LaV LaVer erne ne E. B E. Braban bant
Hong Kong Shanghai
Seoul Tokyo
ASIAN MARKETS AND WHY THEIR IMPORTANT TO THE U. S. PECAN INDUST RY ASIA COMPRISES MORE THAN 4.2 BILLION PEOPLE- 60% OF THE WORLD’S POPULATION FASTEST GROWING ECONOMIC REGION IN THE WORLD WITH CHINA IT’S LARGEST ECONOMY AND WORLD’S SECOND LARGEST ECONOMY ASIA’S LARGEST ECONOMIES IN TERMS OF PPP AND GDP INCLUDE CHINA (HONG KONG, TAIWAN, MACAU INCLUDED), JAPAN, RUSSIA, INDIA, KOREA, INDONESIA, AND TURKEY WEALTH (MEASURED BY PER CAPITA GDP) IS MOSTLY CONCENTRATED IN EAST ASIA: HONG KONG, MACAU, JAPAN, KOREA, SINGAPORE, TAIWAN EXCEPT JAPAN, KOREA, TAIWAN, HONG KONG AND SINGAPORE, ASIA IS CURRENTLY UNDERGOING RAPID GROWTH/INDUSTRIALIZATION
SPEARHEADED BY THE WORLD’S TWO MAJOR ECONOMIES: CHINA & INDIA RAPID ECONOMIC GROWTH + LARGE TRADE SURPLUSES WITH THE WORLD, ASIA ACCUMULATED > US$4 TRILLION IN FOREX RESERVES (>½ THE WORLD TOTAL) CURRENT ECONOMIC GROWTH RATES RANGING FROM MID TO HIGH SINGLE DIGITS OFFER HUGE AND SUSTAINABLE POTENTIAL FOR U. S. PECANS WHILE PECANS HAVE EXPERIENCED A RECENT MARKET WINDFALL IN CHINA , MOST MARKETS IN ASIA HAVE DOUBLED PER CAPITA GDP OVER THE LAST 5-6 YEARS VIETNAM, INDONESIA AND CHINA HAVE UNDER 30 AVERAGE AGED POPULATIONS MEANING MILLIONS OF NEW CONSUMERS ENTER THE MARKET EACH YEAR
WHILE ASIA WAS NOT IMMUNE TO THE IMPACT OF THE GLOBAL ECONOMIC CRISIS IT HAS RECOVERED MORE QUICKLY ESPECIALLY WHEN COMPARED TO THE U. S. AND EUROPE IN PART DUE TO STRONG CONSUMER CONFIDENCE AND SELF-SUFFICIENT ECONOMIES SO, ASIA WITH ITS INCREDIBLY FAVORABLE ECONOMICS, DEMOGRAPHICS AND VIBRANT CULTURE/ASIA IS A SUSTAINABLE GROWTH OPPORTUNITY FOR U. S. PECANS AS INCOME LEVELS CONTINUE TO RISE, SEVERAL NEW CONSUMER GROUPS HAVE BEGUN TO EMERGE AND LOOK EXTREMELY ATTRACTIVE AS WE LOOK TO THE FUTURE INCREASINGLY AN EMERGING MIDDLE CLASS HAS AN APPETITE FOR HIGH-END, HEALTHY, BRANDS W/WOMEN GAINING GREATER FINANCIAL FREEDOM AND SOCIAL INDEPENDENCE
HEALTH IMPORTED PRODUCTS, ESPECIALLY FOOD, PERCEIVED AS SAFER AND HEALTHIER WITH CONSUMERS DEMANDING SAFER-HEALTHIER PRODUCTS STATUS SEEKING-PRICE & QUALITY = STATUS OR A MARK OF A HIGHER LIVING STANDARD IF U. S. PECAN’S ESTABLISHES IT’S BRAND (AMERICAN OR U.S. PECAN’S) THE INDUSTRY COULD BE WELL POSITIONED FOR THESE FUTURE OPPORTUNITIES AS THEY EMERGE HOWEVER TO CAPITALIZE ON THESE OPPORTUNITIES IT WILL TAKE PLANNING, EFFORT AND MULTIPLE APPROACHES ACROSS MULTIPLE MARKETS ORGANIZE TODAY FOR THE MARKETS OF TOMORROW LOCAL PARTNERS OFTEN STRUGGLE WITH A HOST OF PROBLEMS (STRATEGY PLANNING, RISK MANAGEMENT, OPERATING EFFICIENCY, ETC.)
CHINA’S THE WORLD’S 2 ND LARGEST ECONOMY AFTER THE U. S. , SURPASSING JAPAN ONLY 5 YEARS AGO, CHINA’S GDP WAS HALF OF #2 JAPAN’S, CHINA’S GDP GROWTH RATE CONTINUES TO EXCEED 8% WITH A POPULATION IN EXCESS OF 1.34 BILLION CHINA RAPID EXPANSION AND CURRENCY APPRECIATION COULD OVERTAKE THE US AS THE WORLD’S LARGEST ECONOMY BY 2027, PERHAPS SOONER AT CURRENT RATES THE ABOVE IS BASED ON CONTINUED GROWTH AT GREATER THAN 8% ANNUALLY REAL PURCHASING POWER OF US/CHINESE CURRENCIES COULD BECOME = BY 2014 CHINA IS OUR 2ND LARGEST MARKET FOR U.S. FOOD AND AG AFTER CANADA IT’S ESTIMATED BY THE END OF 2013 NEARLY 1,000,000 CHINESE HOUSEHOLDS WILL HAVE INCOMES IN EXCESS OF 1 MILLION YUAN (US$165,000)
THE “MILLION DOLLAR FAMILY CLUB” IS PRIMARILY CONCENTRATED IN BEIJING, SHANGHAI & PROVINCES OF GUANGDONG, ZHEJIANG, JIANGSU, AND SHANDONG CHINA'S ESTIMATED 300 MILLION PLUS MIDDLE CLASS CONSUMERS CONTINUE TO DRIVE RAPID RISES IN DEMAND FOR ALMOST EVERYTHING INCLUDING US PECANS FOOD PRICES ARE RISING AT 8% ANNUALLY, RAMPANT REAL ESTATE SPECULATION HAS CREATED BUBBLE ECONOMIES IN MANY PARTS OF CHINA CHINA’S TORRID GROWTH ALSO PRODUCED CHALLENGES LIKE ESCALATING INFLATION MAKING IT DIFFICULT FOR THE POOR TO PURCHASE FOOD/HOUSING CHINA IS HOME TO MORE THAN 150 CITIES WITH POPULATIONS IN EXCESS OF 1 MILLION PLUS IN POPULATION AND VILLAGE IS DEFINED AS 300,000 IN POPULATION
IN 2012 CHINA‘S RETAIL SALES HIT A RECORD 500 BILLION YUAN ($85 BILLION) DURING THE SO- CALLED “GOLDEN WEEK/SPRING FESTIVAL” UP 20% OVER LAST YEAR CHINESE CONSUMERS INCREASINGLY SEEK INTERNATIONAL BRANDED PRODUCTS (INCLUDING US FOOD PRODUCTS) FOOD MANUFACTURES PRODUCE A VARIETY OF FOODS LIKE MOON CAKES-OTHER CONFECTIONS W/ATTRACTIVE-UPSCALE PACKAGING MORE CHINESE ARE TRAVELING, STUDYING AND WORKING ABROAD OFTEN BRINGING BACK INTERNATIONAL TASTES, IDEAS AND BRANDS CHINESE NOW ARE THE LARGEST GROUP OF INTERNATIONAL TRAVELERS SURPASSING THE COMBINED TOTAL OF JAPAN AND KOREA
SPRING FESTIVAL/CHINESE NEW YEAR = WORLD’S LARGEST HUMAN MIGRATION CHINESE CONSUMERS SEEK INT BRANDED PRODUCTS (INCLUDING FOOD/NUTS) CHINESE CONSUMERS PLACING INCREASING IMPORTANCE ON TRADITIONAL AND INTERNATIONAL HOLIDAYS (CHRISTMAS, VALENTINE ’ S DAY, ETC.) FOOD MANUFACTURES PRODUCE A VARIETY OF FOODS SUCH AS MOON CAKES-OTHER CONFECTIONS WITH BEAUTIFUL-UPSCALE PACKAGING
CHINA IS NOW THE WORLD'S LARGEST INTERNET COMMUNITY WITH INTERNET USE STILL RISING , ESPECIALLY SOCIAL MEDIA AND INTERNET PURCHASING IMPORTED TREE NUT AWARENESS INCLUDING U. S. PECANS IS GROWING BUT SINCE THESE ARE MOSTLY CONSUMED AS SNACK FOOD CONSUMERS ARE NOT AWARE OF IDENTIFYING HEALTH AND NUTRITION DIFFERENTIATION GIVEN MANY TREE NUTS ENTER THE ‘MAINLAND CHINA MARKET ‘VIA SO- CALLED “SWIMMING -OR- GRAY CHANNELS” SNACK MANUFACTURERS OFTEN DECLINE TO LIST PRODUCT ORIGIN ON PRODUCT PACKAGING
TARGET URBAN GROWTH CLUSTERS EXODUS FROM FARM TO CITY IN EMERGING MARKET ECONOMIES (POPULATION OF CITIES GROWS BY 65 MILLION A YEAR = 7 CITIES THE SIZE OF CHICAGO) OVER THE NEXT 15 YEARS JUST 440 EMERGING MARKET CITIES WILL GENERATE HALF OF GLOBAL GDP AND 40% OF GLOBAL CONSUMPTION GROWTH MOST OF THESE ARE UNFAMILIAR NAMES LIKE MEDAN, JINAN, COMPARED TO TIER 1 MEGA CITIES KUALA LUMPUR, SEOUL AND SHANGHAI OFTEN OFFERING OPPORTUNITY THE IDEA SMALLER CITIES CAN OFFER GREATER OPPORTUNITIES ISN’T NEW AS EVIDENCED BY THE SUCCESS OF WAL-MART OF 50 YEARS AVOIDING HIGHLY COMPETITIVE METRO-MARKETS IN EMERGING MARKETS IMPORTANT TO LONG- TERM DEVELOPMENT: CHINA HAS 56 ‘OFFICIAL’ ETHNIC GROUPS SPEAKING > 290 LANGUAGES , INDIA 20 LANGUAGES , HUNDREDS OF DIALECTS AND 4 MAJOR RELIGIONS
INCREASED MARKET PENETRATION VIA DEVELOPMENT OF A STABLE DISTRIBUTION NETWORK FOR A WIDE ASSORTMENT OF TREE NUTS EDUCATING END-USERS HOW TO USE PECANS AS VERSATILE, VALUE-ADDED INGREDIENTS IN A VARIETY OF FOOD APPLICATIONS NON-TRANSPARENT IMPORT/REGULATORY PROCESSES AND CONFUSION WITH U.S. PECANS ALSO PRESENTS SIGNIFICANT CHALLENGES IN THE CHINA MARKET SHELLED PECAN USAGE IS NOT COMMON IN CHAIN BAKERIES-PATISSERIES, BUT SOMETIMES USED NEW-TRENDY PRODUCTS TARGETED @ YOUNGER CONSUMERS PECAN S ENTERING CHINA CURRENTLY FACE SIGNIFICANTLY HIGH TARIFFS (AT THE HIGHEST LEVEL OF ANY TREE NUT IMPORT UNDER THE OTHER CATEGORY)
LEGAL TREE NUT IMPORTS FACE SIGNIFICANT & TRADE DISTORTING TARIFFS IN CHINA HOWEVER, THERE ARE EXCEPTIONS SUCH AS PISTACHIOS, WHICH ENJOY A TEMPORARY TARIFF OF FIVE % (THREE YEARS RUNNING NOW) AND , EFFECTIVE JAN. 1, 2013 THE LONG STANDING DISPARITY BETWEEN IN-SHELL AND SHELLED ALMONDS WAS LOWERED FROM 24% TO 10% HOW WAS THIS POSSIBLE? ACTUALLY, IT WAS THE RESULT OF A NUMBER OF FACTORS DRIVEN BY AN INDUSTRY STRATEGY IMPLEMENTED OVER ABOUT 10 YEARS THE POINT IS THIS MEANS IT'S BOTH POSSIBLE TO SECURE IMPROVEMENTS AND MORE IMPORTANTLY WITHOUT ‘OFFICIAL GOVERNMENT’ INTERVENTION
WHILE PECAN IMPORTS ARE LARGELY IN-SHELL, A LOWERING OF TARIFFS FOR BOTH CATEGORIES IS IMPORTANT TO THE INDUSTRY LONG TERM WITH CURRENT PECAN TARIFF RATES OF 24% IN-SHELL/SHELLED, EFFECTIVE TARIFF RATES ARE UPWARDS OF 40.125% ONCE CHINA’S 13% VAT IS APPLIED THE U.S. PECAN INDUSTRY COULD TAKE A DIVERSITY OF APPROACHES TO THIS RESOLVE THESE TRADE DISTORTING IMPEDIMENTS, YET CAREFUL CONSIDERATION IN DEVELOPING A LONG TERM MARKET ACCESS IMPROVEMENT STRATEGY INCLUDING LOCAL BUY-IN IS KEY THIS SHOULD INCLUDE A ‘RATIONALE’ FOR HOW ADJUSTMENTS AND/OR LOWERING OF TARIFF RATES COULD THEORETICALLY, MUTUALLY BENEFIT CHINA AND THE U. S.
IF ALL ELSE FAILS THEN A BI-LATERAL/MULTILATERAL APPROACH (DEMARCHES, CONTENTIOUS NEGOTIATIONS, ETC.) BUT COULD IMPACT TARIFF REDUCTIONS FOR YEARS BUY-IN FROM LOCAL TRADE-PLAYERS IN LOWERING THE TARIFF RATES ON PECANS IS KEY I EMPHASIS THE NEED TO FIRST DEVELOP INFORMAL YET SPECIFIC APPROACHES IN SECURING POSSIBLE FUTURE TARIFF IMPROVEMENTS THERE ARE ALL TOO MANY EXAMPLES OF AN INDUSTRY WAGING 'WAR’ PRIOR TO ACTUALLY COMMUNICATING TO HOST GOVERNMENT WHAT IT IS THE ‘INDUSTRY’ WANTS WHILE CHINA DOES NOT PRODUCE PECANS THE POTENTIAL FOR SOME TO EQUATE THESE TO LOCAL HICKORY NUTS IS A POSSIBILITY OR POTENTIAL THREAT TO U. S. PECANS
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