There are many aspects of marketing that Chinese companies are just now coming to understand. As these intricacies of selling become more apparent to the controlled expansion of the Chinese marketplace, companies once stifled are now taking advantage. In the past, there may not have been a need for many of these intricacies, but there now appears to be room to take advantage as China’s middle class begins to wield buying power. An investor who can find a Chinese company that understands how to appeal to this class with commonplace Western marketing tactics is an investor who will profit handsomely.
China Organic Agriculture Inc., an organic foods grower, distributor and marketer, works to provide the Chinese market with high-value food products directed primarily at the rising Chinese middle-class. The company is currently following a high-growth strategy through its leading position in growing and distributing green rice/organic rice (7.1% overall rice market share, 3.6% organic green rice market share) and imported, high-quality wines.
Food production and distribution in China is a large task in the best of times; but the company appears to be succeeding and expanding in its quest to become a leader. Largely, the company sees its path as one of providing high-value products to those in the marketplace willing to spend for quality and choice. To this end, the company has recently acquired Bellisimo Vineyards, a California wine property. It believes that this acquisition will allow it to take advantage of the Chinese consumer’s desire for imported, high-quality wines in a Chinese wine market that is quickly outpacing wine markets around the world. Private labels will constitute a portion of the company’s strategy, while highlighting California wines as a quality brand will be another.
Recent news regarding rice supplies around the world has not affected the company significantly. Even though the company’s ErMaPao products are a leading store brand within China, supply and distribution has not been a large issue – although it is there. China organic has put in place a series of distribution agreements that enable it to grow and distribute through major cities and provinces throughout most of China, and the company continues to find wide-spread acceptance of its products.
The company is very aware of the standards associated with providing quality organic products to an astute customer base. To this end, it has received organic certification and located its primary rice growing locations (6,200 total acres) where standards can be controlled and maintained. Its organic rice, for example, is grown in land situated near one of the few remaining unpolluted rivers in China. China Organic Agriculture controls its products from planting to sale, and has profited by this policy since its inception. If past successes are an indication, profit growth is likely as the company fine-tunes its high-growth strategy and targeting of a wealthy middle-class.
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