Sourcing and Selling Product in
China – It’s Different!
Global Business Club of Mid-Michigan
March 31, 2010
Chuck Bird
Director, International Sales
Food Safety Division
Neogen Corporation
CHINA – Interesting Facts
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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
A Mission
that Matters
The mission of
Neogen is to be
the dominant
company in the
development
and marketing
of solutions for
food & animal
safety.
Sourced from China
• LOW TECH COMMODITY PRODUCTS
• High Volume
• Low margin
• Disposables
• Raw materials/ingredients
Sold to China
High Tech Diagnostic Products
• Pathogens
• Toxins
• Allergens
• Drug Residues
• Spoilage Organisms
• Sanitation
• Genetically Modified Organisms
• Plant Diseases
• Cleaners
• 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)
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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
Set 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
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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?