THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW ECONOMIC OVERVIEW OF HONG KONG, MACAU AND CHINA Major Economic Indicators of Hong Kong, Macau and China Hong Kong The Hong Kong economy continued to grow in recent years riding on China’s strong economic growth. Hong Kong’s GDP grew from HK$1,475 billion in 2006 to HK$1,748 billion in 2010, representing a CAGR of 4.3%. According to IMF World Economic Outlook, Hong Kong’s GDP is projected to reach HK$2,494 billion in 2015, representing a CAGR of 7.4% from 2010 to 2015. Similarly, Hong Kong’s GDP per capita grew from HK$213,526 in 2006 to HK$245,433 in 2010, representing a CAGR of 3.5%. According to IMF World Economic Outlook, Hong Kong’s GDP per capita is projected to reach HK$336,321 in 2015, representing a CAGR of 6.5% from 2010 to 2015. The appreciation of Renminbi continues to drive consumption power from mainland China consumers and their spending in Hong Kong. The chart below sets forth the GDP and GDP per capita of Hong Kong from 2006 to 2010 and the forecast from 2011 to 2015. GDP and GDP per capita of Hong Kong HKD billion
HKD 400,000
3,000 2,500 265,248 2,000 213,526
232,363
239,269 229,596
285,341
301,926
319,109
336,321
300,000
245,433
250,000 200,000
1,500 1,000 500
350,000
1,475
1,616
1,677
1,622
1,748
1,904
2,065
2,347
2,203
2,494
150,000 100,000 50,000 0
0 2006
2007
GDP, current prices
2008
2009
2010
2011E
2012E
2013E
2014E
GDP per capita, current prices
Source: International Monetary Fund, The World Economic Outlook database
— 42 —
2015E
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Macau The Macau economy continued to grow in recent years riding on China’s strong economic growth. Macau’s GDP grew from MOP113.7 billion in 2006 to MOP217.3 billion in 2010, representing a CAGR of 17.6%. Similarly, Macau’s GDP per capita grew from MOP227,710 in 2006 to MOP398,071 in 2010, representing a CAGR of 15.0%. The chart below sets forth the GDP and GDP per capita of Macau from 2006 to 2010. GDP and GDP per capita of Macau MOP billion 240
217.3
MOP 600,000 500,000
180
161.7
165.5 400,000
141.9 120
398,071
113.7
300,000 269,960
60
294,505
303,992 200,000
227,710
100,000 0
0 2006
2007
2008
GDP
2009
2010
GDP per capita
Source: Statistics and Census Service, Macao SAR Government
China The Chinese economy has grown significantly since the economic reform by the Chinese government in the late 1970s. China’s GDP grew from RMB21,631 billion in 2006 to RMB39,798 billion in 2010, representing a CAGR of 16.5%. Despite the global recession in 2008 and 2009, China’s GDP experienced a growth of 9.6% and 9.1%, respectively. According to IMF World Economic Outlook, China’s GDP is projected to reach RMB69,005 billion in 2015, representing a CAGR of 11.6% from 2010 to 2015. Similarly, China’s GDP per capita grew from RMB16,500 in 2006 to RMB29,748 in 2010, representing a CAGR of 15.9%. According to IMF World Economic Outlook, China’s GDP per capita is projected to reach RMB50,175 in 2015, representing a CAGR of 11.0% from 2010 to 2015. The chart below sets forth the GDP and GDP per capita of China from 2006 to 2010 and the forecast from 2011 to 2015.
— 43 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW GDP and GDP per capita of China RMB billion 80,000
69,005
70,000 55,225
60,000
49,389
50,000
39,798
40,000 21,631
26,581
16,500
20,169
44,071
50,000
34,051
31,405
20,000 10,000
70,000
61,747
60,000
30,000
RMB 80,000
25,575
23,708
29,748
36,453
32,691
50,175
45,122
40,558
40,000 30,000 20,000 10,000
0
0 2006
2008
2007
2009
2010
2011E
2012E
2013E
2014E
2015E
GDP, current prices GDP per capita, current prices Source: National Bureau of Statistics of China, The World Economic Outlook database
Rapid growth of urban population and urbanization rate in China China is experiencing rapid urbanization due to the country’s rapid economic growth where people are moving from rural areas into cities to seek better jobs and higher standard of livings. The total urban population in China grew from 577.1 million in 2006 to 665.6 million in 2010, representing a CAGR of 3.6% where urbanization increased by approximately 5.8% over the same period. According to National Bureau of Statistics of China, China’s urbanization rate is expected to reach 56.0% in 2015 and urban population is estimated to grow to 771.6 million in 2015, presenting a CAGR of 3.0% from 2010 to 2015. The chart below sets forth the urban population growth trend in China from 2006 to 2010 and the forecast from 2011 to 2015. Urban Population Growth Trend in China
% 70.00 737.4
43.9 577.1
727.5
44.9 593.8
721.3
45.7 606.7
712.9
46.6 621.9
674.1
661.8
648.9
635.5
621.4
606.8
60.00
53.4
50.00
52.1
56.0
50.9
54.7
49.7
685.5
706.1
727.3
749.1
771.6
665.6
40.00 30.00 20.00 10.00 0.00
2006
2007
2008
2009
urban population, million
2010
2011E
2012E
rural population, million
2013E
2014E
2015E
urban populaiton, percent of total
Source: National Bureau of Statistics of China, Yearbook of Statistics of China; The Sixth National Population Census Announcement
— 44 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Income Levels in Hong Kong, Macau and China Hong Kong Hong Kong’s median household income grew from HK$204,000 in 2006 to HK$216,000 in 2010, representing a CAGR of 1.44%. The chart below sets forth the median household income in Hong Kong from 2006 to 2010. Median Household Income in Hong Kong HKD 220,000
216,000 212,400
215,000
216,000 210,000
210,000 204,000
205,000 200,000 195,000
2006
2008
2007
2009
2010
Source: Statistics and Census Department, Hong Kong SAR
Macau Macau’s per capita gross national income more than doubled from MOP124,800 in 2002 to MOP 276,028 in 2009, representing a CAGR of 12.0%, due to the strong growth in gaming and tourism. Per Capita Gross National Income (GNI) in Macau MOP 300,000
269,350
262,645
2007
2008
276,028
250,000 204,034 200,000 150,000
166,252 124,800
180,868
137,508
100,000 50,000 0 2002
2003
2004
2005
Source: Statistics and Census Service, Macao SAR Government
— 45 —
2006
2009
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW China As a result of the rapid economic growth and urbanization in China, disposal income has also grown substantially. China’s per capita disposable income of urban households grew from RMB11,759 in 2006 to RMB19,109 in 2010, representing a CAGR of 12.9%. According to Frost & Sullivan, China’s per capita disposable income of urban households is projected to reach RMB36,317 in 2015, representing a CAGR of 13.7%. Disposable income is the most important factor to personal consumption, thus growing disposable income is expected to support domestic consumption. The chart below sets forth the per capita disposable income of urban households in China from 2006 to 2010 and the forecast from 2011 to 2015. Per Capita Disposable Income of Urban Households of China RMB 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000
13,786
17,175
11,759
15,781
19,109
2006
2007
2008
2009
2010
21,631
2011E
24,652
28,058
31,923
36,317
0 2012E
2013E
2014E
2015E
Source: Frost & Sullivan Report
The Retail Industry in Hong Kong, Macau and China Hong Kong Hong Kong’s consumer retail market has maintained a stable growth as a result of China’s strong economic growth and increased in consumer spending power due to the continued appreciation of Renminbi against the Hong Kong dollar. The total retail sales of consumer goods grew from HK$219.0 billion in 2006 to HK$325.0 billion in 2010, representing a CAGR of 10.4%. According to Frost & Sullivan, Hong Kong’s retail sales of consumer goods is projected to reach HK$572.7 billion in 2015, representing a CAGR of 12.0% from 2010 to 2015. The chart below sets forth the retail sales of consumer goods in Hong Kong from 2006 to 2010 and the forecast from 2011 to 2015.
— 46 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Retail Sales of Consumer Goods in Hong Kong HKD billion 700 600 500 400 300 200 100
219.0
247.0
273.1
274.7
2006
2007
2008
2009
325.0
364.0
407.6
2010
2011E
2012E
456.6
511.3
2013E
2014E
572.7
0 2015E
Source: Census and Statistics Department of Hong Kong SAR, Frost & Sullivan Report
Macau Macau’s consumer retail market has grown significantly as a result of China’s strong economic growth and increased in consumer spending power due to the continued appreciation of Renminbi. The total retail sales of consumer goods grew from MOP10.7 billion in 2006 to MOP29.9 billion in 2010, representing a CAGR of 29.4%. The chart below sets forth the retail sales of consumer goods in Macau from 2006 to 2010. Retail Sales of Consumer Goods in Macau MOP billion 35
29.9
30 22.4
25 19.4
20 15
14.2 10.7
10 5 0 2006
2008
2007
2009
2010
Source: Statistics and Census Service, Macao SAR Government
China China’s consumer retail market has grown rapidly as a result of its strong growth in GDP, urbanization, and disposal income of urban households in recent years. The total retail sales of consumer goods in China grew from RMB7,915 billion in 2006 to RMB15,700 billion in 2010, representing a CAGR of 18.7%. According to Frost & Sullivan, China’s retail sales of consumer goods is projected to reach RMB31,213 billion in 2015, representing a CAGR of 14.7% from 2010 to 2015. The chart below sets forth the retail sales of consumer goods in China from 2006 to 2010 and the forecast from 2011 to 2015.
— 47 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Retail Sales of Consumer Goods in China RMB billion 35,000 30,000 25,000 20,000 15,000 10,000 5,000
7,915
9,357
11,483
13,268
2006
2007
2008
2009
15,700
18,002
20,725
2010
2011E
2012E
23,782
27,264
31,213
0 2013E
2014E
2015E
Source: Frost & Sullivan Report
Tourists and their spending in Hong Kong and Macau Hong Kong The number of tourists to Hong Kong grew at a CAGR of 9.3% from 2006 to 2010 as a result of the increasing number of tourists from China. Visitors from China grew at a CAGR of 13.7% over the same period due to ease of travel restrictions. Tourists from China accounted for 53.8% of the total number of tourists to Hong Kong in 2006 and accounted for 63.0% of the total number of tourists to Hong Kong in 2010, far more than the number of visitors from other areas. In addition to the substantial growth in the number of tourists from China, the spending power of these tourists has also increased over the same period. The per capita spending of Chinese tourists who stayed overnight was HK$4,705 in 2006 and grew to HK$7,453 in 2010, representing a CAGR of 12.2%. Tourist Number by Country/Region 2006
2007
2008
2009
2010
Mainland China ................................ 13,591,342 15,485,789 16,862,003 17,956,731 22,684,388 South and Southeast Asia .................. 2,659,707 2,888,106 2,936,207 2,885,155 3,500,882 North Asia ........................................ 2,029,869 2,200,567 2,229,117 1,823,184 2,207,642 Europe, Africa and the Middle East .. 1,916,861 2,189,424 2,094,039 1,968,781 2,174,199 Taiwan .............................................. 2,177,232 2,238,731 2,240,481 2,009,644 2,164,750 the Americas ..................................... 1,630,637 1,783,609 1,684,734 1,567,807 1,749,558 Macau ............................................... 577,792 626,103 696,829 671,389 780,388 Australia, New Zealand and South Pacific .......................................... 667,684 756,964 763,206 707,963 768,524 Total................................................. 25,251,124 28,169,293 29,506,616 29,590,654 36,030,331
Source: Census and Statistics Department, Hong Kong SAR
— 48 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Per Capita Overnight Tourist Spending by Country/Region 2006
Mainland China ................................ Australia, New Zealand and South Pacific .......................................... Europe, Africa and the Middle East .. the Americas ..................................... South and Southeast Asia .................. Taiwan .............................................. North Asia ........................................ Macau ............................................... Total.................................................
2007
2008
2009
2010
HK$
HK$
HK$
HK$
HK$
4,705
5,193
5,676
6,620
7,453
5,463 5,366 5,505 4,550 5,329 4,316 2,802 38,036
5,589 5,640 5,744 4,773 5,015 4,303 2,772 39,029
6,181 6,045 5,760 4,744 5,126 4,306 3,041 40,879
5,330 5,127 4,914 4,460 5,117 3,893 3,069 38,530
7,050 6,674 6,476 5,251 5,197 4,976 3,824 46,901
Source: Census and Statistics Department, Hong Kong SAR
Per Capita Overnight Tourist Spending by Category
Jewellery and Watch ......................... Garments/Fabrics .............................. Leather/Synthetic Goods ................... Cosmetics & Skin Care/Perfume/ Personal Care ................................ Electrical/Photographic Goods........... Foodstuff, Alcohol and Tobacco ........ Other items ....................................... Total.................................................
2006
2007
2008
2009
2010
HK$
HK$
HK$
HK$
HK$
628 645 336
661 792 459
707 789 543
940 867 697
1,056 988 794
269 408 84 168 2,538
306 403 105 180 2,905
368 363 111 234 3,116
501 298 176 189 3,667
571 351 211 181 4,150
Source: Hong Kong Tourism Board
— 49 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Macau The number of tourists to Macau grew at a CAGR of 3.2% from 2006 to 2010 where visitors from China accounted for 53.0% of the total number of tourists to Macau in 2010, far more than the number of visitors from other areas. Tourist Number by Country/Region 2006
2007
2008
2009
2010
Mainland China ................................ 11,985,617 14,866,391 17,500,469 10,989,533 13,229,058 Hong Kong ....................................... 6,940,656 8,174,064 8,227,421 6,727,822 7,466,139 Other Asian countries........................ 1,121,921 1,773,049 2,327,697 2,075,078 2,285,478 Taiwan .............................................. 1,437,824 1,444,082 1,322,578 1,292,551 1,292,734 the Americas ..................................... 219,610 306,294 325,876 278,661 297,137 Europe, Africa and the Middle East .. 208,272 295,009 312,122 253,891 267,308 Australia, New Zealand and South Pacific .......................................... 84,222 134,106 169,577 135,215 127,557 Total................................................. 21,998,122 26,992,995 30,185,740 21,752,751 24,965,411
Source: Macau Government Tourist Office
Per Capita Overnight Tourist Spending* by Country/Region
Mainland China ................................ Taiwan .............................................. Europe, Africa and the Middle East .. Australia, New Zealand and South Pacific .......................................... Other Asian countries........................ the Americas ..................................... Hong Kong ....................................... Total.................................................
2006
2007
2008
2009
2010
MOP
MOP
MOP
MOP
MOP
4,744 2,216 1,403
4,355 2,232 1,540
4,706 2,303 1,928
4,164 2,754 2,390
3,367 2,078 2,039
1,740 1,895 1,927 1,243 15,167
2,417 1,904 2,252 1,403 16,102
1,808 2,214 1,643 1,493 16,094
2,236 2,272 2,085 1,644 17,544
2,005 1,989 1,658 1,345 14,482
Source: Macau Government Tourist Office *
Excluded gambling expenses
— 50 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Per Capita Overnight Tourist Spending by Category
Clothing............................................ Jewellery/Watches ............................. Local Food Products ......................... Shoes/Handbags/Wallets .................... Cosmetics/Perfume ............................ Cellular Phones/Electrical Equipment ..................................... Others ............................................... Tobacco/Alcohol ............................... Chinese Herbs/Medicine .................... Total.................................................
2006
2007
2008
2009
2010
MOP
MOP
MOP
MOP
MOP
205 166 225 76 93
146 145 236 84 80
196 132 249 126 97
196 118 231 128 88
269 266 219 169 123
145 26 57 22 1,015
96 30 41 20 878
66 31 37 16 950
42 32 22 10 866
50 31 21 13 1,162
Source: Macau Government Tourist Office
Populations in Hong Kong, Macau and China Hong Kong According to Census and Statistics Department of Hong Kong SAR, Hong Kong had a total population of approximately 6.7 million in 2001 and grew to 7.1 million in 2010 representing a CAGR of 0.6%. The proportion of 0-24 year-old population shrank from 30.3% in 2001 to 24.7% in 2010 where the proportion of 45 year-old and above population grew from 32.9% in 2006 to 43.5% in 2010, showing an increase in the aging population. Distribution of Population by Age Groups of Hong Kong 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 0-14
15-24
25-34
35-44
45-54
55-64
65+
2010E
853,000
892,800
1,089,700
1,152,400
1,295,000
865,300
915,000
2009
873,400
893,800
1,076,400
1,174,600
1,282,500
809,600
893,400
2006
939,675
909,005
1,052,126
1,248,855
1,193,788
668,101
852,796
2001
1,109,417
920,445
1,108,529
1,360,487
960,417
502,042
747,052
Source: Census and Statistics Department, Hong Kong SAR
— 51 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Macau According to Statistics and Census Service of Macau, Macau had a total population of approximately 513,400 in 2006 and grew to 552,400 in 2010 representing a CAGR of 1.8%. The proportion of 0-24 year-old population shrank from 33.1% in 2006 to 28.0% in 2010 where the proportion of 45 year-old and above population grew from 33.2% in 2006 to 38.8% in 2010, showing an increase in the aging population. Distribution of Population by Age Groups of Macau 600,000 500,000 400,000 300,000 200,000 100,000 Below Age 15
Age 15-24
Age 25-34
Age 35-44
Age 45-54
Age 55-64
Age 65 and above
2010
67,500
87,100
88,700
94,800
107,300
62,800
44,200
2009
69,100
91,200
84,000
93,200
105,600
57,300
41,700
2008
70,500
96,900
87,600
97,900
104,500
52,200
39,600
2007
72,500
97,300
85,500
98,100
99,200
47,400
38,000
2006
75,400
94,500
78,600
94,500
92,100
42,300
36,000
Source: Statistics and Census Service, Macao SAR
— 52 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW China According to National Bureau of Statistics of China, China had a total population of approximately 1.195 billion in 2006 and dropped slightly to 1.167 billion in 2009 representing a CAGR of -0.8%. The proportion of 0-19 year-old population shrank from 27.2% in 2006 to 24.0% in 2009 due to change in birth control where the proportion of 50 year-old and above population grew from 26.6% in 2006 to 28.5% in 2009, showing an increase in the aging pupulation. Distribution of Population by Age Groups of China Thousand 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 0-19
20-29
30-39
40-49
50+
2009
320,828
186,881
211,693
234,547
380,752
2008
334,508
177,253
215,591
223,574
377,074
2007
346,117
172,681
224,686
213,335
364,481
2006
358,534
165,620
228,531
211,919
349,896
Source: National Bureau of Statistics of China
Overview of the “sub-healthy” population in China According to Frost & Sullivan, “sub-healthy” is a popular concept in China in recent years. The sub-healthy condition refers to a state at which the person experiences reduction in his or her vitality and adaptability although there is no actual disease or illness diagnosed. It is a state featuring physiological function deterioration between health and illness. According to Frost & Sullivan, the main factors that cause the increase in sub-healthy population include the followings: •
High pressure and long working hours
•
Pollution in the surrounding environments
•
Unhealthy living habits including lack of sleep, lack of physical exercises and poor and irregular diet
— 53 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW •
Psychological problems such as passive resistance
According to Frost & Sullivan, China had a total sub-healthy population of approximately 628 million in 2005 and grew to 664 million in 2010, representing a CAGR of 1.1% where the proportion of sub-healthy population as percentage of total population grew from 48.0% in 2005 to 48.4% in 2010. According to Frost & Sullivan, the total sub-healthy population is expected to reach 709 million in 2015 where the proportion of sub-healthy population as percentage of total population is expected to grow from 48.4% in 2010 to 50.2% in 2015. The chart below sets forth the sub-healthy population growth trend in China from 2005 to 2010 and the forecast from 2011 to 2015. Total Sub-Healthy Population in China million 710
60.0%
690 670 650 630 610
649
664
656
672
681
690
699
709
58.0% 56.0% 54.0%
645 50.2% 640 49.5% 49.9% 48.7% 48.8% 48.8% 49.2% 48.4% 48.8% 49.1% 48.0% 628
52.0% 50.0%
590
48.0%
570
46.0%
550
44.0%
530
42.0%
510
40.0% 2005
2006
2007
2008
2009
2010 2011E 2012E 2013E 2014E 2015E
Sub-healthy Population
% of total Population
Source: Frost & Sullivan Report
In recent years, the sub-healthy condition has surfaced as a new killer of human lives in China, according to Frost & Sullivan. As a result, sub-healthy condition is considered as a key driver to stimulate the demand for health and wellness equipments because people believe that they can improve their health conditions and gradually get out of the “sub-healthy” condition through the use of health and wellness equipments. HEALTH AND WELLNESS EQUIPMENT MARKET IN HONG KONG AND CHINA Overview of Health and Wellness Equipment According to Frost & Sullivan, health and wellness equipment can be divided into four categories of products, namely relaxation products, fitness products, diagnostic products and therapeutic products. Relaxation products are defined as automatic massage devices used for whole body or partial body relaxation, which consist of massage chairs, neck and shoulder massagers, foot massagers, portable massagers, and other partial body massage equipments.
— 54 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Fitness products are defined as devices used in any given physical activity for shaping muscle groups for specific areas of the body, which consist of treadmills, slimming belts, exercise bikes, vibration plates, rowing machines, and cross trainers, but exclude all commercial fitness equipments. Diagnostic products are defined as basic level home diagnostic equipments which consist of digital blood pressure monitors, digital thermometers, and fat and water monitors. Therapeutic products are defined as electronic TCM (Traditional Chinese Medicine) therapeutic devices which consist of electronic pulse stimulators. Health and Wellness Equipment Market in Hong Kong and China Hong Kong According to Frost & Sullivan, the total sales revenue of health and wellness equipment market in Hong Kong grew from HK$622 million in 2006 to HK$876 million in 2010, representing a CAGR of 8.9%. Frost & Sullivan estimates that the total sales revenue of this market will grow at a CAGR of 10.2% from 2010 to 2015 and reach HK$1,422 million in 2015 due to the following factors: Large aging population: People aged 50 and older are the major customers of health and wellness products and as the proportion of 45 year-old and above population grew from 32.9% in 2006 to 43.5% in 2010 in Hong Kong, the demand for health and wellness products is expected to stay at a high level. Increasing consumption power from Chinese tourists: One unique aspect in Hong Kong is that Chinese tourists contribute greatly to retail sales, including the purchase of health and wellness products. Increasing demand for gifting purpose: In Hong Kong, health and wellness products are widely purchased for gifting purpose where young people often purchase health and wellness products for their parents. Such demand increased rapidly in recent years and will continue to grow. The Health and Wellness Equipment Market in Hong Kong HKD million 1,600 1,400
1,142
1,200
1,326
1,422
1,024 876
1,000 800
1,229
622
661
695
2006
2007
2008
720
2009
600 400 200 0 2010
Source: Frost & Sullivan Report
— 55 —
2011E
2012E
2013E
2014E
2015E
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW The Health and Wellness Equipment Market by Category in Hong Kong 2010
Diagnostic HKD84.8 million 9.7%
2015E Therapeutic HKD21.9 million 2.5%
Diagnostic HKD108.7 million 7.6% Fitness HKD122. million 8.6%
Fitness HKD96.4 million 11.0% Relaxation HKD672.7 million 76.8%
Therapeutic HKD26.9 million 1.9%
Relaxation HKD1,164.5 million 81.9%
Source: Frost & Sullivan Report
Relaxation is the biggest product category in the total health and wellness equipment market in Hong Kong, contributed HK$672.7 million or 76.8% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 11.6% and reach HK$1,164.5 million or 81.9% market share in 2015 due to people’s high pressure from work and increased awareness to the sub-healthy concept in recent years. Fitness is the second largest product category in the total health and wellness equipment market in Hong Kong, contributed HK$96.4 million or 11.0% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 4.9% and reach HK$122.4 million or 8.6% market share in 2015. The low growth rate is attributable to competition from commercial fitness centers where they provide more advanced products along with personal training services. Diagnostic is the third largest product category in the total health and wellness equipment market in Hong Kong, contributed HK$84.8 million or 9.7% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 5.1% and reach HK$108.7 million or 7.6% market share in 2015. The low growth rate is attributable to stable population and economic growth where many people already own diagnostic products, partially offset by increasing hypertension incidence rate due to heavy workload and changes in lifestyles. Therapeutic is the smallest product category in the total health and wellness equipment market in Hong Kong, contributed HK$21.9 million or 2.5% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 4.2% and reach HK$26.9 million or 1.9% market share in 2015. The low growth rate is attributable to lack of awareness in this product category where people are not certain on the effectiveness of using such products.
— 56 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW China According to the Frost & Sullivan, the total sales revenue of health and wellness equipment market in China grew from RMB6.7 billion in 2006 to RMB12.4 billion in 2010, representing a CAGR of 16.6%. Frost & Sullivan estimates that the total sales revenue of this market will grow at a CAGR of 18.3% from 2010 to 2015 and reach RMB28.7 billion in 2015 due to the following factors: Aging population: People aged 50 and older are the major customers of health and wellness products and as the proportion of 50 year-old and above population grew from 26.6% in 2006 to 28.5% in 2010 in China, the demand for health and wellness products is expected to stay at a high level. Increasing disposable income: Due to China’s continued economic growth and growth in urbanization, disposable income of urban households will continue to increase where people can afford more household electronic products. Increasing awareness to sub-healthy concept: People’s awareness to sub-healthy condition increased rapidly in the past few years, which will drive the demand for health and wellness products. Increasing demand for gifting purpose: In China, health and wellness products are widely purchased for gifting purpose where young people often purchase health and wellness products for their parents. Such demand increased rapidly in recent years and will continue to grow. Total Health and Wellness Equipment Market in China RMB billion 35 28.7
30
24.8
25
21.0 17.7
20 15 10
6.7
7.8
2006
2007
9.3
10.5
2008
2009
12.4
14.8
5 0 2010
Source: Frost & Sullivan Report
— 57 —
2011E
2012E
2013E
2014E
2015E
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW The Health and Wellness Equipment Market by Category in China 2010 Diagnostic RMB0.9 billion 7.0% Fitness RMB1.0 billion 7.8%
2015E Therapeutic RMB0.3 billion 2.3%
Diagnostic RMB2.8 billion 9.7%
Therapeutic RMB0.4 billion 1.5%
Fitness RMB1.8 billion 6.1%
Relaxation RMB10.3 billion 82.8%
Relaxation RMB23.8 billion 82.7%
Source: Frost & Sullivan Report
Relaxation, similar to the Hong Kong market, is the biggest product category in the total health and wellness equipment market in China, contributed RMB10.3 billion or 82.8% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 18.3% and reach RMB23.8 billion or 82.7% market share in 2015 due to expected increase in total sales units which is attributable to more affordable prices. Fitness is the second largest product category in the total health and wellness equipment market in China, contributed RMB1.0 billion or 7.8% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 12.6% and reach RMB1.8 billion or 6.1% market share in 2015. The shrink in market share is attributable to competition from commercial fitness centers where they provide more advanced products along with personal training services. Diagnostic is the third largest product category in the total health and wellness equipment market in China, contributed RMB0.9 billion or 7.0% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 26.2% and reach RMB2.8 billion or 9.7% market share in 2015. The high growth rate is attributable to high incidence rate of hypertension due to life style changes and heavy workload as well as increasing awareness of hypertension and diabetes as health concerns as a result of changes in government policy. Therapeutic is the smallest product category in the total health and wellness equipment market in China, contributed RMB0.3 billion or 2.3% of total sales revenue in 2010. Frost & Sullivan estimates that this category will grow at a CAGR of 8.8% and reach RMB0.4 billion or 1.5% market share in 2015. The low growth rate is attributable to lack of awareness in this product category where people are not certain on the effectiveness of using such products. Relaxation Equipment Market in Hong Kong In 2010, OTO ranked number one in the relaxation equipment market in terms of units sold with a market share of 65.0% in Hong Kong. In terms of sales revenue, OTO is ranked number two with a market share of 28.3%. The top two brands accounted for more than 85.0% of the relaxation equipment market in Hong Kong in terms of both units sold and sales revenue.
— 58 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW In terms of segmentation, partial body massage equipment sales contributed approximately 34.7% in 2010 while massage chair sales contributed the remaining 65.3% of the relaxation equipment market in Hong Kong due to massage chair’s higher average selling price. Relaxation Equipment Market in Hong Kong by Units Sold, 2010 Market Share Rank
Brand
Units Sold
(%)
1 2 3 4 5 6
OTO ................................................................................... OSIM ................................................................................. OGAWA .............................................................................. Panasonic ........................................................................... Sanyo................................................................................... Others ................................................................................. Total....................................................................................
134,200 56,500 5,850 4,800 75 5,150 206,075
65.0 27.4 2.8 2.3 0.0 2.5 100.0
Source: Frost & Sullivan Report
Relaxation Equipment Market in Hong Kong by Sales, 2010
Rank
Brand
1 2 3 4 5 6
OSIM ................................................................................. OTO ................................................................................... Panasonic ........................................................................... OGAWA .............................................................................. Sanyo ................................................................................. Others ................................................................................. Total....................................................................................
Source: Frost & Sullivan Report
— 59 —
Sales (HK$m)
Market Share (%)
397.7 190.1 40.5 32.9 1.8 9.7 672.7
59.1 28.3 6.0 4.9 0.3 1.4 100.0
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Partial Body Massage Equipment Market in Hong Kong In 2010, OTO ranked number one in the partial body massage equipment market in terms of units sold with a market share of 72.2% and in terms of sales revenue with a market share of 60.7% in Hong Kong where the top two brands accounted for more than 90.0% of the total market. Partial Body Massage Equipment Market in Hong Kong by Units Sold, 2010 Market Share Rank
Brand
Units Sold
(%)
1 2 3 4 5
OTO .................................................................................... OSIM ................................................................................... OGAWA ............................................................................... Panasonic............................................................................. Others ................................................................................. Total....................................................................................
129,400 38,000 3,600 3,450 4,800 179,250
72.2 21.2 2.0 1.9 2.7 100.0
Source: Frost & Sullivan Report
Partial Body Massage Equipment Market in Hong Kong by Sales, 2010
Rank
Brand
1 2 3 4 5
OTO ................................................................................... OSIM ................................................................................. Panasonic ........................................................................... OGAWA .............................................................................. Others ................................................................................. Total....................................................................................
Source: Frost & Sullivan Report
— 60 —
Sales (HK$m)
Market Share (%)
141.7 72.5 7.7 5.5 5.9 233.3
60.7 31.1 3.3 2.4 2.5 100.0
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Brand Awareness of Partial Body Massage Equipments in Hong Kong Top of Mind Awareness
Other Unaided Awarenes
OSIM
68.2%
OTO Panasonic
28.2%
OTO
42.3%
Panasonic
31.4%
Sanyo
2.7%
20.9%
0.5%
Fuji
OGAWA
0.0%
OSIM
7.3%
Others
0.0%
OGAWA
6.8%
0.4%
Others
Sanyo
No brands identified 0%
10%
20%
30%
40%
50%
60%
70%
80%
13.2%
0.0%
0%
10%
20%
30%
40%
50%
Note: “Top of Mind Awareness” is defined as awareness of brands mentioned first when being asked of partial body massage equipments and “Other Unaided Awareness” is defined as awareness of all the other brands mentioned after the mentioning of the first brand when being asked of partial body massage equipments. Source: Frost & Sullivan Report
Massage Chair Market in Hong Kong In 2010, OTO ranked number two in the massage chair market in terms of units sold with a market share of 17.6% and in terms of sales revenue with a market share of 11.0% in Hong Kong where the top two brands accounted for more than 85.0% of the total market. Massage Chair Market in Hong Kong by Units Sold, 2010
Rank
Brand
1 2 3 4 5 6
OSIM ................................................................................. OTO .................................................................................... OGAWA ............................................................................... Panasonic ........................................................................... Sanyo ................................................................................. Others ................................................................................. Total....................................................................................
Source: Frost & Sullivan Report
— 61 —
Units Sold
Market Share (%)
18,500 4,800 2,250 1,350 75 350 27,325
67.7 17.6 8.2 4.9 0.3 1.3 100.0
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW Massager Chair Market in Hong Kong by Sales, 2010
Rank
Brand
1 2 3 4 5 6
OSIM ................................................................................. OTO ................................................................................... Panasonic ........................................................................... OGAWA .............................................................................. Sanyo ................................................................................. Others ................................................................................. Total....................................................................................
Sales
Market Share
(HK$m)
(%)
325.2 48.3 32.8 27.4 1.8 3.9 439.4
74.0 11.0 7.5 6.2 0.4 0.9 100.0
Source: Frost & Sullivan Report
Brand Awareness of Massage Chairs in Hong Kong OSIM
75.0%
OTO
19.5%
Panasonic
3.6%
Sanyo
0.5%
OGAWA
0.0%
Others
0.0%
No brands identified 0%
1.4% 10%
20%
30%
40%
50%
60%
70%
80%
Note: Brand awareness is defined as awareness of brands mentioned first when being asked of massage chairs Source: Frost & Sullivan Report
Report prepared by Frost & Sullivan We engaged Frost & Sullivan, an independent marketing and consulting agency founded in 1961, to conduct research and prepare a report on the health and wellness equipment market in Hong Kong and China. Frost & Sullivan currently has more than 40 global offices and 1,800 industry consultants. We paid Frost & Sullivan a total of RMB660,000 in fees for its research and report. We have included certain information from the Frost & Sullivan Report in this document because we believe such information facilitates the understanding of this market for potential investors. In Hong Kong, the methodology used by Frost & Sullivan in this report involved conducting both primary and secondary research obtained from numerous sources within the health and wellness equipment market in Hong Kong. The primary research was conducted through face-to-face interviews. The primary research involved two phases: phase one involved demand-side end-users answering a number of quantitative questions followed by an interactive qualitative session to map
— 62 —
THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained in it is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.
INDUSTRY OVERVIEW brand perceptions; phase two involved supply-side interviews with retailers and manufacturers of health and wellness equipment products. Supply-side interviews were used as a cross-checking mechanism to verify the accuracy of market share and revenue figures that were not contained in publicly available company reports. Secondary research was conducted through review of company reports and independent research reports. For purposes of calculating the market positions of the Company’s massage chairs and partial body massage equipment sales in Hong Kong, in determining the Company’s revenue from massage chairs and partial body massage equipment, Frost & Sullivan had used the retail prices of such products sold to ultimate end-users and consumers. Such retail prices are different from the selling prices of the products sold to the Company’s customers (i.e., distributors), which is the basis for calculating the Company’s revenue presented in the section headed “Financial Information.” The Frost & Sullivan Report adopted certain commonly used assumptions and parameters in the industry research, including GDP growth, population growth, regulation regarding product safety and growth of expenditure on the general population. The research results may be affected by the accuracy of these assumptions and the choice of these parameters.
— 63 —
