Sourcing and Selling Product in China It s

Sourcing and Selling Product in China – It’s Different! Global Business Club of Mid-Michigan March 31, 2010 Chuck Bird Director, International Sales Food Safety Division Neogen Corporation

CHINA – Interesting Facts Ø Ø Ø Ø 700 million cell phone users 350 million internet users 45 billion disposable chop sticks used per year China invented paper (and toilet paper) 9000 different magazines 118 cities with population > 1 million 800, 000 executives – 35% are female

A Mission that Matters The mission of Neogen is to be the dominant company in the development and marketing of solutions for food & animal safety.

Sourced from China • LOW TECH COMMODITY PRODUCTS • High Volume • Low margin • Disposables • Raw materials/ingredients

Sold to China High Tech Diagnostic Products • Pathogens • Toxins • Allergens • Drug Residues • Spoilage Organisms • Sanitation • Genetically Modified Organisms • Plant Diseases • Cleaners • Disinfectants

Three Key Ingredients for Success ØTRUST Ø Open communication Ø Verification/Confirmation Ø Did I mention TRUST?

Sourcing in China Ø Finding the right supplier Ø Networking Ø Referrals Ø US Chamber of Commerce Ø MDEC/Export. gov/Shanghai Office Ø Internet searches Ø In-country interviews Ø On-site Audits Ø References Ø Qualify a second vendor (time permitting)

Sourcing from China Ø Getting the right product Ø Technical Details – make sure all quality related details are defined and confirmed Ø Preserve Trade-Secrets as much as possible (Confidentiality Agreements) Ø Invest in equipment needed (molds, etc. ) Ø Outline and agree to quality specifications Ø Cross-train QA/QC staff Ø Obtain pre-lot samples for validation testing Ø Use same equipment for validation testing

Sourcing from China Ø Getting the right product Ø Perform QA/QC on all samples and lots Ø Agree to delivery schedules and quantities. Ø Don’t forget shipping (cost, lead times) Ø Schedule frequent on-site visits yearly Ø Consider renting an apartment if multiple products or complex products are involved Ø Build a strong relationship – TRUST!

Selling to China Ø Potential Pathway Ø Distributor Ø Joint Venture Ø Company owned store - WOFE

Selling to China Ø Finding the right distributor Ø Networking Ø Referrals Ø US Chamber of Commerce – Gold Key Ø Internet searches Ø In-country interviews Ø References

Selling to China Ø Distributor set-up Ø Signed Distributor Agreement (one-year) Ø Ø Ø Purchase price and retail pricing established Payment terms agreed to Focus on target market(s) May need sub-distributors Hong Kong is separate

Selling to China Ø Expectations ØSet sales goals at the beginning of the year. Ø Participate in trainings and meetings. Ø Communicate success and hurdles. Ø Communicate competitors activities. Ø Carry Inventory. Ø Solid Financials. Ø Distributor has to grow with you.

Selling to China Ø Hurdles Ø Language barrier Ø Cultural differences Ø 18% VAT & Shipping costs Ø “Price is everything” mentality Ø Travel time and costs

Selling to China Ø Keys to success Ø Brand recognition Ø Minimum two visits per year Ø Participate in key trade shows Ø Government references (approvals) Ø Transnational customers Ø Chinese literature/website

Selling to China Ø Next Steps Ø Joint Venture (Trust) Ø WOFE Ex-pat managed Ø Realistic expectations on growth Ø Appropriate staffing Ø Manufacturing in China Ø

SUMMARY ØTrusting relationship Ø Realistic and agreed upon expectations Ø Investment of travel Ø Flexibility Ø Patience Ø Preparation Ø Bring your appetite – Food is important in China – most agreements are completed during dinner!

THANK YOU! QUESTIONS?