CASE STUDIES – INDI Trade Mission 2018 Conducted by Shanghai HUIXIN by INDI

CASE STUDIES â&#x20AC;&#x201C; INDI Trade Mission 2018 Conducted by Shanghai HUIXIN

Project overview Growth of imported F&B products is driven by rising disposable incomes, limited arable land, water scarcity issues, urbanisation, improving logistics systems, growing concerns for food safety, the depreciation of the US dollar versus the Chinese yuan, as well as a growing taste for foreign foodstuffs. China is the last and largest consumer market for the Food & Beverage sector in the world. There are great demands towards the following items :wine, dairy, pasta, pasta sauces, tomato products, olive oil, beer, chocolate and high-end confectionery, pre- packaged biscuits and snacks, breakfast cereal, coffee and meats, as well as baby food/infant formula. Brazilian food & beverage has been approaching China market ever since 2010. ApexBrasil, as well as Food & Beverage sector assocations led the trade delegation to participate the trade fair. As China and Brazil, has 20,000 kilometres between each other, with China strict internet control, Chinese has limited information towards Brazil this country, as well as its food & beverage sector HUIXIN has been working with Brazilian business community (mainly Food & Beverage sector) since 2013. HUIXIN define a good "Go-to-Market"strategy is based on value-based proposition. This does help the companies to have the enduring impact and profitable sales in China Market. During the past 5 years- we have witnessed the opportunities and challenges for Brazilian food & beverage sector and we are familiar with Brazilian business community - operation procedures. In this case study exercise, our purpose is to put all pragmatic suggestions which can efficiently fix the " knowing and doing" gaps, and eventually support Brazilian food & beverage sector succeed in China market. In order to achieve this, we divide this case study in three parts: â&#x20AC;˘! 1st part: we provide the latest market overview of China F&B sector â&#x20AC;˘! 2nd part - via our experience and qualitative interviews with Chinese F&B professionals, we summarized possible barriers for Brazilian food and beverage sector in China market â&#x20AC;˘! 3rd part - we go into details to provide the individual product to provide the pragmatic solutions to support

Part I – Market overview China is the fastest growing F&B market in the world, with an average annual growth rate of 30% between 2009 and 2014. According to Euromonitor, China food service sector the largest worldwide with EUR 440 bilion turnvoer in 2014 and 7,3 million outlets. As for Foreign trade, quantities of China's F&B imports have been increased greatly. Widely acknowledged, the recent rise in the household disponsable income and sandles over food safety have been key drivers that have been boosted rapid growth in China F&B import market . In fact, the data released by Chinese national bureau of statistics show the average income per capita in China's urban households is from Euro 308 in 1990 to Euro 3,791 in 2012, allowing Chinese consumers to spend more on food and dining out

1.! Market Growth Drivers Rising disposable income is the major driver. In the past ten years, since 2003- 2013, China has experienced an average GDP growth of approximately 10%. Since 2014, China average GDP growth is around 6-8%. This created a new middle-income class with higher disposable incomes, as well as affluent class with over 1 million USD in cash. Meanwhile, China government encourage Chinese to move to city, from 2005- 2015, China urban populations have increased by an estimated 153 million; till 2030, there will be around 1 billion Chinese live in the city. The Chinese are certainly getting richer faster: the per-hosuehold disposable income of urban consumers will double between 2010 and 2020, from about $ 4000 to about $ 8000. That will be close to south korea’s current standard of living but still a long way from its level in some developed countries, such as the United States (about $ 35,000) and Japan ( about $ 26,000) The current vast differences in income levels will persist, however, although the numbers at each level will shift dramatically. At present, the great majority of the population consists of “value” consumers – those living in households with annual disposable incomes between $6,000 and $16,000 (equivalent to 37,000 to 106,000 renminbi), just enough to cover basic needs. “Mainstream” consumers, relatively well-to-do households with annual disposable income of between $16,000 and $34,000 (equivalent to 106,000 to 229,000 renminbi), form a very small group by comparison. China has fewer than 14 million such households, representing only 6

percent of the urban population. A tiny group of “affluent” consumers, whose household income exceeds $34,000, accounts for only 2 percent of the urban population, or 4.26 million households.

source: Mickinsey report – 2020 China consumers

Beyond Beijing and Shanghai, Mckinsey predicts that by 2015, nine large Chinese markets will account for 30% of luxury consumption in China, they are Chongqing, Dongguan, Foshan, Guangzhou, Hangzhou, Nanjing, Shenzhen, Tianjing, and wenzhou. Luxury consumption will clearly include luxury F&B products, as well as consumer goods

2.! Import Drivers Food safety scandals Food safety scandals in China remain prevalent, incidents such as the " cooking oil scandal"( where gutter waste as sold as cooking oil ) are still fresh in consumers memories. In 2015, Fonterra( New Zealand's largest diary products producer) discovered bacteria that caused botulism in 38 tonnes of whey proten used to make baby formula. Nearly one-fifith

of New Zealand's diary exports to China . According to local Chinese authorities, 420 tonnes of baby milk in China were affected by the scandal . Previous scandals involving locally produced milk poweder brands allowed foreign companies to gain marekt share . It is estimated that foreign producers control 80% of the milk powder market in China's largest cities. These scandals have damaged confidence and trust in food production processeds and standard. According to Returers, on April 25th, 2015. The standing Comitteee of China's National People's Congress China 's top legislative body voted to amend its food safety law to include tougher punishments for those who violate infant milk formula standards. Consumers of imported food in China are generally upper- or middle income locals and expatriates. These consumers can afford higher prices for food and are motivated to do so because of increasing concerns about food safety and health.

in 2013, HUIXIN Director - LI Xia did presentation for ApexBrasil, General Consulate of Brazil in Shanghai, MAPA to explain â&#x20AC;&#x153;how China consumers deal with the food safety issuesâ&#x20AC;?. Once food safety issues started, Chinese main stream media kept quiet, while the information bursted via China social media. Starting from that , Chinese consumers refused to purchase any Chinese milk brand, not jut Chinese local brands ,as well as Made-in-China foreign milk powder brands.

Via E-commerce platforms to purchase the high & safe products. Chinese government noticed consumers actions, and put extra tax and imposed regulations to E-commerce milk powder purchase, even in Hong Kong, the closet “ international” market to mainland China, Hong Kong government put the limit for each mainland tourist’s milk powder purchase. All of these” efforts”s, it did not stop Chinese consumers, for food safety, they were and still are willing to pay extra amount money. . This " milk powder " was a real game changer, China has voted to amend its food safety law, which was the 1st time - a law was developed and imposed from " bottom-to-top". A 2014 survey of 4,258 Chinese from 59 cities showed that 47,8% of participants were unsatisfied with food safety, a similar poll in 2012 showed only 18,8% dissatisfaction

Online shopping / oversea shopping Chinese online retailer taobao is a market leader in e-commerce sector, and online shopping. Taobao got in the 1st place in Chinese E-commerce sector, thanks to SARAS in 2003. ( During SARAS disease, the whole China was stop, the commerce could only happen online ) Since then, E-commerce has been booming, till now ,there are over 5000 active e-commerce platforms in China. Taobao, Tmall, JD, Yihaodian were the largest F&B importers to China. Online shopping in China is not only about buying things consumers need or want but also about information sharing, communicating and a keeping up with trends. The Chinese are world's largest consumers of online prodcuts, with one in seven consumers purchasing online every day. Once Free-trade zone was introduced, more E-commerce which are those heavily focus on foreign trade, created a new business module- cross-board e-commerce. In this business module, the cargo arrives in free-trade zone, no tariff or tax need to be paid, until the sales happens. There is certain risks, as China has not regulated the relevant laws of cross-board e-commerce. New retailing competition It feels like a decade since Alibaba founder Jack Ma introduced the term “New Retail” to describe a future in which online, offline and logistics would merge to create a dynamic new retailing era. The reality is that he coined the name recently, in 2016. The changes he predicted are arriving so swiftly and so dramatically that each month seems to bring a big new preview of what retailing will look like everywhere, as China sets the pace for the rest of the world. Indeed, with millions of mom-and-pop stores now taking on new life as order-and-delivery

stations for e-commerce, with food delivery platforms such as Hema fulfilling more than half of its orders online, and with mobile payments rising to more than 60 times the US level, wherever retailing is headed, China is already there

Chinaâ&#x20AC;&#x2122;s e-commerce platform, represented by Tmall, is evolving to establish New Retail infrastructure, empowering brands with data. Leading brands are gaining an edge by using the emergence of New Retail as an occasion to build a new consumer-centric model while at the same time creating operations that are more efficient.

Consumers. People are no longer viewed only as consumers. The most forward-thinking brands also see them in the role of coproducers. In the past, with relatively limited consumer insights, it was sufficient for a brand to identify target consumers and determine their needs. Now, armed with a comprehensiveâ&#x20AC;&#x201D;and dynamicâ&#x20AC;&#x201D;profile, brands have new missions, such as finding ways to stimulate consumer needs, identifying look-alike consumers and turning consumers into brand ambassadors who effectively cocreate the brand. Welcome to the C2B (consumer-to-business) age. Merchandise. Products are advancing from commodities to become part of the consumption process and an integrated consumer experience. As the old business-to-consumer model evolves from the simple goal of meeting mass demand to a world of consumer-data-inspired personalized products and delivery, the best brands are determining how to integrate products into the overall customer experience: not only shopping but also learning about a product, using it, talking about it on social media and recommending it. Stores. Stores have extended from online-only or offline-only into a seamless Omni channel consumer experience thatâ&#x20AC;&#x2122;s fully integrated. People can shop while enjoying content or while spending time on social networks, for example, as well as in stores or on e-commerce platforms. Creating occasions beyond the constraints of time and location is among the new moves that winning brands are making to get ahead.

Brick and mortar stores still make up over 80 percent of total retail sales in China. Alibaba and JD have both been investing in the offline retail market, with many projects covering untapped rural areas.

•! Since 2015, Ablibaba has invested $9,3 million in offline stores, it has collaborated with LIANHUA supermarket chain owner Bailian Group to optimize offline stores, online payments and supply chain logistics. In March, the company announced that it will invest approximately $ 692 million in Intime retail, one of China’s leading department store operators.

•! JD announced plans in April to open more than 1 million JD convenience stores across the country in the next five years. This is its third offline cooperation project after launching 10,000 JD home appliance stores. JD’s main partners are Wal-Mart and supermarket chain Yonghui.

•! In May 2018,After Ablibaba and JD, Meituan- Dianping plans to be “ most aggressive investor” in new retail.

New Retail is the new business module to bring online purchase and offline consuming experience together. As more and more Chinese investment rushed into new retail, the new retailers are looking for new products which they can maximize Chinese consumers’ interests and curiosity via its long tail effects. This has been witnessed, since HEMA FRESH has set up the close collaboration with major countries and regions for its Food & Beverage Sectors, to introduce the gastronomy culture, as well as introduce food & beverage brands and products to HEMA FRESH. In terms of Brazil, new retail was looking for the potentials to work with the Brazilian beer during the World Cup period. If new retailer ever succeed this, it is the most cost & efficient promotion

Chinese consumers are Brand oriented and trading up China economy was heavily replied on being OEM (original equipment manufacture). Once the market is open, Chinese were eager to obtain the high- end foreign brands. Chinese purchases brands not just for its design, quality, most important is to fit in their social hierarchy. Many Chinese, like their Western counterparts, judge themselves and others by what they buy.

Strongly early growth in developing markets comes when large numbers of consumers try products for the first time, as market mature, growth replies on consumers who buy more goods and service more frequently and trade up to buy pricier version of items they already have. This pattern explains why some basic –necessity categories have little room for growth: many consumers can already afford such items and probably wont buy a great deal more of them.

Import & Distribution channels The F&B market has been widely open, especially after E-commerce/ cross-board ecommerce/ new retail very heavily impact Chinese daily life. Most of the importers locate in Beijing, Shanghai, Guangzhou regions, while there are large distributors in the 2nd tier / 3 tier market. In some extreme cases, large retailer like RT mart – annual sales revenue over 5 billion RMB, their purchasing decision making still locates in Shanghai. While other regional headquarters can only provide suggestion and recommendations to headquarter in terms of any imported F&B. Most Chinese importers in this market tend to be more interested in “partnership”, rather than via “ trading module”. As China is a very brand-oriented market, without investment in building up brands, it is hard to sell in China. The partnership duration sometimes covers 58 years. Once the partnership agreement has been achieved, Chinese importers will put efforts in online & offline promotion and distribution. While they would like to foreign companies to get involved in samples preparation, brand essence building, return management, etc. Purely trading module does not welcome in China. One of the most common causes of business failure in China is deteriorating partnership. Therefore, it is important to set up a “Ideal distributor profile”, in this profile, companies should look into current capability and capacity to look for the right size distributor to support its access in China.

Annex III – China retailer list

PART II – For Brazilian Food & Beverage Sector Opportunities China market size is big, with the further urbanization, increasing disposal incomes, Chinese needs more high-quality food & beverage products. China consumers are emotional purchasing, rather than technical purchasing. In China, before 1995, it was not a brandoriented market. Because of this, Chinese consumers do not have the brand heritage or preference. Chinese have a strong “ try-on” spirit towards the new products, concepts. China F&B market, especially imported F&B market. As currently European, Japan, Korean, etc are the leading origins for imported Food & Beverage sector, every buyer / retailer is looking for new products to differentiate their product offerings in the market. Only in 2018, HUIXIN has been approached by several retailers for new F&B products, such as beer, melon, etc.

Barriers Legal and Regulations barriers Since joining the World Trade Organization (WTO) in 2001, China has reduced tariffs on a wide range of imported products, but sanitary and phytosanitary restrictions (and, to some extent, labelling) continue to limit access to the market. Meanwhile, the new Food Safety Law will take effect in October 2015, requiring stricter monitoring and supervision methods, tougher safety standards, and the recall of substandard products with severe punishments for offenders. Enforcement of regulations is often haphazard, creating confusion for exporters. New food safety law •! Production and trading of food and food additives •! Packing magerials, vessels, detergents and disinfectants for food and equipment used in food production •! Food additives and food-related products used by food producers and traders •! Safety management of food, food additives and food-related products •! All imported food products, subject to the national food safety standards in China

Standards & certifications There are high market-entry costs when entering China- both in terms of feeds involved in mandatory certification and the resources required .Product registration, labelling and product expiry dates are particularly high concerns in this area. To enter the Chinese retail market, food products must receive a hygiene certificate from the local government where the product will be sold. Inconsistencies in the interpretation of regulations among officials at different entry locations and whether they loosely or more severely apply fines/penalties are also problems. Regulations change with some frequency and without warning. Adjusting and accommodating these regulations can be time-consuming and expensive. Organic Food Certification Chinese certification systems and foreign organic certification systems have not been mutually recognized. Hence, internationally recognized organic products that have not been certified in China or have been certified only by an overseas organic certifying body cannot be labelled as “organic” or “in- conversion to organic” or any other misleading labelling terms purporting to be organic when marketed in Mainland China. To ensure the quality of imported organic products and reinforce regulations on organic produce, Chinese authorities have advised that they will verify consignments in accordance with the Regulation on Certification and Accreditation and the Administrative Measures on Organic Product Certification. Certification costs can vary, as cost is determined by the process of inspection. For example, if a variety of lab tests is required, it will increase the cost of certification. On average, inspection can cost up to EUR 2,870 per product. However, there will be added costs if more tests are required. In addition to this cost, companies wishing to seek organic certification will have to pay travel and accommodation expenses of Chinese inspectors visiting to inspect suitability. Organic certification needs to be renewed each year. Fees, however, are reduced by nearly one-third during the recertification procedure.

Food Labelling To comply with China’s food labelling regulations, all imported foods and beverages have to show a white label attached to individual bottles, cans or packets in simplified Chinese, as

used in Mainland China. Labels must be approved by the Chinese Inspection and Quarantine Service (CIQS). The regulation requests that products are labelled before shipping, but as this can be difficult to carry out, CIQS allows labelling to take place in bonded warehouses in China. Minimum requirement of information to be listed •! Standard name of foodstuffs •! List of ingredients •! Quantitative labelling of ingredients •! Net weight and configuration •! Name, address and contact information of manufacturers •! Name address and contact information of local agent or distributor •! Production date, use by date in YY/MM/DD format and guidance for storing •! Code of the product standard •! Special contents if there are any (e.g. irradiated food, genetically modified, nutrition list, for baby food or diet food) Food Safety Law of PRC, Chapter 6 - Food Import & Export article 97 - imported food label should be in conformity with this law that indicates information of manufacture is needed on the label. http://www.sda.gov.cn/WS01/CL1196/118041_4.html.

http://www.aqsiq.gov.cn/zwgk/jlgg/zjgg/2011_1/201203/t20120305_210390.htm.

Market barriers Packaging: China is a very brand-oriented market. A brand is not value proposition which company promises to deliver to the end consumer. Chinese is actively looking for different brands to fit in their social hierarchy. So, in China, packaging is always “exaggerating” to provide maximum details for end consumers to support them to identify if this brand belongs to his / her social hierarchy.

Learning curve 20,000 kilometers distance, China internet access control, etc. Those well prevent Chinese

consumers/Buyers knowing more about Brazilian F&B products. For example, with our project experience, Brazilian acai companies, currently they have challenge in China market. Although superfruit has booming since US, now in EU, but in China, few people know what is Acai. Meanwhile there is no association which represents Brazilian Açai in the international market to overall educate the new market the value of acai products. This increases the challenges for Acai companies, as in every fair or matchmaking events, they spend majority of their time “educating” the buyers. As the learning curve of acai is still long, its value can hardly be appreciated in China, in this case, it leaves price as the only leverage.

Part III - Suggestions HUIXIN has been working with Brazilian business community since 2013. Following are two typical cases which can well present the opportunities, challenges and solutions for Brazilian business community

Case 1 – Brazilian Wine Wine is extremely competitive business in China. As in China, there are all offerings from the whole world. Wine is widely accepted in China, the demand keeps climbing. For Brazilian wine further access to China Market, there are a few things that they need to bear in mind •! Price is key •! Recognition & reputation Price – 1st Brazil is not like Chile, who signed an agreement with China to enjoy 0% tariff. The total importing cost is higher. 2nd Price-it is hand-in-hand with the reputation and recognition. Same like Brazilian coffee, even Brazil produces very good coffee, as there is no recognition of Brazilian special coffee, there is a price ceiling in China. The recognition of Brazilian wines is low in China, it will push price as the only negotiation leverage in most of the case. 3rd- in China market, we have different offerings, such as Bordeaux wine -RMB 70 / bottle, while some Brazilian wines starting price is over RMB 100/ bottle; average price of a 750mlbottle of top champagne is around RMB 350, while Brazilian sparkling wine is over RMB

400. China is the most brand-oriented market. Consumers look for different brands to fit in their social hierarchy. Drinking a bottle of French wine from Bordeaux or 5 top chateaux, presents a life style and social status. In this situation, Chinese consumers more prefer to purchase sth that other Chinese well know, rather than explore a new wine from a new origin. For example, as the importing costs are higher than Chile … in this case, it leaves Brazilian wine no other choice, but develop and compete on Value-Based Selling. Values are not those Brazilian wine producers highlight or believe, because some values won’t be relevant in China. In order to achieve this, a few strategic steps need to develop, includes but not limits to – a stakeholder mapping, benchmarking exercise, China value proposition offerings, brand equity plan & execution plan, etc. Recognition & Reputation – Everyone can sell in their own interest. If MIOLO or any Brazilian wines decide that they will sell more expensive in China –There is absolutely fine. A GOOD SALES, means reasonable premium price range & enduring selling. Ambition and willingness are always nice, while to achieve Good SALES, there are a few things need to take into account, such as: •! What is the current capability and capacity of Brazilian companies? •! What is the reasonable sales in this market? Feasible and realistic sales volume in this market? •! How to optimize the marketing investment to generate the maximum GOOD SALES? For example: o! Marketing INVESTMENT is not just participating the trade fair, or buyer project. In some situation, achieve an alliance with the target stakeholders (stakeholders, not just distributors, or end consumers), associate with their credibility to reach, educate, influence, guide the target clients. This could be more interesting and efficient to access China market. In this case, some kick off questions might help to start, such as : !! Who are target stakeholders? !! Why they are the target stakeholders? !! What their interest or concerns? !! What Brazilian wine could offerings to those stakeholders at this moment? And why?

!! Marketing investment plan, execution, and foreseen results !! etc.

Case 2 – Brazilian coffee For Brazilian coffee, HUIXIN have done a qualitative interview of China coffee sector. In China, Brazilian coffees are everywhere, while the recognition of Brazilian coffees in China is relatively low. Currently most of the Brazilian coffee is re-exported to China market via Europe, or some regions like Taiwan or Hong Kong. In our qualitative interviews, most interviewees understand that Brazil has commercial coffee, but still in some extreme cases, coffee professionals don’t know Brazil actually produces coffee. As they have very limited knowledge of Brazilian special coffee, it creates a pricing ceiling for Brazilian producers in China. In China, any coffee which is top 25 in Cup of Excellence, the starting price is around RMB 100/ pound- around USD 33 / kilos. For Brazilian special coffee, no matter their actual rate, even above 85, the current price ceiling is around RMB 70, above RMB 70, sales will be very challenging. In some cases, we see some very high quality special coffee, CIF / FOB price is around USD 5 / kilo. After paying tariff, consuming tax and VAT, it ends up around RMB 49. In this case, there is no profit margin space for any importer to work with. As the recognition and appreciation of Brazilian special coffee is very limited in China, so it leaves price as the only negotiation leverage. In this case, no one could ever survive. Brazilian coffee producers can’t see the long-term, profitable sales, they will simply walk way; while Chinese importers don’t see interesting profit margin for them to go further with Brazilian coffees, or if they move forward, they will shortly find themselves in price war, every penny they cut off will just make their margin even smaller.

HUIXI’s Suggestion Short-term Trade delegation is important In terms of openness, market size, growth, mismatch between demand and supply, diversified offerings & opportunities, China is THE LAST

AND THE LARGEST F&B market in the world. Trade Mission is a very good approach to lead Brazilian companies to get closer to potential buyers and partners

Matchmaking service for trade mission, as well as during SIAL !!

SIAL is a big fair, which receives huge traffic, as well as a lot of in-field promotion. In China, we never miss “Noise and Crowd”. every moment in SIAL, there are always other activities will catch buyers’ attention.

Brazilian companies fly 20,000 kilometers to generate more business- they simply can’t afford random traffic and other distraction. About Random Traffic - For example, Açai products, since 2014, Brazilian acai producers attended China food fair, tried to sell acai products in China. In fair, every meeting, Açai companies spend majority of their time to “educate” buyers – what is acai. They are not even sure of the people show up in their booth, whether they are actual buyers or just random traffic. For this part job, matchmaking service provider like us, we can communicate and filter it before the business meetings start. Matchmaking for SIAL will increase commercial effectiveness in bring the right buyer to Brazilian company by better communicating and well shaping both sides expectation. Via HUIXIN’s SIAL matchmaking experience – "! successfully brought a qualified buyer to a Brazilian honey producer (who was 1st time to China), to get a trial order – half container during SIAL, another 1 container order within 6 months; "! brought in largest beef buyer of the south-west China market, so a beef trading company Pamperfood sold out 3 containers on 1st day of SIAL "! bought one of the largest e-commerce platforms to visit Brazilian Pavilion and develop bundle sales opportunity to introduce Brazilian coffee in this platform; etc "! well introduced Apexbrazil delegation to China Yum’s Supply Chain senior management team (VPs, senior directors, managers) "! etc.

Long-term 1.! China Stakeholder Mapping & Alliance program We strongly suggest “A stakeholder mapping and alliance project” could be in place. Still taking coffee as an example, by doing this, it will generate a better idea of all relevant stakeholders in China coffee sector, each one’s role, their current perception, knowledge towards Brazilian coffee, their major interests and concerns of working with Brazilian coffee / special coffee. It is necessary to associate with “friends” in China market, while prepare all necessary questions to fight back the “enemies”. By doing this, a targeted communication will foreseen have the highest return on investment. Eventually it has the great chance to break the price ceiling.

2.! Sector Monitoring Program Monitoring Program can be considered as a Parachute project. As in the market, there are different elements, which has strong correlation, will heavily impact on supply-demand. By putting sector monitoring program, it maps well all elements, which includes but not limits to Macro& Micro-environment ones, and understand its correlation, and provide real-time market update. For any crisis, this program can be an alert system, provide the necessary warning to get Brazilian companies informed and prepared; while for any opportunity, this program can provide real-time info and guidance, Brazilian companies can prepare their production capacity and internal resources to capture and capitalize business opportunities. “When the wind is high, with parachute, fly higher, when the wind is low, get enough protection.” Should INDI has interest or inquiry of these two strategic approaches, we will stay at your disposal.

10 CASE STUDIESâ&#x20AC;&#x201C; INDI TRADE MISSION 2018

COFFEE - 090121 ( coffee, roasted, not decaffeinated ) TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION We take KLEM as an example, their average coffee price is around USD 5/ kilo ( CIF or FOB price )

Green Coffee ( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE TOTAL TAX

TARIFF, CONSUMING TAX , VAT CALCULATION 10% 0% 16%

1 2 3 4

( IN USD) CIF 5 TARIFF RATE - CIF *Tariff rate 10% 0,5 CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)°*Consuming 0% taks 0 VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate 16% 0,88 TOTAL TAX 1,38 After TAX price ( in USD ) 6,38 IN RMB 6,3 0,0

Roasted coffee

SIMULATION ( IN USD)

1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE TOTAL TAX

We take safetrade roasted coffee beans as an example, their average coffee price is around USD 3,5/ 300 g( CIF or FOB price ) 15% 0% 16%

TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD) CIF 3,5 TARIFF RATE - CIF *Tariff rate 15% 0,525 CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)°*Consuming 0% taks 0 VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate 16% 0,64 TOTAL TAX 1,17 After TAX price ( in USD ) 4,67 IN RMB 6,3 29,4

Export & Import documents 1 Health certificate

Export & Import procedure 1

shipping o China (Provide all necessary documents for exportation )

2 3 4 5 6 7 8 9

certificate of origin Phytosanitary report Registration Number Contract Invoices L/C Label Cargo List

HS code

2 3 4 5 6 7 8 9

Recordation of China domestic consignees Arrival to China -first checked by Quantinee bureau Provide all relevant documents for clearing customs calculate & pay tariff, consuming tax and VAT verify label info ( label in Chinese ) cargo out of customs ( still not ready for sales ) AQSIQ sample check Domestic health certificate ( ready to sales in China )

MARKET INTELLIGENCE MARCO-ENIVORNMENT

CHINA coffee market yearly growth is around 15%, while world growth rate is around 2%. The consumption of coffee by Chinese is around 2 cups annually.Chinese coffee consumption has nearly tripled in the past four years, much of China’s millennials is coming of age surrounded by Starbucks, with population nears 1.4 billion Chinese, accompanied by coffee get into tea culture, it’s reshaping the coffee and tea industry, and that potential China market demand for more coffee is enormous.The demand especially for warm sizzling coffee drinks and fresh coffee is rising. For example, the growth ratio of fresh coffee in 2014 was going up to 22.1%. Another trend in the coffee sector is the desire for more high-end coffee. China’s swing toward a consumer-driven economy, Chinese consumers are searching for a greater diversity of beverage products, and further, coffee fashion comes along, now coffee in China stayed vast, and has become more and more one of caption drinks.

QUALTIATIVE INTERVIEW HUIXIN conducted Qualitative interviews with 20 coffee professionals. Among 20 coffee professionals, there are from trading companies, coffee roasting companies, coffee chains & boutiques. So far the recogonition towards Brazilian coffee, especially Brazilian special coffee is relatively low. According to the data which provided by 1 General consulate of Brazil in Shanghai, the total amount of Brazilian coffee directly export to China is equal to the volume to Belgium. Most of Brazilian coffees are reexported to China via Europe, or via like some regions like Taiwan or Hong Kong.

Although Brazilian coffee is everywhere in China, such as in food service sector - KFC, Mcdonald's, retailing chains - family mart, or coffee chains - such as Starbucks or Costa, all of them use Brazilian coffees. The coffee professionals have the comment idea of Brazilian coffee - Brazil only has commercial coffee, and quality is not high2 end. So for some cheap coffees, such as for fast food chains or convenient stores, in order to save costs, Brazilian coffees are widely used. Brazilian coffee is " must-tohave" to have blended coffee

3 in some extreme cases, coffee professionals mentioned that they only work with Italian coffee, as Brazil does not have coffee or good coffee There are some coffee trading companies who works with Brazilian special coffee. But as the market does not have the right recognition or appreciation of Brazilian special coffee. The market price of Braziian special coffee is relatively low in China market. We noticed that average price / kilo of Brazilian coffee in China is around 4 RMB 40- RMB 60 ( USD 6,35 - USD 9,5 - it is not CIF or FOB price, but the market price in China, which means after tariff,consuming tax and all necessary customs charge, on top of this, most important is to leave enough profit margin for importer / distributor to operate in China )

while in China, any special coffee that could be in the final list or top 25 of cup of excellence, the average starting price should be above RMB 100 / pound , in terms of 5 per kilo is around RMB 220 ( USD 35 dollar / kilo, assumed exchange rate is USD 1 = RMB 6,3). In China, any Brazilian special coffee, currently the price ceiling is around RMB 70/ Kilo - USD 11 / kilo. Over this price, the sales will be extremely challenging

As Brazilian special coffee CIF or FOB price is higher. If the market forseen price ceiling is RMB 70 ( USD 11 / kilo). For example, like KLEM , some of its coffee- FOB 6 price is around USD 5 / kilos. See the above simulation, after all necessary tax ( not yet included customs charge) - the price is around RMB 49. It leaves very small margin for the importers or distributors. in this case, it could prevent Brazilian special coffee export to China

As profit margin is not high enough to raise interests and attention. Less Chinese importers or distributors will work specifically with Brazilian Special coffee. Less people works with Brazilian special coffees, less people ( coffee professionals and consumers) will have recognition of Brazilian coffee / special coffee.

China coffee standard - coffee for Brazilians is daily consumption, while in China, coffee is sth from oversea, which has been redefined and repositioned as a high-end products or even a life style. The average cup of coffee in China is around RMB 30 ( USD 4,8 ), much higher than in Europe or in Brazil. In this case, coffee is no more just coffee, it was defined by sector players that it must be high-ended, well branded, no just for B2C market, as well as for B2B sector. We well presented coffee producers their product list ( finished goods, as well as bean lists ) to interviewees, seems most of the coffee producers dont really fit in China coffee standard. In China, 8 a good bean list includes the following items ( type, lot, finca, altitude, collect date, moisture content, points SCAA, varieties process method, Aroma/taste, introduction of coffee farms, ideal consumption method, etc.) While in an extreme case, Brazilian coffee producer came up with the bean list which only consists bean type and price. As Chinese coffee professionals have so many offerings from the whole world, they are spoiled and picky. If the bean list cannot meet China coffee standard, they will simply pass.

Go-to-China Market strategy I via governmetn trade agency level

Associate with " well-known" coffee player in China to co-promote Brazilian special coffee, aliancing with "well-known" coffee player and retailer, via their credibility to introudce Brazilian special coffees in China

Further step - Stakeholder mapping and alliance communication - Promotion is a blackhole in China. We have different possibilities and most fancy promotion methods which can be very costy and see no return on investment. For Brazilian coffee / special coffee, at this moment, it is necessary to run a Stakeholder mapping exercise to identify the stakeholder, and their roles in coffee sector, to better understand their knowledge and preference towards Brazilian coffee / special coffee. Once this 2 mapping exercise is done, each stakeholder, their roles in the whole value chain will be very obvious. Alliance with friends, answer all conerns or questions from " enemies" . It is a typical and efficient way to establish a regional / country foodstuffs in China. Based on this methods, define the best communication platform to maximize the Return on Investment. Successful story includes but not limits to Austrialian beef promotion in China, Austrialian Coffee / barista accessories accessing China market II For Brazilian coffee producers

An education of " China coffee standards", lay out all necessary knowledge, market reality, value chain, each stakeholder's interest in the value chain, as well as all necessary work that should be well managed before Brazilian coffee producers exporting to China.

Keep reasonable inventory in China - from Brazil to China, trading coffee - 15 days delivery time, plus 45 days shipping to China, once it arrives in China, estimated 2 2 weeks before clearing customs and quantinee ( if arrival time is during China Holiday period - like new year, labor day, national hoilday, etc, the total shipping and delivery time will be even longer.) Available stock is crucial in China market Run price simulation - suggested defining wholesale prices, instead of CIF, FOB 1st - A wrong pricing strategy easily leads to price war. In price war, no one could ever survive. For Brazilian coffee producers, as they donâ&#x20AC;&#x2122;t see the enduring sales in China market, while Chinese importers or distributors, donâ&#x20AC;&#x2122;t see the interesting profit & 3 margin, they will simply walk away. 2nd - CIF or FOB prices are not interesting, because this is typical trading module. Chinese buyers are more into " partnership" ,rather than " trading" module. By providing suggested wholesale and retailing prices, it actually put buyer profit margin into consideration. it is the 1st step to be successful in China.

4 Keep the price consistent, not FOB price, but selling prices in China. The worst case is different importers run different pricings, it will 100% kill the business.

China has its own seasonal marketing schedule. For coffee finished goods -such as sachet, producers should work closely with distributors to provide the support. We suggest that at the beginning of collaboration, a yearly marketing promotion should be defined immediately, it will avoid all the bad surprises, and both sides can define 5 each responsibility in each seasonal promotion, and well define and manage the costs. The most frequent seasonal marketing promotion in China, includes: tasting, small sachet / sample offerings, in-store promotion, price reduction or bundled sales, etc

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

HONEY & HONEY BASED PRODUCTS ( PROPOLIS )HS CODE 040900 & 041000

TARIFF, CONSUMING TAX , VAT CALCULATION

If we take 300g multiflower source honey as an example, FOB price is USD 2,6 TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD)

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE TOTAL TAX Normal tariff TOTAL AMOUNT in RMB

SIMULATION

15% 0% 13% 80%

CIF TARIFF RATE - CIF *Tariff rate 15% CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)°*Consuming 0% taks VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate 13% TOTAL TAX 80% IN RMB ( assumed exchange rate is USD 1= RMB 6,3)

6,3

2,6 0,39 0 0,39 0,78 3,38 21,3

Honey based products ( Propolis ) HS 041000 TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE TOTAL TAX Normal tariff TOTAL AMOUNT in RMB

SIMULATION TARIFF, CONSUMING TAX , VAT CALCULATION

20% 0% 16% 80%

( IN USD) CIF TARIFF RATE - CIF *Tariff rate 20% CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)°*Consuming 0% taks VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate 16% TOTAL TAX 80%

5 1 0 0,96 1,96 6,96

IN RMB ( assumed exchange rate is USD 1= RMB 6,3)

6,3

43,8

For Propolis finished goods

Currently China has strict control on Brazilian proplis products, for any finished goods, there is no market access possibility via normal trading method. There are still a possibility for Brazilian propolis to access to Hong Kong market via importers and distributors. For mainland China, cross-board e-commerce will be the only option. Although in mainland China, there are free-trade zone, there wont be possiblities to do cross-board e-commerce via mainland China freetrade zone to introduce Brazilian propolis. The only possibility is to have oversea warehouse, such as warehouse in Hong Kong, while the e-commerce platform aims to sell Mainland Chinese market . In Hong Kong, most propolis products are from Australia, should Hong Kong buyers/ importers have the interests to import Brazilian propolis, their target market is still Mainland China Market. Most of them will sell via cross-board e-commerce business module

Packaging is one thing that bother Chinese buyers most. As propolis is considered as a high-end health supplement. Chinese consumers expect the finished goods can be very well or over packaged. In Brazil, the mentality is about sustainability, protecting environment, package side is minimized version. For Propolis raw material For raw material, mainland China market is open so far. Raw material is only possible to sell to those health supplement companies who have the license or called " blue chapeau" .

Via China CFDA official website, as the following link, we filter all the propolis products total 1519- those are the companies who produce propolis related products. This could be a start for Minas Gerais based propolis producers, should they consider to sell raw material to Mainland China market http://app1.sfda.gov.cn/datasearch/face3/base.jsp?tableId=30&tableName=TABLE30&title=%B9%FA%B2%FA%B1%A3%BD%A1%CA%B3%C6%B7&bcId=1181033

Export & Import documents 1 2

3 4 5 6 7 8

Health certificate certificate of origin Health certificate or FSC ( Free sales certiciate ) or Plant Inspection and quarantine certificates Registration Number HS code Contract Invoices L/C Label

Export & Import procedure 1 2

shipping o China (Provide all necessary documents for exportation ) Recordation of China domestic consignees

Arrival to China -first checked by Quantinee bureau

4 5 6 7 8

Provide all relevant documents for clearing customs calculate & pay tariff, consuming tax and VAT verify label info ( label in Chinese ) cargo out of customs ( still not ready for sales ) AQSIQ sample check

Cargo List

Domestic health certificate ( ready to sales in China )

MARKET INTELLIGENCE MARCO-ENIVORNMENT

China is the world's largest country of beekeeping, honey production and export country, but also the power consumption of honey. According to National Bureau of stratistics data show that China's honey production increased by 10 times over 15 years. As recently food safety has become an issue in China, Chinese prefers to purchase imported honey. From 2013 - 4856,713 KG to 2017, 5660,034 KG, the amount doubled from 42,932,079 USD in 2013 to 91,297,418 USD in 2017. Currently China imported honey from New Zealand, Australia, Germany, France, Russia,Malaysia, Chile,Italy, Portugal, Swiss, UK, Spain, Canada, Greece, Taiwan Region, Kyrgyzstan, Brazil, Denmark, Mexico, Hungary, Poland. So far Chinese consumption honey per capita / year reaches 250 gram, as the urbanisation is moving forwardtill 2030, around 1 billion Chinese will live in city, although at this moment, towards honey prodcuts, most end consumers are the elders adn kids, while with the improve of living condition,salary increasing, health care consiciousness growing, honey still have a strong growth in China QUALTIATIVE INTERVIEW

HUIXIN conducted a qualitiative interviews with retailers, health supplement companies in China. As China has its own bee production, has the strong export capacity. As Chinese middle class is arising, the demand of high end , healthy, safe products is getting higher as well. the success of manuku honey proved Chinese have the consuming power, and intention to have the best product in the world.

Sector professionals have recognition of Brazilian honey. So far their knowledge of Brazililian honey is only the multi-flower source honey. Multi-flower source is the most regular honey products, it is difficult to differentiate from other honey products from China or from any other country. As the differentiate is quite small, it is hard to explain or define the unique value that Brazilian honey could offer to China market, so it leaves pricing as the only leverae in the business negotitation

Most of the professionals have no knowledge of Brazil, especially they have limited knowledge of Brazilian unique flower sources, especialiy those from Amazon regions. As we presented the different flower sources, the relevant honey, and their unique functions. Those all trigger professionals interests

There are a few Brazilian honey selling in China, even selling the unique flower source honey. Its pricing strategy is cost-based, rather than value-based. The price ceiling is around RMB 80 per 500gram. While with our previous honey project experience, the selling prices of Brazilan honey could reach around RMB 200 per 300 gram. in this case, how to define Brazilian honey China value proposition is key.

Nature, no pollution, different type of flower sources, unique functions, usage suggestion, foreseen results, those are the basic / most important infos that Chinese honey sector professionals are looking for. Honey market is not lack of honey, but lack of good story to marketing and tell the mass public

Go-to-China Market Strategy Honey producers 1

For Honey business, trading module still works well ( only for unique flower source honey)

Even the trading module still works well, Brazilian honey producers should define its China value proposition. " Value proposition" “is a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits”. very often it starts from Marketing Mix, in the international trade, an interesting value proposition includes: Unique products, unique values for target clients, SKUs(/ packages, pricing strategy (value creation- clearly define/ present profit & margin, should any company decide to work with this product or brand in China), delivery, payment flexibility, Marketing support

Run price simulation - suggested defining wholesale prices, instead of CIF, FOB 1st - A wrong pricing strategy easily leads to price war. In price war, no one could ever survive. For Brazilian producers, as they don’t see the enduring sales in China market, while Chinese importers or distributors, don’t see the interesting profit & margin, they will simply walk away. 2nd - CIF or FOB prices are not interesting, because this is typical trading module. Chinese buyers are more into " partnership" ,rather than " trading" module. By providing suggested wholesale and retailing prices, it actually put buyer profit margin into consideration. it is the 1st step to trigger Chinese buyers or partners interest.

Define an Ideal partnership profile - starting with own realistic capacity and capability to consider the ideal partnership profile. There are 6 elements could be used and considered when define this profile, which includes : coverage, compatibility, capability, creditworthiness, capacity, and commitment.

China has its own seasonal marketing schedule. For this, honey producers should work closely with distributors to provide the support. We suggest that at the beginning of collaboration, a yearly marketing promotion should be defined immediately, it will avoid all the bad surprises, and both sides can define each responsibility in each seasonal promotion, and well define and manage the costs. The most frequent seasonal marketing promotion in China, includes: tasting, small sachet / sample offerings, in-store promotion, price reduction or bundled sales, etc

Distribution channel management - online & offline distribution. Online currrently has its own advantages, as it efficiently reduce all the intermediaries, and will have the price competence, direct in contact with end consumers and receive their feedbacks. While offline is still important, especially for the brand creation and management. In this online and offline mix, the most tricky part is how to define the retailing prices, how to keep the price consistent, as online and offline pricing structure, especially gateway costs are totally different. end consumers have the expectation of "online purchase is cheaper". In this case, even in the trading module, honey producers should get involved in pricing management, to make sure the price is consistent or different offerings, different pricings via different distributions

Note : tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

CACHACA - HS code : 220840 - updated January 2nd, 2018 TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION We take two cachaรงa producers in this delegation, their average FOB prices per litre

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE

10% 20% 16%

unit

per litre

TOTAL TAX

TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD) 1 CIF 2 TARIFF RATE - CIF *Tariff rate CONSUMING TAX RATE 3 =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks VAT RATE =(CIF/+Tariff+consuming 4 taks )*VAT Rate TOTAL TAX After TAX price ( in USD ) IN RMB

Export & Import documents

10%

10 1

20%

2,75

16%

1,76

6,3

5,51 15,51 97,7

Export & Import procedures

Certificate of Origin

Shipping to China - Provide all necessary documents for exportation ( health certificate, certificate of origin, L/C, etc)

Health certificate or FSC ( Free sales certiciate ) or Plant Inspection and quarantine certificates

Recordation of China domestic consignees

Quality Report & 3rd party quality report

Arrival to China -first checked by AQSIQ

Plasticizer Test report

Provide all relevant documents for clearing customs

bottling date

calculate & pay tariff, consuming tax and VAT

Label pics ( in color ) and translation

verify label info ( label in Chinese )

IPPC - palette Invoice Packing list

7 8 9

cargo out of customs ( still not ready for sales ) AQSIQ sample check Domestic health certificate ( ready to sales in China )

6 7 8 Invoice 9 Packing list

IPPC

MARKET INTELLIGENCE

MARCO-ENIVORNMENT

in China, Revenue in the alcoholic drinks market amounts to USD 285,9 mllion. This market is expected to grow annually by 2,5%. The Market's largest segment is the segement " Spirits" with a market volume of USD 190,234 M in 2018. China has its own liquor consumption tradition, which is Baijiu. For other foreign alcoholic drinks, currently the top three types are wines, champagne, vodakas. Chinese Alcoholic drinks are heavily replying on advertising and in-field promotion. Chinese are used to " word of mouth", which can change his idea in the 1 last min, even he has the strong purchase intention of one type of alcoholic drinks. Seasonal marketing promotion is a must in China market, it requires all different promotion via ontrade ( bars, hotels, clubs, etc ) or off-trade ( hypermarket, supermarkets, convenience stores, etc), including gift offering, tasting sessions, in store promotion, price reduction. For alcoholic drinks, a clear brand image / brand essence must be identified. it should easily to be understood and associated with. Because Chinese are actively looking for products / brands which will help them to fit in their own social hirerachy. QUALTIATIVE INTERVIEW

HUIXIN conducted a qualititative interviews with wholesalers ,retailers in the liquor business, among them, there are wine & liquor importers, retailers,from off-trade and on-trade sector. Off-trade players includes ( hypermarket, supermarkets, conveniencne stores, wine& spirit stores); on-trade ( bars, restaurants, clubs, hotels )

2 Current recognition towards Cachaรงa is still low in China

3 With limited recognition, price is so far the only bargin leverage in any possible sales

Go-to-China Market Strategy

Via government agency or Association

Apply for PGI ( protection of geographical indication )- promote and protect names of quality agricultural products and foodstuffs.Products registered under one of the three schemes may be marked with the logo for that scheme to help identify those products. PGI starts in EU, and now in China, PGI has been widely used, over 100 European based food products were 1 applied PGI in China. According to the trademarke law of China, GI is a sign that signify the place of origin of the goods for which the specific quality, reputation or other features is mainly decided by the natural and cultural factors of the regions. it can be considered as a shortcut to promote cachaรงa in the target market, in order to raise enough attention among all stakeholders.

For Cachaรงa Producers

Run price simulation - suggested defining wholesale prices, instead of CIF, FOB 1st - A wrong pricing strategy easily leads to price war. In price war, no one could ever survive. For Brazilian producers, as they don’t see the enduring sales in China market, while Chinese importers or distributors, don’t see the interesting profit & margin, they will simply walk away. 1 2nd - CIF or FOB prices are not interesting, because this is typical trading module. Chinese buyers are more into " partnership" ,rather than " trading" module. By providing suggested wholesale and retailing prices, it actually put buyer profit margin into consideration. it is the 1st step to be successful in China.

Negotation package: trading module is not suitable for liquor business. As China has its own liquor consumption tradition, for any foreign liquor in order to access to China market, there are extra marketing efforts need to be considered. 1st - marketing support - as China itself has varied seasonal promotion. As a new type of liquor, it wont be suprising that Chinese potential partner ask Brazilian Cachaça producers to support them during different seasonal marketing occasions, especially at the beginning of the business. The possible seasonal 3 marketing supports include- tasting session, gift offerings, In-store promotion, price reduction, etc. All of these will be marketing and sales costs that Brazilian cachaça producers bear in its own balance sheet. Consignent Agreement could be an interesting way to access to China, In this agreement, Brazilian cachaça producers deposit a certain quantity of cachaça in Chinese consignee's warehouse, while Chinese consignees will define Brazilian cachaça retailing prices, and investing in distribution channles. Once sales starts, Chinese consignee pay CIF / FOB prices to Brazilian cachaça producers. In this case, an sales system- IT system, which allows both sides to access is crucial.

Bottling in China - if by any chance to ship cachaça in builk, while bottling in China, it could efficiently reduce the cost. As in China, there are a lot of regions who are experiencing the transformation, from heavy industry, heavy pollutiion to less polluted industry. The entrepneurs in those regions are actually looking for new products to diversify their investments. if 4 the entrepreneurs have the interests in working with Brazilian cachaça producers, they should have enough financial capacity to establish a bottling facility ,while taking care of all the distribution in his region.

Note : 1. tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs 2. PGI -reference -Geographical indications and traditional specialities in the European Union https://en.wikipedia.org/wiki/Geographical_indications_and_traditional_specialities_in_the_European_Union PGI - business practice http://www.inta.org/Advocacy/Pages/ProtectionofGeographicalIndicationsandTrademarks.aspx

Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

Sugar Confectionary / Candy HS Code 180690

TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION We assume candy unit price is 1,5 dollar / 250 g

( IN USD) 1 2

FOB/ CIF TARIFF RATE

CONSUMING TAX RATE

CIF

VAT RATE

16%

Kilos

TARIFF RATE - CIF *Tariff rate 8% CONSUMING TAX RATE 0% =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks VAT RATE =(CIF/+Tariff+consuming taks )*VAT 16% Rate

0,26

TOTAL TAX After TAX price ( in USD ) IN RMB

0,38 1,88 11,8

Unit

TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD)

Export & Import documents Health certificate

shipping o China (Provide all necessary documents for exportation )

certificate of origin

Recordation of China domestic consignees

Health certificate or FSC ( Free sales certiciate ) or Plant Inspection and quarantine certificates

Registration Number

5 6 7 8 9

Contract Invoices L/C Label Cargo List

MARKET INTELLIGENCE

6,3

Export & Import procedures

HS code

1,5

5 6 7 8 9

Arrival to China -first checked by Quantinee bureau Provide all relevant documents for clearing customs calculate & pay tariff, consuming tax and VAT verify label info ( label in Chinese ) cargo out of customs ( still not ready for sales ) AQSIQ sample check Domestic health certificate ( ready to sales in China )

0,12 0

MARCO-ENIVORNMENT

Until 2014, the sugar confectionary market in China saw positive volume growth, however 2015 marked a turning-point. The market saw volume sales decline between 2015 and 2016, and this is forecast to continue until 2020. The two main reasons for this are slowing economic growth and consumers' increasing concerns about sugar intake. According to market research in China, candy & confectionary consumption per capita globally is about 3 kg while it is only 0,7 kg in China. There are 437 candy companies in China, around 42 companies with a year-on-year growth rate of 10,63%. The domestic candy & confenctionary industry is expanding, and various internatoinal candies, such as health-care-oriented, low-sugar-oriented, fun-oriented and ecotype are speeding up to enter China's candy market. The major markets for domestic brands are second and third tier markets.

candy business should focus on product up-grade and continuously promote new products as well as diversify product categories. Also tapping into consumers' taste and emtional needs are also key to building a significant and lasting business since candy& confectionary are far mor than snack food itself in China market, they have been entrusted with certain emtional embodiment such as good and loving wishes. The candy respresents emtionally right through its packaging and brand effect.

QUALTIATIVE INTERVIEW

HUIXIN Conducted qualitative interviews with retailers, wedding professional ( according to coaching with Embare, they have interests of accessing the marriage market ) to well present Embare candies. Qualitative interviews focus on the following items, including tastes /flavors, package, pricing, suggestion for distribution channels, etc

Via tasting sessions, HUIXIN well presented all candies flavors with different target groups. The best feedback goes to classic taste - coffee, chocolate, caramel,etc. For some new flavors, such as matchai, fruits flavors, which would be nicer if taste are more stronger.

via packaging - the classic taste package is more welcomed, while other flavors like fruits, etc is less welcomed

For the distribution channels - most of the interviewees suggest " marriage market" could be an option, this goes well with EmbarĂŠ China sales initative . For accessing tier market question, interviewees' suggestions are : focus 1st tier and 2nd tier market sbesides the regular distribution channel, Embare could consider to have a B2B distributor - focusing on B2B market- wedding business is a large sector in China. Till 2020, experts predict that the marriage market in China will woth mor than $400 billion. Chinese wedding budget has grown by 4000% in the last 30 years. 1st tier market - preferably classic tastes, for 2nd tier market- all flavors should have potential

Go-to-China Market Strategy For embare 1

as they are already in China, including Hong Kong and Mainland China.The question is not to access to China market, while selling more in China market.

HUIXIN has no access to Embare's distributor profile, we can only suggest that Embare could consider the following items :1st categorize and prioritize its candy products, 2nd run tasting sessions ( end -consumer focus session) to prioritize the best or the most interesting candies; 3rd. create small packages, as Chinese dont consume candies as a snack food - small package can be 50 g or a roll package, etc. 4th, redesign the package, as in Asia, package is very important and impact on consumers' final decision. 5th,Besides the retailing channel, invest and develop a B2B distribution to " wedding market". China wedding market ,till 2020, the market size is foreseen to be $400 billion. A lot of wedding companies in China, according to couples' different budgets, they provide different candy packages. we suggest for the wedding sector, embarĂŠ can think of 2nd tier market to introduce its full candy collection

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

Cheesebread - HS Code 190120 - Mixes & Doughs for Prep of Bakers,wares of heading TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION We assume candy unit price is 2 dollar / 250 g

( IN USD) 1

FOB/ CIF

2 TARIFF RATE 3 CONSUMING TAX RATE 4 VAT RATE Unit

TARIFF, CONSUMING TAX , VAT CALCULATION 25% 0% 16%

1 2

CIF TARIFF RATE - CIF *Tariff rate

( IN USD)

Kilos

CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks

25%

2 0,5

VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate 16%

0,40

TOTAL TAX

0,90

After TAX price ( in USD )

2,90

IN RMB

Export & Import documents

6,3

18,3

Export & Import procedure

Origin Label, Chinese label,( includes Brand Name, Produt name, ingredients, production date, shelf life, ,etc)

Certicate of Origin, Health certifcate ( original 2 copy )

Recordation of China domestic consignees

Packing list Contract, Invoice

Arrival to China -first checked by AQSIQ

L/C document

Provide all relevant documents for clearing customs

Domestic consignees business license copy and stamped

calculate & pay tariff, consuming tax and VAT

Recordation of Domestic Consignees

verify label info ( label in Chinese )

brand name ( in Chinese )

cargo out of customs ( still not ready for sales )

AQSIQ sample check Domestic health certificate ( ready to sales in China )

Shipping to China - Provide all necessary documents for exportation ( health certificate, certificate of origin, L/C, etc)

MARKET INTELLIGENCE

In China, Mix & Doughs for preparation, this sector started in 2003, till 2014, as more bakeries entered the China market, this sector increased dramatically. Till now, the market size is around 3 billion USD. Chinese have own consuming tradition ( steam breads, Chinese pastries, Moocakes, etc) . For western Mix doughs such as bread, currently it represents 20% of the total market share. With China Customs data, till 2016,total imported mix & doughs reached 7313,83 tons, increased 12,79%, among all imported mix & doughts, the top 5 countries and regions are Italy ( 20,32% ), France (18,52%), USA ( 8,96%), Hong Kong ( 7,99%) and Thailand (10,46%)

for mix & doughs, there are 4 types : UFF ( unfermented frozen doug) ; PFF ( Prefermented Frozen dough); PBF ( Part Baked Frozen Bread/ rolls), FBF ( Fully baked frozen). For FORNO DE MINAS, the cheeseball is PFF. PFF resprents the 22,6% of market share.

if PFF contains butter or diary products, it is necessary to cross check the relevant regulation of these products. If the diary product are not allowed to export to China.There is a high risk that the customs will refuse the shippment arrive in China

QUALTIATIVE INTERVIEW

For FORNO DE MINAS, its cheeseball products, HUIXIN conducted qualitative interviews during matchmaking events in Hong Kong, as well as in Shanghai. As Cheeseballs are very unique Brazilan food. For the qualititative interivews, we focused on two target groups- - end consumer, as well as food service. Qualitative interviews contain 3 questions: taste & flavor, SKUs / packages, prices.

End consumers feedbacks - taste is interesting, although it is called Cheeseball, it does not taste very oily, interesting concept, and associated well with coffee products. As most Chinese do not have sweet tooth, Chinese have the natural preference towards salty food. over 60% of end consumers mentioned that if the products could be less salty, could be even better. For domestic 2 consumption, as Ovens are not really that common in Chinese household, end consumers more prefer to purchase prepared, baked cheeseballs. For the price side, FOB price does not really matter end consumers, they are more interested in the retailing price for baked cheeseball. Towards the consumption per time, end consumers suggested 2-3 pieces as one unit could be interesting

Food servcie feedbacks - for the taste part, similar with end consumers. SKUs, 3kilo or 5 kilos package will be more interesting. FORNO DE MINAS, its cheeseball menu is interesting. It presents different possibilities to consume Cheeseballs. Because of the menu, it makes cheeseball not too Brazilian. it has flexibility to adapt in different occassions, as well as cuisines. Well present and 3 manage distributors' expectation, and have a good story to market. Price part, FOB price is fine, as PFF has to be frozen delivery, indeed it will increase the costs. This is also potential buyers would like to have the proposal of large package- 3kilos or 5 kilos.

Go-to-China Market Strategy

Cheeseballs best distribution channels in China will be on-trade ( restaurants, hotels, food service, coffee stores, etc). Mainly for the food service sector. As most Chinese household does not have oven, and FORNO DO MINAS cheeseball taste better by baking, although there is a micro-wave possiblity. At the beginning we test the convenience store or stand possibilities, while we notice that in most convenience store, they have micro-wave, the average heating time is around 1 mins -1,5 mins, FORNO DO MINAS cheeseball should be micro-waved at least 5 mins, waiting time is too long. So for consumers buy frozen cheeseballs and warm up in the store, this does not seem any chance. In most of the convenient stores, they have pre-cooked food section, for this part, if the convenient stores have the oven facility, it could be any chance, as convenient chains are actively looking for some new concept of food & beverage to diversify their product portofilo

2 For food service, the package could be more interesting over 3 kilos or 5 kilos

Marketing support - For Cheeseball product, it still can go for trading module, it wont be surprise that distributors/ importers would ask for marketing support, especially at the beginning of the collaboration. For B2B collaboration, marketing support might include small trial package which distributor can easily send to the food service for test.

Run price simulation - suggested defining wholesale prices, instead of CIF, FOB 1st - A wrong pricing strategy easily leads to price war. In price war, no one could ever survive. For Brazilian producers, as they donâ&#x20AC;&#x2122;t see the enduring sales in China market, while Chinese importers or distributors, donâ&#x20AC;&#x2122;t see the interesting profit & margin, they will simply walk away. 2nd - CIF or FOB 4 prices are not interesting, because this is typical trading module. Chinese buyers are more into " partnership" ,rather than " trading" module. By providing suggested wholesale and retailing prices, it actually put buyer profit margin into consideration. it is the 1st step to be successful in China.

As FORNO DO MINAS currently has one distributor in China, as we dont have any access to see the distributor profile. Our suggestion to all Brazilian companies that is very necessary to set up 5 an Ideal partnership profile:- starting with own realistic capacity and capability to consider the ideal partnership profile. There are 6 elements could be used and considered when define this profile, which includes : coverage, compatibility, capability, creditworthiness, capacity, and commitment.

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

Cheese

0406100000

(

)(

;

/ 040690

TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION Assume the cheese CIF price is USD 5 / kilo

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE

12% 0%

VAT RATE

16%

TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD) 1 2

3 unit TOTAL TAX

CIF TARIFF RATE - CIF *Tariff rate CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks

5 12%

0,6

per kilos

0 4

VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate TOTAL TAX After TAX price ( in USD ) IN RMB

16%

6,3

0,90 1,50 6,50 40,9

For importing Diary products, although Customs only ask for AB- similar like other food & beverage import regulation, there is an extra request, the importer should have a specific registration and license to import / receive diary products in China. ( AB represents import and export customs notificiation, which is supervised and managed by AQSIQ ) Export & Import documents

Export & Import procedures

Certificate o origin

Shipping to China - Provide all necessary documents for exportation ( health certificate, certificate of origin,

certificate of sanitary

Recordation of China domestic consignees

Nutrient compisition report

Arrival to China -first checked by AQSIQ

certificate of production date s

Provide all relevant documents for clearing customs

Weight emo / packing list

calculate & pay tariff, consuming tax and VAT

Commercial invoice

verify label info ( label in Chinese )

Purchase contract ( signed and stamped)

cargo out of customs ( still not ready for sales )

Bill of landing

AQSIQ sample check

Domestic health certificate ( ready to sales in China )

For orginal label, front and back, 3 copies, Chinese and English translation- Seller corporation name, address, contact person, email, and telephone 9

Original label For Chinese importer business license, tax registration number, warehouse address, recordation of consignee

MARKET INTELLIGENCE MARCO-ENIVORNMENT

Daiy Chinese average consumption 40,1% protein, only 3,1% is from diary products, this figure is much lower than EU 22,8%, US 20,3%. Among all protein that Chinese take daily, over 33,9% of rice, 19,5% from meat, 13% from vegetables. In China, current market trendss " milk powder - milk -butter and chese", currently Millk respresent 90,5% of the total diary markets, especially the demand of Yogurt. Till 2016, the total market size of Cheese reached RMB 3,5 billion ( around USD 55 million ). Processed cheese took 70% ,reached RMB 2,5 billion ( USD 39,7million); unprocessed cheese took 30%, reached RMB 932 million ( USD 148 million)

supermrarekt is still The distribution channel for cheese in China , till 2017, 64% of the total cheese sold in supermarket

Consumer beahavior- Chinese purchase cheese for kids. Bright Milk, the top Chinese diary companies, have heavily invest in cheese sector, and develop the products specifically for Kids

Besides kids, importd cheese have been dramatically increase as well. According to Euromonitor- from 2013 to 2017, Chinese cheese consumption got 20% yearly growth. Although Chinese cheese consumption per capita is around 50g,there is a big growth possibility in China. At this moment, New Zealand Australia, US, represents 43%, 24%, and 16%. France has its special position in global cheese market, but not yet in China

Most of cheese still go to food service, such as ( KFC, Mcdonald's, subway) or bakery, etc. via retailing, only 20% of cheese is sold to end consumers

Cheese, prodution gross margin is higher than other diary products. Cheese is around 30%-40%, while other diary products is average 20%. It pushes more Chinese domestic companies get involved in investing and producing cheese. Recently Chinese government removed 0% tariff for New Zealand cheese products, and increased to 8%. This is a strong signal that the supply from China domestic market is rising.

Go-to-China Market Strategy

As recently Brazil has the agreement with China government to export diary products. It is necessary to keep in touch with Embassy to ask all relevant information, and prepare the necessary documents to facilitate the exportation

the recognition of Brazilian cheese is still at the beginning stage, should government or association take initative to promote in China, and introduce Brazilian cheese to China, it will be more efficient and effective. The promotion could start with a clear study of stakeholders in the cheese sector, define each stakeholder role, develop the accurate message, and choose the right platform to communicate, last but not least do follow-ups

Run tasting session to understand Chinese taste preference. As Chinese do have the tradition of consuming cheese, it is necessary to provide a customized product to maximize the end consumers' satisfaction. Currently French cheese producers are actively working on this, revised its production and ingredients, in order to provide the most suitable cheese products to Chinese consumers

Brazilian producers should define its China value proposition. " Value proposition" “is a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits”. very often it starts from Marketing Mix, in the international trade, an interesting value proposition includes: Awards ( Minas Gerais cheese won international awards ) ,Unique products, unique values for target clients, SKUs(/ packages, pricing strategy (value creation- clearly define/ present profit & margin, should any company decide to work with this product or brand in China), delivery, payment flexibility, Marketing support.

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

Artisanal Malt Beer - HS CODE: 2203.00 TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION Assume the cheese CIF price is USD 1/ Litre

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE unit

0% 10% 17% per litre

TARIFF, CONSUMING TAX , VAT CALCULATION ( IN USD) 1 2

CIF TARIFF RATE - CIF *Tariff rate

CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks

TOTAL TAX

VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate TOTAL TAX After TAX price ( in USD ) IN RMB

1 0

10%

0,11

17%

0,17

6,3

0,28 1,28 8,1

For importing Beer Products, Chinese buyer should have a special license - Alcohol importation license - ( Customs requires AB certificate, AB represents import and export customs notificiation, which is supervised and managed by AQSIQ ) Export & Import documents 1 2 3 4 5 6 7 8

Export & Import procedures

Certificate o origin certificate of sanitary production method certificate of production date s Weight emo / packing list Commercial invoice Purchase contract ( signed and stamped) Bill of landing

Original label

For orginal label, front and back, 3 copies, Chinese and English translation- Seller corporation name, address, contact person, email, and telephone

1 2 3 4 5 6 7 8

Shipping to China - Provide all necessary Recordation of China domestic consignees Arrival to China -first checked by AQSIQ Provide all relevant documents for clearing calculate & pay tariff, consuming tax and VAT verify label info ( label in Chinese ) cargo out of customs ( still not ready for sales ) AQSIQ sample check

Domestic health certificate ( ready to sales in China )

Original label

Brand Name in Chinese

For Chinese importer - business license, tax registration number, warehouse address, recordation of consignee brand name - Phonetic translation in Chinese Translation of its production origin

MARKET INTELLIGENCE MARKET SIZE

China's beer market grew by 29% in volume between 2006 and 2011 and total consumption volume was 50 bilion litres according to Mintel. Till 2012, China beer market reached its highest growth. Market growth slowed down, and dropped from 50% annual growth to 20%. China Beer market includes three major local beer, QingDao, Huarun, Xuehua, only Qingdao beer takes over 40% of the local market share. Compared to the local beer market, the imported beer, no matter in terms of its volume and value, it is still relevant small. According to China customs statistics, in 2016, total imported beer reached 640 million litres, increased 20% ,total value reached 440 million RMB ( around 68 million USD) China market may be the biggest in the world, but even large international brands have found it difficult to survive, while others compete in a continuing search for economies of scale, with production based in China. Quality control, hygiene and distribution are major challenges in this market. Due to relative price inelasticity compared to Chinese wine market, and the low price of local beer, compeitition is high

according to China customs statisitcs , the major beer origins are Germany, Netherland, Spain, Belgium, Mexico, Protugual, France, Korea, UK, Russia

German beer so far reached 40% of total Chinese imported beer market, some leading German brands have set up their own Rep office in Beijing to fully support their Chinese distributors.

With a few year fast growing, currently in 1st and 2nd tier market,s there are more imported beer brands than the local beer brands. Some well-known imported beer brands, such as Corona, Hoegaarden Erdinger WeiĂ&#x;ber,Paulaner, as well as Budweiser, Heineken, Carlsber, which have been highly accessed to China market since 2000. 1st and 2nd tier markets are highly competitive, imported foreign beer moved further to 3rd and 4th tier market in China

So far there is no single imported beer dominated in China market. As distribution channels vary in each regional markets, as more local distributors got involved in imported beer business, the market has become more competitive. Distributors and retailers have been in price war ever since 2014. Even in some extreme case, the wholesale price droped to RMB 24,9 / carton ( 12 cans - 500ML ) , which is equal to USD 4. This might still not be the worst case. As the competition is getting higher, price is inelastic, inventory turnover is very slow. Distributors have to use extreme sales promotion to get rid of inventory. According to Tmall, JD.com; most of the imported beer retailing prices have dropped to RMB 5- RMB 10 / bottle, which is in the same price range of Chinese local beers

Meanwhile, the imported beer prices keep going down as well. According to China customs figure ( 1000L/ USD ), as following:

Distribution - supermarkets, E-commerce ( internet +mobile), bar, specialist stores, restaurants, barbecue restaurants, hotels, and KTV, etc.As " word of mouth" is very efficient promotion to change Chinese consumers at the last minute. Distributors heavily invest in In-field promotion to have a direct communication with consumers.

online distribution - JD.com, TMALL , those leading e-commerce platforms, create different seasonal marketing promotion, such as TMALL launched International Alchol festival on September, 2016. From September 1st to September 9th, there were over 100 million consumers realized purchase via TMALL

Go-to-China Market Strategy

Opportunities for boutique beers from SME producers are currently available though local distribution to specilist stores and bars in large cities. For the dedicated beer ethusiast,micro-breweries are developing and opportunites may exist in second-tier cities, although it must be taken into consideration that this requires residency in China

light beers are preferred, provide the customerized taste to satisify Chinese consumers

Brazilian beer should define its China value proposition. " Value proposition" is a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price, it will charge each customer segement for those benefits. It starts very often with definig Marketing Mix, in the international trade, an intereting value proposition includes: Awards, Unique products, Production methods, taste , unque values for target clietns, SKUs ( packages, pricing strategy ), delivery, payment flexibility, most important for Beer business, marketing support, including the initial marketing investment

Run price simulation - suggested defining wholesale prices, instead of CIF, FOB 1st - A wrong pricing strategy easily leads to price war. In price war, no one could ever survive. For Brazilian producers, as they donâ&#x20AC;&#x2122;t see the enduring sales in China market, while Chinese importers or distributors, donâ&#x20AC;&#x2122;t see the interesting profit & margin, they will simply walk away. 2nd - CIF or FOB prices are not interesting, because this is typical trading module. Chinese buyers are more into " partnership" ,rather than " trading" module. By providing suggested wholesale and retailing prices, it actually put buyer profit margin into consideration. it is the 1st step to be successful in China.

Seasonal Marketing - Although Brazil is a beer country, the largest brewer company- inbev is a brazilian- Belgian company, while the recognition of Brazilian Beer in China market, so far is almost zero. Alcohol is a competitive, heavily -investing -in -marketing business. China, in terms of advertising, marketing promtiong, it can be a blackhole. companies invest in promotion, while hardly to estimate or see its return. In China, there are a lot of noices, while the actual voices are hardly communciated. In this case, randomly rushing into China market to compete in this extremely competitive seems meaningless. While taking Seasonal marketing opportunties - such as World Cup, etc. HUIXIN has been approached by several large retailers to ask for introducing Brazilian beer during the World Cup. Each retailer wants to have the exclusive collaboration with Brazilian beer during the World Cup. In this occassion, it could be a good opporunity to associate with Brazilian foodball, which Chinese well recognize, to launch Brazilian beer to China market.

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: May 8th, 2018

Tapioca- HS Code 1903.00 TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION Assume the cheese CIF price is USD 5 / kilo

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE unit TOTAL TAX

TARIFF, CONSUMING TAX , VAT CALCULATION 12% 0% 16%

1 2

( IN USD)

per kilos

3 4

CIF TARIFF RATE - CIF *Tariff rate CONSUMING TAX RATE =((CIF+Tariff)/ (1-Consumer taks)*Consuming taks VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate TOTAL TAX After TAX price ( in USD ) IN RMB

5 0,6

12% 0% 16%

6,3

0 0,90 1,50 6,50 40,9

For importing Diary products, although Customs only ask for AB- similar like other food & beverage import regulation, there is an extra request, the importer should have a specific registration and license to import / receive tapioca / starch products in China. ( AB represents import and export customs notificiation, which is supervised and managed by AQSIQ )

Export & Import documents 1 2 3 4 5 6 7 8

Export & Import procedures

Certificate o origin certificate of sanitary Nutrient compisition report certificate of production date s Weight emo / packing list Commercial invoice Purchase contract ( signed and stamped) Bill of landing For orginal label, front and back, 3 copies, Chinese and English translation- Seller corporation name, address, contact person, email, and telephone Original label For Chinese importer - business license, tax registration number, warehouse address, recordation of consignee

1 2 3 4 5 6 7 8

Domestic health certificate ( ready to sales in China )

MARKET INTELLIGENCE MARKET OVERVIEW

The major tapioca production locates in South-East Asia and American countries. Among all these export origin, Thailand so far is the largest export origin, represents over 70% of global exportation volume. Major Global tapioca trading countries locates in Asia and West Europe, Top 5 countries and regions are: China, Korea, Netherlands, Spain and Belgium. In terms of the importation volume, China, Korea, and Netherlands are 3 largest destinations.

Since 2012, China became the largest Tapioca importing countries. Average import volume reached 3,069 million ton, yearly import value reached 369 million USD. According to China Starch assocation, in 2008, China mainly imported tapioca from Thailand and Vietamn. Only from Thailand, the import value reached 391 million USD. Among all the import, origns from Thailand was 63,12%; 30, Vietamn was 30,90%, followed by Indonesia 5,61%, Laos, 0,32%; Cambodia 0,05%

China itself prodcues tapioca as well. Main production locates in south of Yangtze River, Guangxi, Guangdong, Fujiang and Hainan. As in China, there are some regions has the extreme weather, rice, wheat, etc can't surive. So in some regions, such as Guangxi, Henan Province, government provide subsidiary to farmers. GuangXi province so far provides the biggest financial support to encourge farmers increase the tapioca producation

In China, tapioca has been widely used in Food, Pharamecutical, Brewery, Engery, Chemical, etc. Every year there are around 2000 new R&D projects related to Tapioca. As China its own supply can meet the market demand, China heavily replies on importation.

Idea and suggestion

Acccording to the current info from China Starch assocation, the import of tapioca to China is dominated by Thailand and rest East Asian countries. Only in 2008, the import of Tapioca from South East Region was 100% of total China Tapioca import

Although Brazil is one of the largest tapioca production origin in the world, with 20,000 kilometres, it increases the transportation cost, as well as delivery time. In foreign trade, especially for commdity, risks are high

China itself, has huge demand, especially in terms of the new energy. So far, China use corns to produce renewable, clean energy. With the demand of clean energy increase, it might be challenge for South East Asian countries to supply China market.

For commodity, a monitoring program can be in place. Monitoring Program can be considered as a Parachute project. As in the market, there are different elements, which has strong correlation, will heavily impact on supply-demand. By putting sector monitoring program, it maps well all elements, which includes but not limits to Macro& Micro-environment ones, and understand its correlation, and provide real-time market update. 4

For any crisis, this program can be an alert system, provide the necessary warning to get Brazilian companies informed and prepared; while for any opportunity, this program can provide realtime info and guidance, Brazilian companies can prepare their production capacity and internal resources to capture and capitalize business opportunities. â&#x20AC;&#x153;When the wind is high, with parachute, fly higher, when the wind is low, get enough protection.â&#x20AC;?

1. 2

Note : source : China Starch assocation http://www.siacn.org tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: June 18th, 2018

PASTA ( containing Egg )- HS Code 190211 TARIFF, CONSUMING TAX , VAT CALCULATION

SIMULATION Assume the cheese CIF price is USD 0,5/ kilo

( IN USD) 1 2 3 4

FOB/ CIF TARIFF RATE CONSUMING TAX RATE VAT RATE

TARIFF, CONSUMING TAX , VAT CALCULATION 15% 0%

16%

per kilos

unit TOTAL TAX

( IN USD)

CIF TARIFF RATE - CIF *Tariff rate CONSUMING TAX RATE =((CIF+Tariff)/ (1Consumer taks)*Consuming taks VAT RATE =(CIF/+Tariff+consuming taks )*VAT Rate TOTAL TAX After TAX price ( in USD ) IN RMB

0,5 15%

0,075

0% 16%

6,3

0 0,09 0,17 0,67 4,2

For importing Diary products, although Customs only ask for AB- similar like other food & beverage import regulation, ( AB represents import and export customs notificiation, which is supervised and managed by AQSIQ ), Besides AB, it should also meet R -import food sanitary supervision & quarantine; P- imported animal and plant & relevant products quarantine currently Brazilian Egg products cannot directly export to China Market Export & Import documents 1 2 3 4 5 6 7 8

Export & Import procedures

Original label

For orginal label, front and back, 3 copies, Chinese and English translation- Seller corporation name, address, contact person, email, and telephone For Chinese importer - business license, tax registration number, warehouse address, recordation of consignee

1 2 3 4 5 6 7 8

Domestic health certificate ( ready to sales in China )

MARKET OVERVIEW

Chinese Consumers seek to make major changes to their diet options to increase nutritional intake. Apart from being more aware generally and specifically about sodium and sugar content, they also look for nutritious staple foods. There was a decline in many traditional white rice types such as Thai fragrant rice, pearl rice and jasmine rice. Since people became more health conscious, they often mix the rice with health and wellness rice such as unrefined rice, whole grains and brown rice for extra fibre and natural minerals. Also, spaghetti and macaroni gained sales share quite fast due to the westernisation of eating habits.

since 2001, Italy has been exporting pasta to China. From 2001 to 2010, the average exportation was around 3million kilos. From 2011 , the growth rate reached 30%. So far, in China market , italian pastas dominated the markets, followed by other European origins such as Spain.

Distribution- via restaurants , 1st, 2nd markets end consumers start to purchasing from supermarkets. supermarkets or speciality stores, they directly import pasta. According to HUIXIN's qualitative interviews with the retail professionals. Even some large supermarkets, they purchase quantity is not large. Normally yearly purchase quantity is around 1 container. For pasta brands ,supermarkets normally choose the most famous pasta brands, and depends on its price, supermarket will purcase 1 premium brand, 1 medium brand, 1 low-end brand. For SKUs, procuement department will only choose the most common pasta,such as spaghetti, penne, macaroni. Some speciality stores might consider to import other type of pasta. As the pasta category is quite small in China, supermarkets are getting price sensititive, and need to run sales promotion to keep the high inventory turn-over. Most of supermarkets have no interest to get out their current comfortable zone, and develop new projects

China has its own noodle culture, in northern China, wheat is major nutrition, noodles is daily food. While in southern China, rice is the major food. In China, the major noodle manufacturers now product the pasta, via its local production, distribution network , and logistic system, pasta -made-in-china has a strong price advantage

IDEAS AND SUGGESTIONS

Run the monitoring exercise, should Brazilian eggs and relevant products ever allow to access to China market

Product R& D- pasta market is relevant small , and highly occupied by Italy, and other European origins. In this case, competing with European producers is meaningless. As Chinese Millennials become the major, and powerful consuming group. "Fast, convenient, small portion, etc" are key preference from this generation. VIA HUIXIN previous experience with Brazilian pasta, there are nstand pasta products,which can prepared by using hot water in a few mins. The concept is good, the taste should be customerized to adapt Chinesse consumers preference, and should this product be successful, a good value proposition should be developed and put in place

the recognition of Brazilian products is still at the beginning stage, should government or association take initative to promote in China, and introduce Brazilian pasta to China, it will be more efficient and effective. The promotion could start with a clear study of stakeholders in the restaurant and retail sector, define each stakeholder role, develop the accurate message, and choose the right platform to communicate, last but not least do follow-ups

Event promotion, associated with the top chefs or large retail or restaurant to understand Chinese taste preference. By doing this, Brazilian pasta can obtain certain credibility in China market

Note : 1.

tariff, consuming tax, vat source - via http://www.qgtong.com/HScode/ - official website from China Customs Done by Shanghai HUIXIN Management Consulting Ltd Date: June 18th, 2018

Case Studies â&#x20AC;&#x201C; HS Code 7103.99 I.!

China Jewellery Market overview

1.! As a result of the economic slowdown in China over recent years, the market demand for jewellery has declined. According to figures from the National Bureau of Statistics, in 2016 jewellery retail sales from businesses above a certain designated scale totaled RMB299.6 billion, roughly the same as in the previous year. It seems, however, that many investors switched their focus from gold jewelry to gold bars. In line with this, 2016 figures released by the China Gold Association show that gold consumption in China amounted to 975 tons, making the country the worldâ&#x20AC;&#x2122;s leading gold consumer for the fourth year running 2.! At present, jewellery in the Chinese market can be divided into three main categories: Metal, precious stones and others. o! Metal jewellery: Jewellery made from all kinds of metals, which can be further divided into: !!

Precious metal jewellery: Jewellery made from precious metals, such as gold, platinum and silver. Common examples are platinum jewellery, gold jewellery, silver jewellery and alloy (carat gold) jewellery.

Non-precious metal jewellery: By comparison with precious metal jewellery, jewellery made from non-precious metals offers better value for money. Commonly, this kind of jewellery is made from copper and aluminium.

Imitation precious metal jewellery: This refers to jewellery made from materials which bear a close resemblance to precious metals in terms of appearance. In fact, this kind of jewellery does not contain any precious metals, but it has achieved a large degree of popularity because it can offer certain advantages, notably colorfastness, cheaper prices and a high decorative value.

Thin film jewellery: This kind of jewellery is created using special techniques to bond a layer of precious metal firmly on the surface of another, cheaper material. Examples of this include gold-plated, gold-gilded and forged gold jewellery.

o! Precious stone jewellery: Precious stones are made into ornaments using a variety of processes, including grinding, carving,

inlaying and stringing. Thanks to its aesthetic value and innate elegance, precious stone jewellery is becoming increasingly popular. Common precious stone types include diamonds, rubies, sapphires, crystal, jade, pearls, amber and topaz.

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o! Others: Jewellery made from materials other than metals and precious stones. This would include materials such as clay, wood,

string, leather and ivory. 3.! Platinum jewellery: China is one of the worldâ&#x20AC;&#x2122;s largest consumer markets for platinum jewellery. According to sources within the trade, in 2016 retail sales of platinum jewellery in China dropped by 3-20%. One significant factor in the dwindling demand for platinum is that consumers now prefer to buy gold. 4.! Gold jewellery: In recent years, gold jewellery manufacturers have begun to move away from traditional, homogenous designs and, instead, have looked to match with other materials. As a result, more and more young people are beginning to favor this style. In parallel with the lackluster overall consumer market, the consumption of gold jewellery has fallen. However, investment in physical gold remains brisk, with gold bar and gold coin consumption rising significantly, registering a total growth of almost 30%. In the long run, then, there is still definite potential for growth with regard to the consumption of gold jewellery within the Chinese market. This will be driven by a number of factors, including the continued increase in upscale consumption, higher numbers of marriages and births and the trend for buying gold as a hedge against inflation. 5.! Diamond jewellery: According to the White Paper on Chinaâ&#x20AC;&#x2122;s Cultural Consumption Market in 2016-2017 (Jewellery & Wrist Watch Section) Diamond Index Report, Chinaâ&#x20AC;&#x2122;s market demand for diamonds is currently valued at around RMB62 billion a year. In addition, it is estimated that, over the next five years, demand will continue to grow at a rate of 5-10%. This growth in market demand can mainly be attributed to an increase in the number of middle-class consumers and high income-earners. Moreover, the huge demand stemming from the wedding market remains a major impetus in terms of propelling diamond sales growth forward. By way of comparison, at present only 20% of Chinese urbanites own diamond jewellery, whereas 70% of the population of the US own such items. In light of this, there is still considerable room for expansion in the mainland diamond market. II.!

Chinese Consumer Behavior & Preference

1.! Luxury jewellery: According to Euromonitor, luxury jewellery sales totalled RMB13.2 billion in 2016, accounting for 2% of overall jewellery sales, an increase of 1%. Primarily, consumers were seen as buying either for weddings or as an investment. The majority of

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buyers were female, with sales of men’s luxury jewellery actually dropping by 3%, supposedly a consequence of the anti-corruption policy implemented by the Chinese government. 2.! Made-to-order jewellery: According to a recent industry survey, bespoke diamond wedding rings are the leading choice for 75% of the post-80s and 90s generations living in the first- and second-tier Chinese cities, such as Beijing, Shanghai, Shenzhen and Chengdu. In recent years, the traditional sales model for finished jewellery products has failed to meet growing consumer demand for exclusivity and individuality. As a result, bespoke jewellery has been gaining traction, so much so that many companies have been introducing made-to-order services. 3.! The wedding market: Of the total volume of consumer jewellery sales in China, it is estimated that more than 50% of are related to weddings. The less developed the city (such as second- or third-tier), the higher the share. In 2016, there were 11.328 million newly-wed couples in China. Over the next few years, it is expected that this trend will be maintained, with more than 10 million couples getting married every year. As jewellery items are seen as essential components of traditional Chinese weddings, the jewellery market is sure to benefit from this growth in matrimonial statistics. 4.! Festival market: The level of jewellery sales on the mainland is very much influenced by festivals and anniversaries. Many people have a habit of buying jewellery as a gift to celebrate birthdays and festivals, especially the Lunar New Year and Valentine’s Day. Many shopping malls also organize promotional activities tied in to these festivals. 5.! Men’s market: While the traditional women’s market is fiercely competitive, the male jewellery market is still in the early stage of its development. As well as traditional jewellery items, such as rings, the men’s market also includes such solely masculine items as tie clips, cufflinks and belt buckles. The interest of mainland male consumers in jewellery products stems mainly from their taste for diamonds. According to one industry report, among Chinese males in the 30-44 age group, 67% wish to own diamonds. Compared with the relentless growth in overall demand, though, the development of the mainland male jewellery market is relatively slow. To address this situation, companies could open up new markets by placing greater emphasis on boosting innovation with regard to product designs, product cultural connotations, product point-of-sale promotions and advertising. 6.! Junior market: In accordance with Chinese traditions, people give longevity locks, bracelets and necklaces to children as goodwill tokens and as way of wishing them a healthy and happy life. In particular, the kinds of gold jewellery items that can be worn, but which

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also have an inflation-proof value, are the top choices among those parents who are skilled at managing finances. With the implementation of China’s ‘two-child policy’, demand in the junior market is expected to grow. Nevertheless, when compared with the adult jewellery sector, where new styles are launched on a regular basis, the children’s jewellery market offers fewer choices in terms of types and styles. It also receives less of a promotional push. 7.! Senior market: By comparison with young people, the elderly give a higher priority to jewellery that is both inflation-proof and has a demonstrable sentimental value. According to sources within the industry, the elderly age group’s spending on jewellery is no longer restricted to four traditional items – gold rings, gold bracelets, gold earrings and gold necklaces – as they also have a growing preference for jade, ruby and sapphire jewellery. 6.! In 2016, the HKTDC’s survey of jewellery preferences in 10 mainland cities, came to the following conclusions: o! Respondents who make planned purchases make up 66% of the total, representing a significant 13% rise when compared with a

similar survey in 2011. The average spending of the respondents during the year prior to the survey was RMB4,000. o! When making a purchase, the main consideration was ‘to be trendy / to complement clothing’, while the main occasion for

wearing jewellery was ‘when going to work’. o! Overall, necklaces were the most popular jewellery item purchased by respondents in the 10 different cities and among different

income groups. The next most popular items were rings and bracelets. Overall, 75% of respondents indicated they would give higher priority to necklaces in their purchases over the coming year. o! As far as materials were concerned, the first choice for consumers was gold, followed by platinum and carat gold. The younger

the consumer, the greater the interest in diamond jewellery. o! The main channel through which the respondents obtained information on jewellery was from a shopping mall/department

store, followed by recommendations from sales personnel. Compared with the survey conducted in 2011, there were increases in the percentages of respondents accessing jewellery information through both of these channels. Interestingly, in an era of information overload, respondents still preferred to receive information about jewellery through personal experience.

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III.!

Market Competition

1.! The majority of jewellery processing enterprises on the Chinese mainland are located in Guangdong, Shandong, Shanghai, Fujian or Zhejiang. Overall, Guangdong is the primary location for jewellery production for the whole country, while Shenzhen and Panyu are the leading centres for jewellery processing. In the case of Shenzhen, it has been dubbed the ‘City of Jewellery’ as its jewellery businesses hold the largest share of the domestic market, largely through setting up sales counters and specialty stores across China. 2.! Even though China has the craftsmanship required by many top international brands, the industry has yet to catch up in terms of branding and product design. 3.! The huge potential of China’s consumer market has seen numerous international jewellery giants keen to stake their claim in the sector. To this end, many of the world’s leading jewellery brands have already entered the mainland market, including De Beers, the world’s largest dealer of diamonds, Cartier, the celebrated French watch giant, and Perles De Tahiti. A number of Hong Kong brands, most notably Chow Tai Fook and TSL, have also followed suit. The arrival of so many foreign brands has inevitability seen them competing for market share with the local brands. The mainland jewellery market is currently dominated by brands such as Chow Tai Fook, Chow Sang Sang, Luk Fook, Laofengxiang, Laomiao, Mingr, TSL and Chow Tai Seng. 4.! Overall, jewellery brands are developing at a rapid pace, while stepping up their expansion into China’s second- and third-tier cities. Over the next few years, many of these brands will see the help of franchisees to complete their moves into the second-, third- and fourth-tier cities. Given their superior local resources, many of these franchisees will be well equipped to access the sales channels in these new territories. IV.!

Sales Channels

1.! Mainland jewellery retail and wholesale channels can be divided into the following categories: jewellery counters at shopping malls, chain stores, supermarkets, specialty stores and specialized markets. The 2014 HKTDC survey indicated that Chinese consumers mainly shop for jewellery on weekends and public holidays, typically making their purchases at the jewellery counters of

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department stores. The percentage of consumers making their purchases at independent shops and chain stores, however, is now on the increase. 2.! In recent years, more and more large-scale jewellery enterprises have been exploring the possibilities offered by chain operations and specialty stores. This has led to fierce competition with shopping mall jewellery counters. According to media reports, Luk Fook now has more than 1,400 retail stores, while Chow Tai Fook has in excess of 2,000. 3.! Over the past few years, China’s jewellery brands have moved more and more into e-commerce. The success of its ‘website + experience store’ concept, for instance, has seen zbird.com expand swiftly on the mainland. In the case of both Chow Tai Fook and Chow Sang Sang, they sell online via Tmall.com, while Chow Tai Fook runs its own B2C shop. Despite the recent explosive growth of e-commerce across China, the fact that the online sale of jewellery currently accounts for just 5% of the industry’s total demonstrates that the market is still very much dominated by the traditional brand-name jewellery stores. 4.! For many, the mainland’s trade fairs offer the most effective means of getting an overview of the jewellery sector in China and beyond, while also being the best places to meet dealers. Among the jewellery fairs scheduled to be held on the mainland in the second half of 2017 and the first half of 2018 are the following:

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V.!

Import and Trade Regulations

1.! 2017 import tariffs of jewellery items:

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1.! A consumption tax of 5-10% is levied on all jewellery sold in China. 2.! The Shanghai Diamond Exchange is Chinaâ&#x20AC;&#x2122;s only legal channel for the import and export of diamonds for general trading, as well as for the domestic sale of rough diamonds transferred-out in the course of the processing trade. For details of its import and export policies, customs supervision policies, tax policies and foreign exchange management policies, please refer to www.cnsde.com. 3.! In May 2003, the mainland abolished the licensing system for running businesses trading in gold or silver products. As a result, the production, processing, wholesale and retail of jewellery are all now fully deregulated, meaning that any individual can now register to operate a business in the jewellery production, processing or wholesaling sectors. 4.! The national standard GB/T 25071-2010 Classification and Codes for Products of Gems and Precious Metals was implemented on 1 December 2010. As an important basic standard for the informatisation of Chinaâ&#x20AC;&#x2122;s jewellery industry, it provides the basis for the management, transmission, retrieval and dissemination of data with regard to gem and precious metals products 5.! As of February 2011, updated versions of the three national standards on jewellery â&#x20AC;&#x201C; GB/T 16552-2010 Gems: Nomenclature; GB/T 16553-2010 Gems: Testing; and GB/T 16554-2010 Diamond Grading, became effective simultaneously, superseding the earlier 2003 versions.

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Annex I – Useful reading

Global Agricultural Information Network Report: China – People’s Republic of: China Retail Annual Report http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Chengdu%20 A Torch ina%20-%20Peoples%20Republic%20of_12-31-2014.pdf Published by: USDA Foreign Agricultural Service, December 31st 2014 Accessed on: April 30th 2015

Food and Beverage to China http://wenku.baidu.com/view/7413cfd2b14e852458fb57cd.html Published by: New Zealand Trade & Enterprise, January 2012 Accessed on: April 20th 2015

China’s Food and Agriculture: Issues for the 21st Century http://www.mckinseychina.com/preparing-for-chinas-middle-class-challenge-part-1/ Published by: McKinsey China, March 31st 2014 Accessed on: April 16th 2015

Exporting to China https://www.gov.uk/government/publications/exporting-to-china Published by: UK Trade & Investment, March 26th 2015 Accessed on: April 20th 2015

Global Agricultural Information Network Report: China – People’s Republic of: Food and Agricultural Import Regulations and Standards – Certification http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural% 20Impor t%20Regulations%20and%20Standards%20%20Certification_Beijing_China%20-%20Peoples%2 0Republic%20of_12-31-2012.pdf Published by: USDA Foreign Agricultural Service, December 31st 2012 Accessed on: April 30th 2015

Annex II- Useful website Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) A ministerial-level department under the State Council of the People’s Republic of China that is in charge of national quality, metrology, entry-exit commodity inspection, entry-exit health quarantine, entry-exit animal and plant quarantine, import-export food safety, certification and accreditation, standardisation, and administrative law enforcement. www.aqsiq.gov.cn

Chinese Academy of Inspection and Quarantine A national scientific research body. Carries out research on the application of science and technology in inspection and quarantine. http://www.cnca.gov.cn/jky/

CFDA Administration China elevated the status of the existing State Food and Drug Administration to a general administration in early 2013 to strengthen regulations and boost consumer confidence in food and drug products. The new organization combined the State Council’s Food Safety Office, the food supervision duties from AQSIQ and State Administration for Industry and Commerce and will be responsible for supervising food and drug safety in the process of production, circulation and consumption. www.sfda.gov.cn

Certification and Accreditation Administration of the People’s Republic of China (CNCA) An institution directly under the General Administration of Quality Supervision, Inspection and Quarantine. Coordinates certification and accreditation activities across the country.

General Administration of Customs

An administrative agency within the government of the Peopleâ&#x20AC;&#x2122;s Republic of China. Responsible for the collection of value added tax (VAT), customs duties, excise duties, and other indirect fees. Also responsible for managing the import and export of goods and services into China. www.customs.gov.cn

Annex III - Key Retailers in China

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