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Series F-1: Fosun’s Acquisition of Club Méditerranée (1)

First Stake in 2010 – 7%

On June 13, 2010, Club Méditerranée and Fosun jointly announced that Fosun has acquired 7.1% of Club Med’s share capital, and has become one of Club Méditerranée’s largest strategic investors ^[1],[2].

Fosun has acquired from FIPAR International and GLG Partners shares and ORANEs representing approximately 7.1% of the share capital of Club Méditerranée on a fully diluted basis (i.e. assuming the redemption in shares of all the ORANEs issued by Club Méditerranée)^[1].

One representative of Fosun will be appointed at the board of directors of Club Méditerranée. If Fosun reaches the 9% threshold in the share capital of Club Méditerranée (on a fully diluted basis), the appointment of a second board member selected by Fosun will be submitted to shareholders’ approval at the next shareholders meeting. One representative of Fosun will sit on each of the strategic committee and the audit committee of Club Méditerranée ^[1].

Fosun intends, if it reaches a 10% stake in the company (on a fully diluted basis), not to increase such stake beyond the 10% level during the following 24 months (from June 2010), subject to no other shareholder having more (or expressing the intention to have more) than 10% ^[1].

Strategic partnership – 5 Club Med resorts in China by 2015

Included in the statement is a short description of strategic collaboration – Fosun commits itself to support Club Med’s development strategy with the aim to open five Club Med resorts in China by 2015. Club Med has already identified specific sites for resorts which would be developed with the support of Fosun or its affiliates. Fosun (or its affiliates) will propose additional sites, considering their in depth knowledge of the Chinese property market. On a mid term basis, the parties will cooperate to identify opportunities for the opening of new resorts, through greenfield development or by taking over existing upscale resorts ^[1].

Club Med has already initiated new projects in China, in particular its first Village, as a ski resort, in Yabuli (the largest Chinese ski station in north-east China), to be opened by the winter season of 2010. Club Med’s goal is to attract 5% to 10% of potential Chinese visitors to 4 and 5-²star vacation resorts by 2015, representing just 0.2% of the total Chinese population. On this base, Club Med could have over 200,000 Chinese customers by 2015 ^[1].

Stake Increased to 9% in Early November 2010

One thing to note here – Club Med’s fiscal year begins on 1 November and ends on 31 October of the following year. Therefore, when Club Med filed its annual report 2010, it only needed to disclose the Fosun’s stake of 2,247,551 shares (~7.4%) and one board seat (JIANNONG QIAN) ^[3].

After one year, in Club Med’s annual report 2011, it says – on November 9, 2010, the Fosun Group disclosed that it had surpassed the threshold of 9% of capital and voting rights through the purchase of shares between October 14 and November 8, 2010, thus holding 2,801,569 Club Méditerranée shares (2,940,295 shares as of Oct 31, 2011) ^[4].

And Fosun has two board seats, adding GUANGCHANG GUO (Fosun’s chairman) to Club Med’s board (13 directors as of Oct 31, 2011, including 2 non-voting directors) ^[4].

The Yabuli village

In 2010, in launching its operations on China, Club Med signed a management and marketing contract for the Yabuli Village and paid €2 million for these exclusive rights. These rights are amortized over the life of the contract ^[4].

Yabuli Village, opened in 2010 winter season, is 4-Trident village with 284 rooms, 706 beds and a capacity of 80,484 (hotel days). It is Club Med’s ninth village in Asia and its second managed property in this region ^[4],[5].

References

[1] http://corporate.clubmed/wp-content/uploads/2010/06/CP-EN.pdf

[2] https://www.reuters.com/article/us-clubmed-china/chinas-fosun-acquires-7-1-percent-of-club-med-idUSTRE65C1EU20100613

[3] http://corporate.clubmed/wp-content/uploads/2011/02/Rapport_Annuel_2010_EN.pdf

[4] http://corporate.clubmed/wp-content/uploads/2012/02/Annual-report-2011.pdf

[5] http://corporate.clubmed/wp-content/uploads/2010/12/Press-Release-of-Club-Med-Yabuli-Opening.pdf

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WeChat: More Than Messaging And Payment (3)

WeChat is also gradually upgrading itself as an entrance to internet.

Scanning a QR code is as common as using WeChat.

Businesses are using QR codes as the beginning of a customer relation; government departments/agencies are using QR codes as a way to provide/introduce/reserve many services.

And most of these websites or alternatives or websites are happening in Tencent’s ecosystem/domain. (or Alibaba/Baidu/JD/Toutiao/Weibo/Meituan’s domain)

Few people are creating their own website nowadays in China. For example, when we can find a restaurant’s website in US, usually in China we find it on WeChat/Ele(alibaba)/Meituan/Dianping(Meituan).

And when people are used to it, search engines are going to give away their position as the entrance of internet.

And when people forget how to type a web address, internet is more disconnected and is just comprised of a few closed bubbles – not exciting.

WeChat: More Than Messaging And Payment (2)

The previous post discussed around how WeChat has made life in China different in terms of eating in restaurants, buying bubble teas and more.

WeChat has also become the primary working station and personal cloud for many people.

One background – email is not that popular or useful in China. Many corporates give employees email accounts, but unlike in the US, email is just not a pervasive thing in China.

In the US, people use Gmail or Outlook and the cloud services provided by Google or Microsoft. In China, the equivalent of cloud storage is not Baidu Cloud, which provides the first 15GB free, but WeChat. People just send files as attachments in emails. And if he/she needs to CC other people, just send it in a group chat. It is a very smooth experience of sending files and discussing in a certain group of people.

The only inefficient part is probably editing files. But it is very common to use WeChat on PC so that files could be downloaded and edited. For most people, WeChat works perfect well to organize work. And it’s free.

So yes, it is just like Slack.

Meanwhile, however, files are not actually stored in or accessed through the cloud. They are local and taking up storage space in phones. So for Tencent, it is not managing an ever-expanding cloud usage and needs to think about charing fees; and for users, there is no limit in storage and they can use it as free forever, as long as they enough room in phone storages. I think it is very common for a person’s WeChat to take over 10G space in the phone.

In addition, it is more efficient to search through the files as they are grouped by groups. You go into a group chat’s history to find files, instead of searching the entire gmail for them.

On a side note, WeChat history has been very useful as a poof for nearly everything. A screenshot of chat history could be as powerful as a signed contract (not legally; but one can post it in moments or Weibo, and it seems more personal or embarrassing; so to avoid this, one usually takes a yes in WeChat seriously)

WeChat: More Than Messaging And Payment (1)

It’s time to talk about WeChat’s development after I have spent more than two month catching up in China.

This series will try to summarize several things WeChat has already been doing great and what it could possibly do in the foreseeable future.

First of all, restaurant mini-programs/official account.

The most significant feature to me is probably the ability to order on a digital menu via a QR code. All you need to do is to seat down and scan the code (with the information of table number usually) that is sticked on the table. One can totally make an order and wait for food without any help from the restaurant (saving lots of labor and waiting time). In addition, since everyone on this table can scan the code, they will share the same page and see each other’s ordering, which is extremely helpful as they are mostly shared plates.

What is more, usually it also makes users to follow the restaurant’s official account in WeChat in a very smooth way. Sometimes it’s mandatory. It is particularly beneficial for restaurant chains (and milk tea / coffee chains) that have multiple locations and marketing campaigns.

Then, depending on the frequency of customer’s visits, chains usually have their membership system in WeChat official accounts or mini-programs. That way, an WeChat account is essentially a Facebook or gmail account in the US. Complex reward and membership programs can be implemented in WeChat by chains, such as McDonald’s.

Besides ordering, WeChat provides a way for consumers to take a number to wait for a table before arriving at the restaurant.

The booking/waiting environment is a little different here in China. While booking a table at a specific time is common in the US, restaurants in China mostly only have a queue system. Most people will need to go to the restaurant first, take a number and wait for an hour or more in prime time. This is actually good for the shopping mall as people need to stay here longer, either generating other purchases or making the mall look more popular.

Also, on WeChat one can order ahead, which is especially helpful in beverage chains like Hey Tea. Hey Tea has long been “featuring” its super long line to order. As Starbucks in China just announced its order-ahead-and-pick-up feature “Fei Kuai” in a few cities this summer, its competitors have been able to do this at least one year earlier on WeChat.

Not to mention the payment step, which WeChat has been doing for years.

Series E-2: Sportswear Market Competitive Landscape

Competitive Landscape – Companies

Nike and Adidas have been the unchallenged leaders in the China market for years. This can be explained by (1) their early entrance to the China market, (2) their higher ASPs than major domestic brands, and (3) significantly higher exposure in Tier 1 & 2 cities, where per-capita consumption power is higher than in the rest of China. Their dominating position is also in line with their global market share. [1]

Among domestic companies, Anta is the only local company that has enjoyed a notable market share gain over the past few years, and its position as the leading domestic sportswear company has been further deepened with the help of the Fila brand. Li Ning, once the leader among domestic companies, is still in the recovery stage, after the Company underwent a major management change in 2012-2014. 361 Degrees and Xtep are usually considered second-tier domestic brands. The market share of Xtep, however, has dropped due to its restructuring. [1]

Competitive Landscape – Brands

Generally, since the 2011 downturn, domestic companies have been struggling with various internal problems. The downturn was mainly due to inefficient channel management, leading to excessive inventories at the distributor level. At the same time, foreign companies took more market share by executing precise marketing strategies, offering superior products, and not being too aggressive in pricing. It took domestic companies years to regain their growth momentum, under various reform initiatives such as ramping up product designs, improving inventory monitoring systems and implementing radical changes in their management systems. [1]

Anta is a very rare domestic company that gained market share (in terms of retail sales value) over the past few years. However, Anta gained market share mainly because of Fila, an Italian brand which Anta acquired in 2009. The core Anta brand is also growing, albeit at a slower pace. Li Ning, Xtep and 361 Degrees have been somewhat flat over the past few years, but they are domestic brands that are doing relatively well. For smaller domestic brands, such as Erke and Peak, the market share loss is more serious. [1]

By and large, the market share of top five foreign brands, Nike, Adidas, New Balance, Skechers and Fila, increased rapidly. In contrast, the market share of the top five domestic brands, Anta, Li Ning, Xtep, 361 Degrees and Erke, modestly while other brands losing market shares fast. The market of China sportswear has become more concentrated. [1]

[1] http://www.chinastock.com.hk/ewebeditor/uploadfile/20180709142620143.pdf

Series E-1: Overview of Chinese Sportswear Industry

The industry faced a downturn in 2011 and recovered in 2014. According to Euromonitor, the sportswear market achieved a CAGR of 12% between 2013 and 2017, and in 2017, the market size of sportswear in China reached RMB212.1 billion, accounting for 46% of the total sporting goods market[1].

According to Euromonitor’s latest report on China Sportswear, the 2018 market size is RMB264.8 billion. Meanwhile, US Sportswear, market size is USD117.1 billion in 2018, about 3 times larger (using 1USD = 6.9RMB). (Euromonitor[2]^,[3], screenshots)

The industry can be furthered categorized into Sports Apparel and Sports Footwear, which are sized at RMB116.2 billion (44%) and RMB148.6 billion (56%) respectively. Footwear is the faster growing category compared with apparel. (Euromonitor2, screenshots)

Both footwear and apparel can be further divided into three product types: performance, outdoor and sports-inspired. Sports-inspired products, especially footwear, have been the largest product category over the past few years. Sports-inspired products refer to products with elements of both fashion and sportswear. Typical examples include Nike’s Converse and Adidas Originals1^,2.