Research On Pet Items

Prospective Item Research Company Name: Joy Rainbow International Limited Item: Market Research on Pet plastic items

2008. 10. 28

1. Marketability

(1) Market Information Overview In 2007 there were various issues hitting China's export industries:

-

several recalls and poor quality of manufactured goods in different industries in China

-

rising raw material and labor costs

-

yuan-US dollar exchange rates

imposed a stricter product quality and safety requirements

Toward the 2nd quarter of 2007, a pet food scare in the US sparked questions regarding the safety of China-made products, affecting partly the exports of various pet supplies items. This urged the local government to implement an export suspension on all suppliers in the line, under efforts to straighten out the

manufacturing

industry.

As a result, profits were seriously hit, and many SME in China which could not withstand the global declining waves and new Chinese government policies were forced to shut down. Until March 2008, the ban from outside countries was lifted on the basis that all factories have been inspected and found to be qualified

to

produce

hygienic

pet

and

food

and

products.

To maintain the product quality and integrity of China's exports and avoid similar cases from happening again, extensive inspections and in-house safety regulations becomes tougher and more aggressive, such as inspection certificates by widely recognized Test Centres on each component of China-made items must be provided. Such measures are pushing manufacturers of pet items to conduct a higher level of in-house quality

Another

level,

and

major

to

strengthen

drawback

the

for

overall

manufacturing

processes.

pet

product

suppliers:

- rising cost of raw materials and components, wood, metal and plastic (commonly used for making kennels, beds and some pet toys), increased by about 17 % in 2007. - foreseen to rise further by 10 - 20 % through 2008.

Supplier

Anhui

Profile:

Light

Industries

International

Co.

Ltd

Anhui Light is a large trading company that offers a diverse range of products, including home textiles, camping

furniture,

candles

and

lamps,

kitchenware,

power

hand

tools

and

pet

supplies.

The supplier has been exporting the featured line for about eight years, and sources FDA- and EN 71compliant designs from 30 ISO 9001:2000- certified partner factories in Zhejiang and Jiangsu provinces.

All pet products are exported, with OEM orders making up eighty percent of shipments. Kennels, beds and mats, which are the company's largest category in the line, are primarily made of sponge, polyester and nonwoven fabric. They range from $1 to $30 per piece, depending on the size. Mats for kittens measure 30 to 40cm in diameter, while versions for adult cats are 100 to 120cm. Upscale models feature zippers and

handles

for

portability.

Some

use

hook-and-loop

tape

for

closure.

Pet toys are usually priced from $0.10 to $10 per piece, although some cat trees may reach $30 each. The main raw materials are rope, cotton yarn, vinyl rubber and polyester. Cat trees are mostly made of sisal

rope

and

plush.

Most pet feeders are molded from PP, PVC or PC, while some high-end versions come in stainless steel or chrome. Anhui Light's in-house R&D department releases about 10 new designs each month. The team takes two or three days to finish a sample. Delivery is within 30 days. Creating more novelty models will be the key focus in coming months.

The country of China is one of the fastest developing country in the world and the economy of the country is literally thriving. In the continent of Asia, the country of China has an economy that is growing by leaps and bounds. The import and export sector of the country contributes to its economic well being. The country of China has a number of products that they export and through export they achieve a lot of foreign revenue. The China export market is pretty wide spreading and wide ranging. Pet supplies export in China form an integral part of export in the country of China and Top Chinese export products . China Pet supplies export includes pet furnitures, pet toys, pet carrier bags, pet cloth, pet toys, pet shoes, pet feeders, pet cleanup, pet grooming

and

other

items

which

form

the

core

of

Pet

supplies

export

in

China.

There are a number of manufacturers that produce these products and in many countries these Pet supplies export in China products are very popular. These supplies are exported from the country of China to countries spreading across various parts in the several continents. Transportation and communication facilities have improved and for that reason export has undergone a remarkable face lift. Even a few decades ago, the trade relationship of the country of China and other nations was not very healthy, but gradually the trade prospect has increased quite a bit and at present it is the major area that earns revenue for the country

of

China.

Among pet furnitures, the pet tunnel is in great demand. A pet tunnel is a perfect place where a pet can live as well as play. Pet tunnels can be of many vibrant colors with zipped back and has strap so that it can be easily hung on he wall when not in use. A dog bed is also a very promising product for Pet supplies export in China. Dog beds are required all over the world and various

shapes and sizes are available. The size of the bed depends on the size of the dog. This product is in demand in America and Europe. Various types of pet carrier bags are manufactured by many Chinese companies providing pet supplies. These bags are very attractive and can be perfect for pets all over the world. Pet toys include rubber tug pet toy, dog toy, cat toy, dag toy, bird toy, pet tennis ball, flying disk and many more. These things are perfect recreational products and items for pets.

There are a variety of pet clothes available for pets which are beautiful and having very vibrant colors. Pet feeders are very necessary for pets as their feeding is a very essential aspect. Pet bowel, nylon feeder, pet food fork, water bowl, travel water bowl, pet bowl double and many more such products. Pet grooming products and pet clean up products are exported too in large quantities. Pet supplies export in China is facilitated by the variety of products that the Chinese pet supplies manufacturers produce

(2) Potentials to develop in US and other markets 

According to an undated posting on the U. S. Commercial service website, total market for pet industry was estimated at US$4.3-billion for 2006 with a growth rate: 3% - 5% per year for the near term. Major segments are: - pet food (65%) - pet supplies and accessories (25%) (<--- around US$1,075,000,000 ) - the cost of purchasing the pets themselves (10%)



The pet population of US is high and growing. There are an estimated: - 7.3-million cats - 5.1-million dogs - 4.5-million birds - 5.9 million other small animals - 10-million tropical fish



When PET in US looked at sales by pet group, it found that sales volume: - the two major groups Cats and Dogs: -0.1% in 2006. - "small mammals" group: +2.2% - "ornamental bird" group: +3.0%



Ranking of Volume in different nationwide markets: At 9.6-million, 1st: United States 2nd: Brazil 3th: China

4th: Japan 5th: Russia



Selling Point: Nice packaging as a gift

(3) Product and Price Trend

The manufacturers have been exporting the featured line, and sources FDA- and EN 71-compliant designs from 30 ISO 9001:2000- certified partner factories in Zhejiang and Jiangsu provinces. - All pet accessories products are exported, with OEM orders = 8% - Kennels, beds and mats (primarily made of sponge, polyester and nonwoven fabric) - Price range: $1 to $30 per piece, depending on the size - Mats for kittens: 30 to 40cm in diameter, while versions for adult cats: 100 to 120cm) - Pet toys: from $0.10 to $10 per piece for Ex-Factory cost (manufacturing countries: South East Asia) - main raw materials are rope, cotton yarn, vinyl rubber and polyester - Cat trees are mostly made of sisal rope and plush - Most pet feeders are molded from PP, PVC or PC, while high-end versions come in stainless steel or chrome - Average rate of PD by SME: about 10 new designs per month - SME takes two or three days to finish a sample. Delivery is within 30 days - Creating more novelty models will be the key focus in coming years

On the other hand, American ginseng is widely popular in Hong Kong market as well, because American ginseng is milder than ginseng from other countries and therefore can be consumed more frequently. It results in the rising demand on American ginseng, targeting on medium-ended market at a competitive price level. Owing to the differential quality of ginseng and its usage, the target market between American and Korean ginseng is totally different. Apart from Korea and America, ginseng roots are also supplied by Mainland China in Hong Kong market. This Chinese-made ginseng is offering great variety and often provides similar types to Korean ginseng. When compared to original Korean ginseng, Chinese ginseng generally costs lower. Since Chinese ginseng is at lower price, and it dominates medium to lower-ended market, it helps to raise the popularity of using Chinese ginseng, which is more affordable by most consumers. The most popular South Korean ginseng is the brand “Cheong-Kwan-Jang” which has dominated in the ginseng market in Hong Kong, which provides only the 6-year-old red ginseng. Red ginseng is also more popular than white ginseng, and it can easily be reached by the local consumers. The red ginseng is believed to provide

the original medicinal values whereas the white ginseng is further processed and the medicinal value is believed to be lower. The following table shows the consumer prices of South Korean ginseng of 6-year-old available in the market. Pet Item

Photo

Tick Tock Teaser

Description Two moving targets for non-stop predatory activity

Retailing Price (USD) 21.99

Stimulates indoor-only cats to keep them mentally and physically fit Kitty Kat Circus

includes four catnip-infused toys and an array of other goodies to keep cat entertained for hours.

Kitty Hoots Catchables Crunchy Cat Toys

3.79

Made of Thermal Plastic Elastamer

Planet Dog OrbeeTuff

Pet Furniture Cat's Meow Kitty Gym

Little Oak Cat Gym

24.99

Photo

Description satisfy your cat (or cat's) need to survey his surroundings

provides multi-level climbing layers, several scratching areas, and plenty of resting space

13

Retailing Price (USD) 269.00

619.00

Cats Roost Activity Center

Doggie Bed & Bath

Personalized Pet Feeder

Modular Cat Playground

Plastic container

Dog House Durable Plastic

All in one activity center will provide hours of fun and hours of rest.

The small dog's version of a litter box

129.99

349

Different styles of feeders to show customized message to dogs

29.99

provides every activity a cat needs to lead a healthy and happy lifestyle

89.95

large capacity box to carry pets

21.49

Solid plastic dog kennel. Weather durable and high quality.

45.00

Comparatively speaking, the Korean ginseng from North Korea is less popular in Hong Kong market. According to the sales person of Sun Wah Co., they comment that the price of North Korean ginseng is relatively lower in price and higher in quality when compared with South Korean one. However, the import from North Korea is limited, and consumers do not fully understand the differences of ginseng ingredient between North Korean and South Korean one. The consumer confidence and impression towards North Korean ginseng is also rather weak, for the sake of

unstable political and economical environment in North Korea. Only few options are available for the North Korean 6-year-old ginseng in Hong Kong:

Apart from those red ginseng cultivated in South and North Korea, there are mainly three major types of Chinese ginseng: Jilin ginseng (吉林蔘), Chang Bai Shan ginseng (長白山人蔘) and Shizhu ginseng (石柱蔘), in which Jilin red ginseng are more popular to consumers.

Unlike the famous Korean brand “Cheong-Kwan-Jang”, many of the current red ginseng root do not have any brand names or standard bottle package, the price ranges from HK$ 55 – 139 per catty. As informed by retailers, Japanese ginseng and Australian ginseng is also not common in Hong Kong market where a majority of ginseng is imported from America, Korea and Mainland China. Except Korean ginseng, American ginseng is also very popular among consumers and is widely available in many Chinese medicine stores in many forms, for example gift packing, or small and economical packing.

(4) Competition and Challenge Pet product industry is thriving in China. However, numerous challenges are taken to threaten and to curb the continuous growth. The following are some of the key trends in China's pet product manufacturing industry:

   

Stricter product standards, quality turmoil of made-in-China pet products in export in 2007 Rising material and labor costs Yuan's revaluation To protect margins, the majority of China companies will raise their prices in the next 6 months due to the inability to absorb swelling expenditure.



Many will also expand capacity to achieve better economies of scale.



Some pet supplies manufacturers in China are shifting their focus to upscale, human-style products under efforts to try to guarantee price upward adjustments.



This is likewise a means of evading the low-end sector, where competition is more aggressive.



New entrants will continue to join the line, most of which are companies belonging to related, struggling or seasonal industries.



More suppliers of pet collars and leashes, kennels and carriers, and clothing will be coming up with novelty, human-style designs.

The following shows some ginseng products available in Hong Kong market for reference: Brand Eu Yan Sang

Product

Price (HKD) 580

Wild American Ginseng and Cordyceps Capsules 50’s Eu Yan Sang

380

Wild American Ginseng & Herba Dendrobii Capsules 50’s Tung Fong Hung

169

American Ginseng Essence 60’s Wai Yuen Tong

338

Heaven Ginseng Capsule 60’s Fancl House

160

Korean Ginseng Extract 90’s Wah Sze

880

Panax Ginseng Collagen 150g

Wah Sze

780

Essence of panax ginseng & panax notoginseng 150g

(4) Import & Export Statistics

ports the value of Hong Kong’s imports of GINSENG ROOTS, FRESH OR DRIED, WHETHER OR NOT CUT, CRUSHED OR POWDERED (HS 121120) (in thousand US dollar) by Top 8 countries/regions. The value of total imports is decreased by 27.7% in 2005 to US$97.1 million, and increased by 2.8% to US$71.8 million in the first ten months of 2006, compared with the same period in 2005. The leading position belongs to Canada, which contributes 56.2% and 56.1% of the import values of the said items in 2005 and the first ten months of 2006 respectively, followed by Republic of Korea (2005: 2.3%; October 2006: 22.3%) and USA (2005: 21.4%; October 2006: 15.2%).

Figure. The American Pet Products Manufacturers Association Releases ALL Time High 2007 Pet Industry Spending of USD 40 Billion Category

2006

2007

% Growth

($ Billion)

($ Billion)

2007

Pet Food

15.4

16.1

4.8

Pet Supplies

9.3

9.9

6.5

Veterlinary Care

9.2

9.8

6.7

Live Animal Purchase

1.9

2.1

8.4

Other Service

2.7

2.9

6.5

Total

38.5

40.8

5.9

Source: Business-Stat of APPMA The above figure reports the value of America’s intake of spending of Pet Food, Pet Supplies, Veterlinary Care, etc (in Billion US dollar). The value of total spending in 2007 has increased by 5.9% to US$40.8 billion, compared with US$38.5 billion in 2006.

(5) Import Duties As HKSAR is a free trade port, there is not tariff on general imports, including ginseng.

2. Potential Buyers

1. Company Name Address Contact Person Tel Fax E-mail No. of Staff in HK Establish Year Business Nature

PetSmart, Inc.

http://www.petsmart.com/home/index.jsp 5 1993 the largest specialty retailer of services and solutions for the lifetime needs of pets Major Importing Country United States Business Experience with Yes Korea Handling Items Health food, Pet Supplies Remarks The company operates more than 1075 pet stores in the United States and Canada, a growing number of in-store PetsHotels cat and dog boarding facilities and Doggie Day Camps, and is a leading online provider of pet supplies and pet care information. PetSmart provides a broad range of competitively priced pet food and pet supplies; offers complete pet training, pet grooming and pet adoption services.

2. Company Name PetWholesaler.com Address Contact Person Tel Fax (852) 25544023 Email http://www.petwholesaler.com/ No. of Staff in HK Establish Year Business Nature Wholesaler, Distributor Major Importing Countries Business Experience with Yes Korea Handling Items Web portal for Pet Retailers to purchase wholesale pet supplies. Petwholesaler Remarks offers supplies for Dogs, Cats, Birds, Reptiles, Horses, Aquarium, Small Animals, Exotic Animals etc from hundreds of manufacturers and distributors at greatly discounted prices

3. Company Name Address Contact Person

Lung Cheong Hong Medicine Co Ltd G/F, 15 Queen's Road West, Sai Ying Pun, Hong Kong Mr Hok-Chee Hui/ Director

Mr Chan Tel (852) 25440818 Fax (852) 25412441 Email [email protected] No. of Staff in HK 15 Established Year 1990 Business Nature Importer Major Importing Countries China Business Experience with No Korea Handling Items Deer Antler, Ginseng and Chinese Medicine Remarks This company handles a wide range of Chinese medicine and medicinal herbs such as deer antler and ginseng products.

As per Mr Chan’s information, they usually import their products from Mainland China. He commented that the market of the said item is quite saturated in Hong Kong and it would be quite difficult to further develop the market. He said that the price range mainly depends on the quality of the ginseng. He would first like to receive more information for further study of the company, quality of products and price range.

4. Company Name Address Contact Person

Tel Fax E-mail No. of Staff in HK Establish Year Business Nature Major Importing Country Business Experience with Korea Handling Items

Korea Ginseng Centre Limited Room 9-10, 25/F, Nan Fung Tower, 173 Des Voeux Road Central, Central, Hong Kong Mr Peter Chiu/ Director Ms Lee (852) 25444822 / (852) 25457700 (852) 25419946 [email protected] 5 1974 Importer China Yes Ginseng and health drinks

Remarks

This company mainly handles Ginseng and health drinks such as Ginseng tea from Korea and USA.

This company is the official agent of Korean Red Ginseng for Ginseng Tea and Ginseng. As per Ms Lee’s information, she would like to receive more information for further study as they would like to expand their product line and provide more choices to their clients to choose from. Their major concerns of importing the said items would be price and quality.

5. Company Name Address

Hon Man Medicine (Wing Lee) Company Room 6, 29/F, Asia Trade Centre, 79 Lei Muk Road, Kwai Chung, New Territories, Hong Kong Contact Person Ms Chow Miu Tao, Marketing Manager Tel (852) 24298070 Fax (852) 24259318 Email [email protected] No. of Staff in HK 9 Establish Year 1990 Business Nature Import, Export, Agents Major Importing Country China Business Experience with No Korea Handling Items Chinese Herbal Medicine and Health Food Remarks This company the importer, exporter, as well as agents for health food, medicine and Chinese medicine.

They are importing form Belgium and China, and their target markets are Asia, mainly Mainland China.

They are interested in your company’s

products because they are always looking for health food that is suitable for the market, and they believe Hong Kong people accepts this kind of health food and supplement. The major concerns are packaging, ingredients and demand of the product.

6. Company Name Address Contact Person Tel

Signature Stores at Culture Homes Ltd G/F – 2/F, Kingston Mansion, 20 Wai Fung St., Ap Lei Chau, Hong Kong Ms Ivy Chiu (Officer – Procurement) (852) 35538497

Fax Email Website No. of Staff in HK Business Nature Major Importing Countries Handling Items Remarks

(852) 27710098 [email protected] www.checl.com www.checl.com Elderly Centre, Elderly Living, Wholesale Center, Retail Stores Worldwide Health products and food suitable for the elderly This company handles a large variety of business including elderly center, elderly living homes, wholesale center and retail stores.

This company is interested in health food and products suitable for the elderly. It is handling health food such as Ling Zhi, chicken essence and vitamins. Ms Chiu would like to receive more information from your company first to decide whether the said item is suitable for their product line.

3. Useful Information

(1) Related Fairs & Events International Conference & Exhibition of the Modernization of Chinese Medicine & Health Products

-

Organised by the Hong Kong Trade Development Council and Modernized Chinese Medicine International Association Ltd

-

Suitable for Chinese Medicine, Health Supplement, Health Care and Therapy, and Research & Development etc. exhibitors

-

9,152 trade buyers and 231,000 public buyers attend the last fair

-

Next exhibition: 16-20 August 2007, Hong Kong Convention & Exhibition Center

Health Care Expo 2007 -

Organised by the Hongkong-Asia Exhibition (Holdings) Limited

-

Suitable for Fitness items like Chinese & Western diet medicines and fitness courses, Chinese and Western medicines such has Chinese herbs and healthy capsule, and Health products such as nutritional products and health therapies’ exhibitors

-

New Exhibition

-

Next exhibition: 1 – 3 June 2007, Hong Kong Convention & Exhibition Center

(2) Business Practices

-

Since Hong Kong companies have very fast working pace, reply or feedback should be given to them immediately since they do not usually have the patience to wait. Effective communication with English is a must since many Hong Kong companies worry about the communication issue when considering working with Korean companies.

(3) Regulations According to the Chinese Medicine Ordinance, Ginseng is the Chinese herbal medicines, which specified in the Chinese Medicine Ordinance (Cap 549 Schedule 2), passed by the Legislative Council on 14 July 1999. Under the regulations, all persons, either wholesalers or retailers, should be qualified and registered to sell the proprietary Chinese medicines. The two main key points of the ordinance are: The licensing of Chinese medicines traders: Chinese medicines traders who wish to engage in the business of retail and wholesale of Chinese herbal medicines as well as the wholesale and manufacturing business of proprietary Chinese medicines must first apply for the relevant license from the Chinese Medicines Board. They may continue operating their own business only after they have obtained the license. The registration of proprietary Chinese medicines: All kinds of proprietary Chinese medicines must first be registered by the Chinese Medicines Board before they can be imported, manufactured and distributed in HK. (Details will be discussed in the later part of this section) Details

of

this

ordinance

are

available

in

the

Chinese

Medicine

Council

of

Hong

Kong

(http://www.cmchk.org.hk/). Under the Import and Export Ordinance (Cap.60), any person who wishes to import or export any of the Chinese herbal medicines specified in Schedule 1 or five types of Chinese herbal medicines specified in Schedule 2 of the Chinese Medicine Ordinance (including Radix Clematidis, Flos Campsis, Processed Radix Aconiti, Processed Radix Aconiti Kusnezoffii, and Radix Gentianae), or any proprietary Chinese medicines, must first apply for an import or export licence. Ginseng root is not under these two schedules; no licence is required when importing the said item to Hong Kong.

However, the import/export control of Chinese herbal

medicines will be implemented at a later stage and relevant details and application procedures will be announced later, The supplier should aware of the implementation of the said policy if they are planning to export ginseng to Hong Kong.

4. Reference

Hong Kong Trade Development Council Hong Kong Census and Statistics Department

The American Pet Products Manufacturer's Association (APPMA) Oriental Daily News IBISWorld America's richest source of business information http://www.ChinaSourcingReports.com/petproduct08

http://www.chinaexportxl.com/pet-supplies/

Large Plastic Dog House

Bone-shaped Pet Bowl

Pet Toys with blended material (e.g. Plastic and Rope)