Doing Business-jul-aug2010

INFOCUS | doing business

CASHEW TRADE WITH CHINA

Ready to go Nuts C

ashew is the most nutritious among tree nuts India is the biggest producer processor and exporter of cashew in the world.

India exports cashew mainly to US and Europe.

Kerala State Cashew Development Corporation (KSCDC) is a company owned by Government of Kerala Head Quarters at Kollam. Kollam in Kerala State is the cashew capital of world.

More than 0.3 million people are involved in cashew processing directly in Kollam District. KSCDC is the biggest processor of cashew in the world with 30 factories and 20,000 workers.

KSCDC has developed New Value added products from Cashew Viz. Cashew Soup, Cashew Powder, Cashew Vita and Cashew Bitz. Central Food Technological Research Institute (CFTRI) Mysore, has developed these products for KSCDC. The KSCDC wants “CDC Cashews� to be promoted as a global quality brand focusing end consumers.

Traditionally India is exporting cashew to the world market. 38% goes to America. 31% goes to Europe. This was happening for last 80 years. Now the world economic scenario is changing and recession is affecting the US and Europe at the same time. Russian and Chinese economics are growing.

Considering this factor the market leader KSCDC with the help of Government of India conducted a market study in Russia and China. Study was conducted by Indian Institute of Foreign Trade.(IIFT, New Delhi) The Chinese Ambassador His Ex|48| India-China Chronicle

cellency Zhang Yang visited Kerala State Cashew Development Corporation and highly impressed with the systematic working of woman in cashew processing. He called cashew as Kidney fruit and was wondering that of the Chinese starts consuming cashews, India will not be able to supply its requirements.

The Chairman, Sri. E.Kasim and the Managing Director Dr.K.A.Retheesh has visited China as a part of the study.

The study report says that Cashew

DR. K.A. RETHEESH, Managing Director, KSCDC, Kollam

Consumption in China increased from 7,000 tons in 2003 to 18,000 tons in 2007. Further, the consumption is expected to increase to about 25,000 tons by 2010. Domestic production of cashew kernels is low in China and accounts for about 2% of the demand.

As such, dependence on imports is very high particularly for meeting the rising demand for cashew kernels. The average import volume in 2008 was 18,000 tons. In terms of value, the import of cashew kernels has increased from

PRODUCT POSITIONING AND TARGET CONSUMER Product

Product Position

Kernels

1. As a snack to welcome family guests.

Target in

2. Material when cooking

Housewives

Vita

As a breakfast drink

Housewives & Working ladies

Soup

As a breakfast / afternoon soup in office

Housewives & Working ladies

July-August 2010

US$.1.4 million in 1996 to US$.18.3 million in 2007.

In China, cashews are used in cooking and as a snack. Amongst KSCDC’s portfolio, there are three products that are accepted in the Chinese market.

Cashew Kernel (Plain and Roasted) Cashew Vita Cashew Soup These products have a potential to penetrate the market with certain degree of product and packaging adaptation. Sweetness in Vita and strong pepper taste in soup is to be reduced. Roasted and Plain cashews are to be positioned as tasty snack and Soup & Vita as a convenient drink and beverage. From a strategic point of view, KSCDC should not engage in bulk exports but market only CDC brand of cashew products in China.

Over a period of time, CDC Cashews is to be developed as India Brand of Cashew products.

The potential market space for Indian cashew products is primarily in South East China. The target provinces could be: Beijing, Shanghai, Zhejiang, Guangdong and Fujian.

Amongst these, the target cities could be: Shanghai, Beijing and Guangzhou.

To target the snack nut market, KSCDC is to introduce small packs ranging from 100 to 150 gms for plain and roasted cashews. KSCDC’s existing packaging format of transparent plastic pouches to continue. But, the company needs to ensure convenience in opening the packet. For this, zip lock or zig zag opening to be provided. For Cashew Vita & Soup, one cup packets to be introduced. 12 Packets can be packed in to a box (e.g. Tea bags, Coffee sachets). Packaging to be done in India as per the labeling requirement

From extreme left: Shri. E.Kasim,Chairman,KSCDC, His excellency Zhang Yang (The Chinese Ambassador to India), Mohammed Saqib- Secretary General (ICEC) ,P.K.Gurudasan- Hon: Minister for Cashew Industry, GOK & Dr.K.A.Retheesh, MD, KSCDC

of China. The above recommendations on packaging can easily be met

by KSCDC as the company has the technical capability to do so.

As an entry strategy, KSCDC can adopt Direct Exports. In the long run, this will provide the company with the advantage of establishing CDC brand of cashews in China. Simultaneously, the company can reduce the initial market risks by ensuring a proper selection of Importer; identifying the appropriate retail mix; and promotional strategy. The importer should provide the distribution services and should have strong retail reach in the identified potential provinces/ cities/ markets. The option of dealing with more than importer should be kept open by KSCDC. KSCDC should also explore the

possibility of exporting to Hong Kong and establishing a marketing network with Hong Kong based importers. A large number of Hong Kong based importers have active trade engagements in China which would also enable easy penetration in to Chinese market.

The develop a long term strategy of a sustained presence in the Chinese market, KSCDC needs to establish its own brand in the packaged nut market.

Establishing a brand in a new international market would necessitate sustained efforts in the following areas.

Building awareness about Indian cashew and cashew products Establishing and position as QUALITY products Q Choosing an appropriate retail mix for a wider customer reach Ensuring ready availability of stocks KSCDC, therefore, needs to carefully plan an aggressive TV and Print Campaign to educate the consumer.

This needs to be closely monitored by KSCDC officials based in China for which a small marketing office needs to be opened.

Based on the study report KSCDC is planning to enter in to China in big way.

-August 2010

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INFOCUS | DOING BUSINESS

We need to build more bridges Sam Su, General Manager, BROAD Air Conditioning, in conversation with Anchit Goel and Swaralipi Maity.

|40| India-China Chronicle

July-August 2010

What is the USP of BROAD products?

BROAD specializes in non-electric chillers powered by clean and recyclable energies. BROAD chillers also use non-polluting refrigerant. BROAD non-electric air conditioning dramatically reduces energy consumption and cuts CO2 emissions by 80 per cent.

BROAD air conditioning terminal products and air purifiers reflect the theme of “Better City, Better Life” by greatly enhancing indoor air quality.

Why did you choose to come to India?

Because of the market potential.

India is the No. 1 for GREEN products. If any company from China plans to go overseas, it must look towards India and cannot ignore it.

If Chinese ignore Indian markets, business will be affected. India is a very attractive market with huge possibilities. We entered the US market in 1998 and then expanded to Europe in 2000.

The next year, in 2001, BROAD came to India.

Did you face any challenges while setting up business in India?

Initially there was difficulty with the languages spoken, which led to communication gaps. But now it’s not a much of a hurdle. But I must say both countries have a very different mindset – in culture and practices too. For example Indians believe a lot in god whereas we don’t.

But then we have had tremendous cooperation from Indians at all levels and that came about very fast. But since direct dealing and selling proved a little difficult, BROAD entered India through an agent.

That proved to be very beneficial for business.

How has your experience been so far working in India and with Indian customers?

We have an impressive list of clients already. Our customers in India include DLF, Leela Hotels, ED Mall, among others and is spread all over the country including places like Surat, Kota and

Bangalore. Our biggest customer in India is DLF. They have brought 53 chillers and plan to buy more. They are very happy with our offering and product quality.

We are sure once a company becomes our client, they will never leave us. Also because they are able to save money as our chillers help to reduce carbon emission and are energy efficient.

The experience of working with Indian businessmen has been very good. Indian people have very good

INDIA AND CHINA NEED TO FURTHER STRENGTHEN AND DEVELOP MORE ECONOMIC RELATIONS. THEY NEED TO BRING TOGETHER ITS PEOPLE ON VARIOUS PLATFORMS AND PROMOTE MORE TRADE, INVESTMENT AND TECHNOLOGY EXCHANGE. THE TWO COUNTRIES SHOULD BRIDGE THE DIFFERENCES BETWEEN THEM AND WORK TOGETHER FOR THE BENEFIT OF ITS PEOPLE. business skills. They understand business and people much better. But they are always looking for the best quality at the lowest prices. However, the cost of BROAD products is on the higher side but the quality is also the BEST in the world. The best after all always comes at a higher price.

What has been the market response to BROAD products?

BROAD is specially known for its GREEN energy. The market has very enthusiastically welcomed BROAD

products as they are non-electric, save energy and above all save money by bringing down chilling costs by 80-95 per cent. It is considered that the most essential to human life are water and air. In case of water you have the option of selecting the best for you but in case of air you don’t, but with BROAD you can make a choice.

How do you think the trade gap between the two countries be narrowed?

There is a trade gap between the two countries but soon the trade gap will decrease. India can increase its exports to China as there are so many areas in which India is better than China. Two such areas where India has great skills and expertise are the IT services and the pharmaceutical sector.

What is your view on the current state of India China relations?

From historical times, the development and position of the two countries has been almost the same. The relationship between the two countries was very good. But the war in 1962 made all the difference.

The two countries are very special and play a significant role in the world.

Everyone looks forward to India and China. If India and China maintain good relationships, they can benefit a lot from each other’s strengths. However, if the two countries fight, the rest of the world may take advantage of it.

What is the key to help develop India-China relations?

There are two ways to further strengthen the relationship between India and China. First of all, the two countries need to understand each other better in terms of culture, language and ways of doing business.

Secondly, India and China need to further strengthen and develop more economic relations.

They need to bring together its people on various platforms and promote more trade, investment and technology exchange. The two countries should bridge the differences between them and work together for the benefit of its people.

July-August 2010

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