2.4 million yuan ($395 million) in Yinlu which will aid in the production of new facilities and the expansion of existing ones.

Nestle SA’s goal with this investment is to double the amount of its investment in the Chinese coffee market within the next three years.  Yinlu had a 52.5% increase in its revenue in 2010, reported a revenue of 5.4 billion yuan. 

Nestle SA is also reportedly planning to purchase a 60% stake in the Chines candy maker Hsu Fu Chi International Ltd.

Porsche Expands in Chinese Market

As reported by Adam Roseman of ARC China, China will soon overtake the United States as the location with the largest Porsche AG market. As Helmut Broeker, CEO of Porsche (China) Motors Ltd. said, “China has been our second-biggest market, with more than half of sales coming from our SUV model, the Cayenne. We expect it to beat the US to be our No 1 market in 2014, with significant sales growth from the coming, smaller SUV model, the Cajun.”

The SUV has surged in popularity in China in the past four years with the fastest sales growth of any class of car. IN 2010, 1.33 million SUVs were sold, according to the China Association of Automobile Manufacturers. This represents a sales growth that is almost four times that of sedans.

The Sinotrust International Information & Consulting (Beijing) Co Ltd. has reported that SUVs show the largest potential for growth in the years ahead.

Porsche established itself in the Chinese market 10 years ago, and they expect to have “100 dealers by the end of 2014” according to Broeker. As Broeker said,

“The strong growth brings a big challenge: We need to provide enough, and high-quality, service to the customers. So the major task for us in the next year will be training our dealers.”

A Porsche Driving Experience Center will soon be opening in China, as well, as only the third country to have such a center after Germany and the UK.

China’s Internet Retail Market Taking Off

According to the Boston Consulting Group Inc., China’s internet retail market may soon be overtaking the one in the U.S. as the world’s largest. In 2010, e-commerce sales in China were at 476 billion yuan, as compared to 128 billion yuan in 2008.

The report further estimated that 44% of city dwellers in China will shop on the Internet in 2015, while 23% did this past year.

As the consulting firm said, “Internet access has far outpaced the reach of the top physical retailers. China’s massive geography hampers the effectiveness of physical retailing.” China’s online retailers are also doing so well because China has incredibly low shipping costs ($1 on average for a 1-kilo parcel as compared to $6 in the U.S.). In addition, income is rising throughout China, helping retail sales to increase.