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Peter Fuhrman
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Chairman, Founder and Chief Executive Officer at China First Capital ( , a China-based international investment bank and advisory firm for capital markets and M&A transactions. China First Capital was established in 2007 and has its headquarters in Shenzhen, China.... More
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China Private Equity, by China First Capital
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  • China's Caijing Magazine On America’s All-Conquering Dumpling Maker, General Mills

    The secret is out. Chinese now know, in far greater numbers than before, that the favorite brand of the favorite staple food of hundreds of millions of them is made by a huge American company, General Mills, best known for sugar-coated cereals served to American children. (See my earlier article here.) In the current issue of China's weekly business magazine Caijing is my Chinese-language article blowing the cover off the well-hidden fact that China's tastiest and most popular brand of frozen dumplings, known in Chinese as 湾仔码头, "Wanzai Matou", is made by the same guys who make Cheerios, Cocoa Puffs and Lucky Charms in the US.

    You can read a copy of my Caijing article by clicking here.

    Getting these facts in print was not simple. I've been an online columnist for Caijing for years. When I sent the manuscript the magazine's editor, he did the journalistic version of a double take, refusing to believe at first that this dumpling brand he knows well is actually owned and run by a non-Chinese company, and a huge American conglomerate to boot. He asked many questions and apparently did his own digging around to confirm the truth of what I was claiming.

    He asked me to reveal to him and Caijing's readers the secret techniques General Mills has used to conquer the Chinese market. That further complicated things. It wasn't, I explained, by selling stuff cheap, since Wanzai Matou sells in supermarkets for about double the price of pure domestic brands. Nor was it because they used the same kind of saturation television advertising P&G has pioneered in China to promote sales of its market-leading products Head & Shoulders and Tide. General Mills spends little on media advertising in China, relying instead on word of mouth and efficient distribution.

    My explanation, such as it is, was that the Americans were either brave or crazy enough, beginning fifteen years ago, to believe Chinese would (a) start buying frozen food in supermarkets, and (b) when they did, they'd be willing to pay more for it than fresh-made stuff. Wanzai Matou costs more per dumpling than buying the hand-made ones available at the small dumpling restaurants that are so numerous in China just about everyone living in a city or reasonably-sized town is within a ten-minute walk of several.

    In my case, I've got at least twenty places within that radius. I flat-out love Chinese dumplings. With only a small degree of exaggeration I tell people here that the chance to eat dumplings every day, three times a day, was a prime reason behind my move to China. For my money, and more important for that of many tens of millions of Chinese, the Wanzai Matou ones just taste better.

    The article, though, does explain the complexities of building and managing a frozen "cold chain" in China. General Mills had more reason to master this than any company, domestic or foreign. That's because along with Wanzai Matou they have a second frozen blockbuster in China: Häagen-Dazs ice cream, sold both in supermarkets and stand-alone Häagen-Dazs ice cream shops. Either way, it's out of my price range, at something like $5 for a few thimblefuls, but lots of Chinese seem to love it. Both Wanzai Matou and Häagen-Dazs China are big enough and fast-growing enough to begin to have an impact on General Mills' overall performance, $18 billion in revenues and $1.8bn in profits in 2014.

    For whatever reason, General Mills doesn't like to draw attention to its two stellar businesses in China. The annual report barely mentions China. This is in contrast to their Minnesota neighbor 3M which will tell anyone who's listening including on Wall Street that it's future is all about further expanding in China. But, the fundamentals of General Mills' business in China look as strong, or stronger, than any other large American company operating here.

    The title of my Caijing article is "外来厨子会做饺子" which translates as "Foreign cooks can make dumplings". It expresses the surprise I've encountered at every turn here whenever I mention to people here that China's most popular dumpling company is from my homeland not theirs.

    Jan 15 7:14 PM | Link | Comment!
  • NFL Football In China -- The US Treasury Pays For Ads To Capture Big Chinese Tourist Dollars

    Watching the NFL playoffs this weekend on Chinese internet TV channel PP Live, I saw something I never imagined. No, not a live broadcast in China of American football. The NFL has a great thing going here in China. While not a big-time success yet like the NBA in China, the NFL is quietly making fans out of a meaningful slice of the country's most gold-plated demographic: males with advanced degrees and senior management positions.

    No, what surprised me while watching the game was the frequent commercials paid for in part by money from the US Department of Treasury. Yes, Uncle Sam is now involved in buying advertising time during NFL games on Chinese tv. Never quite thought I'd live to see the day.

    The ads are to promote tourism to the US. Chinese tourist money is now the most eagerly-sought-after prize in the $900 billion US travel industry. Big hotel groups, rental car companies, airlines and attractions are investing heavily to cater specifically more to Chinese travelers in the US. The ad running on NFL broadcasts features snapshots of American scenery, a catchy little song playing in the background, and then this splash screen comes up at the end:

    Follow that link and one eventually learns the group behind the ads is something called "Brand USA", a body describing itself as a "public private partnership". That's generally code for some kind of organization where the US Treasury picks up some or all of the tab, but whose purpose is to help private companies make money. Sure enough. Last month, President Obama signed legislation that keeps the government money flowing to Brand USA at least through 2020, long after he's out of office. The budget for fiscal year 2014 was $125 million.

    The board of Brand USA includes top executives from hotel group Marriott International, Disney's travel arm, the air reservation system Sabre Corporation as well as the top bureacrats in the tourist promotion office in the states of California and Minnesota. Brand USA's chairman is president of a company I never heard of called Jackmont Hospitality, whose website says it is "a minority-owned, comprehensive foodservice management company and one of the fastest growing TGI FRIDAYS® franchisees."

    The intent of the commercial is, of course, to get more Chinese to travel to the US as tourists. A laudable goal, and one that became much easier at the end of last year when Obama and Chinese President Xi Jinping agreed a new bilateral visa regime which gives citizens of each country ten-year multi-entry visas. Chinese tourism in the US is growing, with 1.8 million visiting last year, fifth most among all countries sending tourists to the US, but still about half the number of British tourists each year.

    What they lack in numbers Chinese tourists make up for in extravagance. They spend $7,200 per visit compared to $4,500 by the average foreign tourist, according to the US Travel Association.

    Like a lot my government does, the commercials running during football timeouts don't display a particularly keen knowledge of consumer marketing. The jingle is sung in English, so not likely to be understood by a lot of Chinese viewers. The places featured don't seem likely destinations for Chinese tourists. No Times Square or Fifth Avenue Apple Store in Manhattan. No Disneyland, no Harvard Yard and no Las Vegas.

    So where is the US government pushing Chinese to visit? Price Lake. Never heard of it? Me neither. According to Wikipedia it's in the Blue Ridge Mountains of North Carolina, about 200 miles from the nearest major airport, Raleigh-Durham. It's said to host the largest annual gathering of lumberjacks each year. If China has a large contingent of passport-holding lumberjacks it's news to me.

    While Brand USA hasn't been around long, it's already attracted a fair bit of criticism, led by Republican members of Congress, who launched a formal investigation into what is called a "history of questionable expenditures and lavish spending" at the organization. The report they issued says all Board members, though officially appointed by the US Secretary of Commerce, were in fact chosen by an Obama aide from among those who "have donated to Democrats and Democratic organizations almost exclusively."

    The private sector is supposed to donate funds which the US government matches by dipping into a pool of money raised through a $10 fee charged to all tourists arriving in the US under what's called the Visa Waiver Program. Brand USA board members have claimed the amount they spend on travel should be considered by Uncle Sam as a "donation", including first class air fares and hotel rooms paid for by their companies. Among the claims was one for $94.87 for a two mile taxi ride in Washington DC that the report points out should cost no more than about $15 including tip. The report's conclusion is that the Brand USA documents and expense accounts "paint a picture of mismanagement, waste, and cronyism."

    No word on what Brand USA are paying for the ads during the NFL games on PP Live. Let's hope they drive a tough bargain. Other than the Brand USA spot, repeated over and over, I saw no other ads during the second half of the game. During many of the commercial breaks, the Chinese broadcast stays with a live feed from the stadium of the players waiting around for the timeouts to end, something one rarely gets to see while watching football in the US.

    The NFL games are broadcast in China with Chinese commentary only, once an annoyance but now a source of almost infinite delight for me. In case you're wondering, the name for football in Chinese translates as "olive ball".

    Chinese who like the sport and are persuaded by the ads to visit the US would do well to read up first on Brand USA and its public/private affairs. It's an excellent primer on how politics and spending sometimes operate in my nation's capitol - and so why the US has this chronic reliance on China to finance our deficits by buying US Treasuries.

    Jan 14 9:56 AM | Link | Comment!
  • The ‘children' Of Deng Xiaoping — Toronto Globe And Mail

    The 'children' of Deng Xiaoping

    (click to enlarge)
    From left: Yang Hongchang, Hung Huang, Zhuo Wei, Grace Huang, Wu Hai, He Yongzhi.


    The other Chinese revolution: Meet the people who took Deng's economic great leap forward

    By Nathan Vanderklippe


    Deng Xiaoping was no Winston Churchill. He possessed a thick southern accent most people found nearly impenetrable, and was anything but garrulous. In fact, little of what he said was memorable or even original. His most-cited aphorism - "To get rich is glorious" - did not actually spill from his mouth; historians suspect its provenance can be traced to the West.

    But in deed more than word, Mr. Deng was the linchpin in redirecting China's economy away from the backward, centrally planned beast it had become under Mao Zedong. He set it on a path that would see decades of unrelenting growth and the creation of credulity-defying prosperity.

    What he wanted to do, he said in 1978, was to "light a spark" for change:

    Deng Xiaoping

    "If we can't grow faster than the capitalist countries, then we can't show the superiority of our system."

    - Deng, 1978

    And on many indicators, grow they did - more than the U.S

    He succeeded in spurring growth, and wildly so, marshalling the power of the world's most populous nation. Now, 110 years after his birth - an occasion that its leadership has sought to celebrate with lengthy TV biopics and other remembrances - China is filled with millionaires.

    But has the sudden influx of wealth made it happy?

    Where chasing profit was once grounds for harsh re-education, the country's heroes and superstars - Jack Ma and an entire generation of tuhao, or nouveau riche - are now, in ways both spiritual and economic, the children of Deng.

    President Xi Jinping has consciously sought to present himself as the current generation's version of Deng. But for many of Deng's figurative progeny, wealth and happiness haven't always come together. In a recent survey published in the People's Tribune magazine, worries about a moral vacuum, personal selfishness and anxiety over individual and professional status were high on the list of top concerns about the country today. The poll reflected a pervasive cultural disquiet that has reached even into the ranks of those most richly rewarded by the Deng-led opening up.

    "On the social level, money became the only currency in terms of personal relationships, and that's a really sad reality," says Yang Lan, one of the country's top television hosts.

    She points to "the lack of a value system" that she sees when she hears young girls "discussing how they would love to be a mistress so they can live a wealthy life before they are too old. And you see girls discussing these things very openly." China, she says, needs "a new social contract."

    There is little doubt that those who no longer need to worry about making money are more free to criticize others, raising the spectre of hypocrisy. But pained reflection has been among the less-anticipated products of the wealth China has amassed. The comforts of financial security have provided a new space to rethink the path the country has taken and ways it has fallen short.

    And as China's economy slows to a pace not seen in decades, it also faces a moment to consider the sweep of its modern history - decades marked by the vicious turbulence of the Mao years, followed by the full-throttle race away from it inspired by Mr. Deng.

    From 1978, the first year of the Deng-led reforms, China has been so thoroughly reshaped that even numbers struggle to do it justice. Gross domestic product has expanded 156-fold, the value of imports and exports is 727 times higher, and savings are up by a factor of 2,131.

    The growth has been driven by an extraordinary - and massive - cohort of people who have turned personal quests for profit into a national obsession. "China has, in absolute numbers as well as percentage of populace, the most successful entrepreneurs anywhere in the world," says Peter Fuhrman, chairman and founder of China First Capital, a specialist investment bank based in Shenzhen.

    But even those who most warmly embraced the Deng mandate are now pausing for a second look at a country whose vast financial progress has become marred by other problems.

    Read complete article by clicking here.

    Dec 13 8:20 AM | Link | Comment!
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