In the plastic pipe industry, many customers are very familiar with the brand AQUA-SCIE since it is an original high-end plastic pipe and a symbol of excellent quality. Ever since entering the Chinese market 15 years ago, this brand of high-end plastic pipes from Germany, refuses to seek quick success and instant benefits by drifting with the tide, even under the pressure of market competition. Additionally, with people-oriented policies, it always adheres to an unwavering positioning of original high-end products and wins a large amount of the customers' attention and favor.
So, how does AQUA-SCIE achieve such success? In an ever-changing market structure, how will AQUA-SCIE take advantage of opportunities and with what policies will AQUA-SCIE achieve continuous development? Recently, the journalist from our editorial department interviewed with Mr. He Yisheng, the Sales Director of the KDF Distribution (Shanghai) Co., Ltd. Please follow along to see Mr. He Yisheng's wonderful responses.
Q: KDF Distribution (Shanghai) Co., Ltd. belongs to the Germany K.D.Feddersen Group. First of all, please introduce the background and development situations of the Germany K.D.Feddersen Group to our readers.
He Yisheng: The Feddersen Group is an old-line German company based in Hamburg, Germany. With global establishment of subsidiaries in more than 20 countries, it has over 700 employees in total. It deals mainly with the import and export of things related to chemical raw materials, pipes, pipe fittings, and other products in the world. The company was founded by a Hamburg entrepreneur, Karl-Detlef Feddersen, in 1949. So far, it has a history of development of more than 60 years. Our company is special in this regard. Since this man had no offspring, when he passed away, the company was donated to the local government. The only legal owner of Feddersen Group is a non-profit organization K.D. Feddersen Foundation, which operates nursing homes and related living assistance agencies in Hamburg, Germany. Quite a large portion of our operating profits for global business is spared every year to support the local welfare for the elderly. Because of this type of a relation, we are a very people-oriented company. We have no stockholders and the company's Board of Directors is run under the administration of the foundation. This is our company's distinctive characteristic. As compared to general family businesses (we know that many corporations with foreign capital are family businesses), we don't have so much utility. Our corporate culture is relatively moderate and attaches much importance to the development of employees. In such a company context, overall management and operation of the company's culture and employees, including our wholly-owned subsidiary in Shanghai, is very humane.
Q: In 1998, the KDF Distribution (Shanghai) Co., Ltd. was established in Shanghai, China. In 15 years, KDF enjoyed, with the JieShui brand, a lot of publicity and a good reputation among the water supply and heating systems in the Chinese market. So, what is the reason AQUA-SCIE has achieved so much success?
He Yisheng: KDF Distribution (Shanghai) Co., Ltd. was established in 1998 and registered in the Shanghai Waigaoqiao Free Trade Zone. It's a wholly-owned Chinese subsidiary of the Feddersen Group in Hamburg, Germany. At present, we have three main types of business in China: distribution of plastic particles, modified production of plastic particles, and import and export of pipes and pipe fittings. The number of employees in China is more than 100. The annual volume of sales exceeds 800 million RMB. I am in charge of the pipe aspect of the business. We have carried forward the promotion of plastic pipes in the common household use market since 1998. The brand we registered then was called "JieShui". It was a private brand of our wholly-owned trading company in Germany. With 15 years of development, this brand has got its foothold in the high-end market of the entire industry of building materials. Among many of our end customers and some of our partners, JieShui was known for its high-end pipes.
Current influence of AQUA-SCIE in the market is inseparable from the distinctive management and culture of the Feddersen Group, as I just mentioned before. Whether it is for the whole project, or a business model, considerable operating space is provided by our company. We have run the JieShui brand for 15 years so far. Over the course of these 15 years, because of many different factors, we also experienced a slow and rough development. When just entering the Chinese market, the Jieshui brand actually experienced great difficulties. Due to the high-end positioning of this brand with high prices, some problems appeared while facing domestic competitors. However, the company always gave full support to this undertaking, and our operating team established high brand concentration. As time passes, in our main customer groups from the real estate section of the building materials industry, such a high-end brand is gradually accepted in some high-end buildings under construction or for sale, as well as by high-end users. Additionally, our brand is trusted by more and more people. So I think the current influence of AQUA-SCIE mainly depends on our persistence and toughness. We have never been indecisive in the long-term high-end positioning for our brand. A great many competitors localized their brands in consideration of the pressure within the market, the volume of sales, etc. We didn't follow this kind of pattern. It is because of our persistence in the brand positioning of original high-end products that AQUA-SCIE has won a place among the current market so that the original high-end imported brands is scarce. AQUA-SCIE is praised highly by our distributors, especially home decoration companies and customers. Today's success is due to fast development in recent years.
Q: AQUA-SCIE has been in the Chinese market for a long time. A brand positioning of high-end pipes has been continually maintained. A full upgrade was provided to KDF's AQUA-SCIE brand last year. In this regard, please introduce the situation in detail.
He Yisheng: In our development pattern lasting more than 10 years, our suppliers and products lack relative diversification, we have only one supplier whose products are mainly PP-R pipes. However, as our high-end brand is continually promoted, the current industry has increasingly deep contact with the integrated mode. That is to say, our audience hopes for an upstream resources one-stop purchase solution. And accordingly, we also hope for the provision of such one-stop services in the market. Such a prerequisite requires completing the brand's supply chain, including the products under it. Given the circumstances, we made a bold attempt last year: We widened the supply field by expanding our pipes from the original single field of water supply and drainage to the fields of heating, ventilation and refrigeration, including some extended applications. Until now, we are still looking for some suppliers who are willing to cooperate with us and agree with our brand positioning. At present, we have had four suppliers in different application fields. Thus, customer groups have grown more and have a wider breadth. In regards to our products, after we have a larger audience base, we will naturally have more opportunities.
Of course, the most important thing is, no matter which mode is adopted, the high-end brand positioning must ultimately be affirmed. I.e. what we are building is a brand marketing mode. No matter which field is involved, we build AQUA-SCIE into a high-end brand and to be recognized by the audience. We also made a bold attempt last year by removing some old suppliers and optimally adding several suppliers whose products had no conflict. For these suppliers, we also uphold the same principles adopted for the old ones. In the process of optimal selection, the building of a brand of original high-end products is maintained. All of these suppliers are European enterprises, particularly natives of Germany. In this way, we can ensure that our products will have the same quality as before. With such an optimal combination, it can be said that the combination of our products is the widest in the pipes industry.
Q: As AQUA-SCIE is one of leading brands in the global pipes industry. What is your understanding of the positioning of AQUA-SCIE in the Chinese market? What distinguishing features do AQUA-SCIE products have? What are the development policies of AQUA-SCIE in the Chinese market after its repositioning? What breakthroughs do you hope for in the areas of technology, products or channels?
He Yisheng: When we entered the Chinese market 15 years ago, the brand JieShui had a high-end positioning. We wanted to build a brand that is synonymous with pure high-end products in the building materials industry. At the very beginning of such positioning, some competitors in the same industry also came to do the same thing. But, looking back now, some of them may have disappeared from the market. For us, the concept of 100% original product import has never been changed after all these years. We will continue to maintain this notion and continuously provide some optimization and expansion for all AQUA-SCIE pipe systems and expanded applications, including control products and some small terminals. Our product lines will be expanded, but all series of product lines come from some original high-end brands imported from Europe. We will continue to maintain this positioning in the future, which is a core concept for us to base ourselves in the market.
After repositioning AQUA-SCIE, we also made adjustments accordingly for its development policies in the Chinese market. We hoped for future breakthroughs in the areas of technology, products or channels through these adjustments. In the first half of this year, in addition to participating in the ISH Exhibition, we also established exclusive shops in multiple cities through China. Moreover, we carried out numerous marketing activities to publicize the changes in the AQUA-SCIE brand. In the first half of this year, our suppliers specially arranged two different time periods within which they conducted surveys of the domestic market. Meanwhile, some local markets were also developed. In January of this year, our suppliers arrived in China to participate in some promotional activities in Xi'an and Suzhou. We also made some return visits to a batch of domestic core distributors by visiting and examining their factories and taking part in plenty of interaction. In April, our suppliers arrived in China again to participate in the ISH Exhibition and the conference of our distributors. They also conducted surveys of local markets.
Q: “Exploit new markets, focus on the future, adhere to sustainable development” is the basic principle the Germany K.D.Feddersen Group has continually believed in. How will KDF continue to uphold this principle in the future and maintain its theme of green and energy-saving development of the plastic pipes industry, winning the trust and favor of more customers and gaining a broader development space?
He Yisheng: With over 10 years of development, the market in Southern China has also grown at a high speed and is presently entering an adjustment phase. The whole industry has been mature with multiple brand selections. Our customers and small proprietors are increasingly professional. They don't follow others blindly as they were initially when selecting products and solutions, which imposes increasingly high requirements for us as integrators. In this process, we need to be more professional to survive. And to us, how can we make customers select your brand among so many others? First, we must be distinctly positioned. If high-end positioning is adopted, then the highest product quality must be maintained and the best solution must be provided. This way there will be a prominent distinction between us and middle- and low-end brands, and we will also reflect the high-class nature of a high-end brand.
What's more, we will optimize and continuously arrange the mode of our channels because our channel distributors presently lack diversification, i.e. their main portion of building materials distribution. In the future, we will have more contact with integrated HVAC companies, consultation companies, mainstream design companies, even engineering installation companies. We will fully upgrade our channels to a higher level. Through channel optimization and a high-end positioning of products, we will continuously expand production lines and provide first-class services. With a combination of more powerful measures taken for the real estate market, we will provide more space for menu-style selections for our end customers.
In another regard, we are also exploiting some emerging fields or emerging applications in traditional fields. Taking traditional large-dimension PP-R products as an example, in foreign countries, they are used widely for air conditioner units and in the fields of agricultural irrigation, water treatment (including water purification) and so on. In this aspect, some old metal pipes are still currently used in the domestic market. The application of these pipes in the whole system causes many problems, requiring the addition of water and additives, rust removal and corrosion prevention and other maintenance work which involve a heavy workload and high cost. We are now vigorously promoting the application of large-dimension plastic pipes in large pipeline systems. Currently, we can provide the pipes and their fittings with a dimension of 630mm at the greatest. These pipes cannot be provided by domestic manufacturers. Our AQUA-SCIE large-diameter PPR-CT pipes, with an interlayer of fiber glass, are globally patented and very suitable for air conditioning systems. Though similar products can also be provided by our competitors, they cannot make this type of PPR-CT pipe with an interlayer of fiber glass. Currently, no more than three enterprises have the ability to make this type of large-diameter pipes in the world. In other words, our large-diameter PPR-CT products have reached the top level internationally. Moreover, we are also the only enterprise in the current domestic market that is promoting the market of this type of pipes. We will promote this market by using typical case projects.