Two headlines are catching the attention of almost everyone in China: soaring CPI and pervasive rumors of food safety. The symbol of CPI story is pork, while for food safety is bogus bao zi .
Concisely speaking, food industry in China, like what industry of TV sets used to be, is facing the tide of recombination and integration, in which the strong will survive and the weak will die.
Soaring CPI is something about cost and price. Usually big companies can take advantage of scale economy and endure tougher production cost pressure via a lower purchasing price. On the contrary, many small companies have to either increase their selling price (and lose market to big ones) or lower their production cost to survive, which often means choosing materials of poorer quality. In China, in this perfect environment of “Bad Money Drives Out Good Money“, the second choice proved practical in the past and left headache to the big ones.
Today, however, Chinese consumers do not only concern about the price but also the safety. Though well-known all over the world for their adaptability to hardness, Chinese are still shocked when the whole process of turning junk into food is vividly presented before their very eyes in forms of text, photo and videos. Thanks to the information technology. Now the market consist of “fearless consumers” is shrinking and not much left for the “bad money”‘ to back off.
It is a great chance since inflation and crisis now come hand in hand. It is a great chance for branded products which have little room of price deduction but have a solid basis of positive brand image and clean quality history. They are good products under household brands provided by reliable manufactures lasting for tens or hundreds of years. It is quite difficult for speculative small companies to compete on sound credit records. Imagine what happens to these credit-less small companies- they are in a inflation but their consumers now prefer to pay for credit.
I just want to say that it is crazy to discard brand equality and talk about price discount promotions at this time, and for the next year. It is as stupid and crazy as running against the tide instead of riding on it. The inflation will probably last into middle 2008 by official estimation, while concerns about safety can only be strengthened in future. Those discount-men are not living in this world.
Or I am not living in this world.
Oh my.
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