Look under the hood, the same applies to canmaking machines

Look under the hood

Occasionally some of our Chinese clients claimed that prices of our products that we deal with appeared to be uncompetitive. I know our prices are competitive, otherwise, we won’t be in business and doing so well for over 20 years.  China is a highly competitive market as there are a lot of suppliers and agents setting up offices there and are trying to undercut each other so as to survive.

“Look under the hood”. It is the message that I have been trying to convey to those clients in question. Buying parts for canmaking machines are no different from buying parts for a car. Often times, the clients in question approached us with parts involving Original Equipment Manufacturers (OEM), such as Stolle, Belvac etc. The serial numbers provided by them mostly are those of the OEM. Therefore, we have to go to such OEM for quoting the relevant parts. OEM prices are understandably more expensive. It is like going to a Toyota dealership to buy a carburetor, an air filter, or spark plugs or a set of tires when it comes to maintenance of a Toyota car.

However, if one looks into each of the OEM machines, i.e. look under the hood, one is likely to find that a lot of the parts are not manufactured by OEM. For instance, you may find a ABC Motor in an OEM machine. If a client could provide the serial number for such motor to us, we can go to ABC Motor and ask for a quote for that particular motor. I am sure we can provide the clients with very competitive prices for that motor, and likewise for other parts. At the end of the day it will mean tremendous savings to the clients.

AMRO’s edges

In this respect, AMRO’s competitive edges are:

1      We are able to obtain competitive prices for parts of some of the US small manufacturers. As we are a leading provider of US parts we are able to get bigger discounts than our competitors  from those manufacturers due to our long dealings and relationship with them.

2.     We  have our own warehouse in the US. We are able to consolidate orders of the various manufacturers into one shipment at our warehouse. Therefore, the clients can save freight charges and administration costs. Some of my Chinese clients incline to deal with the OEM or their agents because they do not want to deal with too many manufacturers. However, this problem can be solved by dealing with AMRO, one source for many manufacturers. Further. those clients by going to the OEM or their agents they are sometimes paying more for the parts then they realize, as explained above.

A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 2)

It is a continuation of my preceding blog of the same title.

About WLJ the company

The history of WJL dated back to 170 years ago or the Qing dynasty. History has it that the legendary, Wang Lao Ji, a Chinese medicine practitioner, developed a formula for certain herbal tea, which was said to be effective for curing an epidemic in Guangzhou at that time. The tea was so popular that people from afar came to Wang’s  medicine shop to seek his medical advice and consumed the tea.  The formula was passed from generations to generations. The production of the tea became a business. It is said that several branches of the Wang’s family claimed to have the original formula.  When Communists took control of China in 1949, one branch of the Wong family moved to Hong Kong and continued the business under a Hong Kong company, while the business of the  Mainland WLJ was taken over by the China government.

The Hong Kong WLJ has been selling the tea in Hong Kong and overseas under the brand, Wong Lo Kut, which is the transliteration of its phonetic Cantonese name. WLJ was sold in Tetra paks until recently. The tea was only massively produced in cans in 2004. Prior to that it was thought that the tea would cause certain chemical reactions with metals, and therefore not compatible with cans. As a matter of fact the China WLJ thought it had little use for the related patent that it granted the use of license thereof to the Hong Kong WLJ for 20 years at a nominal fee.

After the Hong Kong company obtained the license, it undertook an aggressive marketing strategy in China by promoting the tea on national TV, buses, billboards and direct sales at supermarkets and restaurants. The tea soon became the number one drink in China. That woke up the China WLJ as it had apparently let go a money generating machine on the cheap. It is said that the China WLJ has been selling the tea parallelly in China. It is further said that there is an going legal battle between the two companies over the rights to sell the tea in China. One may have to look at the printing on the can to find out which is the producer, the Hong Kong or the China WLJ.

About WLJ the drink

A more appropriate description for the kind of tea that WLJ belongs to  is “cool tea” or liangcha 凉茶, a generic name for the kind of herbal tea in question. Liangcha used to be commonly found in family run liangcha shops in Hong Kong or could be home brewed each according to its own formula. Due to the change of demography in Hong Kong, less and less of those shops could be found, let alone the home brewed practice.

According to traditional Chinese medical theory, liangcha, is known for being able to remove the bodily heatness from one’s body and almost all symptoms of minor illnesses are due to excessive bodily or internal heatness (neiri 内热).  Such  symptoms can be dryness or cracks on lips, ulcers on gum or tongue, hot air in nasal cavity,  swelling of the throat, tiredness of the whole body, loss of appetite and etc..  If you mention any one of such symptoms to a Chinese, you don’t need expert medical advice, he or she, young or old, is likely to advise you to drink liangcha, to help reduce your bodily heatness,jianghuo 降火, hence the name cool tea. For this reason, one should not take “cool tea” literally as the tea does not necessarily have to be drunk cold. Quite the contrary, the proper way is to drink it while it is hot.  The coolness of the tea refers to one’s bodily heatness. If one has excess of the latter, he needs to be “cooled down” until a balance is restored.

Traditionally, it is not a cool thing (see the pun) to drink the cool tea in front of other people as it is bitter and is usually drunk from a rice bowl. However, WLJ added sugar to its tea and HKWLJ took it a step further by producing the drink in cans and undertook massive promotion efforts. Now WLJ can be consumed widely in restaurants and other public places. It is now a cool thing to do so after or with a meal, a hotpot dinner or a BBQ especially Chinese foods are known for their spiciness and greasiness, which are among the major causes for the excessive bodily heatness. Besides, some of the Chinese smokers and drinkers see WLJ as a soothing medicine, which has the effect of lessening the occurrence of illnesses or diseases brought on by such habits. No wonder WLJ literally sells like Cokes in China or should I say better than Cokes.

A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 1)

wangloji can2Guess which is the best selling drink in China? Coke? Pepsi? No, it is Wangloji 王老吉 (WLJ), which is little known to other peoples outside of China other than the Chinese communities. Look at the photo on the  left, one wonders what is inside this ordinarily looking can (I am being nice) and why it is so popular in China. WLJ is a kind of traditional Chinese herbal tea. According to a reliable source sales  of canned WLJ amounted to RMB2.5 billion or US$365 million in 2008, which surpassed sales of Coca Cola in the country.

What is relevant to the canmaking industry is that the canned WLJ emerged from its obscurity only in or about 2004, when the company first started to sell the drink in cans. At that time, WLJ was sold only in Tetra paks. The China WLJ, which holds the license, thought that WLJ in cans would have no market at all and  granted the use of the license to a Hong Kong company, which is related through history, at a low price for 20 years. Herbal teas in cans were then considered a revolutionary idea.

The type of cans currently used by WLJ belongs to the kind known as 3 piece steel can. The company is taking  another  innovative move this year by changing the cans to 2 piece aluminum. It is said  that the state owned corporation, COFCO, is building a huge plant in Wuhan for producing 2 piece cans mainly to cope with WLJ’s demands.

I am not an expert on canmaking technology. Nevertheless, I consider WLJ’s switching to 2 piece cans a bold move.  Some of the experts in the idnustry have doubts that herbal teas are chemically compatible with aluminum, the metal which most 2 piece cans are made of. Further, WLJ, being a non-carbonated drink, is said to be not suitable for a 2 piece can which relies on the gas of the liquid inside to support the soft aluminium wall and keep it in shape. I think WLJ will face a lot of challenges on the technical front for switching over to 2 piece cans. That said, I was told that WJL by doing so it could save about 15% of the costs for each can it produces and on the whole the company could save hundred millions of dollars in costs each year. It will save on materials costs as aluminium is cheaper than steel and also on operating costs as the former is a lighter material, hence, cheaper transportation and storing costs. I was told that WLJ’s competitor, Red Bull, which is in a similiar situtaion, is watching the related developments closely. If WLJ’s move is proven to be successful, Red Bull, will likely to follow suit.

That is enough on the tecnical aspect or I should say that is all I  know. As a matter of fact, the history of WLJ is quite intriguing and so is the drink. I will talk more on these two subjects in the subsequent blog.