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To be or not to be in China, that is no longer the question
Economy

To be or not to be in China, that is no longer the question

Wednesday, 06 July 2011
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Christophe Roulet
Editor-in-chief, HH Journal

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3 min read

Much can be learned from Nestlé’s experience in China. According to Frits van Dijk, Executive Vice President at the multinational, any company still saying it needs to get into the country has already left it too late.

“We entered China fairly early, opening our first manufacturing operation in 1992,” says Frits van Dijk, Nestlé’s Executive Vice President and Zone Director for Asia, Oceania, Africa and Middle East, in Consumer Currents, published by KPMG. “Today, we have 23 factories. We have been growing by double digits for many years. We saw some slowdown during the financial crisis, particularly in the southern areas, but it was very limited. I was surprised by how quickly it came back. We are there for the long term, and in fact have seen an acceleration in the market over the past couple of years. […] China’s growth won’t be a straight line, but it will continue.”

Soon n° 2

Asked if he could see a time when China would be Nestlé’s second-biggest market after the US, Frits van Dijk gave a straight answer: “Yes. I don’t pretend to have a crystal ball, but if I look at the kind of growth we are enjoying it could be five to ten years. It’s not a question of if, it’s when, through a combination of local and external growth. We are always on the lookout for acquisitions, but we will also invest in innovation and renovation in China.”

If a company today is still saying it needs to get into China, it's already too late.
Frits van Dijk
"Think local"

He continued: “If a company today is still saying it needs to get into China, it’s already too late. That train has left. It makes me laugh when I hear companies discovering there is an opportunity in emerging countries. Many Japanese companies are finally getting out of their home territory because there is no more growth there. They’re going to China or Europe and they’re struggling to adapt. Nestlé’s biggest success factor is our ability to think local.”

China, now the second-biggest market for luxury goods, looks set to reduce import duty as a way to encourage domestic consumption, reports the national press. Until now, Beijing has levied import duty of 50% on cosmetics and 30% on high-end watches, prompting Chinese consumers to make their purchases in Hong Kong, London or Paris. The Chinese Ministry of Finance is expected to announce a new package this autumn to boost end-of-year sales. This strategy fits with the country’s five-year plan, announced in spring, which makes domestic consumption a government priority to make the world’s second-biggest economy less dependent on exports.

Under these new measures, import tariffs on cosmetics, powdered milk, watches, clothes, luggage and shoes are expected to be cut and possibly quashed altogether. A Ministry of Trade survey has shown that 20 brands of watches, luggage, clothes, alcohol and consumer electronics currently cost more in China than in Hong Kong (+45 %), the US (+51%) and France (+72%).

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