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Industry Overview THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack. INDUSTRY OVERVIEW This section contains certain information which is derived from official government publications and industry sources as well as a report we commissioned from Euromonitor International, an Independent Third Party. A total fee of US$125,250 was paid to Euromonitor International for the preparation of the report. We believe that the sources of this information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information derived from the above sources has not been independently verified by us and no representation is given as to its accuracy. Unless otherwise indicated, all figures in this industry overview section are in nominal terms. REPORT COMMISSIONED FROM EUROMONITOR INTERNATIONAL We commissioned a report from Euromonitor International, an Independent Third Party, to conduct an analysis of, and to report on, the branded traditional Chinese tea leaves, Chinese tea ware and tea snacks market in the PRC for the period from 2000 to 2013. Euromonitor International has been engaged in a number of market assessment projects in Hong Kong, covering the PRC’s consumer products industries in particular. The report commissioned has been prepared by Euromonitor International independent of our influence. Research Objective In preparing its report, Euromonitor International designed a trade research program whose objective was to deliver quantitative and qualitative findings in relation to: • the market size in retail value of the unbranded and branded traditional Chinese tea leaves, Chinese tea ware and tea snack markets in the PRC; • the market size in retail value of sub-categories of branded traditional Chinese tea leaves in the PRC, including non-fermented green tea, partially-fermented Oolong tea, fully fermented black tea, post-fermented Pu’er tea and flower tea; • the leading companies in the PRC for (a) each sub-category of the branded traditional Chinese tea leaves market, (b) the Chinese tea ware market and (c) the tea snack market; and • the key trends and drivers that are influencing, and will influence the branded traditional Chinese tea leaves, Chinese tea ware and tea snack markets in the PRC. Research Methodology Euromonitor International primarily undertook top-down central research with bottom-up intelligence to present a comprehensive and accurate picture of the branded traditional Chinese tea leaves, Chinese tea ware and tea snack markets in the PRC. –74– THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack. INDUSTRY OVERVIEW Secondary Research Syndicated Intelligence Euromonitor International gathered information from multiple, relevant published data sources, including: • official sources, such as the National Statistics Bureau of China; • statistics, reports and databases, such as the “The PRC Tea Statistical Report”; • trade associations and other semi-official sources, such as The PRC Tea Marketing Association; • independent analysts or research groups’ reports; and • Euromonitor International Passport data system. Furthermore, Euromonitor International reconciled these sources against any existing information and knowledge. Company Research Where relevant, brief corporate intelligence and background information was drawn from sources such as annual reports and financial sheets published by leading market participants. Primary Research Euromonitor International conducted qualitative and quantitative based trade interviews not identified by numbers of survey samples, but by the assessment of the quality of answers received, and the analysis of that data intelligently and transparently. To generate an industry consensus on the market size and growth for the branded traditional Chinese tea leaves, Chinese tea ware and tea snack markets in the PRC, Euromonitor International conducted trade interviews with multiple organisations including companies, distributors and retailers, as well as industry trade associations, governmental and semi-public organisations and other observers of these markets. Euromonitor International believes that interviewing respondents from different departments within companies and multiple organizations across the value chain enables coverage of a range of issues and helps reconcile a spectrum of data and opinions. Data validation and integrity assessment Euromonitor International’s primary and secondary sources are standardized, checked and validated against other primary and secondary sources to ensure a robust research feed for its analysis. Furthermore, a critical analysis of all sources is conducted whereby Euromonitor International compared data, insights and hypotheses to arrive at a set of data and conclusions. Projection Euromonitor International adopted its standard practice of both quantitative and qualitative forecast in terms of market size and trends on the basis of a comprehensive and in-depth review of the historical development of the relevant market, and a cross-check with established industry figures or trade interviews. Estimated statistics for future periods up to 2013 have been derived based on this projection methodology. –75– THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack. INDUSTRY OVERVIEW INTRODUCTION We are engaged in the sale and marketing of a comprehensive range of tea products and the development of product concepts, tastes and packaging designs in the PRC, including traditional Chinese tea leaves, tea snacks and tea ware. We believe that the performance of the traditional Chinese tea market is driven primarily by the growth of the Chinese economy and, in particular, urbanisation, increases in the disposable income of urban households and strong consumer spending growth in the PRC. OVERVIEW OF CHINA’S ECONOMY Strong Growth of the PRC’s Economy The PRC’s economy has expanded rapidly since the adoption of reform and market liberalisation policies by the Chinese government beginning in the late 1970s. The PRC’s economy has demonstrated strong and steady growth over the last three decades and has become one of the largest economies in the world. From 2000 to 2010, according to 中華人民共和國國家統計局 (National Bureau of Statistics of China*), the PRC’s nominal GDP grew from RMB9.9 trillion to RMB39.8 trillion and its nominal per capita GDP grew from RMB7,858.0 to RMB29,695.5, representing a CAGR of approximately 14.9% and 14.2%, respectively. The real GDP growth rate was 10.3% in 2010, higher than that of 2008 and 2009 when the real GDP growth rate was negatively impacted by the global financial crisis. The following charts set out the nominal GDP and nominal per capita GDP of the PRC between 2000 and 2010. Nominal GDP and Real GDP Growth RMB trillion % of growth 45.0 16.0% 40.0 14.0% 35.0 12.0% 30.0 10.0% 25.0 8.0% 20.0 6.0% 15.0 4.0% 10.0 5.0 2.0% 0.0 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Nominal GDP Real GDP growth Source: National Bureau of Statistics of China –76– THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack. INDUSTRY OVERVIEW Rapid Urbanisation and Increasing Disposable Income Industrialisation and economic growth in the PRC have resulted in rapid urbanisation through the migration of rural populations to urban areas and the development of towns into cities. According to the National Bureau of Statistics of China, the total urban population in the PRC increased from 459.1 million as of the end of 2000 to 636.6 million as of the end of 2010, representing a CAGR of 3.3%. During the same period, the urban population as a percentage of the total population increased from 36.2% to 47.5%, and is projected to continue to increase rapidly over the next decade or more. The following chart sets forth the growth of the total population in the PRC and the percentage of urban population to the total population from 2000 to 2010. Total Population and Urban Population as Percentage of Total Population Source: National Bureau of Statistics of China –77– THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack. INDUSTRY OVERVIEW Growth in the economy and the proportion of urban residents is associated with improvements in living standards and increases in income levels in the PRC. According to the National Bureau of Statistics of China, per capita annual disposable income of urban households in the PRC has increased from RMB6,280.0 in 2000 to RMB19,109.0 in 2010, representing a CAGR of 11.8%. During the same period of time, per capita annual disposable income of rural households increased from RMB2,253.0 in 2000 to RMB5,919.0 in 2010, representing a CAGR of 10.1%. The following charts set forth per capita annual disposable income of urban households and per capita annual disposable income of rural households in the PRC from 2000 to 2010.
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