Capitalize on Chinese Consumers' Liquid Love Affair

Blame my parents. I was raised on a vegetable farm and don’t have much appreciation or need for the finer things in life.

I could afford a Mercedes but I prefer a pickup truck, I do most of my shopping at Wal-Mart (WMT) and Costco (COST), wear a $20 Timex watch, and I’ll take a bottle of cold Budweiser (BUD) over a bottle of $100 wine any day.

Heck, I think the last time I bought wine was some “Two-Buck Chuck” at Trader Joe’s.

While I may not have expensive taste in wine, a rapidly growing number of Chinese do.

China’s economic rise has created a new class of multimillionaires that filmmaker David Roche features in his movie “Red Obsession,” which chronicles China’s new love affair with wine.

Roche suggests that the entire output in the wine in the world may not be enough to satisfy the Chinese market in another 20 years.

“One expert we spoke with estimates that in 10 to 15 years, if you want to drink one of the world’s great wines, you would have to travel to China to do it.

“Wealthy Chinese are wanting to add wine to their stable of brand products. Along with their Rolexes and BMWs, they want a case of Chateau Lafite,” said Roche.

Fine wine serves as yet another
status symbol for newly wealthy Chinese.

The Chinese use expensive wines just like they do other luxury goods. They serve them to guests to demonstrate their success or give them as gifts to important business contacts.

But wine sales aren’t the only thing booming in China.

More Ways to Toast
Their Growing Success

China’s affluent and growing middle class is spending money like crazy. The Chinese Bureau of Statistics reported that China’s retail sales grew by 12.4% in the first quarter of this year to US$887 billion.

The reason retail sales are increasing by double-digits is that the Chinese economy is undergoing an intentional, MONUMENTAL transformation from an export-dependent manufacturer of low-margin trinkets to a consumption-driven economy powered by its own internal growth and wage growth.

China’s leaders don’t like being dependent on the West for its exports, so it is intentionally focusing on growing its internal domestic demand.

China’s 12th Five-Year Plan (2011-’15) prioritized more-equitable wealth distribution, increased domestic consumption, improved social infrastructure, and social safety nets. The plan is representative of China’s efforts to shift its emphasis toward domestic consumption.

They’re buying, all right. Here are some of the standouts …

Plenty of Room for Everyone
On China’s Store Shelves

Chinese companies and French winemakers aren’t the only ones cashing in on that spending boom. Lots of U.S. companies are doing landmark business in China, and making a big chunk of their overall sales there.

For example, Coach (COH) just reported that its first-quarter sales in China jumped by an astonishing 40% year-over-year.

Coach is a popular brand in China, and the company has positioned itself to keep cashing in on that popularity by opening 118 stores there. This year, it expects to pull in $425 million in sales.

Starbucks (SBUX) reported a 26% rise in first-quarter profits and raised its full-year earnings outlook thanks to a 22% increase in Asian revenues. Starbucks opened 516 stores over the last 12 months in Asia.

And Virtual Shelves Too …

It isn’t just the brick-and-mortar retailers that are doing big business in China. After all, the country covers about 3.7 million square miles. So, 516 Starbucks sounds like more of a growth opportunity than a saturated market!

For customers who don’t have physical stores that they can easily access, there’s always the Internet. Although the government is known to censor many sites, online shopping is a seemingly unstoppable activity.

In fact, the Internet Society of China reported that online retail sales jumped to $210 billion in 2012, a 64.7% increase from the previous year, and now comprises 6.3% of the entire Chinese retail economy.

The People’s Daily publication in China suggests that online buyers spend about $1,100 a year in first-tier cities (Beijing, Guangzhou, Shanghai and Shenzhen) alone, which represents just under 20% of their disposable income.

My Asian Century subscribers already have a profitable position in one of these names, with about 29% in open gains tracked so far. And there are plenty more profit opportunities coming down the pipeline from companies that make a fortune selling their products and services to Asian consumers.

Now, I am not suggesting that you rush out and buy Coach or Starbucks or any other stocks with significant China exposure tomorrow morning.

After all, as we discussed in yesterday's issue, plenty of companies that are doing well in the U.S. don’t always have a successful China strategy. (Find out why here.)

There is, however, no question that there is a mountain of money to be made by investing in companies that are successfully selling to China’s 1.3 billion consumers.

And no matter how rich and famous I become, I will still be the son of a dirt farmer and a man of simple tastes/needs.

But I sure like banking big returns in stocks that appreciate quickly (and regularly) thanks to smartly incorporating China’s growing consumer demand into their sales strategy … and having those profits in the bank just in case I want to celebrate my next winning trade with a good bottle of champagne!

Best wishes,

Tony

P.S. To get all the names of my favorite stocks — what’s working today AND what to buy as newly wealthy Chinese continue to fill their cabinets, kitchens and their lives with more and better-quality items — get on board with all the profit opportunities my service The Asian Century offers today. Click here to get started right away!


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Posted 05-03-2013 11:19 AM by Tony Sagami
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