STAINLESS steel cookware maker Ni Hsin Resources, which is enroute to a Bursa Malaysia second board listing, is focusing on the China market in its effort to enhance future earnings growth.
Being the major supplier to Ni Hsin International, the success of the sibling company would boost Ni Hsin Resources’ bottomline in the coming years, managing director Hsiao Chih Jen said in an interview with StarBiz in Shanghai.
“Rising disposable income and the desire for quality in life among the young and well-to-do Chinese consumers will create demand for our stainless steel cookware,” Hsiao added..
Ni Hsin Resources, which is already exporting a bulk of its products to Japan, Taiwan and other parts of the world, has the spare capacity to cater to the new market in China.
Hsiao, who also oversees the operations of Ni Hsin International, said the manufacturing plant in Balakong, Selangor, could operate round the clock with an annual capacity of 1.6 million pieces, should the orders flood in from China.
Ni Hsin Resources, he added, had no plans, at the moment, to commence production in China
Although wage rates are much cheaper in China, Hsiao finds that the labour cost advantage could be offset by its low labour skills.
“Furthermore, the Chinese have a strong preference for imported items,” he added.
Japan and Taiwan are currently Ni Hsin Resources' two largest export markets. Japan accounts for 48% or RM18.4mil in revenue last year , with Taiwan, 11% or RM4.4mil, followed by Hong Kong, 9% or RM3.4mil.
Hsiao, who has steered his family business under the Ni Hsin group to success over the past 20 years, is not contented with being a contract manufacturer for people’s brands and instead wants to develop his own brands.
In Malaysia, Ni Hsin Resources has established the Buffalo brand in the quality stainless steel cookware segment via a direct sales network in the local market.
China will be the next market that the group wants to target for its in-house brand name. Buffel is the brand that Ni Hsin International wants to promote to the Chinese yuppies.
Ni Hsin International started marketing its high-end stainless steel cookware early last year. Its products, which are competing with European brands like Meyer and Thermos, are available in five cities, including Shanghai, Beijing and Chengdu.
The company intends to focus on major cities where residents have the purchasing power.
Ni Hsin International is scheduled to open 150 specialty stores and 25 consignment sections in department stores by 2007.
Currently, it only has one specialty store and eight consignment areas in Pacific department stores, which mainly serve the middle to high-income crowd in China.
Last year, Ni Hsin International recorded revenue of RM500,000 after it invested US$200,000 (RM760,000). This year, it is expecting revenue to more than double to RM1.2mil.
Ni Hsin group is not one of those that just following the herd in investing in China, without having precise market knowledge and strategy.
It decided to enter the Chinese market only after years of observation and study on demographics and consumer preference, he added.
However, Ni Hsin International did not venture into China earlier because the targeted market, which was the middle and high-income group, was not sizeable enough, Hsiao said.
“But it is different now. The Chinese middle-income class is expanding, although the rich-poor gap remains relatively wide.
“Those living in the city earn more compared with ten years ago. More importantly, they are willing to spend on better quality of life,” he said.
However, Hsiao noted that China was a very dynamic market.
A product that sells well in Shanghai, may not be well-received by folks in Beijing, or Chengdu (South- west China).
“Going from one province to another is just like crossing the international border. Consumers’ taste, preference and culture are very different in each province even though it belongs to the same country,” Hsiao said, adding that this would be the main challenge faced by Ni Hsin International in China.