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1 Corporate Headlines
The long-rumored divestiture of Fulinmen by China Foods has finally been confirmed today. This morning, China Agri-Industries and China Foods, both subsidiaries of COFCO, announced separately that the former will acquire the entire Fulinmen edible oil business, operated by COFCO Fulinmen Food Marketing, from the latter for 1.05 billion yuan.
Thirty-four fragile retail department stores will close on a large scale; the U.S. will close at least 10,000 stores this year. According to a retail industry report by consulting firm F&D, since January 2017, the U.S. has closed 3,600 stores, and by the end of the year, the total number of closures is expected to reach 10,000. Previously, Bloomberg made a similar prediction: in the coming years, more than 10% of U.S. retail space, nearly 1 billion square feet, may need to be closed and converted to other uses. The frequent store closures in the retail department store industry have also led to poor employment conditions; in February and March, retail layoffs exceeded 50,000. According to BI, American teenagers, who have always loved part-time work, are also unable to find summer hourly jobs due to the current state of retail.
Herbalife China President dismissed after ten years in office. According to a reporter from Zhongcai.com, confirmed by informed sources, Li Yanliang, President of Herbalife China, was suddenly dismissed, and his successor is Zheng Qunyi, Global R&D Vice President of Herbalife International. Li Yanliang is a veteran of China's direct selling industry: he joined Amway in 1997, Tiens in 2003, and Herbalife at the end of 2004. In 2007, Li replaced Qian Gangji as President of Herbalife China. During his tenure, Herbalife China's direct selling performance soared, with estimated sales of 6.19 billion yuan last year, according to direct selling institutions.
2 FMCG News
Budweiser Reintroduces 'America' Beer: Another Patriotic Marketing Campaign Ahead of Summer. This summer, Budweiser plans to bring back cans and bottles emblazoned with the word "America" to the U.S. market. The company announced the news on Tuesday, stating that the "patriotic packaging" product line also includes a camouflage design "to honor military personnel." The original slogan "King of Beers" will be replaced with the motto from the U.S. national seal, "E Pluribus Unum" (Out of many, one). Additionally, phrases from the Pledge of Allegiance recited before Congress and lyrics from the U.S. national anthem, "The Star-Spangled Banner," will also be used on the beer packaging. The renaming and slogan change are part of the campaign. Choosing this time to reintroduce the patriotic packaging also capitalizes on the upcoming summer season. According to the National Beer Wholesalers Association, beer sales during this period typically exceed the rest of the year by 20%, and Memorial Day (the last Monday in May) is the highest beer sales day after Independence Day. The camouflage bottles will be sold until July 4th, Independence Day, while other "America" packaging will remain on shelves until Labor Day (the first Monday in September). Budweiser also pledged to donate a portion of the proceeds from "patriotic beer" sold between May 22 and 29 to Folds of Honor, a military-related nonprofit, with an expected total donation of $1 million.
Suntory Launches Espresso Designed to Pair with Cereal. To pair with Calbee's Furugura granola cereal, Suntory will release a maple-flavored espresso, which, when combined, is said to recreate a café-style breakfast at home. The other party in this collaboration, Suntory BOSS LATTE BASE, is a concentrated coffee. When poured into milk, a 490ml bottle of LATTE BASE can make about 10 lattes. Suntory's BOSS series coffee has traditionally been popular among men in Japan, but the LATTE BASE, launched in 2016, unexpectedly gained popularity among female consumers. After research, Suntory found that about 70% of LATTE BASE purchasers are women, and nearly 60% of them drink it during breakfast. Due to the similar consumer base, Suntory LATTE BASE and Calbee Furugura decided to collaborate to jointly develop the breakfast market.
Panda Brewery Announces Completion of 119 Million Yuan Series A Funding. At the end of 2015, Panda Craft Brewery completed a 20 million yuan Pre-A round, becoming the hottest topic in the craft beer circle at the time. A year later, Panda started its Series A and recently completed a 119 million yuan financing. This is encouraging as market competition intensifies and craft beer begins to gain momentum. The Series A round, involving Huatong Group, Shanghai Zhushan Wealth, investor Six (from Smartisan), and Tang Binsen, CEO of智明星通 (Elex), has been completed, and the Panda team still holds controlling stake.
3 B2B Column
In the 'Spring of Price Hikes,' Why Are Japan's Three Major Convenience Store Chains Cutting Prices Together? This spring has been dubbed the "Spring of Price Hikes" by Japanese media. Nisshin Oilio raised prices on 14 olive oil products by 10%; Daio Paper increased prices on all household paper products by over 10%; 10 major electric power companies raised monthly electricity fees by about 100 yen (approx. 6 yuan), and 4 major gas companies raised monthly gas fees by about 60 yen (approx. 3.6 yuan); in February, Japan re-imposed a fuel surcharge on international flights after a 10-month hiatus, and from April, the surcharge doubled; wheat prices rose by 4.6%, which may lead to higher prices for bread and noodles. Recently, Meiji Yasuda Life Insurance released the 2016 household livelihood survey. It showed that the average monthly discretionary spending for Japanese couples was 25,100 yen (approx. 1,505 yuan), down 4,421 yen (approx. 265 yuan) from the previous year, marking the lowest since the survey began in 2007. Only 8% of respondents said they lived comfortably. When asked why they felt less comfortable, the most common answer was "increased spending on daily necessities and food." Against this backdrop, Japan's three major convenience store chains began cutting prices against the trend. The first to cut prices was 7-Eleven. On April 19, 7-Eleven reduced prices on 61 items, including laundry detergent and toothpaste, by 5%. This was 7-Eleven's first large-scale price cut in 8 years. Following on May 8, Lawson and FamilyMart announced they would follow suit, cutting prices on 29 items, including laundry detergent and shampoo, by about 5%. Convenience stores have long been perceived as selling daily necessities at "higher prices." Unless it's an emergency, most consumers prefer to buy daily necessities at cheaper drugstores and supermarkets. Spokespersons for 7-Eleven and Lawson's advertising departments both said in interviews that the price cuts were made in line with drugstore and supermarket prices. Convenience stores are extremely dense in Japanese cities; you might find one every few steps, while drugstores and supermarkets are not as close. For elderly people with mobility issues and busy office workers, even though convenience store daily necessities are pricier, the extra ten or twenty yen is acceptable given the time and effort saved. Around 2010, food sales accounted for about 14% of convenience store sales. After realizing people wanted to buy meals nearby, convenience stores gradually increased their bento and frozen food offerings, raising the food sales share to 17.4%. Now, Japanese convenience stores want to encourage consumers to buy more daily necessities at their doorstep. They also want a piece of the drugstore business.
Alibaba Acquires 18% Stake in Lianhua Supermarket! The new retail strategic cooperation between Alibaba and Bailian Group has entered a substantive stage. On May 26, 2017, Alibaba Group signed a "Share Transfer Agreement" with Yiguo Fresh, acquiring an 18% stake in Lianhua Supermarket (HKEX: 980) from Yiguo Fresh, becoming the second-largest shareholder of Lianhua Supermarket. This investment in Lianhua Supermarket, upgrading the strategic cooperation with Shanghai Bailian, reflects Alibaba's mission to help merchants and retail partners complete business restructuring using its internet, big data, logistics, and payment capabilities. By providing omni-channel technology solutions, it aims to effectively improve the efficiency of the entire industry value chain, ultimately delivering a new consumer experience anytime, anywhere, across multiple scenarios. Alibaba has designated 2017 as the "Year of New Retail." To date, Alibaba has invested in dozens of projects, including Suning, Intime, Bailian, Sanjiang, and RRS. Every time a strategic cooperation is announced, it's like one shoe dropping, and people often speculate where the next shoe will fall. The frequent moves in new retail highlight Alibaba's ambition to define the future of business through its economic ecosystem. As Alibaba Group CEO Daniel Zhang said at the Alibaba-Bailian strategic cooperation launch: "There was no road in the beginning; the road is made by people. There was no new retail; new retail is created by people. Now Alibaba and Bailian Group are walking on this road. Only when everyone truly forms a community can we achieve fundamental change and innovation, and trigger the chemical reaction of new retail."
Editor: Long Xiaolong, New Distribution Team -END-