05/11/2017 |

How do Russian entrepreneurs make their way to China

China (photo Reutors)

Chinese producers quickly react to trends and immediately fill the world market with running goods. How do Russian companies fight for a place in the sun in a country where everything is already there? RBC collected several examples.

“Red sausage” instead of “Red Square” – read hieroglyphs on the signs in the newly opened park “Charge.” Wrong translation caused the laughter of Chinese tourists and forced the leadership of the park in a hurry to erase the inscriptions. In business with China, a bad translation is a common, but far from the only mistake.

“The Chinese often call Russian businessmen” bukaopu “(a whale” not falling into notes, unreliable. “- RBC). Still, we are much closer to the West by the mentality, than to the East, “says Alexey Nikitin, the head of the Russian representative office of UGL Consulting, which helps build relations between Russian and Chinese entrepreneurs. Mikhail Belousov, a partner of the Chinese company Market Entry Atelier, agrees with him: “China is still terra incognita for the majority of Russian entrepreneurs, and most people have a minimal and very vague idea of ​​it.”

Sexism, protectionism and instant theft of ideas – in such realities Russian entrepreneurs in China work. But the game is worth the candle – it’s a huge, growing and enticing market. According to the Market Entry Atelier, in 2016 imports to China amounted to about $ 130 billion. Russian business accounts for only about $ 1.55 billion, but this is 19.5% more than a year ago. In 2017, the growth is projected at 12-15%. “We really still have a lot of space for growth and development in China due to the low ruble exchange rate,” Mikhail Belousov is convinced.

Putin to the rescue

The main graph of Russian exports to China is raw materials, but this does not mean that small and medium-sized businesses are closed to local markets. Demand in the Middle Kingdom enjoys Russian food: frozen fish and seafood, cereals, sunflower and soybean oil, flour confectionery, ice cream.

For example, the company “33 penguins” to gain a foothold in the Chinese market helped President Vladimir Putin. In September 2016, he presented Chairman of the People’s Republic of China Xi Jinping a box of Russian ice cream (it was not possible to discern his brand of observers). “Thank you very much for the gift, for the tasty ice cream. With each of my trips to Russia, I ask that I buy a Russian ice cream. You have better cream, so it is especially delicious, “- then thanked the Russian leader Xi Jinping. This event was the best advertisement. Chinese sellers picked up the news and began posting an image of the Russian president on trucks carrying ice cream.

In fact, the company “33 penguins” began shipping shipments to China in 2014, but at first sold products to intermediaries at the border, so as not to contact legal delays. According to Olga Stepiko, director of the “33 Penguin” trademark, after the advertisement from the first persons, the demand instantly increased, and the ice cream maker agreed on direct deliveries with the Chinese distributor Richness.

However, it quickly became clear that for the average Chinese, Russian ice cream is too sweet. It was necessary to change the composition and formulation: they removed sugar, replaced milk with lactose-free substitutes, and changed the taste combinations. New samples of products were tested at local exhibitions, they also collected the feedback of the tasters. After long experiments, the company “33 penguins” managed to select a palette of palette that suited local buyers. In Russia, this line was positioned for lovers of a healthy lifestyle.

Now China accounts for about 10% of the company’s exports, but sales are growing dynamically. Locals are very fond of ice cream. According to the Assessment of the Indo-China IceCream Market, in 2016 the volume of the Chinese market reached $ 6.65 billion – this is about a third of global consumption.

Flax is banned

Russian food producers are faced not only with the fact that it is difficult to predict the tastes of the Chinese, but also with the specific regulation of the local market. “The Chinese have a list of ingredients that can not be used in food. But this list can not be found in the public domain. To get it, you need to contact the government. For us it was a discovery that they can not use, for example, flax, “- says Elena Shifrina, the founder of the company producing healthy snacks BioFoodLab.

From colleagues, she heard that it is not difficult to enter the Chinese market, but in practice everything turned out the exact opposite. “They are producers of everything and everything and very strongly protect their market from new players,” Shifrina says. There are a lot of official and unofficial prohibitions, which Russian entrepreneurs find difficult to understand. For example, the package layout had to be redone several times. Chinese officials did not arrange the inscription No sugar added.

“The political community of China is against products that focus on harmlessness to the body. If one producer stresses that his product does not contain sugar, then the others have a lot of sugar? – says Shifrina. – Therefore, it is better not to say that this is a bio-product in the Chinese market. You can, for example, write that this is food for athletes. ” Promoting bioproducts in such conditions is not easy. And the most amusing is that while Shifrina’s team adapted the product to the local market, Chinese manufacturers appeared that copied both the product and the name. Fortunately, after claiming rights holders, they removed this product from the shelves.

The first deliveries began in 2015. Thanks to the trend towards a healthy lifestyle and high demand for products in social networks, China has now become a priority market for the company. She found a Russian partner there and plans to open her own sales outlets. According to SPARK-Interfax, the revenue of Biofudlab in 2016 was 142 million rubles, profit – 39 million rubles. According to Shifrina, supplies to the Middle Kingdom now make up about 10% of the total output.

The company “Russian Caviar House” to overcome bureaucratic obstacles, took about two years – she opened a representative office in Hong Kong in 2014, and the first deliveries began only in 2016. Part of the time was spent looking for local partners and signing contracts. Then it was necessary to issue documents for the export supply – it took a bit more than six months. “The difficulty was that nobody brought us black caviar to China and the scheme of the import procedure was absent. It was quite obvious that artificial barriers were created, since China is today the leader in the production of caviar in the world and protection of the national market for Chinese is absolutely priority, “says Anna Medvedeva, the company’s spokesperson.

As a result, it was still possible to obtain permits, and exports from Russia started – now it accounts for 10-15% of all sales. “So far, our activities in South-East Asia are aimed at increasing the brand recognition, rather than making a profit,” Medvedev admits.

Exhibitions and Messengers

Problems arise with the promotion of new goods for the Chinese market. “An unfamiliar Russian brand can hardly be called a magnet for Chinese consumers, for them the popularity of a trademark is an important factor in the selection,” notes Vitaliy Foltz, CEO of the company for the production of air purification equipment “Tion”. According to him, dealers usually prefer inferior to the functional, for example, European technology only because local consumers already know it.

Until 2014, the company had a single supply of equipment abroad, there was no strategy for entering foreign markets. However, the founders of the “Tion” reasoned that China has obvious problems with air purity. At the same time, only purifiers of the premium segment were represented in the market, and “Tion” can offer more affordable equipment.

The company took a year to register a legal entity in China. Then the team of Foltz had to build a dealer network of Chinese partners and invest in the promotion of the brand. First of all, they began to advertise on the Internet and get acquainted with local representatives of the industry: they made product presentations, tried to attract the interest of local media, participated in industry exhibitions. It was exhibitions that became the most effective channel of promotion – each brought 20-30 new partners. By 2017, there are 100 partner companies in the dealer network of Tion. The brand began to learn.

Foltz is still surprised by the meticulousness of local consumers – in China special sensors are very popular for measuring air quality; without them, there is not a single purchase of ventilation equipment: “The Chinese market places high demands on the quality of air purification in household devices. On the one hand, given the highest level of air pollution in cities, this can be understood. On the other hand, the requirement to make the air in the apartment cleaner than in the forest or in the mountains is somewhat absurd. ” Nevertheless, he managed to build a stable sales channel – in 2016, China provided “Tion” 80 million rubles. revenues (the total revenue of the holding is about 1 billion rubles).

Margarita Fedotova, the first vice president of the Russian-Asian Union of Industrialists and Entrepreneurs, advises Russian entrepreneurs to actively use the WeChat messenger to advance – it has become an integral part of Chinese life, and advertising often gets a viral effect, but the skills of promotion in the usual global social networks are practically useless.

Buddhist approach

Russian companies have an important advantage over local players. “The Chinese believe in the quality of goods from the West and do not trust the Chinese producers very much, so they prefer western products and Western cosmetics, they think that Russian and Western goods are much more environmentally friendly,” says Alexei Zyuzin, founder of the manufacturer of household chemicals “Synergetic.”

In 2012, Zyuzin was born a child. The young father noticed that on the shelves there are not enough eco-friendly tools for cleaning and washing dishes, and those that were were very expensive. This prompted the idea to launch its own line of household chemicals, which cost 10-15% more than conventional means, but at the same time was cheaper than other brands that were positioned as “eco”. The products began to be in demand – it can be found in “Auchan”, “Biblio-Globus”, “Carousels”, “Children’s World”, “VkusVille”, “Lenta” and other networks. The entrepreneur began deliveries to Kazakhstan, Belarus and Kyrgyzstan. China has become a logical continuation of business scaling.

In 2015, Zyuzin entered the school of management “Skolkovo”, in which there was a module dedicated to working with China. As part of the training program, he developed a strategy for the withdrawal of goods to the Chinese market: he studied the audience, carried out various studies, consulted with expert practitioners.

During the preparation Zyuzin discovered that the income level of Chinese in the cities is often two to three times higher than the level of income of Russians. For example, the secretary’s salary is estimated at $ 1 thousand, the sales manager – $ 2,5 thousand, the head of the sales department – $ 5-10 thousand, the commercial director – $ 15 thousand. Accordingly, the prices for European goods in China are higher, than in Russia.

In 2017, the entrepreneur began to enter a new market. The creation of a legal entity, the import of products and customs procedures, the receipt of certificates, negotiations with potential partners and buyers took nine months. He managed to agree on supplies to local networks – 18 containers of products worth about $ 1 million have already been delivered to China.

“Our strategy is a long game. We have worked on the Shanghai market, agreed with networks in the south of the country, now we hire employees from local. For a year or two, we expect to take a place on the Chinese shelves and understand how to reach out to consumers. Quickly nothing is being done here, “Zyuzin said.

This strategy is supported by Ainar Abdrakhmanov, the founder of Babystep, which produces a training video for beginners and a range of products under their brand. Last year, on the sale of licenses, video ads and a line of children’s furniture, it earned $ 32 million in revenue in China. To understand the intricacies of the local culture, the entrepreneur offers to start a business in China to take tickets for a month, “relax and travel as many business events as possible.” “No hard plans before the real trip and the first six months of work. Work in a stream and as much as possible of conversations with consumers or the people making a decision “, – advises Abdrakhmanov.

An important point – any negotiations are better for leading men. “We were faced with the fact that the Chinese conservative views categorically refused to communicate with the girl, and the young leader was not taken seriously,” says Renat Nezametdinov, director of the children’s applications publishing company Interactive Mult. In September, 2017, this company signed with Dazzle Interactive Network Technologies, a subsidiary of the state corporation China Telecom, under the terms of which it transferred to the Chinese company the rights to distribute more than 500 episodes of animated series of the Russian animation studio “Steam Engine”, as well as nine educational mobile games .

The location of Chinese partners is not easy. To do this, it is necessary to constantly maintain personal contact: ideally communicate in Chinese or at least through an interpreter, eat lunch, dinner, exercise, travel. According to Alexei Nikitin, the Chinese have a different understanding of social ties: no one will seriously consider business projects with unfamiliar people – recommendations are necessarily needed. And it takes a very long time to build relationships. “The Chinese, unlike us, do not live like the last day and can, for example, year simply meet and drink tea with a potential partner to see if it is possible to deal with it,” Nikitin explains.

Author: Ilmira Gaisina

Atricle in Russian: RBC Daily

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