Jebsen sees opportunity in China’s health awareness
121-year-old company turns to air purifiers, wines and e-commerce for growth
Over five days last November, Beijing’s air pollution index soared off the charts, double the level that was considered “hazardous.”
Less than a decade after presenting blue skies for the world to see during the 2008 Olympics, the Chinese capital now regularly tops the list of global cities with chronic air pollution.
That’s not entirely bad news for Helmuth Hennig, managing director of Hong Kong trading house Jebsen & Company.
Sales of Dyson air purifiers, fans and vacuum cleaners, distributed in China by Jebsen, more than tripled in 2015 as Chinese families splash out on sophisticated appliances to filter out particulate air matter from their homes and offices.
The sales boom marks another piece in the eclectic mix of businesses for Jebsen, which traces its history to 1895 in Hong Kong as a shipping agency. Besides Dyson’s futuristic appliances, Jebsen brought the Porsche marque to China, and distributes Casio cameras and Nomos time pieces.
The next business opportunity lies in the health of China’s population, Hennig said in an interview with the South China Morning Post.
“They are shifting toward a healthy lifestyle, so it is a little bit different from what it was 10 to 15 years ago,” Hennig said.“Now it’s about how people live a long and healthy life, and how people make sure they can enjoy that life.”
That’s prompted the 58-year-old Hong Kong-born Danish businessman to pin Jebsen’s business strategy on products and services that offer “healthier alternatives,” a direction born after spending decades exploring China’s consumer market.
More than 75 per cent of China’s urban consumers will earn between 60,000 yuan (HK$70,008) and 229,000 yuan a year by 2022, according to McKinsey estimates. This swelling middle class is increasingly eager to pay a premium for clean air. The market for air purifiers can have a compound annual growth rate of 18 per cent in the next five years, according to an estimate by TechSci Research.
Dyson’s Pure Cool Link purifier starts from 3,190 yuan on the mainland, while the Swiss-made IQAir HealthPro purifier sells for more than 10,000 yuan each.
“The consumers are basically being driven to look into these premium home appliance products,” Hennig said.
Another emerging trend and business opportunity is Chinese drinkers switching from their traditional distilled rice liquor to mid-range wine, which he describes as something “people can afford, and can enjoy over time.” Rice liquor, also grouped in a category known as “baijiu”, is de rigueur in China’s business banquets and many social gatherings. In recent years, incidences of baijiu found with excessive amounts of phthalates – used in softening plastics – has raised health concerns, pushing younger consumers to seek alternatives.
Wine is “a healthier option,” Hennig said. “There’s a trend where people are enjoying themselves but also looking after their health.”
Still, China’s economy is expanding at its slowest pace in decades, weighing down Jebsen’s growth momentum, Hennig said. Imports by China slumped by a bigger-than-expected 12.5 per cent in July. Economists expect domestic demand to remain sluggish due to shrinking manufacturing, a weaker yuan and lower private investments.
From double digits, the conglomerate’s expansion has slowed to single-digit percentages, he said.
“Looking forward, we expect trade data to remain lacklustre in the coming months, given our outlook of subdued momentum in global trade and China’s domestic demand,” Louis Kuijs of Oxford Economics wrote in a note.
While the Chinese economic expansion slows, that’s creating more opportunities for companies such as Alibaba Group Holdings and Tencent Holdings, which are using e-commerce and social networking to break down business barriers. Alibaba, which owns the South China Morning Post, on Thursday reported its fastest quarterly sales growth since its IPO, as more Chinese took to shopping online.
“Alibaba, Tencent, and their spin-offs, are really setting the tune of the development, making it very difficult for others to follow,”Hennig said. “For very big foreign companies like Amazon, it is extremely difficult to move at the same pace as the Chinese ones.”
That’s providing a challenge for a century-old brick-and-mortar firm like Jebsen to adopt to e-commerce to reach out to customers. With all kinds of information available at the swipe of a thumb, prices are becoming transparent, and consumers are more adept at price arbitrages, Hennig said.
That means global distributors might have to consider equalising prices between different markets, and gradually phasing out charging an import premium on products in China, he said.
“There is pressure on pricing, particularly on big ticket items, and consumers will be more cautious,”he said. “Consumers in China are sensitive... so brand owners are forced to look at global pricing nowadays.”