Trends in the Chinese Gold Jewellery Market - · PDF fileSession 3a Albert Cheng LBMA Precious Metals Conference 2007 1 1 Trends in the Chinese Gold Jewellery Market Speech by

Session 3a Albert Cheng

LBMA Precious Metals Conference 2007 1

1www.gold.org

Trends in the Chinese Gold Jewellery Market

Speech by Albert Cheng

LBMA Conference

Mumbai

19-20 November 2007

2Assumption

• I will use the opening of the

Shanghai Gold Exchange on Oct 30, 2002

as the bench mark year;

• hence the SEVEN trends represent

the happenings in the past five years.



3Key Jewellery Trends in China

1. A more “liberalized” gold market

2. A faster growing economy

3. A more consolidated manufacturing base

4. A keener competitive operating retail scene

5. A very competitive media scene

6. A more individualistic, younger and affluence

consumers base emerged at major urban centres

7. A better product offer in both K-gold (18K) product

and “Only Gold” (24K) Elite Collections.

4Key Jewellery Trends in China - ONE


i. Set up on Oct 30, 2002

ii. 153 members:

-22 financial members,

-122 general members and

-9 principal members

iii. Among them there are

-18 commercial banks,

-39 gold producers,

jewellery

manufacturers /

retailers;

-95 other legal entities.



5Key Jewellery Trends in China - ONE

In December 1st 2006, SGE had a record daily trade volume, 13.03 tonnes.

SGE Annual Trading Volume & Amount

4 2 .4 9

4 70 .6 9

6 6 5.3

9 0 6 .4

1,2 4 9 .6 0

3 7.3 8

4 9 179 5.2 3

10 6 9 .76

19 4 7.51

0200400600800

100012001400

2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6

volu

me (

ton

nes)

0

500

1000

1500

2000

2500

Am

ou

nt

(100 m

il)


6Key Jewellery Trends in China - TWO

i. The key factors jetting

up demand for gold

jewellery is the

increasing wealth in key

urban centres.

ii. However, in the past

years, it has spread to

second-tier cities;

iii. We also saw a trend of

non-jewellery sector

money investing in the

jewellery business.






2nd Tier Market - Chengdu



2nd Tier Market - Nanjing




Others Investment from overseas

• ENZO - its parent company is Lorenzo which is a listed company in NASDAQ.

• Supported by its mother company’s, ENZO grows very fast in China after it enters Chinese market. Only in Shanghai, ENZO has eight stores and counter at shopping.

• It also set up a large-size factory in Shenzhen with both jewelry design and manufacturing. The factory has more than 3000 workers and produces more than 2 million pieces of jewellery every year.



Others Investment within China

• Local retail giants like LaoMiao and Laofengxiang are affiliated to listed companies from Shanghai stock market.

• Financial support brings them enough investment to build on their brand image as well as distribution channel development.




11Key Jewellery Trends in China - THREE


Pure gold manufacturers in Shenzhen produce 70% of gold

jewellery in China.

-Members of “Shenzhen Gold Jewellery Association :

230 (approx.)

-Top 10 manufacturers : 7 in Shenzhen and 3 in other

regions.

-Smaller manufacturers in Guangdong & Fujian

Province : 1,500

-Family-sized and miniature workshops : 10,000 in

Guangdong Province


Company Name No. of

Employees

2005 Gold

Off-take

2006 Gold

Off-take

2007 Gold Off-

take (Est’d)

Bai Tai

(+40 retailers in 40 cities)

- - -

Yuehao - - -

Jinye - - -

Gold Dragon - - -

Cui Lu - - -

AnShenghua - - -

Tongxin - - -

Lu, Miracle (Shangdong) - - -

Ri Yue (Jejian) - - -

Cui Hua (Shenyang) -

TOTAL 132.09 154.02 187.62

y-o-y% change 16.60% 21.82%


Top Gold Jewellery Manufacturers in China




Shenzhen – Manufacturing

Base workshop




Shenzhen – Manufacturing

Base workshop





Wholesale Centre

16Key Jewellery Trends in China - FOUR

i. Keener competitive operating retail scene, we saw jewellery stores /counters mushrooming at modern shopping malls/ department stores;

ii. Some local regional retail brands with multiple stores started to emerge,

iii. in terms of number of stores nationally, retail brands from Hong Kong still dominate the scene.

iv. Competition also comes from other consumer goods such as cosmetics, fashion, etc…

v. Even big and international designers’ brand are promoting jewellery lines.

4. A Keener Competitive Operating Retail Scene





Examples of modern shopping malls



Jewellery counters at modern shopping malls – HK Brands





Independent Jewellery Stores – China Brands – LFX and Ming in Shanghai



National Brands & Regional Brands from China





International Jewellery Brands in China



Hong Kong Jewellery Brands in China













Leather Goods and Cosmetics



Watch and Mobile Phones





Jewellery from

International Famous

Brands



Jewellery from

International Famous

Brands





Jewellery from

International

Famous Brands



Jewellery from

International

Famous Brands





Jewellery from

International

Famous Brands

32Key Jewellery Trends in China - FIVE

i. China is the third biggest

market in the world by media

spending and the yearly growth

is around 20%.

ii. Female goods market has grown

fast (25% to 45% within latest 2

years).

iii. Jewellery category media

spending increased sharply

(2006 reached around 2 billion

RMB, increased by 53%

compared with 2005, and

doubled 2004’s spending),

making it more expensive to

market gold jewellery

5. A Very Competitive Media Scene

iv. Thanks to collective

efforts of WGC, DTC, and PGI,

all major retail and

manufacturers trade are now

have better understanding of

marketing, however, cost of

doing business is much higher





34

50,979

80,233100,404

139,473

198,762

261,444

315,678

386,646

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1999 2000 2001 2002 2003 2004 2005 2006

57%

25%

39%

43%

32%

21%

Data Source: ACNielsen Adquest 1999-2006

RMB (Mil.)

22%


Key Jewellery Trends in China - FIVE




893,664

1,249,521

1,914,540

0

500,000

1,000,000

1,500,000

2,000,000

2004 2005 2006

RMB(‘000)

Data Source: 2004 ~ 2006 AC Nielsen

2006 category

spending

increased

dramatically

compared with

last 2 years

53%

40%


Jewelry Category Spending Trend

36Key Jewellery Trends in China - SIX

i. Emerged at major urban centres

and is spreading from coastal area

to inlands, spending on jewellery

increased obviously and has

became the new hot spot of

consumption market.

ii. There are much more occasions

for jewellery show- off as society

circle developed. These groups of

consumers are also less price-

sensitive to gold price hike.

6. A More Individualistic, Younger & Affluence Consumers Base



37Key Jewellery Trends in China - SIX

i. Party animal group

emerging in key urban

centres

ii. They are looking for

stylish entertainment for

fun and to fulfill their

fantasy as well as to

show-off their fashion

taste.

iii. More exciting night life

opportunities available

iv. Wearing jewellery as

accessory help to express

their personal statement

6. A More Individualistic, Younger & Affluence Consumers Base

38Key Jewellery Trends in China - SEVEN

i. For both K-gold (18K)

product and “Only Gold”

(24K) Elite Collections,

ii. However, traditional 24K

gold demand is still

dominating.

7. A Better Product Offer – K-gold and Only Gold Jewellery




7. A Better Product Offer – K-gold Jewellery


7. A Better Product Offer – K-gold Jewellery




7. A Better Product Offer – Only Gold Jewellery


7. A Better Product Offer – Only Gold Jewellery




Retail environment and products 10 years ago

Gold Jewellery in 1998


Only Gold & K-gold 2007

Retail environment and products NOW



45Conclusion

• China gold production will becomes number 2 in the world

this year and soon, China gold demand will take over US to

become the number two consumption country in the world.

• Foreign jewellery retailers from Europe, Middle East and

India is looking into entering the China market

• Local export-oriented jewellery manufacturers will

gradually shift some of their resources locally

• Tough competitions will continue and at all facets

• Chinese consumers are spoiled with choices making

marketing gold jewellery a more difficult job.

• Winner will take all. Scale decides.

46All Jewellery Categories Consumption

Source: China Jewellery Association/GFMS

Jewellery Consumption in China

Unit: tonnes

2002 2003 2004 2005 2006

Gold Total (tonnes) 199.6 201.1 224.1 241.4 244.7

Pure Gold (increase

in absolute tonnage)195.6 191.0 198.3 205.2 200.7

K-gold (increase in

both absolute

tonnage and market

share)

4.0 10.1 25.8 36.2 44.1

Platinum Total (tonnes) 45.7 37.3 29.0 28.0 25.0

Palladium Total (tonnes) 7.62 7.8 15.9 38.6 27.6

Silver Total (tonnes) 250.0 320.0 400.0 450.0 460.0

Diamond Total in value (US$)2.13 billion 1.24 billion 1.37 billion 1.3 billion 1.56 billion

Chinese

GDP

Growth

Y-on-Y (%) 10.2% 9.0% 9.5% 9.9% 10.70%

Gold Split



47China - Total Gold/PT/PD Consumption

3.1 6.2 10.89 18.7 26.4 34.2 40.4 47 38 30 28 25

326

297.5

373.9

279.3

225212.5 205.6 203.9 207.6

234253 259.6

0

50

100

150

200

250

300

350

400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Platinum Gold Palladium

Tonnes

Source: Johnson Matthey and GFMS London

48

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Trends in the Chinese Gold Jewellery Market - · PDF fileSession 3a Albert Cheng LBMA Precious Metals Conference 2007 1 1 Trends in the Chinese Gold Jewellery Market Speech by