Sugar ShackTáng xi owūǎ

糖小屋

SupplementaryMarketing Plan

Scott Shafer

Working to GiveMatthew Holguin

December 12th, 2014

Executive SummaryIt is the mission of Working To Give to offer creative, unique and quality products and services to generate maximum profit for the sole purpose of giving back to others. With this in mind Sugar Shack, a subsidiary, aims to continue this same mission.

The purpose of this report is to present my idea of Sugar Shack as a potential idea for Shanghai Disney. Sugar art is a unique idea that has never been implemented in a Disney location that I feel has the potential for widespread success based on the marketing research conducted for this and the Waffle Empire marketing project.

Sugar Shack is a food cart exclusively inside Downtown Disney Shanghai that will provide artistic and delicious sugar paintings for both children and adults to enjoy. Sugar paintings will come in a variety of animal designs, these various designs will create a beautiful array of both Chinese and Disney culture on display. Some of the designs available may include dragons, butterflies, Mickey, and Donald. The production cost for one sugar art painting will vary by size, with our most expensive costing $0.05 cents per unit. We will be selling our product for $4.85; this leaves a profit of $4.80 per unit.

Shanghai is one of the world’s largest financial centers, and forecasted to become one of the world’s leading cities; growth in Shanghai opens the opportunity for more growth within Downtown Disney and Sugar Shack. Sugar art originated in China and has been popular among children for many generations. Bringing this art form into a major institution like Downtown Disney Shanghai, I feel is the next step and will be greeted warmly by Disney guest.

Sugar Shack has an extremely low start-up cost, making it much easier to break even early in the business. We need to sell 3,439 units in one year to reach the break-even point. This low break-even point makes Sugar Shack a low risk venture compared to other cart offerings.

The objective is to position Sugar Shack as both a memorable experience and a delectable dessert at downtown Disney. Sugar Shack will differentiate itself from other food carts with outstanding customer service, competitive prices, one of a kind items, and a unique experience at Downtown Disney. I believe this unique art form will make a lasting impression on the minds and stomachs of visitors to the park.

Sugar Shack’s ultimate goal is to provide a product that will not only sustain itself but also produce enough in profits to contribute a substantial amount back into the community as all Working to Give companies aim to accomplish.

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IntroductionChinese sugar art is a well-established tradition in Chinese culture. Sugar art is believed to have its origins date all the way back to the Ming Dynasty, some four hundred years ago. During the 60s and 70s sugar art was popular in much of China, however today the art form has become increasingly rare in the more developed areas. Street vendors selling sugar art can still be found in the Sichuan province of central China.

The basics of creating sugar art is very simple, consisting of Maltose Syrup or granulated sugar being melted in a wok allowed to cool and harden on a flat surface and then reheated and drizzled from a small ladle onto a marble surface. The hot sugar substance hitting the colder marble surface causes it to cool and harden quickly, so the artist must work swiftly to construct a painting of various creatures. Once the painting is completed a wooden stick is attached to the painting with a few drops of the liquid and then it is removed from the marble with a spatula device and sold or put on display. The level of detail in the sugar paintings is directly related to the skill of the artist.

The purpose of this report is to present my suggested product and plan for Sugar Shack, based on the marketing research we have conducted. The following report contains research on China, Shanghai, and Disneyland. Research methods used were Internet articles, websites, statistical reports and primary sources from a Chinese student at Vanguard University.

Because W2G operates in Downtown Disney, it is important to ensure that Sugar Shack will produce a large enough profit to not only maintain operation in Disney, but also to generate enough profit to donate half and reinvest the other half.

The following assumptions based on research were used in the making of this report: Assumed that there will be a 6.25% growth increase in the market Assumed that the “Disney Economy” will be similar to that of the U.S. Disney where

guests are willing and ready to spend more money once inside the resort. Assumed that there will be no direct customers selling our exact product. Assumed that Sugar Shack will be given a prime location within Downtown Disney Assumed that all guests will be operating in Chinese currency. Assumed that we will be able to generate at least $500,000 in profit Assumed that there will be at least 10 million guests at Disney Shanghai in the first

year.

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Market SummaryChina’s population contains over 1.35 billion people and Shanghai has 24 million people. 1330 million people live within a 3-hour trip of Shanghai.2 Government officials in China expect at least 7.3 million visitors to Shanghai Disney in the first year. 3

The middle class resident of the shanghai area has about $12,000 (¥73,815.00) in disposable income per year. Urban Chinese residents have about $3,000 (¥18,453.75) in disposable income a year. That may not seem like a lot but cost of living is much cheaper in urban China so $3,000 is fairly good compared to having only about $280 (¥1,722.35) in disposable income for those areas in 1980. 4

Source: China Market Research Group:

1 "WPR." Shanghai Population 2014. Web. 26 Oct. 2014.2 "Disney's Shanghai Bet." CNBC. N.p., Apr.-May 2011. Web. 26 Oct. 2014.3 "Shanghai Disneyland Project Breaks Ground at Last." BBC News. BBC, 04 Aug. 2011. Web. 26 Oct. 2014.4 NEW YORK (CNNMoney) -- As China's Economy Has Exploded over the Last 30 Years. "China's Middle-class Boom." CNNMoney. Cable News Network, 26 June 2012. Web. 26 Oct. 2014.

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Diet Restrictions15%

Can't affort to spend 5%

Potential Customers80%

Market Breakdown

Market Analysis

Potential Customers

Growth Year 1 Year 2 Year 3 Year 4 Year 5

Local’s 6% 7,500,000 7,950,000 8,427,000 8,932,620 9,468,577Tourists 6.5% 2,500,000 2,662,500 2,835,562.5 3,019,874 3,216,165.8

All numbers are assumptions based on growth rate of Hong Kong Disney,5 as well as the Shanghai projected amount of visitors6, projected number of guests7 and number of visitors of the World Expo. 8

Market NeedsThe Disneyland Resorts are busy and full of hungry tourist and regular visitors. Guests want to buy something they can enjoy while they explore the park. Due to the high prices throughout the Disney Resort, guests want their chosen product to be not only delicious but also pleasing to the eye. Since the park is located in Downtown Disney, our product needs to be something that is not often found in Disney parks, but something that Chinese people are open to and tourist would enjoy as well.

5 "Related Images." Hong Kong Disneyland Posts Record-breaking Performance in Fiscal Year 2012. N.p., n.d. Web. 22 Nov. 2014.6 "Most Viewed." Shanghai Visa Plan 'set to Boost Visitor Numbers'|Politics|chinadaily.com.cn. N.p., n.d. Web. 22 Nov. 2014. "Shanghai Airports – International Airports near Shanghai." Shanghai Airports – International Airports near Shanghai. N.p., n.d. Web. 22 Nov. 2014.7 "Shanghai Disneyland Expects 30 Pct More Tourists." - Xinhua. N.p., n.d. Web. 22 Nov. 2014.8 "Facts and Statistics of World Expo 2010 Shanghai China." The Official Shanghai China Travel Website. N.p., n.d. Web.

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Market TrendsAs China’s middle class grows so does their consumer spending output. On average consumers are spending 18 percent more every year and that trend is likely to continue as more people enter the middle class.

Europe and America currently make up the two largest areas for snack food consumption at a combined 291 billion but the Asia-pacific market for snack foods is growing in the developing regions like China, which currently have 46 billion in annual snack food sales. 9

Snack foods in general have become more accepted in Chinese culture with its continued economic growth and westernization. With many Chinese entering the middle class, eating between meals has now become common practice. This is due to a busy lifestyle and the many western snack foods that have now become commonplace in China, such as popcorn which has seen widespread success in China.10

Market GrowthThe snack food market in China has seen increased growth in the last few years. In 2012 China had 12 billion in snack foods sales, which was up 44% since 2008 and is expected to see continual growth. 11Specific products such as the cookie market have seen excellent growth in China with sales reaching 38 billion Yuan in 2012 which is up 53% from five years before.

The disposable income of China’s middle class continues to grow seeing a 10.9 increase from 2012 to 2013. The growth rate of Shanghai where the Disney Park will be located has also seen growth on par with the national average. The area has a current GDP of 2,010 billion Yuan.12

China’s relatively undeveloped sweets market together with its massive population and their increasing disposable income means incredible potential for growth. Consumption of sweets/snacks is set to rise in the coming years.

9 "The Fastest-growing Snack Categories in the World." FoodBevcom RSS. N.p., n.d. Web. 27 Oct. 2014.10 "Snacking An Emerging Trend In China." Snacking An Emerging Trend In China. N.p., n.d. Web. 27 Oct. 2014.11 The Wall Street Journal. Dow Jones & Company, n.d. Web. 27 Oct. 201412 "Top 10 Regions in China with Highest Disposable Income 2012." - China.org.cn. N.p., n.d. Web. 27 Oct. 2014.

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Product Offering Sugar Shack will be exclusively offered in Downtown Disney Shanghai. Sugar Shack will provide unique, Disney and Chinese heritage animal sugar paintings. They will come in a variety of characters and sizes. The various characters will display a range of creatures unique to Chinese culture as well as exclusive Disney characters that the Chinese will be introduced to through Shanghai Disney. These may include:

Chinese Zodiac:Ox

TigerRabbitDragonSnake

MonkeyRooster

Dog

Disney Characters:MickeyDonaldPluto

Buzz LightyearMarvel Heroes

PiratesDisney Princesses

Lucas Arts characters

Movie Offerings:   New characters can be implemented when new Disney movies, rides, events are added in Shanghai Disney and movie theaters. If a new hit Disney movie is released in China, our artist can be trained to create new sugar paintings based on those new characters.

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SCOT AnalysisThe following SCOT analysis portrays the key strengths and challenges that Sugar Shack will face at Downtown Disney Shanghai.

Strengths Sugar Shack has an extremely low start-up cost, making it much easier to break

even early in the business. Sugar artist of Sugar Shack are trained with Disney Cast members and follow

the same customer service regulations; this raises the quality of customer service experienced at Sugar Shack.

Sugar Shack offers a unique product and exciting experience. Customers have the option of many Chinese zodiac and Disney character sugar paintings to pick from.

Challenges Limited marketing options available due to Disney’s regulations. Struggle to build brand equity, competing with Disney products. Producing enough sugar paintings per hour to become profitable.

Opportunities Sugar art is making a resurgence in recent years but is relatively rare in the

Shanghai area. Sugar Shack will have a prime location in downtown Disney, and will be

exposed to high foot traffic, exposing thousands of people daily to sugar art. Shanghai is one of the world’s largest business cities, and forecasted to become

one of the world’s leading cities, growth in shanghai opens the opportunity for more growth within Downtown Disney and Sugar Shack.

Sugar painting is something that was a part of many Chinese adult’s youths and they will feel nostalgia seeing it being offered in Downtown Disney.

Threats Competition from other treat retailers in Downtown Disney Shanghai. Sugar Shack relies heavily on the success of Disney in Shanghai, if Disney does

not succeed, Sugar Shack will likely struggle as well. Disney may not allow our sugar artist to make sugar paintings based on Disney

characters which would limit the assortment of sugar paintings we could offer.

Competition

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Operating a business in Downtown Disney gives us the advantage of a large amount of foot traffic. Disney Parks are usually oriented so that guests must walk through Downtown Disney in order to get to the park. Because Disney Resorts are large, there is a large amount of competition. Other carts and stores throughout the resort offer products such as churros, kettle corn, chocolate, Carmel apples, turkey legs, and ice cream.

Because guests have a limited amount of money to spend, our competition also includes the shops that sell physical products; these shops have products such as sunglasses, Disney apparel, toys and much more.

Customers that chose our product are likely looking to fulfill a sweet craving or simply want a unique experience and artwork. This means that our main source of competition is the other food carts and the Disney shops that sell dessert food or artwork.

Sugar Shack’s product offers a unique experience as well as a delicious treat. This combination sets Sugar Shack apart from other food stands at Downtown Disney.

Keys to Success Generate maximum profit in order to invest 50% back into the business and

give away the other 50%. Increase market share within Downtown Disney. Create brand awareness and generate a “buzz” within Downtown Disney. Increase profit margin of product. Increase transaction amount per customer. Impressive art quality and customer service. Constant innovation and creativity to introduce new character paintings

regularly.

Target MarketingOur target market mainly consists of tourist from the mainland-China, who may have experienced sugar art in their youth, also tourists from other countries who will find the unique draw of sugar art appealing. The sugar art can be eaten by any age group and are easy to consume. Sugar Shack aims to target all age groups; however I feel children will be the most interested in the fun animal and Disney characters offered.

PositioningSugar Shack will position itself as a high-quality, innovative and unique snack and artwork stand at Downtown Disney Shanghai. Sugar Shack will differentiate itself from other food carts with outstanding customer service, competitive prices, and a unique offering.

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Sugar Shack will distinguish itself from competitors: Sugar Shack customer service and customer orientation will differentiate itself

from other companies that do not place the focus on the customer. Sugar Shack has used pricing strategies to determine the most profit-

maximizing price, while maintaining a competitive edge. Sugar Shack’s competitive edge is based on our unique product offering with

characters to delight every zodiac or Disney lover’s desire. Instead of exclusively offering animal sugar paintings we will offer Disney character paintings as well.

Marketing MixProduct:

Sugar Art such as Mickey Mouse and Donald Duck will help establish unique options for customers

All sugar art characters will be displayed on the front of the cart to attract customers

Sugar Shack will be written on the top of the cart as well as on the containers to help establish branding.

Place: Sugar Shack will be sold exclusively at Downtown Disney in Shanghai. Sugar Shack will be located in the middle of Downtown Disney where costumers

will constantly be walking by. Price:

Disneyland is a place where people expect to spend their money. They know that products will be priced higher than outside of the park therefore enabling us to charge more for our product.

There will be discounts offered for Disney Cast Members. Promotion:

Because Disneyland monitors us, Sugar Shack will be limited in the promotion and advertisement we can do. We cannot legally put signs or advertisements, so we need to make sure our carts are being seen and our product is spread through word of mouth.

Sugar art is a unique item that will promote itself while on display at our cart.

Price of Product:In order to determine the price of our sugar art product being sold in Downtown Disney I needed to find the price of sugar art in the Sichuan province where it is popular. Fortunately a Chinese student from that area attends Vanguard University and had purchased sugar art in the past. She explained that it is somewhat difficult to find as many of the older sugar artist have passed away. With some searching it can be found in Chinese centered areas where they charge about ¥15 ($2.42), but in tourist centers they like to charge about ¥30 ($4.85) to the tourist. I wanted to come up with a

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price that was not unreasonably high, is competitive and a complete number of Yuan so cents can be avoided. I found that the tourist price street vendors sales price of ¥30 ($4.85) will be a competitive number that could be used in Downtown Disney.

Financials, Budgets, and Forecasts

Financial ObjectivesSales Forecast:A. To reach adequate number of units sold in order to produce a profitable

product in Downtown Disney Shanghai.B. 110,000 units sold from open date of December 15th 2015 until December

31st 2016 is our target goal to produce a sales revenue of $511,491 (¥3,165,771.25).

C. 10 million visitors are expected first year. If we secure 1 sale each from 5 percent of visitors this would equate to $2,425,000 (¥15,009,052.50) over a year.

Contribution Margin:A. Our sugar art consist of only one main item which is sugar (maltose syrup is

sometimes used instead). B. Our total cost for production of one unit is $0.05(¥0.31).C. Our profit after unit cost is $4.80 (¥29.71) per sale.

Break-Even Analysis:A. Total fixed cost equates to $16,509.02 (¥102,179.28) per year.B. We need to sell 3,439 units over the course of a year to reach our break-even

point.C. Cost of an employee manning the cart for 16 hours of park operation time

for 365 days a year at minimum Shanghai wage of ¥17 equals ¥99,280 ($16,161.62) per year.

D. If we sell 110,100 units then our profit would be $511,491 (¥3,165,771.25).

Our ultimate goal is to provide a product that will not only sustain itself but produce enough in profits to contribute a substantial amount back into the community as all Working to Give companies aim to accomplish.

Break-even AnalysisThe break-even analysis represents the sales amount that is required to cover total costs (both fixed and variable). Since Working to Give is already planning on operating food carts in Shanghai Disney and will have employees producing food items in their kitchen, we feel the cost of paying those employees making the products will be shared with the other working to give stands. Therefore employee cost covers 1 employee

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operating the stand at all working hours of the park. 8am to Midnight based on Disneyland hours. Sugar Shack will also have the cost of the sugar artist plus addition woks to cover broken units as well as the cost of producing each piece of sugar art.

Employee(s) at cart pay of ¥17 ($2.77) per hour for 16 hours per day = ¥272 ($44.28). For 365 day coverage of the cart this would be ¥99,280 ($16,161.62) per year.

The woks used to heat up the maltose syrup or sugar cost $34.74 per unit. We feel having 10 units would cover any unexpected issues that may arise with the woks. $34.74 for ten units equals $347.40. (¥2,150.16)

Our sugar art unit cost is $0.05(¥0.31). Total fixed cost= $16,509.02 (¥102,179.28)

Based on this information my calculations have determined we would need to sell 3,439 units per year in order to reach our break-even point. If we sell 110,000 units then our profit would be $511,491 (¥3,165,771.25).

In order to cover the cost of the cart stand employee(s) of one employee for 16 hours of park operation for a 30 day month, we would need to sell 286 units a month to reach break-even.

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Sales ForecastSales forecasting is a combination of research on our target market, economic and financial calculations and product knowledge to produce a calculated “gestimate” of future projections of sales. In cases of new products or ideas in new avenues this can be problematic and this forecast is meant to be a guideline to where I see Sugar Shack potentially going as opposed to a definitive roadmap. The following details were used in order to project Sugar Shacks sales forecast for Shanghai Disneyland which is scheduled to open on December 15th 2015.13

All US Dollar to Chinese Yuan exchange rates are based on 12/10/2014 calculations.

1. Our sugar art will be sold per unit at $4.85 (¥30 Chinese Yuan or known as the Renminbi). I chose ¥30 because I felt it was a reasonable price for sugar paintings to be sold in the Disney Park as well as it is an amount that can easily be exchanged between vendor and customer based on the paper money value currently in China. ¥5, ¥10, and ¥20 are commonly used amounts in Chinese Yuan.

2. Based on new estimates made by Disney and China, Shanghai Disney is expected to host 10 million visitors in its first year of business.14

3. Sugar painting is based on an art form that has an established track record in China, so I feel our product will not be seen as a foreign or unappealing product and will not encounter much resistance upon opening.

4. Various trends in Chinese leisure and holiday activity were studied in order to project estimated highs and lows per month of activity in the park.

5. Past working to give food carts have been considered successful with an income of $500,000 (¥3,071,475) and we have structured our forecast to convey similar results.

CalculationsIn order to reach a target goal of $511,491 (¥3,165,771.25) in sales, our product selling at $4.85 (¥30) needs to sell 110,000 units per year, this is 1.1% of target market. This comes out to 9,167 units per month, 2,292 per week and

13 "Family Volunteer Day – Serving Communities in the Spirit of Thanksgiving." Disney Parks Blog RSS. N.p., n.d. Web. 27 Nov. 2014.14 "Shanghai Disneyland Expects 30 Pct More Tourists." - Xinhua. N.p., n.d. Web. 29 Nov. 2014.

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327 units a day. In monetary numbers this comes out to making $44,459.95 (¥275,175.97) a month, $11,116.2 (¥68,801.50) a week, and $1,585.95 (¥9,815.92) a day. Unit sales amount will fluctuate per day and month, however I feel 327 units a day is a reasonable quote that can be met on a consistent basis.

With an estimated attendance first year of 10 million visitors we would need 1.1 % of visitors to purchase our product to achieve our target sales. Sugar paints take on average 1 to 5 minutes to complete. Meaning with one painter we could produce between 12 to 60 sugar paintings an hour.

A worst case scenario of only 0.5 percent of visitors purchasing one order each would equate to $242,500 (¥1,500,905.25).

A highly optimistic forecast of 5 percent of visitors purchasing one order each would equate to $2,425,000 (¥15,009,052.50) over a year.

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Contribution Margin Per Unit

For the individual unit production cost only variable direct material and supply cost are calculated while wages are not calculated unless employees are being paid based on the number of units produced. (Shanghai hourly minimum wage is ¥17 [$2.77] for reference). Numbers are estimates based on research conducted. The per unit cost is as follows:

$500 (¥3,094.65) for 1 metric ton of white granulated sugar (2,204.62 pounds) makes 11,023 (on average) sugar paintings.15

This equates to $0.22 (¥1.36) per pound and $0 .045 cents or $0.05(¥0.31) cents per sugar art order.

Cost of electricity to power the stove for the cart was not added for this contribution margin.

Therefor Sugar Painting contribution margin is:Contribution Margin = (P) $4.85 – (V) $0.05 = $4.80Contribution Margin = $4.80 (¥29.71)

Contingency Planning

Business Liquidity:In the event that the business lacks liquidity, Working to Give, will carefully examine their accounts to make sure we are financially stable enough to keep our carts going with a full stock of product and money to pay employees. Cash flow projections will also be reviewed to determine if unforeseen cash layouts and expenses are undermining the financial health of the enterprise.

Running Out Of Supply:Working to Give will carefully analyze expected sales, amount of maltose syrup needed for sales, and make sure we have enough supply to last us every period. We need to have a warehouse or storage near the park with emergency supple of ingredients in case we do not foresee highly increased sales that would cause us to run out of product unexpectedly.

15 http://www.alibaba.com/product-detail/Refined-Sugar-in-50-kg-bags_164673099.html

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Critical Issues1. Legal issues – China’s socialist based government have a vastly different legal

structure than ours and may pose challenges in running a business in China. In China, bureaucratic tasks that have been simplified in America can be quite time-consuming. Everything from opening a bank account, to registering your company, to gaining product approval, can drag on for months. Inconsistent application of regulations means that such processes are not always designed for your foreign convenience.

2. Communication - could play a key issue as well. Names of items or concepts may not translate well into Chinese culture, extra special care must be taken to make to a product or business work within Chinese culture.

3. Business model - To succeed in China, our company must understand that we cannot take the same business model, which works in America and simply apply it to the Chinese market. We will need to adjust to a country that practices business according to “Chinese characteristics” deeply related to its traditions. Due to these differences, many Chinese business practices do not always conform to commonly accepted international standards.

4. The Chinese people can be unaccepting of radically new ideas; our product needs to be tailored for their market in order to be successful.

5. In a country that has a far lower expendable income we need to keep our product cost and selling point down in order to stay profitable.

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Recommendations I recommend that you rotate the Disney character paintings seasonally, if

certain characters do not sell as well as others- discontinue the character. Maltose Syrup is also used to make candies and lollipops. Molds can be

produced to pour the hot maltose syrup in, to produce Disney or zodiac themed suckers to sell at Sugar Shack or other W2G food carts.

I recommend that Sugar Shack also offer beverages. During the warms seasons

offer bottled lemonade and soda. During the cooler offer hot chocolate, tea and apple cider. I also recommend that you always have bottled water available.

o Bottled Water is $0.25(¥1.54) a bottle. A Can of coke is $0.29(¥1.78) per can.

o This creates a huge profit margin and allows employees to upsell customers.

Hire Employees who are well versed in English, Mandarin and possibly Cantonese.

Appendix

1. Chinese economy China, which is a socialist controlled economy, is currently the world’s second largest economy by GDP and purchasing power only behind the United States currently. Over the last thirty years it has had consistent growth and is currently considered the world’s fastest growing major economy with an average growth of 8-10%. China also has a small but growing consumer market as well as being the second largest importer of goods.16

16 Magnier, Mark. "Economists React: Surprising Signs of an Uptick in China’s Economy " The Wall Street Journal. September 23rd 2014. September 25th 2014 <http://blogs.wsj.com/chinarealtime/2014/09/23/economists-react-signs-of-uptick-in-chinas-economy-make-for-a-september-surprise/>.

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The coastal regions of China, such as shanghai, tend to be more industrialized. Inland areas tend to be more rural and agriculture based. 17 At the start of the 2010s, China remained the sole Asian nation to have a GDP (PPP) above the $10-trillion mark, along with the United States and the European Union.

Since 1980, China has established special economic zones that spread successful economic experiences to other areas. The SEZs create a more free market-oriented society. The government of the People's Republic of China gives SEZs special economic policies and flexible governmental measures. This allows the SEZs to attract more business than the rest of China because they can apply an economic management system. SEZ policies:18

1. Special tax incentives for foreign investments in the SEZs.2. Greater independence on international trade activities.3. Economic characteristics are represented as "4 principles": a. Construction primarily relies on attracting and utilizing foreign capitalb. Primary economic forms are Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprisesc. Products are primarily export-orientedd. Economic activities are primarily driven by market forces

Shanghai is located in an SEZ, China treats SEZ’s as free market business and therefore china’s communist political structure will not affect business in Downtown Disney Shanghai.

In 2024 China will become the world’s largest economy, according to the global information provider IHS Inc. NYSE:IHS. “Over the next 10 years, China’s economy is expected to rebalance toward more rapid growth in consumption, which will help the structure of the domestic economy,”19

17 "China" Forbes. December 2013. September 25th 2014 <http://www.forbes.com/places/china/>.18 "Special Economic Zones of the People's Republic of China." Wikipedia. Wikimedia Foundation, 30 Nov. 2014. Web. 01 Dec. 2014.19 McGrath, J.J.. "China Will Be World’s Largest Economy In 2024: IHS" International Business Times. September 8th 2014. September 25th 2014 <http://www.ibtimes.com/china-will-be-worlds-largest-economy-2024-ihs-1681058>.

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1.1 China’s middle classThe growth of China’s developing middle class has caused huge economic changes and social transformation. It is projected that by 2022 more than 75 percent of China’s urban consumers will earn ¥60,000 to ¥229,000 Renminbi ($9,000 to $34,000) a year.20

Middle class households have an annual income of between $10,000 and $60,000 U.S. dollars21. The cost of living in China is different than in the U.S., causing income to be misleading. A household with a third of its income for discretionary spending is

20 Barton, Dominic. "Mapping China’s middle class" Mckinsey&Company. June 2013. September 25th 2014 <http://www.mckinsey.com/insights/consumer_and_retail/mapping_chinas_middle_class>.21 Luhby, Tami. "China's growing middle class" CNN Money. April 26 2012. September 25th 2014 http://money.cnn.com/2012/04/25/news/economy/china-middle-class/.

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considered middle class. Research has estimated that China’s middle class is 300 million people; this is 25% of the population.

1.2 Various Sugar Art paintings found in China.

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