INDUSTRY OVERVIEW
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INDUSTRY OVERVIEW SOURCES OF INFORMATION China National Textile and Apparel Council China National Textile and Apparel Council (中國紡織工業協會), an Independent Third Party, is a national industry organization authorized by the PRC government providing business consultation, constructing of market intelligence system and facilitating market development for the textile industry in the PRC. Preparation of the China Textile Industry Development Report is not commissioned by our Company. Euromonitor We have engaged Euromonitor to conduct detailed market analyses of, and provide reports on the bedding and yarns products markets in the PRC (the ‘‘Research Reports’’). The aggregate contractual amount for the Research Reports and services provided by Euromonitor is US$50,000, the payment of which was not contingent upon our successful [.] or on any of the results obtained from the Research Reports. The Research Reports, dated in July and November 2009 respectively, consists of, among others, historical data for the period from 2004 to 2008, and forecasts for the period from 2009 to 2011. Euromonitor primarily undertook top-down central research with bottom-up intelligence to present a more comprehensive and accurate picture of bedding and yarns products market in the PRC. Euromonitor assessed relevant background information that is publicly available such as annual reports and accounts published by major manufacturers and reconciled these sources against any existing information and knowledge from our Company. Euromonitor also conducted trade interviews with multiple organizations for added perspective and accuracy. Multiple secondary and primary sources were also checked to validate all data and information collected with no reliance on any single-source. Furthermore, a test of each respondent’s information and views against those of others is applied to ensure reliability and to eliminate bias from these sources. To ensure forecast accuracy, Euromonitor adopted its standard practice of both quantitative as well as qualitative forecasts. These forecasts allow Euromonitor to establish the terms of the market size, growth trends etc, on the basis of providing a comprehensive and in-depth review of the market development’s past and future, while simultaneously providing cross-checking with established government/industry figures, trade interviews, and statistical tools (e.g. regression analysis, time-series analysis, data modelling) where possible.
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INDUSTRY OVERVIEW COTTON TEXTILE INDUSTRY Cotton production and market Cotton is the principal raw material for producing cotton textile. The following chart shows the global cotton production from 2002 to 2008:
40,000
35 30
32,000 25
24,000
20 15
16,000
10
8,000 5
0
0
Source: China Textile Industry Development Report 2007/2008, China National Textile and Apparel Council
According to China Textile Industry Development Report 2008/2009, the PRC has been the world’s largest cotton producing country from 2002 to 2008 with its production accounting for more than 20% of global output. Shandong Province, in which our Group is situated, produced about 13.9% of PRC domestic cotton in 2008 and is one of the largest cotton-growing provinces in the PRC.
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INDUSTRY OVERVIEW The following chart shows information relating to international and PRC cotton prices for the periods indicated: (Unit: RMB/tonne)
Source: China National Textile and Apparel Council
International cotton price has been stable since the end of 2004 but decreased by 35.7% from US$0.7 per pound (or RMB10,716 per tonne) in June 2008 to US$0.45 per pound (or RMB6,781 per tonne) in December 2008. PRC cotton price demonstrated a trend roughly similar to the international cotton price, with a slight decrease in December 2006 and a more significant decrease of 22.6% from RMB13,946 per tonne in June 2008 to RMB10,790 per tonne in December 2008. The difference between domestic cotton price and international cotton price remained in the range of RMB3,000 per tonne to RMB5,500 per tonne between 2005 and 2008. Cotton yarn production According to China Cotton Textile Association (中國棉紡織行業協會), cotton yarns can be divided into the following categories according to yarn counts. Types of cotton yarn
Description
Coarse-count cotton yarn (粗支紗)
Yarn count of 18 and below
Medium-count cotton yarn (中支紗)
Yarn count of 19 to 28
Fine-count cotton yarn (細支紗)
Yarn count of 29 to 60
High-count cotton yarn (高支紗)
Yarn count of 61 and above
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INDUSTRY OVERVIEW In 2008, the number of spindles in the PRC was 104 million which accounted for 43.3% of total spindles of 240 million worldwide, making it the largest cotton yarn producing country in the world. The PRC cotton yarn production increased from about 14.4 million tonnes in 2005 to about 21.5 million tonnes in 2008, with a CAGR of about 14.3%. The following table sets out the production of the top five cotton yarn producing provinces in the PRC from 2005 to 2008: 2005
Production Amount
2006
As a Percentage of PRC Production
(tonnes) Shandong Jiangsu Henan Zhejiang Hubei Fujian
3,677,700 3,050,400 1,388,000 964,100 898,200 —
Production Amount
2007
As a Percentage of PRC Production
(tonnes) 26.0% 21.6% 9.8% 6.8% 6.3% —
4,766,600 3,505,600 1,883,600 1,158,300 1,066,400 —
Production Amount
2008
As a Percentage of PRC Production
(tonnes) 27.7% 20.4% 10.9% 6.7% 6.2% —
5,609,600 3,818,300 2,466,600 1,467,100 1,221,200 —
Production Amount
As a Percentage of PRC Production
(tonnes) 28.1% 19.1% 12.4% 7.4% 6.1% —
5,745,100 2,767,800 2,928,900 — 879,810 984,040
26.7% 12.9% 13.6% — 4.1% 4.6%
Source: China Textile Industry Development Report 2005–2008, China National Textile and Apparel Council
Eastern China, including Shandong Province, is the major cotton yarn producing centre in the PRC. The top five cotton yarn producing provinces of the PRC are Shandong Province, Henan Province, Jiangsu Province, Fujian Province and Hubei Province, which in aggregate produced about 13.3 million tonnes of cotton yarns in 2008, and accounted for about 61.9% of the PRC cotton yarn production. Shandong Province is the largest cotton yarn producing province in the PRC. In 2008, production of cotton yarns in Shandong Province was about 5.7 million tonnes, accounting for about 26.7% of the total production in the PRC cotton yarn industry.
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INDUSTRY OVERVIEW Cotton yarns market size of the PRC The table below shows the historical market size of yarn products in the PRC by value in terms of manufacturer sales prices from 2004 to 2008 and the projected market size of yarn products in the PRC by value in terms of manufacturer sales prices from 2009 to 2011.
The table below shows the historical CAGR market growth of yarn products in the PRC by value in terms of manufacturer sales prices from 2004 to 2008 and the projected CAGR market growth of yarn products in the PRC by value in terms of manufacturer sales prices from 2009 to 2011.
Product segment
Growth 2004-2008 CAGR
Yarns products — Coarse-count — Medium-count — Fine-count — High-count
13.9% 4.1% 13.9% 15.9% 19.9%
2009–2011 CAGR 9.4% 7.9% 9.1% 9.2% 13.0%
For the first half of 2009, we ranked as the fourth largest yarns manufacturer in terms of sales value of fine-count and high-count yarns in the PRC according to market research conducted by Euromonitor.
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INDUSTRY OVERVIEW Development trends of the cotton textile industry in the PRC The two major leading objectives for current cotton textile industry are ‘‘scientific development’’ and ‘‘industry upgrade’’, which emphasize improvement in equipment standard, reduction in labour costs and enhancement of productivity. The cotton yarn industry in the PRC is expected to have the following development trends: Demand for fine and high-count yarn Domestic consumption of cotton textiles, in particular high-end textile products, has been driven by the growth of economy and improvement in living standards in the PRC. Since the outbreak of the financial crisis in 2008, the market demand for fine-count and high-count yarns and cotton clothes made from those yarns has decreased, especially in the US market, resulting in a decrease in export for cotton textile products and cotton clothes. However, as the pace of urbanization in China increases, the demand for high-count and premium high-count textile products from urban population is expected to gradually increase. Fine-count and high-count yarns is expected to experience further growth in the long run. Increased use of compact spinning Compact spinning is performed by adding a condenser unit between the drafting zone and the yarn formation zone that uses air flow to group the fibre strands horizontally. The yarns formed are less hairy, smoother, tighter, firmer and more balanced and stronger than the ordinarily combed cotton yarns. Compact yarns can increase the efficiency of weaving machines and save dyes and sizing and desizing costs, making the fabrics more environmentally friendly. Compact spinning is most suitable for producing high-count yarns and the yarns produced can be used for producing high grade dyed fabrics and knitted fabrics. High grade dyed fabrics are commonly used in luxury men shirts with significant growth prospects. Development of blended spinning Blended spinning is the future development trend in the yarn spinning industry, and is one of the highly recommended development directions for the cotton textile industry stipulated in the revitalization plan for textile industry proposed by the PRC government. The focus is expected to be development of fibre blended with different yarns and new materials to enhance the fabric’s functionalities. The prosperity of the textile industry is crucial to domestic economic development, stimulate export, create job opportunities, increase the income of farmers and accelerate the pace of urbanization. In order to further develop the textile industry, the central government has convened three meetings since November 19, 2008 and issued ‘‘Plan for Adjusting and Promoting Textile Device Manufacturing Industry’’ 《紡織和裝備製造業調整振興規劃》 ( ) on February 4, 2009 and ‘‘Notice on Adjusting the Export Tax Rebate’’ 《關於提高輕紡電子信息等商品出口退稅率的通知》 ( (財稅[2009]43號)) on March 25, 2009, pursuant to which the government is expected to implement the following measures: .
Stimulation of domestic demand and exploration of international market.
.
Technological upgrade and development proprietary brands.
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INDUSTRY OVERVIEW .
Acceleration of replacement of outdated machinery.
.
Focusing on production of high value-added productions with advanced technologies and lower consumption of resources.
.
Providing the financial supports and tax incentives: Effective from April 1, 2009, the rate of export tax rebate of certain textile products and clothing increased to 16%.
BEDDING INDUSTRY Home textile market in the PRC According to Euromonitor, home textile products include bedding and home furnishing products such as curtains, sofa/table covers and table runners. In recent years, the national income and living standards have improved steadily due to fast economic growth. As a result, the domestic home textile market has also steadily increased with an annual growth of approximately 20%. By 2008, the domestic retail value of the home textile industry had hit RMB300 billion. The future demand for home related textiles is robust, and its market capacity and potential is the most promising within the textile industry. Despite the global financial crisis, the domestic bedding products market continued its strong growth in 2008 due to growing demand after the real estate market boom. Weaker import demand from overseas markets also forced many export oriented manufacturers to shift their focus to domestic markets, which contributed to the home textile market growth in China in late 2008. In recent years the home textile market in China has shown significant development, benefitting from the rapid growth of the domestic real estate market and improvement in residential housing conditions and living standards. Booming tourism and strong demand overseas has also contributed to the growth of this industry. According to Euromonitor, it is widely believed by national experts that the Chinese home textile industry has much room for expansion and a huge market capacity.
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INDUSTRY OVERVIEW The chart below shows the retail market size and the related growth of home textile products in the PRC from 2004 to 2008:
Overview of the PRC bedding products market The bedding industry is a sub-sector of system and the constant improvement of consumers are attaching greater importance product quality and materials. This urges the identifiable brand images.
the home textile industry. With the reform of the housing people’s living standards and aesthetic consciousness, to bedding products and pose higher requirements for industry to constantly develop new products and establish
As soft interior decorations, bedding products have progressively become the focus of the textile industry and a field valued by consumers. The domestic bedding products market has made some outstanding progress in recent years, with the retail value of domestic bedding products soaring from RMB42 billion in 2004 to RMB88 billion in 2008, representing a CAGR of 20.2%.
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INDUSTRY OVERVIEW Bedding products can roughly be divided into high, medium and low-grade products by price, process and materials, and the table below shows the general classification of bedding products. Pricing
Process
Materials
High-end
. Above RMB5,000
. Transfer printing . Flat screen printing
. . . .
Medium
. RMB1,000 to RMB5,000
. Embroidery (chain stitch embroidery, full embroidery) . Flower embroidery . Printing
. Cotton . Silk . Blends
Low-end
. Below RMB1,000
. Common printing and pattern
. Cotton . Blends
Long-staple cotton Pure silk Cotton fiber Blends
Source: Euromonitor report — China Bedding Market Analysis
The table below shows the historical market size of bedding products in the PRC by retail sales value from 2004 to 2008 and the projected market size of bedding products in the PRC by retail sales value from 2009 to 2011.
Source: Euromonitor report — China Bedding Market Analysis
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INDUSTRY OVERVIEW The table below shows the historical CAGR market growth of bedding products in the PRC by retail sales value from 2004 to 2008 and the projected CAGR market growth of bedding products in the PRC by retail sales value from 2009 to 2011. Growth 2004–2008 2009–2011 CAGR CAGR
Product segment Beddings products — High-end segment — Mid-range segment — Low-end segment
20.2% 42.9% 20.2% 15.7%
20.5% 32.0% 23.7% 11.6%
Source: Euromonitor report — China Bedding Market Analysis
The majority of domestic bedding products are medium grade products. For most premium brands, the proportion of high-grade products, medium-grade products and medium & low-grade products are no more than 10% (high), 60% (medium) and 30% (low) respectively. For secondary brands, the proportions become no more than 5% (high), 60% (medium) and 35% (low) respectively. Tier 1 cities are the major contributors to the consumption of high-grade products, with tier 2 and tier 3 cities being the primary consumers of medium and low-grade products. The consumption structure of bedding products has changed with the improvement of people’s living standards. The consumption proportion of high-grade products, medium-grade products and lowgrade products changed from approximately 4%, 60% and 36% in 2004 to 8.8%, 59% and 32.2% in 2008. The proportion of high-grade products is climbing, that of low-grade products is falling, with medium-grade products remaining dominant. The consumption of bedding products is becoming more and more inclined to medium and high grades. From 2009 to 2011, the CAGR retail sales of high-grade, medium-grade and low-grade products are estimated to be 31.9%, 24.7% and 9.6% respectively. Currently, bedding products featuring innovative designs are increasingly favored by consumers. Featured brand design, high quality, coziness and health (i.e. sleeping conditions) are the main trends of bedding products in the future. When two brands are equal in quality and coziness, the fine design and individuality of bedding products will decide which brand will gain the advantage in the market. Emerging Western classical style design elements are recognized increasingly by Chinese families, and these bedding products are especially favored by young consumers as symbols of high quality and luxury. Apart from this European style design, which plays a considerable role in the domestic bedding products market, the new colors and new designs of domestic brands is growing swiftly. The industry considers design innovation and brand establishment as the major methods to keep a firm foothold in the market. Changes in the consumption of bedding products are first reflected in the number and patterns of bedding products. Common varieties have increased from the traditional four pieces — quilt, mattress pad, quilt cover and pillow, to accessories like bed covers and skirt covers, and to the new flexible set of long and short pillow covers. Now, there are five-piece, six-piece, and even eight-piece and ten-piece sets. Consumers tend to like an elegant and natural design in their bedding product such as matching/ complementary colors and coordination with the entire room. On the other hand, the major function of
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INDUSTRY OVERVIEW bedding products has shifted from preservation of swarm the market. Instead of the single sheet warmth hollow cotton that have been snubbed recently, new use pure cotton fabrics, and most stuffing and mitedispelling.
warmth to health care. Functional products now preserving bedding products like duvet and dacron bedding products with the function of health care fabrics are indicated to be antimicrobial and
Competitive environment of the PRC bedding products market Currently there are more than 1,000 enterprises specialized in the manufacturing of bedding products. They are mainly located in Guangdong, Shanghai, Shandong, Zhejiang and Jiangsu. The bedding product market is characterized by strong regionality, which means many brands are well known in certain regions or are locally dominant but are unknown in other areas. According to Euromonitor, the top 5 bedding products enterprises accounted for about 6.1%, 5.7%, 5.8% and 6.4% for 2006, 2007, 2008 and the first half of 2009 respectively in terms of retail sales value in the PRC bedding products market. For the first half of 2009, our Company is ranked by Euromonitor as the seventh largest bedding products manufacturer in terms of retail sales value in the PRC bedding product market. Large bedding products enterprises mainly adopt self-operation stores plus franchised outlets as their marketing channel, while the major distribution channels of bedding products still involve traditional retail channels such as hypermarkets, bedding product specialists, supermarkets and department stores where customers can test the products. Emerging retail channels like online shopping and TV shopping don’t have the edge in bedding products sales in spite of their convenience. This is because consumers are not able to check the quality of the products, not to mention the fact that color variation exists between graphics displayed on the Internet and TV which do not always align with the coloration of the real products. The chart below illustrates the retail channel contribution of total bedding product sales value from 2006 to 2008.
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INDUSTRY OVERVIEW
The chart below illustrates the contribution of bedding products distribution channels by retail sales value of bedding products manufacturers from 2006 to 2008.
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INDUSTRY OVERVIEW With decades of development, the PRC bedding products market has changed significantly. Some relatively strong domestic brands have emerged while foreign brands have started to enter the Chinese market, which mainly focus on high-end demographics. The chart below illustrates the market share of domestic bedding brands and foreign bedding brands by retail sales value from 2006 to 2008.
Compared with other industries, the PRC bedding products industry is still in a state of ‘‘large industry, but small enterprises’’ with a very fragmented market. Most famous brands still distribute their products regionally rather than nationwide. Some adequately funded enterprises have completed their preliminary layout of retail outlets across the country, aiming to achieve nationwide brand status and popularity. Other local brands have achieved strong sales results and are now striving to extend their markets to other provinces and municipalities.
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INDUSTRY OVERVIEW At present, the PRC bedding products retail industry has not been affected seriously by the financial crisis, and remains steady in spite of heavy export pressure. The chart below illustrates the proportion of bedding products produced in the PRC for domestic consumption and exports by sales value from 2006 to 2008.
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INDUSTRY OVERVIEW SOURCES OF INFORMATION China National Textile and Apparel Council China National Textile and Apparel Council (中國紡織工業協會), an Independent Third Party, is a national industry organization authorized by the PRC government providing business consultation, constructing of market intelligence system and facilitating market development for the textile industry in the PRC. Preparation of the China Textile Industry Development Report is not commissioned by our Company. Euromonitor We have engaged Euromonitor to conduct detailed market analyses of, and provide reports on the bedding and yarns products markets in the PRC (the ‘‘Research Reports’’). The aggregate contractual amount for the Research Reports and services provided by Euromonitor is US$50,000, the payment of which was not contingent upon our successful [.] or on any of the results obtained from the Research Reports. The Research Reports, dated in July and November 2009 respectively, consists of, among others, historical data for the period from 2004 to 2008, and forecasts for the period from 2009 to 2011. Euromonitor primarily undertook top-down central research with bottom-up intelligence to present a more comprehensive and accurate picture of bedding and yarns products market in the PRC. Euromonitor assessed relevant background information that is publicly available such as annual reports and accounts published by major manufacturers and reconciled these sources against any existing information and knowledge from our Company. Euromonitor also conducted trade interviews with multiple organizations for added perspective and accuracy. Multiple secondary and primary sources were also checked to validate all data and information collected with no reliance on any single-source. Furthermore, a test of each respondent’s information and views against those of others is applied to ensure reliability and to eliminate bias from these sources. To ensure forecast accuracy, Euromonitor adopted its standard practice of both quantitative as well as qualitative forecasts. These forecasts allow Euromonitor to establish the terms of the market size, growth trends etc, on the basis of providing a comprehensive and in-depth review of the market development’s past and future, while simultaneously providing cross-checking with established government/industry figures, trade interviews, and statistical tools (e.g. regression analysis, time-series analysis, data modelling) where possible.
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INDUSTRY OVERVIEW COTTON TEXTILE INDUSTRY Cotton production and market Cotton is the principal raw material for producing cotton textile. The following chart shows the global cotton production from 2002 to 2008:
40,000
35 30
32,000 25
24,000
20 15
16,000
10
8,000 5
0
0
Source: China Textile Industry Development Report 2007/2008, China National Textile and Apparel Council
According to China Textile Industry Development Report 2008/2009, the PRC has been the world’s largest cotton producing country from 2002 to 2008 with its production accounting for more than 20% of global output. Shandong Province, in which our Group is situated, produced about 13.9% of PRC domestic cotton in 2008 and is one of the largest cotton-growing provinces in the PRC.
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INDUSTRY OVERVIEW The following chart shows information relating to international and PRC cotton prices for the periods indicated: (Unit: RMB/tonne)
Source: China National Textile and Apparel Council
International cotton price has been stable since the end of 2004 but decreased by 35.7% from US$0.7 per pound (or RMB10,716 per tonne) in June 2008 to US$0.45 per pound (or RMB6,781 per tonne) in December 2008. PRC cotton price demonstrated a trend roughly similar to the international cotton price, with a slight decrease in December 2006 and a more significant decrease of 22.6% from RMB13,946 per tonne in June 2008 to RMB10,790 per tonne in December 2008. The difference between domestic cotton price and international cotton price remained in the range of RMB3,000 per tonne to RMB5,500 per tonne between 2005 and 2008. Cotton yarn production According to China Cotton Textile Association (中國棉紡織行業協會), cotton yarns can be divided into the following categories according to yarn counts. Types of cotton yarn
Description
Coarse-count cotton yarn (粗支紗)
Yarn count of 18 and below
Medium-count cotton yarn (中支紗)
Yarn count of 19 to 28
Fine-count cotton yarn (細支紗)
Yarn count of 29 to 60
High-count cotton yarn (高支紗)
Yarn count of 61 and above
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INDUSTRY OVERVIEW In 2008, the number of spindles in the PRC was 104 million which accounted for 43.3% of total spindles of 240 million worldwide, making it the largest cotton yarn producing country in the world. The PRC cotton yarn production increased from about 14.4 million tonnes in 2005 to about 21.5 million tonnes in 2008, with a CAGR of about 14.3%. The following table sets out the production of the top five cotton yarn producing provinces in the PRC from 2005 to 2008: 2005
Production Amount
2006
As a Percentage of PRC Production
(tonnes) Shandong Jiangsu Henan Zhejiang Hubei Fujian
3,677,700 3,050,400 1,388,000 964,100 898,200 —
Production Amount
2007
As a Percentage of PRC Production
(tonnes) 26.0% 21.6% 9.8% 6.8% 6.3% —
4,766,600 3,505,600 1,883,600 1,158,300 1,066,400 —
Production Amount
2008
As a Percentage of PRC Production
(tonnes) 27.7% 20.4% 10.9% 6.7% 6.2% —
5,609,600 3,818,300 2,466,600 1,467,100 1,221,200 —
Production Amount
As a Percentage of PRC Production
(tonnes) 28.1% 19.1% 12.4% 7.4% 6.1% —
5,745,100 2,767,800 2,928,900 — 879,810 984,040
26.7% 12.9% 13.6% — 4.1% 4.6%
Source: China Textile Industry Development Report 2005–2008, China National Textile and Apparel Council
Eastern China, including Shandong Province, is the major cotton yarn producing centre in the PRC. The top five cotton yarn producing provinces of the PRC are Shandong Province, Henan Province, Jiangsu Province, Fujian Province and Hubei Province, which in aggregate produced about 13.3 million tonnes of cotton yarns in 2008, and accounted for about 61.9% of the PRC cotton yarn production. Shandong Province is the largest cotton yarn producing province in the PRC. In 2008, production of cotton yarns in Shandong Province was about 5.7 million tonnes, accounting for about 26.7% of the total production in the PRC cotton yarn industry.
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INDUSTRY OVERVIEW Cotton yarns market size of the PRC The table below shows the historical market size of yarn products in the PRC by value in terms of manufacturer sales prices from 2004 to 2008 and the projected market size of yarn products in the PRC by value in terms of manufacturer sales prices from 2009 to 2011.
The table below shows the historical CAGR market growth of yarn products in the PRC by value in terms of manufacturer sales prices from 2004 to 2008 and the projected CAGR market growth of yarn products in the PRC by value in terms of manufacturer sales prices from 2009 to 2011.
Product segment
Growth 2004-2008 CAGR
Yarns products — Coarse-count — Medium-count — Fine-count — High-count
13.9% 4.1% 13.9% 15.9% 19.9%
2009–2011 CAGR 9.4% 7.9% 9.1% 9.2% 13.0%
For the first half of 2009, we ranked as the fourth largest yarns manufacturer in terms of sales value of fine-count and high-count yarns in the PRC according to market research conducted by Euromonitor.
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INDUSTRY OVERVIEW Development trends of the cotton textile industry in the PRC The two major leading objectives for current cotton textile industry are ‘‘scientific development’’ and ‘‘industry upgrade’’, which emphasize improvement in equipment standard, reduction in labour costs and enhancement of productivity. The cotton yarn industry in the PRC is expected to have the following development trends: Demand for fine and high-count yarn Domestic consumption of cotton textiles, in particular high-end textile products, has been driven by the growth of economy and improvement in living standards in the PRC. Since the outbreak of the financial crisis in 2008, the market demand for fine-count and high-count yarns and cotton clothes made from those yarns has decreased, especially in the US market, resulting in a decrease in export for cotton textile products and cotton clothes. However, as the pace of urbanization in China increases, the demand for high-count and premium high-count textile products from urban population is expected to gradually increase. Fine-count and high-count yarns is expected to experience further growth in the long run. Increased use of compact spinning Compact spinning is performed by adding a condenser unit between the drafting zone and the yarn formation zone that uses air flow to group the fibre strands horizontally. The yarns formed are less hairy, smoother, tighter, firmer and more balanced and stronger than the ordinarily combed cotton yarns. Compact yarns can increase the efficiency of weaving machines and save dyes and sizing and desizing costs, making the fabrics more environmentally friendly. Compact spinning is most suitable for producing high-count yarns and the yarns produced can be used for producing high grade dyed fabrics and knitted fabrics. High grade dyed fabrics are commonly used in luxury men shirts with significant growth prospects. Development of blended spinning Blended spinning is the future development trend in the yarn spinning industry, and is one of the highly recommended development directions for the cotton textile industry stipulated in the revitalization plan for textile industry proposed by the PRC government. The focus is expected to be development of fibre blended with different yarns and new materials to enhance the fabric’s functionalities. The prosperity of the textile industry is crucial to domestic economic development, stimulate export, create job opportunities, increase the income of farmers and accelerate the pace of urbanization. In order to further develop the textile industry, the central government has convened three meetings since November 19, 2008 and issued ‘‘Plan for Adjusting and Promoting Textile Device Manufacturing Industry’’ 《紡織和裝備製造業調整振興規劃》 ( ) on February 4, 2009 and ‘‘Notice on Adjusting the Export Tax Rebate’’ 《關於提高輕紡電子信息等商品出口退稅率的通知》 ( (財稅[2009]43號)) on March 25, 2009, pursuant to which the government is expected to implement the following measures: .
Stimulation of domestic demand and exploration of international market.
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Technological upgrade and development proprietary brands.
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INDUSTRY OVERVIEW .
Acceleration of replacement of outdated machinery.
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Focusing on production of high value-added productions with advanced technologies and lower consumption of resources.
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Providing the financial supports and tax incentives: Effective from April 1, 2009, the rate of export tax rebate of certain textile products and clothing increased to 16%.
BEDDING INDUSTRY Home textile market in the PRC According to Euromonitor, home textile products include bedding and home furnishing products such as curtains, sofa/table covers and table runners. In recent years, the national income and living standards have improved steadily due to fast economic growth. As a result, the domestic home textile market has also steadily increased with an annual growth of approximately 20%. By 2008, the domestic retail value of the home textile industry had hit RMB300 billion. The future demand for home related textiles is robust, and its market capacity and potential is the most promising within the textile industry. Despite the global financial crisis, the domestic bedding products market continued its strong growth in 2008 due to growing demand after the real estate market boom. Weaker import demand from overseas markets also forced many export oriented manufacturers to shift their focus to domestic markets, which contributed to the home textile market growth in China in late 2008. In recent years the home textile market in China has shown significant development, benefitting from the rapid growth of the domestic real estate market and improvement in residential housing conditions and living standards. Booming tourism and strong demand overseas has also contributed to the growth of this industry. According to Euromonitor, it is widely believed by national experts that the Chinese home textile industry has much room for expansion and a huge market capacity.
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INDUSTRY OVERVIEW The chart below shows the retail market size and the related growth of home textile products in the PRC from 2004 to 2008:
Overview of the PRC bedding products market The bedding industry is a sub-sector of system and the constant improvement of consumers are attaching greater importance product quality and materials. This urges the identifiable brand images.
the home textile industry. With the reform of the housing people’s living standards and aesthetic consciousness, to bedding products and pose higher requirements for industry to constantly develop new products and establish
As soft interior decorations, bedding products have progressively become the focus of the textile industry and a field valued by consumers. The domestic bedding products market has made some outstanding progress in recent years, with the retail value of domestic bedding products soaring from RMB42 billion in 2004 to RMB88 billion in 2008, representing a CAGR of 20.2%.
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INDUSTRY OVERVIEW Bedding products can roughly be divided into high, medium and low-grade products by price, process and materials, and the table below shows the general classification of bedding products. Pricing
Process
Materials
High-end
. Above RMB5,000
. Transfer printing . Flat screen printing
. . . .
Medium
. RMB1,000 to RMB5,000
. Embroidery (chain stitch embroidery, full embroidery) . Flower embroidery . Printing
. Cotton . Silk . Blends
Low-end
. Below RMB1,000
. Common printing and pattern
. Cotton . Blends
Long-staple cotton Pure silk Cotton fiber Blends
Source: Euromonitor report — China Bedding Market Analysis
The table below shows the historical market size of bedding products in the PRC by retail sales value from 2004 to 2008 and the projected market size of bedding products in the PRC by retail sales value from 2009 to 2011.
Source: Euromonitor report — China Bedding Market Analysis
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INDUSTRY OVERVIEW The table below shows the historical CAGR market growth of bedding products in the PRC by retail sales value from 2004 to 2008 and the projected CAGR market growth of bedding products in the PRC by retail sales value from 2009 to 2011. Growth 2004–2008 2009–2011 CAGR CAGR
Product segment Beddings products — High-end segment — Mid-range segment — Low-end segment
20.2% 42.9% 20.2% 15.7%
20.5% 32.0% 23.7% 11.6%
Source: Euromonitor report — China Bedding Market Analysis
The majority of domestic bedding products are medium grade products. For most premium brands, the proportion of high-grade products, medium-grade products and medium & low-grade products are no more than 10% (high), 60% (medium) and 30% (low) respectively. For secondary brands, the proportions become no more than 5% (high), 60% (medium) and 35% (low) respectively. Tier 1 cities are the major contributors to the consumption of high-grade products, with tier 2 and tier 3 cities being the primary consumers of medium and low-grade products. The consumption structure of bedding products has changed with the improvement of people’s living standards. The consumption proportion of high-grade products, medium-grade products and lowgrade products changed from approximately 4%, 60% and 36% in 2004 to 8.8%, 59% and 32.2% in 2008. The proportion of high-grade products is climbing, that of low-grade products is falling, with medium-grade products remaining dominant. The consumption of bedding products is becoming more and more inclined to medium and high grades. From 2009 to 2011, the CAGR retail sales of high-grade, medium-grade and low-grade products are estimated to be 31.9%, 24.7% and 9.6% respectively. Currently, bedding products featuring innovative designs are increasingly favored by consumers. Featured brand design, high quality, coziness and health (i.e. sleeping conditions) are the main trends of bedding products in the future. When two brands are equal in quality and coziness, the fine design and individuality of bedding products will decide which brand will gain the advantage in the market. Emerging Western classical style design elements are recognized increasingly by Chinese families, and these bedding products are especially favored by young consumers as symbols of high quality and luxury. Apart from this European style design, which plays a considerable role in the domestic bedding products market, the new colors and new designs of domestic brands is growing swiftly. The industry considers design innovation and brand establishment as the major methods to keep a firm foothold in the market. Changes in the consumption of bedding products are first reflected in the number and patterns of bedding products. Common varieties have increased from the traditional four pieces — quilt, mattress pad, quilt cover and pillow, to accessories like bed covers and skirt covers, and to the new flexible set of long and short pillow covers. Now, there are five-piece, six-piece, and even eight-piece and ten-piece sets. Consumers tend to like an elegant and natural design in their bedding product such as matching/ complementary colors and coordination with the entire room. On the other hand, the major function of
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INDUSTRY OVERVIEW bedding products has shifted from preservation of swarm the market. Instead of the single sheet warmth hollow cotton that have been snubbed recently, new use pure cotton fabrics, and most stuffing and mitedispelling.
warmth to health care. Functional products now preserving bedding products like duvet and dacron bedding products with the function of health care fabrics are indicated to be antimicrobial and
Competitive environment of the PRC bedding products market Currently there are more than 1,000 enterprises specialized in the manufacturing of bedding products. They are mainly located in Guangdong, Shanghai, Shandong, Zhejiang and Jiangsu. The bedding product market is characterized by strong regionality, which means many brands are well known in certain regions or are locally dominant but are unknown in other areas. According to Euromonitor, the top 5 bedding products enterprises accounted for about 6.1%, 5.7%, 5.8% and 6.4% for 2006, 2007, 2008 and the first half of 2009 respectively in terms of retail sales value in the PRC bedding products market. For the first half of 2009, our Company is ranked by Euromonitor as the seventh largest bedding products manufacturer in terms of retail sales value in the PRC bedding product market. Large bedding products enterprises mainly adopt self-operation stores plus franchised outlets as their marketing channel, while the major distribution channels of bedding products still involve traditional retail channels such as hypermarkets, bedding product specialists, supermarkets and department stores where customers can test the products. Emerging retail channels like online shopping and TV shopping don’t have the edge in bedding products sales in spite of their convenience. This is because consumers are not able to check the quality of the products, not to mention the fact that color variation exists between graphics displayed on the Internet and TV which do not always align with the coloration of the real products. The chart below illustrates the retail channel contribution of total bedding product sales value from 2006 to 2008.
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INDUSTRY OVERVIEW
The chart below illustrates the contribution of bedding products distribution channels by retail sales value of bedding products manufacturers from 2006 to 2008.
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INDUSTRY OVERVIEW With decades of development, the PRC bedding products market has changed significantly. Some relatively strong domestic brands have emerged while foreign brands have started to enter the Chinese market, which mainly focus on high-end demographics. The chart below illustrates the market share of domestic bedding brands and foreign bedding brands by retail sales value from 2006 to 2008.
Compared with other industries, the PRC bedding products industry is still in a state of ‘‘large industry, but small enterprises’’ with a very fragmented market. Most famous brands still distribute their products regionally rather than nationwide. Some adequately funded enterprises have completed their preliminary layout of retail outlets across the country, aiming to achieve nationwide brand status and popularity. Other local brands have achieved strong sales results and are now striving to extend their markets to other provinces and municipalities.
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INDUSTRY OVERVIEW At present, the PRC bedding products retail industry has not been affected seriously by the financial crisis, and remains steady in spite of heavy export pressure. The chart below illustrates the proportion of bedding products produced in the PRC for domestic consumption and exports by sales value from 2006 to 2008.
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