High margins for food suppliers during lockdowns – Ben Cavender

 

Ben Cavender

Their annual results reveal that food suppliers booked high margins during COVID lockdowns. Pang Pang Xiang (China) Company Ltd was retained by the Shanghai government earlier this year to supply food, and citizens are now shocked by their profits. However, they won’t be able to continue, says Shanghai-based retail analyst Ben Cavender to Reuters.

Reuters:

The company was among those picked by the Shanghai government this year to guarantee the supply of agricultural products during the city’s lockdown of its 25 million residents between April and May.

“The typical supply chain during the lockdown was greatly disrupted, the result was a lot of pricing asymmetry as well as very high demand,” said Ben Cavender, managing director at China Market Research Group in Shanghai.

“This in turn allowed the company to dramatically improve margins over what they normally would be.”

Many Shanghai residents turned to community group-buying to procure essentials during the lockdown, where residents in one community band together to bulk buy groceries or meals from suppliers or restaurants.

Among COVID-related buying customers, group-buying contributed to roughly half of its revenue, with a gross profit margin of 74.7%, according to Pang Pang Xiang’s disclosure.

Pang Pang Xiang’s sales were impacted by the lockdown, however. Its revenue dropped 15% from a year earlier during the first five months, though gross profit jumped 35% due to higher margins.

Cavender said the firm’ margins were on the high end compared to what he has seen in the industry, and that the results will be very difficult to replicate going forward.

While the rest of the world is opening up, China has vowed to maintain its zero-COVID policy, with authorities continuing to stem outbreaks through lockdowns and mass testing. Some analysts believe the government will largely stick with the tough restrictions well into next year.

More at Reuters.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more consumption experts at the China Speakers Bureau? Do check out this list.

Expect real opening of Shanghai by the end of June – Ben Cavender

 

Ben Cavender

The number of Covid cases in Shanghai keeps on dropping and residents do get small bits of freedom back from the stringent lockdown. But Shanghai-based consultant Ben Cavender expects only business activities to resume by the end of June, he tells in RTHK.

RTHK:

Ben Cavender, a Shanghai-based consultant for the China Market Research Group, told RTHK’s Moneytalk that some residents have been allowed to leave their homes to run errands.

“I’d say probably 80 percent of the people that we’ve spoken with over the past week have now gotten to the point where they’re receiving timed passes that allow one individual from the household to leave their compound for a couple of hours a day, presumably to go shopping or take care of medical issues or things like that,” he said.

Cavender added businesses have been slowly reopening.

“The reality is most businesses are still very much closed here, so it’s really sort of a limited opening in the right direction, though I think over the next three weeks or so, we’re going to see pretty big changes in that direction.”

The mainland reported 184 new coronavirus cases on May 29, of which 34 were symptomatic and 150 were asymptomatic, the National Health Commission said on Monday.

More in RTHK.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

China lockdowns hurt multinational firms – Ben Cavender

 

Ben Cavender

Global companies have been warning of the major effects of China’s lockdown on their operations, curtailing Shanghai for more than six weeks. But they have very few alternatives apart from sitting out the ordeal, says Shanghai-based business analyst Ben Cavender to CNN. The corporate exodus from Russia after the invasion of Ukraine did not help. For sure, consumption in China is down.

CNN:

The combination of both events has created a staggering one-two punch for multinational corporations, such as Estée Lauder (EL), which said last week that the “two significant headwinds” forced it to slash its outlook for the year.

The crisis is a stark reminder of China’s outsized importance to global companies.

“Like it or not, at this point if you’re a multinational, China is probably your first or second largest consumer market,” said Ben Cavender, managing director of the consultancy China Market Research Group…

“Frankly speaking, consumers right now are not worried about buying lipstick or coffee,” said Cavender. “They’re really much more focused on getting [necessities].”

In Shanghai, for instance, the lockdown initially led to a massive scramble for food and widespread complaints about difficulties receiving deliveries.

Now, even as access improves, many people concentrate on what’s known as “group buying,” allowing users who live in the same community to place bulk orders together for groceries and other essentials.

Even those who aren’t stuck at home may be affected. Consumers who live in cities without restrictions might also hesitate to go out and hit the mall, for fear of “what has happened in Shanghai,” where people remain in lockdown indefinitely, said Cavender.

“It’s been a very big negative drag on consumption.”…

Cavender said that the recent challenges in Ukraine and China had highlighted “a period of greater risk” more broadly for international firms.

“I do think there are a lot more challenges now to being a multinational than there have been in the past,” he added.

More at CNN.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts on your China risks? Do check out this list.

Why the Shanghai lockdown was necessary – Shaun Rein

 

Shaun Rein

Shanghai-based business analyst Shaun Rein – in this sixth week of quarantine – explains why it was needed for the 26-million city to lock down fully.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts on risk management at the China Speakers Bureau? Do check out this list.

Please 

300 million migrant workers asked to stay put to avoid another corona crisis – Arthur Kroeber

 

Arthur Kroeber

China’s authorities are trying to avoid 300 million migrant workers to go home for Chinese New Year, in an effort to avoid another embarrassing corona lockdown like in 2020, says leading economist Arthur Kroeber in the New York Times.

The New York Times:

The Chinese government is trying to avoid a major outbreak that could undermine the country’s economic recovery. Last year’s lockdowns tipped China’s economy into its first contraction in nearly a half-century, but it later bounced back as officials ordered its state-run banks to lend and factories to open. Earlier this month, China reported that its economy grew 2.3 percent in 2020, most likely outpacing other large countries, including the United States.

Getting people to spend money has been less effective. Another widespread outbreak would cast a pall on any pent-up demand for shopping that usually accompanies the Lunar New Year holiday.

“What would be really damaging is if the virus spread enough to have to shut down more factories and construction sites,” said Arthur Kroeber, managing director of Gavekal Dragonomics, an independent economic research firm.

Mr. Kroeber said the authorities did not seem eager for a repeat of last year’s draconian response.

“They are trying to walk a tightrope,” Mr. Kroeber said. To impose harsh rules on gatherings for a second year “would be embarrassing,” he added.

More in the New York Times.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more strategy experts at the China Speakers Bureau? Do check out this list.

Moving to the new normal - William Bao Bean

William Bao Bean

Shanghai-based VC William Bao Bean used to spend 30-40 percent of his time at planes and airports, now found himself back in an office job in Shanghai after the corona lockdown had ended and explains to CNBC how that may work out.

William Bao Bean is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more experts on life after the coronacrisis at the China Speakers Bureau? Do check out this list.

Business expected to resume in July, August

Last week we saw a resumption of economic activities in China, and hoped our speakers' business would be up to steam before the summer, including a few months for event organizers to get their act together. But recent developments show that the coronavirus crisis might only be starting in the rest of the world, as European countries and the US have started to lockdown their economic activities to stop the spread of the virus. Together with gloomy assessments of the lackluster way those countries deal with the crisis, our first analysis might have been too optimistic.

Even in countries that have not been hit by a major crisis, the expectation is that current limitations on travel and meetings will last for at least three months, and longer if those countries cannot contain the crisis in the weeks to come. Also the availability of flights - key for organizing international events - will remain very limited until the summer. Holidays have been cancelled for most of the Europeans until this summer, and that is a major negative indicator in a continent where holidays traditionally have been more important than going to work.

At the China Speakers Bureau, we will keep our activities at a backburner. When the crisis is over, there will be much need for China experts who can help to set straight the thought-process on the fallout of this crisis. Does it make sense to adjust logistical chains from its current China-dominance? How to deal with the next crisis? After a messy start, China has been able to manage a major health crisis, better than most other countries in the world. How does that work, and it is able to manage the impacts on its economy in a similar way. Do expect we will pick up stories to illustrate those capabilities among our speakers, although we do not expect a brisk business until the crisis really subdues.

We have started to watch news items on this subject - available on twitter - and are happy to discuss upcoming opportunities.

Tweets by fonstuinstr
a