In China, the Pen Is Mightier When It’s Pricier

One of the greatest benefits of globalization is ability to resuscitate and recycle entire markets.  As countries develop, certain markets mature and fade, thus losing their luster and revenue.  Over the last 20 years, markets for such products and services as pagers, pumps, movie theater designers, luxury watch purveyors and a number of others enjoyed their second wind in emerging markets.  As the story below illustrates, fountain pens are a great case in point. Long on the decline in the U.S. the market for high-end writing instruments is enjoying a rebirth in China and other emerging markets.

Besides being an entertaining read, this story should serve to prompt any U.S. CEO, whose current business is stagnating during these difficult economic times, to examine the possibility of taking the business abroad and regaining the growth mojo there. More often than not, it is possible to inject new life into existing businesses by crafting a comprehensive international strategy.

If you have any other examples of companies, or entire market being reborn as the result of international expansion, or would like to explore taking your company abroad, please write to me at agordin@broadstreetcap.com

I hope you enjoy the article and welcome your comments.

Parker Writing Instruments Find a New Prestige Market for a Category That’s Been Fading in the West

as published in the Wall Street Journal  November 2, 2011

BEIJING—Fancy pens are writing a new chapter for themselves in China.

Smartphones and tablets have made expensive pens passé to business executives in many parts of the world. But Chinese professionals are increasingly snapping them up—including some that cost thousands of dollars—as a display of their new wealth.

Laurie Burkitt/The Wall Street JournalA shopper in China looks at upscale pens, which are selling briskly there.

A design team in China for Parker Pen Co., one of the world’s largest producers of writing instruments, has darkened its pens’ ink to appeal to writers of Chinese characters and added to the pen’s head a special Chinese character that says “Fu,” meaning prosperity and good luck. Parker has launched several special edition pens, including a “Golden Dragon” pen costing 39,888 yuan, or about $7,500.

Such moves have helped make China the top-selling market for Parker, says Penny McIntyre, head of the office products division of Atlanta-based Newell Rubbermaid Co., which owns Parker. Sales of Parker have surged 30% to 50% within the past three years in many of the nearly 500 department stores in China, where Parker sells its Chinese-inspired collection at special kiosks, she says.

Parker PensParker’s Golden Dragon

The office products division, which includes Parker, is Newell Rubbermaid’s most profitable, and in 2010 accounted for about 40% of operating profit and 30% of sales at Newell Rubbermaid, which had 2010 revenue of $5.76 billion. The company does not release specific sales figures for its individual units, but a company spokesman said fine pen sales in China now contribute “substantially” to sales growth for the company. A restructuring and 500 layoffs announced by Newell Rubbermaid on Friday won’t affect the Parker division, in which the company plans further investments, the spokesman said.

Parker is one of many companies attempting to gain a second wind in China, where pre-existing images can be recast for a brand new set of consumers. Best Western International Inc. launched in China in 2009 as a three-star hotel instead of maintaining its budget image in the U.S. General Motors Corp. positioned Buick in China as an upper-class brand and it has largely become a status symbol in China, a sharp contrast to its image in the U.S. Similarly, French fashion brands Pierre Cardin and Cerruti also came to China in hopes of reviving their luster.

Yu Liang, a 37-year-old personal trade consultant, visited a Parker kiosk in the northern port city of Tianjin recently and spent 3,688 yuan ($573) on his sixth Parker pen. Mr. Yu started buying Parker pens a few years ago. “Some people collect handbags, some people collect jewelry, and I collect pens,” Mr. Yu said.

The number of affluent citizens earning a household income of more than one million yuan (about $156,000) jumped about 20% last year, and they accounted for 45% of China’s luxury buyers, according to consulting firm McKinsey & Co.

Pens are selling well because they’re an affordable accessory and useful in China’s gift-giving business culture, says Shaun Rein, managing director of China Market Research Group and author of “End of Cheap China.” Pen sales in China, including non-luxury brands, jumped to 7.8 billion yuan, or $1.2 billion, in 2009, up nearly 17% from a year earlier, according to the most recent data available from market research company Euromonitor International.

Parker isn’t the only maker of pricey pens building a business in China. Montblanc, owned by Cie. Financière Richemont SA, has opened up standalone stores to sell pens and other products, and says sales are growing quickly.

Parker, and a small brand, Waterman, also owned by Newell Rubbermaid, command about a 25% share of the global market for fine writing implements, according to company estimates provided to analysts in 2010. Montblanc has about a 28% global market share, according to the same report. Montblanc wouldn’t comment on its market share.

Parker’s success in China is essential for the brand’s survival. Founded in Janesville, Wisc., in 1888, Parker was the most popular fine-writing pen in the U.S. for generations. U.S. Gen. Douglas MacArthur used a Parker pen when he signed Japan’s surrender ending World War II.

Newell Rubbermaid bought Parker as part of a package of companies in 2000. The company gradually lost prestige—and profits. Sales slumped in North America and Europe, though those markets still make up about half of the company’s sales.

So Parker turned to China. Jean-Charles Hita, Newell Rubbermaid’s Geneva-based president of fine writing, came to Parker about four years ago from Bulgari, and found lots of work to do to rebuild the pen’s reputation as a luxury item.

The chance to restore sales, Mr. Hita and others saw, was in China, where an expensive pen remains a status symbol that climbing middle-class consumers can aspire to own.

Parker dispatched its design team to the country in 2009. The company also priced the pens to make them aspirational—unlike in North America, where it had cut prices as sales lagged.

“They went for volume,” Ms. McIntyre said of previous Parker management teams in the U.S. “That’s fine, I guess, but you denigrate your brand in the luxury space. We saw what happens if you don’t pay attention to a market. It’s called North America.”

Zhao Lin, a 40-year-old trade director at a state-owned enterprise in the northern port city Tianjin recently went to the local department store to buy a 1,518 yuan ($236) Parker Sonnet Ladies’ Fountain Pen and a 528 yuan ($82) Sonnet Rose Gold as birthday gifts for a co-worker in the human-resources department.

“She’s always having people sign papers and she can’t just pull out any pen for them to use,” Ms. Zhao said.

Write to Cameron McWhirter at cameron.mcwhirter@wsj.com and Laurie Burkitt atlaurie.burkitt@wsj.com

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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