1994-01-31 | Forbes Magazine
Doing business in China is a nightmare! fumes TV star/ cosmetics mogul Yue-Sai Kan, whose poise and charm are known to Chinese television viewers numbering in the hundreds of millions. She cites red tape, higher charges for foreign companies in difficulties in enforcing contracts.
We should all have such nightmares. New York-based Yue-Sai Kan Cosmetics, Ltd. entered Shanghai in the fall of 1992 and has been profitable since its first month of operation. Promoted as The best the world has to offer for Asian women, Kans line of perfume and cosmetics is now sold through department stores in eight markets in central and northern China. Last year, sales hit $12 million, versus $2 million on an annualized basis for the company's three months of operation in 1992.
In Mao days, Chinese communism was unisex-minded. Women weren't supposed to look like women. The education of beauty did not exist in China for over 40 years, says Kan, 44, a diminutive woman with an animated demeanor. She is helping Chinese women make us for lost time, deploying rigorously trained young women-known as little Yue-Sais - to staff department-store counters where her products are sold. Clad in black uniforms with brightly colored scarves, they project cosmopolitan confidence to people long starved of glitz and glamour. Now they look at least a little bit like Yue-Sai. It would be hard to find a more appropriate symbol for a capitalistic China.
Kan's father, Wing-Lin, is a celebrated painter, and her grandfather owned so many houses in Canton, there were streets named after him. After the Communist takeover in 1949, the family fled to Hong Kong, where Kan studied at the exclusive Maryknoll convent school and was pampered by her family with a Russian ballet instructor. She graduated from a branch of Brigham Young University in Hawaii.
In 1971 she visited Manhattan and was smitten. After a few years as partner in a small import-export business financed by her family, Kan sold out and went into TV production. For her first English-language show, Looking East, Kan signed up advertisers like Singapore Airlines and the Hong Kong Tourist Association. Designed to introduce American to Asian culture, Looking East eventually was picked up by the Discovery Channel and carried on cable systems throughout the country.
Kan won favor with the rulers of China with her production One World, which was supported by U.S. companies like Procter & Gamble and given free to the Chinese broadcasting ministry. The show gave an audience of some 400 million their first glimpse of life beyond the Bamboo Curtain; subjects ranged from headhunters in Malaysia to the Queen of Denmark. I spoke more to the Chinese people than the Chinese leaders spoke to the Chinese people, says Kan, an American citizen since 1978.
How to capitalize on that experience? Kan first thought about creating a line of cosmetics for Asians in 1986, but the idea didn't get off the ground until she married James McManus in 1990. McManus, 60, is founder and majority owner of Westport, Conn.-based Marketing Corp. of America, a $300 million (revenues) marketing services company whose subsidiaries include Business Express, a regional airlines in the Northeast. Together they invested $4 million to launch Yue-Sai Kan Cosmetics. They concept, says McManus, was: Yue-Sai, the new face of China, the first line of cosmetics designed for Asians by an Asian.
To avoid the steep import tariffs on finished goods, Yue-Sai Kan Cosmetics processes in China raw ingredients imported from the U.S. Her lipstick sells for $6, versus an average of $4 for local brands and $20 for imported brands. Like a lot of smart celebrities, Kan capitalizes on her image to give luster to quite ordinary products. When entering a new market, she gives demonstrations and public lectures and garners lots of free publicity. There are also private talks with the likes of the wife of Chinese Prime Minister Li Peng.
Bypassing the official CCTV, Kan uses local television stations for her advertising messages. She has produced a new series, Yue-Sais World, which local stations get free in exchange for letting Kan run two commercial spots. One episode using footage from Wisconsin, New York and Japan- examined the craze for Harley-Davidson motorcycles. The boys loved it! exclaims Kan.
For all her complaints about red tape, Kan's way has been eased considerably by her local celebrity status. With fame comes guanxi, or connections. So, for example, Kan wasn't required to enter into a joint venture with a local Chinese firm. This gives her a big advantage over competitors like Avon, Unilever and Japan's Shiseido, all of which had to take Chinese joint-venture partners. She recounts with a smile an offer she received from the bureaucrats at a local tax bureau. They offered to do a joint venture with her. What is more ridiculous than the tax bureau asking me if I'm interested in putting together a joint venture for beauty salons? she says incredulously. Sometimes I get so upset with them, she says of her former countrymen. Then I step back and say, It is amazing what they have done.