Lohao City: Professional Concept - Ambitious Plans

With Lifestyle of Health and Organic - a variation of the name of the worldwide movement of the health and environment-conscious LOHAS supporters (Lifestyle of  Health and Sustainability) - a group of Taiwanese entrepreneurs is launching a business model with which they want to dominate the Chinese market. The Lohao company belonging to the IT entrepreneur Terry Yu is still very new but he has carefully thought through his marketing concept and is pursuing a very ambitious expansion policy.

Picture: The Lohao Team consists entirely of young people

With two stores in Beijing already, he has now opened his first Lohao City store in Shanghai. The first thing the customer sees on entering the store is an inviting display of fruit and vegetables. On the ground floor (around 100 m²) you also find service counters for meat and sausage products, cheese, cakes and pastries, a cafe and soya milk production. There are also about eight metres of chilled goods (dairy products, drinks and convenience) and  self-service shelves with a big selection of  fresh bread and bakery products (including wholemeal bread and pretzels).

Other noteworthy features are a café with around 16 places inside plus more on a terrace, bookshelves with health literature (picture) and a display with leaflets on a whole variety of topics like baby care, allergies and food intolerances.  The dry goods range is located on the first floor that has the same area as the ground floor. You are immediately struck by the wide selection of wine including many European names, although the number of organic wines is marginal. The third level is still at the planning stage. There will eventually be cosmetics and plants, and facilities for seminars. When it is finished, the store will have a total of 300 m² of retail space.

According to one of the management staff in the store, the Lohao range consists of about 20 % imported goods and 30 % organics, depending on the season and the store’s location. Among organic dry goods you find many products packaged by Lohao itself, imported organic baby food and, for example, ham and sausage products supplied by the manufacturer Senfter in South Tyrol. In China, imported goods as a whole are considered to be safe and healthy. Quite normal conventional goods in Germany like products by Nestlé and Dole or Kühne’s tinned products are apparently regarded by the Chinese as healthy specialities.

Foreigners in particular buy familiar brands because many of them have little confidence in Chinese products. At Lohao City organics are clearly distinguished from conventional products by means of the price label on the shelves. Although the intention is to create clarity, it does require well trained staff since products can easily get mixed up. Often you cannot easily see which goods are organic and which are not, especially as the store sells Green-Food-Goods that you find all over the country. These products come from farms with integrated pest management systems but they are not organic. The Lohao company stated that it has in place a training programme for its young team of employees.

Some of the fresh organic produce (fruit, vegetables and eggs) comes from the Le Zhiwan Organic Ranch that is located in a nature reserve in the mountains about two hours by car from Beijing. A large flat screen above the till shows scenes from this paradise and it was here that the Lohao story started. Terry Yu, an IT guru born in Taiwan, joined forces with some friends and bought a farm, and they began growing organic produce for their own consumption. What started as a leisure time activity became a business idea emulating the Wholefoods Market chain in he USA, and to judge by the situation today it is a successful concept that is going to make a big name for itself in China. Assuming Mr Yu and his group of about ten with a share in Lohao actually implement their plans - with the title “We are spreading Lohas seeds in China”, Lohao states in its brochure that it intends to open 15 city stores by the end of 2007. If it goes according to plan, a second store will open in the Gubei district of Shanghai in August. By 2009, 500 Lohao shops will be rolled out in 30 Chinese cities. Lohao also offers a delivery service.

But as we all know, there is often a very long way to go before plans become reality. Nevertheless, it has to be said of Lohao that their concept is well thought through and, so far, their ideas are being put into practice. Strong points are that they supply some produce from their own farm, have attractive shops and service that is very customer-oriented - in Shanghai there are 60 employees and the store is open 12 hours a day. They also have their own information material, run courses (cookery and health) and provide information via websites (www.lohaocity.com).

Mr Yu explains that he considers the biggest challenge is gaining the confidence of consumers. At the moment, between 60 % and 80 % of customers are foreigners who already have some idea of what organic means, so it is now a question of convincing Chinese consumers and persuading them to buy products that are as much as 100 % - 300 % more expensive. Another challenge might well be securing adequate supplies of the right quality, especially if the organic range is to be expanded. At BioFach China, that took place for the first time inn Shanghai in June 2007, Lohao was at least a big presence. Their professional stand was permanently overrun and Terry Yu said how pleased he was with the contacts he made. He made it clear that his aim is to become the biggest and best purveyor of healthy products in the whole of China.

07.08.2007