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Foshan Tao enterprises export a large amount of profits but low profits to promote the brand in Dubai
New Zhongyuan's marketing company in Dubai, along with a 900-square-meter showroom, is set to open in March, replacing all of the former export unit's operations in the Middle East. Huo Jinxiang, the general manager of the company’s export business department, stated, “If the Dubai initiative proves successful, we will quickly replicate this model in Africa, South America, and Russia.†The move marks a strategic shift from traditional export methods toward direct brand promotion and market control.
Despite large export volumes, profit margins have remained low. According to data from the China Ceramic Industry Association, Foshan ceramics exports reached $2.2 billion by November 2010, a 36% increase compared to the previous year. The Middle East has been China’s largest ceramic export market for two consecutive years since 2008. In 2009 alone, Guangdong ceramics exported $8.1 billion to the region, growing by 22.2% after a massive 41.2% rise in 2008. That year, exports to the Middle East exceeded those to the EU by $92.43 million, a 26-fold increase compared to 2008.
However, this growth was driven more by volume than by value. From January to July 2010, while the Middle East remained the top market, the export value began to decline, falling below that of the EU. Huo Jinxiang noted, “The Middle East accounts for 10% of our business, but the products are of lower quality, and profits are not high.â€
The European market, though still significant, faced its own challenges. Price declines started appearing in 2009, with export volumes to Germany, the Czech Republic, and Sweden increasing by 47.5%, 38.8%, and 31.1%, respectively, while average prices fell by 6.5%, 12%, and 23.4%. This trend, combined with rising production costs and currency appreciation, pushed many companies into a low-profit trap.
To counter these issues, New Zhongyuan is focusing on brand promotion through direct expansion. Unlike some competitors who rely on international investors or design partnerships, the company is taking a hands-on approach. Huo Jinxiang explained, “We are transitioning to a mid-to-high-end product line to add more value. But we must improve our product image and cannot depend on local dealers. We need to promote our own brand directly.â€
Previously, the company followed a traditional model, selling ceramics to distributors worldwide, who then sold them locally. While efficient, this method weakened the brand’s presence in foreign markets. When Xinzhongyuan first entered the Middle East, it focused on low-end products, which shaped the perception of the brand and limited profitability. Now, the company is working to reposition itself, but local dealers remain loyal to cheaper options, making it difficult to penetrate the mid-to-high-end market.
Since June of last year, President Huo Lianquan of New China International visited the Middle East and, after six months of planning, decided to relocate the Middle East Export Division to Dubai. The new setup includes an independent sales company and a 900-square-meter showroom, aiming to strengthen the brand’s image. More than 10 staff members will be based in Dubai upon opening.
Huo Jinxiang emphasized that despite the financial crisis, the ceramics market in the Middle East remains strong. “We chose Dubai because of its tax-free port policy, which allows us to build a solid base for the Middle East and even Africa.†Dubai’s Jebel Ali Free Zone, one of the largest professional markets in the region, offers zero taxes, full currency freedom, and access to key markets like Russia, India, and the Middle East.
According to Lan Weibing, director of the Foshan Ceramics Office at the China Ceramic Industry Association, using third countries as export channels is becoming a common strategy to navigate rising costs, currency appreciation, and global anti-dumping barriers. Xinzhongyuan’s approach in Dubai is a pioneering step, and if successful, could serve as a blueprint for other Chinese ceramic companies looking to expand internationally.