Levercliff - China Article

The Opportunity

The market for Food and Beverages in China is expected to reach US$22bn in 2019 and is growing rapidly. Statista.org predict a CAGR of 13.8% over the next 4 years, bringing the market to a US$37bn by 2023. That will create a market over 50% larger than Europe combined.

Your Strategy

Before companies run for the first opportunity in China though, it's essential to consider what your long term-international vision is. Is this opportunistic cash generation, or is building a global presence part of a true internationalisation project? Taking a longer-term view is always important to ensure your short-term actions don't hinder things further down the line.

Identifying Opportunities

Do your research. Verify your assumptions about the potential market size for the product you want to sell. Visit the market. A relatively small up-front cost to understand what you're up against is well worth the investment. Talk to people, understand what the appeal is for your proposition.

Deciding on a business Model

There are various different business models for trading in China, each with their own nuances of how you will be allowed to trade. It's essential to engage with experienced advisers to guide you through the strengths and limitations of each type of business model. The simplest is finding a distribution partner for the market, ranging to the most complex, having a full operation of your own.

Working with a partner

Probably the most popular way to enter the China market is by working with a distribution partner. But it's essential that you do your research as there is a known problem with fake and rogue traders. Good distributors do exist though, and in some ways, you just need to follow common sense when finding one. Ideally, meet your distributor and build a relationship before you start trading. Absolutely insist on seeing their legal entity documents such as business license, financial documents and tax certificates. At a simple level, phone their telephone numbers and check someone responds, and ask for references. Speak to local partners to get other people's opinions.

Know the flow

Before you start selling, it's crucial that you map out and understand the process flow for your goods and associated paperwork. Simple things like how to invoice appropriately and get successfully paid need to be nailed right from the start. Cultural differences also need to be clearly understood, with communication platforms like WeChat being just as important as email or websites in China.

Overall, the potential market size is huge and growing quickly, but that doesn't mean it will be easy. You need to step back, dedicate a good amount of time to planning and due diligence before going feet first. Levercliff's advice is to engage with the right partners to guide you through the process and help you identify the most appropriate route to market for your business.

Last reviewed: 03 Jul 2020