© DKSH

Fisherman’s Friend Asia-Pacific Conference

China – The Challenge

Kevin Ding, Marketing Manager, DKSH China

Jakarta, July 10, 2014

Diversity

© DKSHPage 3

China is not one country but more like Europe

• Whichever dimension we look at , China is composed of several distinct markets:

- Language / Dialect & Sub-culture- Economic Development- Habits / Needs

• Only 7% of retailer chains can be found in both provinces

Population: 1.3 bn

Size: 9,6 mn sq km

City > 1 mn: 166

Municipality cities 4

Provinces 28

Cities 656

Country Towns 1,642

Towns 36,862

FMCG Retail Outlets 3,6 mn

Shanghai Population: 23,0 mn GDP per capita: RMB 82,560 Main language: Wu (Shanghainese) Behavior: Rich flavor food with a bit sweet; pay more for good product

Guangdong Population: 104,3 mn GDP per capita: RMB 50,500 Main language: CantoneseBehavior: Light taste flavor and fresh food; More care about price

Heilongjiang Population: 38,3 mn GDP per capita: RMB 32,600 Main language: Mandarin Behavior: Heavy flavor food; Gift rather than own consumption

© DKSHPage 4

FF Sales by Product / Channel / Region

Sales in LoF

• Consumer demanding and channel importance is different region to region

© DKSHPage 5

FF strategies …

• Focus on key cities and appropriate key channels

• Different strategies upon the understanding of consumer and market needs region by region

• Tailor-made product and promotion for specific key accounts

Competition

© DKSHPage 7

Continuous new product innovation by competitors

• Over a thousand new product launched per year to attract young consumer

• Keen fighting for listing due to limited shelf space in store

© DKSHPage 8

Huge A&P investment by competitors

Media Spending

Unit: RMB Mil

Data source: Nielsen(TV/MG/NP) CTR(RD) CODC(OOH) IResearch(Digital) Period: Y2011-Y2013

BrandY2013

Rank Spending %Wrigley's 1 1,351 24%Alpenliebe 2 641 12%Skittles 3 554 10%SK&F 4 369 7%Want Want 5 299 5%Golden Crownstuff 6 260 5%Golden Throat 7 219 4%Eclairs 8 172 3.11%Chupa Chups 9 172 3.1%Halls 10 152 2.7%Others 　 1,359 25%Total 　 5,548 100%

• Heavy A&P spending by key competitors on both A-T-L and B-T-L

© DKSHPage 9

• Keen competition from key international brands but produced locally

• Fisherman’s Friend was one of few “imported” brands positioned at “premium” segment

Keen competition from local, regional, global brands …

Data Source: IMS and AC Nielsen Retail Tracking 2012

© DKSHPage 10

FF strategies …

• Introduce new packaging (zip-lock pack) / flavor to attract new consumers

• Tactically invest on brand advertising with massive sampling to drive brand awareness e.g. regional bus body / LCD advertising

• Focus on key accounts via appealing in-store merchandising and promotions to attract consumer’s attention and trial

Trade Barrier

© DKSHPage 12

High trade cost

• High supply-chain cost and long lead time due to large geographical size of China

• Extremely high trading terms by MT channels along with their expansion in 3rd and 4th tier cities (new store opening, listing, etc….)

• 2.4 M stores located in 2,300 cities which need huge manpower investment for store maintenance

Import Duty- Sugar- Sugar Free

10%20%

VAT 17%

Sub-wholesaler GM 10%

Retailer Ave. GM 45%

1 GBP (ex-work) ≈ RMB 40 (RSP)

2,4 m+ stores2,287 cities

© DKSHPage 13

Other barriers

• Strict shelf life requirement by MT chains – 2/3 shelf life is the basic requirement while some key accounts even ask for ½ shelf life

• Chinese label regulation be more strict and still changed frequently without prior notice, rigid CIQ procedures

© DKSHPage 14

FF strategies …

• Focus on well developed 1st and 2nd tiers by direct selling to shorten the lead time and save the cost

• Expand to more 2nd and 3rd tier cities via local sub-wholesaler who can provide better after-service

• Focus investment on top 20 key accounts which can contribute 80% sales

© DKSHPage 15

DKSH Shanghai Limited 3rd Floor, Tomson Commercial Building,710 Dong Fang Road, Pudong Shanghai , 200122People’s Republic of Chinawww.dksh.com

Thank you for your attention.

© DKSHPage 16

Disclaimer

Due care has been used in preparation of this presentation and DKSH makes every effort to provide accurate and up-to-date information. Nevertheless, this presentation may be subject to technical inaccuracies, information that is not up-to-date or typographical errors. DKSH does not assume liability for relevance, accuracy and completeness of the information provided. DKSH reserves the right to change, supplement, or delete some or all of the information on this presentation without notice.

The layout, graphics and other contents in this presentation are protected by copyright law and should not be reproduced or used without DKSH’s written permission.