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.

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Canneed’s list of customers

  • Coca-Cola Beverages (China)
  • Snow Breweries (China)
  • Pepsi Cola Beverage (China)
  • Yeo Hiap Seng (Guangzhou)
  • Budweiser (Wuhan) International
  • Rexam Beverage Can
  • Shantou oriental Technology
  • Hangzhou Wahaha Group
  • Jianlibao
  • Fute Container Jiaduobao Drink & Food
  • Carlsberg Brewery (Guangdong)
  • Shanghai Maling Aquarius Guangdong
  • YASHILI Group
  • Baosteel Can Making
  • Mead Johnson Nutrition (China)
  • Zhujiang Brewery
  • Tongfa Group
  • Red Bull
  • COFCO Packing
  • Tsingtao Brewery
  • Jianlibao Beverage
  • ORG Can Making
  • Yanjing Beer Group
  • LEE KUM KEE
  • Tibet Lhasa Brewery Company Limited
  • Nestlé Qingdao Limited
  • Wuzhou Zhizhonghe Health Food Co., Ltd.
  • Guangzhou Watson’s Food & Beverage Co. Ltd.
  • Inbev (China) Zhedong Brewery Company
  • Canpac Vietnam Pte Ltd
  • Saudi Arabian Packaging Industry
  • Impress USA
  • Kian Joo can Envases Comeca Alfa Interfood
  • Asko-Vogel & noot
  • PT. Indonesia Multi-Colour Printing
  • PT. Ancol Terang MPI Hindustan Tin Works
  • PT. Balihai Brewery Indonesia
  • Modern Co. for Food Products Fabrica de Envases del Pacifico Vinayak Industries
  • Picopack ZRT.
  • Beverage House
  • Bickfords Australia Pty Ltd
  • Evergreen Drums & Cans Pvt. Ltd.
  • Envases Layta
  • MetalPren
  • Owens-Illinois Peru S.A
  • Emarati Foodstuff & Plastic Packing co.
  • Tech Pro Packing S.L
  • Rheem South Africa (PTY) LTD
  • Witec GmbH
  • Egyptian Canning Best

Per information provided by Canneed

China banks are becoming world’s financial powerhouse

Readers of my blog, although not too many of them, know that I from time to time criticized my Chinese clients. In my last blog, I criticized the un- professionalism of a China bank. It seems that I am a China basher. However, as a matter of fact I am not. I am just using this blog to air my grievances. It is interesting to note that China bashing usually attracts more blog readers than otherwise. If it helps my blog, I don’t mind being seen as one of them. Further, I know the (Mainland) Chinese would not read my blog simply due to the fact all foreign social nets, such as WordPress, Twitter, Facebook, Google Blog and others, are blocked  in China. I can criticise my Chinese clients all I want and I won’t lose their businesses. The same cannot be said about my US principal. If I criticise them,  they may read it (although I doubt it) I may just as well kiss my job good-bye.

Talking about China Banks, I would like to bring up an interesting question. Recently, I came across a Chinese client who intended to pay for the goods ordered from us by a letter of credit (LC). The LC would be opened by one of the three largest state banks in China. When I mention “a China Bank” hereinbelow, I am referring to one of such banks.  My question is would you as a seller accept a LC opened by a China bank?. Personally, I would. A LC is essentially a bank guarantee. Therefore, the issue is whether a China bank is an acceptable risk. Do you know that currently the 3 largest banks in the world by market capitalisation are the 3 largest in China, namely Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC), and in that order? It is the reason this blog is entitled “China Banks are becoming the world’s financial powerhouse”. I have so much confidence in them that over 7o% of my stock portfolio are invested in ICBC and BOC and I am sitting on very nice profits on these two stocks (see I am a China fan and not a basher).

Being one of the largest banks in the world and being a state bank, I can’t see how a China Bank could renege or default on a LC. Therefore my answer to the above question as to whether one could accept such LC is an undeniable YES.  What is your view?

The magic of the SWIFT Codes

I had a busy day today. I spent almost half a day trying to sort out a payment which a China client claimed to have made but was returned by the remitting Chinese bank. The client claimed that they had following the payment instructions appearing on our invoice to the letter. So if there were an error it could only be that the banking information provided by us was incorrect. Without checking,  I knew the client’s claim did not have a leg to stand on.  Personally, I think any company which got the instructions for making payments on its invoice wrong should not be in business at all.  I knew our company would not be one of them. Further, our bank, Citibank, is an international bank. I did not doubt for a minute their ability in handling such transaction.

The ball was clearly on the client’s court. I wrote an e-mail to the client asking them to sort out the matter with their bank. Apparently the client was not happy that I was pointing the finger at them or their bank. The client reiterated that it had done everything right and was trying to pass the ball to me.

Finally, the client sent me the note that Citibank sent to the remitting bank. When I looked at the note, lo and behold, I knew where the problem was.  Citibank was advising the remitting bank to comply with the SWIFT practice for remittance of such sort. Nevertheless I could not pin down what exactly went wrong. Thanks to my colleague’s  advice, the remitting bank apparently ommitted to put down the relevant SWIFT code. No wonder the remittance was rejected.

SWIFT codes are like branch codes but are applicable to banks when making overseas money transfers. The relevant SWIFT codes could easily be obtained through searching the SWIFT portal. I did that on the Citibank New York office by entering the name of the bank at the said portal. I was surprised why the China remitting bank, which should be familiar with international banking practices, could have overlooked such an important piece of information.

More on China banks tomorrow.

China, one tough market to crack

I had a tough day yesterday. A potential China client which I have attended to since April asked me to revise my revised revised quote.  I will call this potential client “the client” just for the sake of convenience, though  it is unlikely that I am going to get it. There were a lot of toings and froings with this client since April. I can’t remember how many times I have revised the quotes.  Finally the  client gave me the impression that the deal were to be closed imminently.

I spent the last couple of days liaising with my principals in the US and a freight forwarder in Hong Kong trying to give the client the best deal. Due to the time difference, I had to stay up late just to talk to my US office. There are so many rules and regulations for doing business in China.  Sometimes one has to be creative in structuring deals for making shipments into China. Finally, I thought I had come up with an excellent deal for the client and e-mailed the final quote to the client. Within 10 minutes I got a reply from the client claiming that my quote was not competitive and it decided to stay with the company which it had been dealing with for 10 years. Essentially he was asking me to substantially cut my prices which made us not making any money at all. Needless to say, my US company refused to budge. There goes the deal and the efforts my company and I had put into were “wasted”.

I think the Chinese buyers are really spoiled nowadays. There are so many overseas suppliers and manufacturers knocking on their doors.  It is a survival game out there.  For me to survive I just have to hang in there. It is two o’clock in the morning.  I will hit the sack and wake up tomorrow and go on with another deal.

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.