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BRITA in China A case study Markus Hankammer, CEO BRITA Group June 2014
BRITA in China A case study
Markus Hankammer, CEO BRITA Group
June 2014
Agenda:
• Who is BRITA? – a short introduction
• Case study China
Vision
“We will change the way people drink water sustainably.”
Mission
“We offer to everybody the best possible
drinking water experience according to
their individual expectations.” German Water Partnership Berlin
June 2014
Individual needs: Supply of BRITA optimized water
Direct from the
water supply Water filter jugs
Professional
appliances
Integrated into
domestic appliances German Water Partnership Berlin June 2014
German Water Partnership Berlin June 2014
CO2 Filtration
Cooling and heating German Water Partnership Berlin June 2014
1966 Founded by
Heinz Hankammer
1970 BRITA invents the water
filter jug for household use
1980 Start of international business
and the Professional segment
1999 Markus Hankammer becomes
CEO of the BRITA Group
2004 “BRITA Integrated
Solutions” business idea
launched
2013 Establishment of new
subsidiaries in the Far East
BRITA® History
2008 B.I.G. strategy: basis of
BRITA World of Water –
the world of individualized
Water/ strategy adjustment
in 2013 with BRITA BIG50
2016 50th anniversary
of the company German Water Partnership Berlin June 2014
BRITA® Turnover Distribution
20%
in Germany
80%
outside Germany
German Water Partnership Berlin June 2014
250 million
people
enjoy BRITA®
optimized water
a day.
This corresponds to
11 billion liters
of water run through
BRITA® filters per year.
350 liters
of water per
second.
German Water Partnership Berlin June 2014
BRITA® Quality
BRITA
quality guarantee
TÜV seal
DIN EN ISO 9001 and 14001,
OHSAS 18001 and
Continuous Improvement Process CIP
Complies with food
standard regulations in
the individual countries German Water Partnership Berlin June 2014
Case study China
The China Journey Comparing it to the Mount Everest endeavor is appropriate. Overwhelming, imposing and intimidating, the Himalaya is the highest within the border of China, as well as in the world. At the top of the mountain it is breath-taking, the achievement marks the history and forever changes the lives of everyone involved. The reward is simply irresistible.
It is appropriate at another level. This journey has many unpredictables on its way; the team has to work together; it has to keep the communication open with the base camp.
Careful planning, right gears, vitally important communication, flexibility and ability to deal with the local conditions are key to success—for the climb to Mount Everest, as well as our journey in China. PWC concluded this in its recent report: China is a market beyond your comfort zone. Source: PWC, Doing Business and Investing
in China
Be sure about your own status!
The Brand
…
Understanding of China’s complexity and associated risks.
…
Possibly world’s largest water filtration market
Market leadership still open for contest
…
Competitors are many; they play hard & not to the rules. E.g. copycats
China is an entirely different game that calls for different governance model.
…
BRITA SWOT
S
T O
W
German Water Partnership Berlin June 2014
Understand the market status: China’s Water Problems
Water shortage 25,000 missing rivers
Sense of resignation
Severe pollution 90% of surface water is polluted
Regional water differences
Varied water quality
Social &
Med
ia Am
plificatio
n
Beautiful China Initiative
Government denial & lack of transparency
Stricter enforcement of laws
Lost credibility
No new laws
The situation is critical. Is the PERCEPTION even worse?
PEACE OF MIND Is what consumers look for in a world of negative news
Water Reality Government Actions
Source: China EPA 2007
German Water Partnership Berlin June 2014
China USA JAP UK DE
402
115
49 27 40
HH in mio An assumed long-term growth potential in China to a level 30% HH-Penetration would equal:
120.600.000 water filtration systems.
No other market worldwide is able to offer this growth perspective (!)
Understand the overall picture
German Water Partnership Berlin June 2014
Understand the local market
German Water Partnership Berlin June 2014 17
Understand the local market
The Chinese water filtration market is strongly fragmented and highly competitive
Sources: EAC research
1
2
3
4
5
6
Strong market fragmentation
Few larger-sized national and international water filtration companies and numerous smaller-sized local companies
High market competition
8-10 relevant competitors with none having a market share of > 20% (Western market tend to have 2-3 relevant competitors)
Market not as mature as expected
Overall market maturity is lower than expected (even in some tier 1 cities), with Shanghai being the most developed market
Distribution focus between international and national companies differs
Local companies such as Angel or Midea seem to be better distributed in tier 2 and 3 cities than international competitors
Success factor product portfolio
Most successful water filtration companies have a broad product portfolio and originally come from POE business
There is no “one big step” to become the leading water filtration company in China
Acquiring a local company improves ones future market position but not necessarily increases ones market share to > 20%
German Water Partnership Berlin June 2014
German Water Partnership Berlin June 2014
Understand the challenges and respect the differences
Sources: Asia Society by Kent Kedl
5 biggest challenges to doing business in China
1 Understand why you are doing business in China
• Find out what your motivation is and why you want to enter China
• Make sure that the entire management agrees as China is commitment for the long haul
2 Learn how to deal with a lack of information
• Get used to making decisions on a limited information base (“crossing the river by feeling for stones”)
• An experimental, learning-by-doing approach tends to pay off
3 Figure out the “story behind the story”
• When doing business with Chinese find out where the person and his money is from and/or who stands behind him
• Never stop asking questions
4 Be aware of the role of the government
• Although more and more companies are being privatized, local government involvement and control remains high
• Make sure to know what the local governments thinks before entering into a cooperation with a Chinese company
5 Avoid generalizations and acknowledge China's regional complexities
• Understand China as a complex market place, there is no one definition how to do business in China
• Remember that business in China is always local and can be quite different between tier 1, 2, 3 and 4 cities
German Water Partnership Berlin June 2014
German Water Partnership Berlin June 2014
Understand the biggest hurdles • TOP 3: compliance, customs, certification
• Compliance: established clear guidelines and structures (e.g. a supervisor) for
a clean business from the beginning
• Customs: problems such as an abrupt change of the customs code for our product
• Certifications for our products: difficult or bad experiences with both the regulatory/political bodies Apart from that: intercultural misunderstandings, bureaucracy, sie of the market (logistics); in future: retention of talents! German Water Partnership Berlin
June 2014
BRITA China: The key factors for success • High quality products, German brand (security/health) • Willingness to go for a longterm investment and a sustainable development • Dedicated team of experienced specialists at the BRITA headquarter in Germany • Committed local team of BRITA China • A strong network: regular exchange with other Mittelstand (middle sized companies)
in order to learn from their best practice or avoid their mistakes; highly professional support from both the German Chamber of Foreign Commerce (AHK) in China and from the German Embassies; external specialists/agents
• A clear objective – but within that framework sufficient flexibility!
=> What would certainly have helped: To have dedicated information centres that provide professional, reliable information and support for companies going to China already here in Germany
German Water Partnership Berlin June 2014
BRITA China: achievements after 12 month and next steps
• a „black zero“ from the start.
• 15 mio. € revenue at the end of the first 12 month; best ever start of a new BRITA market!
• Expanding business from Shanghai to Peking and Guangzhou
• Building a physical distribution in addition to the existing online channel
• Increase depth of value chain locally: sourcing, manufaturing, development, …
• Ensure a change management process within the company – from a europe-centred business to a truly global one!
• Plan a very aggressive growth for China
German Water Partnership Berlin June 2014
Thank you !
Berlin June 2014
