Sourcing and Selling Product in China – It’s Different! Global Business Club of Mid-Michigan Global Business Club of Mid-Michigan March 31, 2010 Chuck.

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Presentation transcript:

Sourcing and Selling Product in China – It’s Different! Global Business Club of Mid-Michigan Global Business Club of Mid-Michigan March 31, 2010 Chuck Bird Director, International Sales Food Safety Division Neogen Corporation

CHINA – Interesting Facts  700 million cell phone users  350 million internet users  45 billion disposable chop sticks used per year  China invented paper (and toilet paper)  9000 different magazines  118 cities with population > 1 million  800,000 executives – 35% are female

. The mission of Neogen is to be the dominant company in the development and marketing of solutions for food & animal safety. A Mission that Matters A Mission that Matters

Sourced from China LOW TECH COMMODITY PRODUCTS High Volume Low margin Disposables Raw materials/ingredients

Sold to China High Tech Diagnostic Products Pathogens Pathogens Toxins Toxins Allergens Allergens Drug Residues Drug Residues Spoilage Organisms Spoilage Organisms Sanitation Sanitation Genetically Modified Organisms Genetically Modified Organisms Plant Diseases Plant Diseases Cleaners Cleaners Disinfectants Disinfectants High Tech Diagnostic Products Pathogens Pathogens Toxins Toxins Allergens Allergens Drug Residues Drug Residues Spoilage Organisms Spoilage Organisms Sanitation Sanitation Genetically Modified Organisms Genetically Modified Organisms Plant Diseases Plant Diseases Cleaners Cleaners Disinfectants Disinfectants

Three Key Ingredients for Success  TRUST  Open communication  Verification/Confirmation  Did I mention TRUST?

Sourcing in China  Finding the right supplier  Networking  Referrals  US Chamber of Commerce  MDEC/Export.gov/Shanghai Office  Internet searches  In-country interviews  On-site Audits  References  Qualify a second vendor (time permitting)

Sourcing from China  Getting the right product  Technical Details – make sure all quality related details are defined and confirmed  Preserve Trade-Secrets as much as possible (Confidentiality Agreements)  Invest in equipment needed (molds, etc.)  Outline and agree to quality specifications  Cross-train QA/QC staff  Obtain pre-lot samples for validation testing  Use same equipment for validation testing

Sourcing from China  Getting the right product  Perform QA/QC on all samples and lots  Agree to delivery schedules and quantities.  Don’t forget shipping (cost, lead times)  Schedule frequent on-site visits yearly  Consider renting an apartment if multiple products or complex products are involved  Build a strong relationship – TRUST!

Selling to China  Potential Pathway  Distributor  Joint Venture  Company owned store - WOFE

Selling to China  Finding the right distributor  Networking  Referrals  US Chamber of Commerce – Gold Key  Internet searches  In-country interviews  References

Selling to China  Distributor set-up  Signed Distributor Agreement (one-year)  Purchase price and retail pricing established  Payment terms agreed to  Focus on target market(s)  May need sub-distributors  Hong Kong is separate

Selling to China  Expectations  S et sales goals at the beginning of the year.  Participate in trainings and meetings.  Communicate success and hurdles.  Communicate competitors activities.  Carry Inventory.  Solid Financials.  Distributor has to grow with you.

Selling to China  Hurdles  Language barrier  Cultural differences  18% VAT & Shipping costs  “Price is everything” mentality  Travel time and costs

Selling to China  Keys to success  Brand recognition  Minimum two visits per year  Participate in key trade shows  Government references (approvals)  Transnational customers  Chinese literature/website

Selling to China  Next Steps  Joint Venture (Trust)  WOFE  Ex-pat managed  Realistic expectations on growth  Appropriate staffing  Manufacturing in China

SUMMARY  Trusting relationship  Realistic and agreed upon expectations  Investment of travel  Flexibility  Patience  Preparation  Bring your appetite – Food is important in China – most agreements are completed during dinner!

THANK YOU! QUESTIONS?