China is an interesting market. Caleffi’s presence in this controversial country is a consolidated reality: after all, its first Chinese sales office was opened 11 years ago.The strategy followed has been to avoid entering the market using more or less exclusive possible distributors, but to patiently construct a direct presence using selected personnel trained by Caleffi. Subsequently the number of sales offices has grown to 6, not enough to totally cover the immense spaces involved in China, but a good point of departure when the moment comes for the HVAC market to really take off.
The Beijing office, the first to be opened and the headquarter, employs 15 people and has already taken on the role of a real company branch in its activities and structural dimensions (800 square metres of warehouse space and 350 of office space), even though from an administrative point of view it’s preferable to opt for a different profile. Five years ago a second office was opened, in Shanghai, with a staff of ten.
Another sales office of growing importance is responsible for the southern area of Shenzhen, a key strategic zone thanks to its nearness to wealthy Hong Kong and its high concentration of OEM constructors.
In the course of the last year, attention has been focussed on three other areas: Xi’an, in central China; Tian-Jin, a few hours journey from Beijing, and Qindao, to the north of Shanghai. All these offices have two fixed staff members and a coordinator who moves back and forth between his respective area of responsibility and the central office in Beijing.
This organisational structure reflects our wish to increase the capillary nature of the brand’s presence in such an immense country, even though – for a whole series of organisational, social and cultural reasons – it is difficult to reproduce European commercial models in China. In a great number of fields, for instance, sales are not made through organised structures, there being no equivalent of the western concept of wholesale distribution: most of the time products are sold from warehouses containing all kinds of totally different wares, from screws to taps to lawnmowers, at all kinds of price and quality levels. Caleffi’s policy in China has been to work directly with builders and developers, through direct contacts with installers or technical designers. Depending on the type and cost of products, an initial screening is made to restrict the field of activity to prestigious projects and luxury structures where the budget can run to high quality materials, destined for well-off sections of the population with a taste for western technology and aesthetics (such as hotels, prestigious residential or office buildings, Olympic sports structures, shopping centres or trade fair sites.) Within the context of such projects, Caleffi frequently finds itself clashing with its biggest western competitors, many of which have their own manufacturing plants in China. Caleffi’s strategy has been to renounce any relocation of manufacturing facilities to the Far East, instead maintaining a totally Italian production.
Despite competing with giants, the brand’s presence is extremely significant and continues to grow over time, thanks to its technical competence and the in-house training of its Chinese personnel in Italy – a model which can certainly serve as an example – further enhanced by the direct experience of Chinese bureaucratic and social mechanisms offered by this fully “native” staff. In terms of total turnover, 2007 closed with good results, achieved mainly in the Beijing area and mostly through products connected with floor heating and cooling systems, the kind of systems that appeal to a medium-to-high social target.
For the moment, the best commercial strategy seems to lie with concentrating on the higher earning social categories as a target market, partly on account of our product costing significantly more than locally manufactured competitors, and partly because of the actual nature of the Chinese hydrothermal systems market: contrary to first impressions, for a number of reasons this is not a huge or particularly well developed sector yet. Climate is one of the contributing factors: the most heavily populated part of the country is the warm area south of the Yellow River, where heating systems are not felt to be a priority. Another factor is the relative simplicity of temperature control technology, and its lack of safety regulations, to the point where a simple safety valve can be considered an optional extra with the disadvantage of driving up costs.
Future prospects? A period of cooling demand is inevitable after the “falsified market” of the Olympic Games preparations, which were driven by what could be described as government marketing aimed at boosting the China brand. But it is also a fact that the local HVAC market is waiting for a wave of dramatic expansion, and Caleffi is ready to take advantage of it when it comes. We view our prospects with confident optimism, sustained by our experience in Europe and the skill and talent of our forces in the field.
On Thursday 11 December, the Group Top Management repeated the China Awards 2008 event at the headquarters at a smaller scale, for assigning the prize to Mr Shu Xue Song, Chief Representative of the chinese commercial organisation, who was visiting the Italian Headquarters together with a delegation from Beijing.
It was a real surprise for the delegation who did not know about the official prize and a pleasant occasion to congratulate our chinese colleagues and give them a big thank you for the deep commitment to widespread the Caleffi brand on a particularly toughmarket.
Pictures show Shu Xue Song with Giovanni Monti and Luca Bonini, and with Marco Caleffi.