“From an ecosystem point of view, this year we have been talking to many brand operators and retailers who are being impacted by Chinese competitors, and you should feel threatened by the ones who know how to localize. If they do not know how to localize, that is actually a good thing for local players, because if you exclude half of the population as your customers, you will eventually have problems. These are the ones you should look at and study their playbook, and if they can adapt parts of that playbook to this market, maybe you can adapt parts of that playbook as well.” - Jianggan Li, Founder of Momentum Works


“Many F&B players in China see Southeast Asia as a natural extension for expansion for a few reasons. The region is historically linked to China in cuisine types, taste preferences, and the raw materials that can be sourced. In some cases, they can easily tap into supply chains in China, or Chinese suppliers can set up factories locally, which allows them to expand faster. When you look at Chinese F&B players setting up in Southeast Asia, many do not resemble traditional restaurants focused on cooking meals. They operate more like factories.” - Jianggan Li, Founder of Momentum Works


“It is a big shock for many Singapore F&B retailers because there is both a business angle and a societal angle. On the business side, Chinese restaurants sell cheaper, turn tables faster, secure strong locations, and appear backed by investor capital, which makes local players feel outcompeted economically. On the social side, Singapore is a multiethnic society, and for people who are not Chinese or Chinese-speaking, the experience can be difficult. Many outlets are not halal, the menus and ordering systems are in Mandarin, and there is little localization, which makes the experience feel exclusive and closed off to racial or language minorities.” - Jeremy Au, Host of BRAVE Southeast Asia Podcast

Jianggan Li joins Jeremy Au to break down why Chinese consumer, F&B, and hardware companies are expanding so aggressively into Southeast Asia and global markets. Drawing from years of observing Chinese operators and supply chains, they explore how brutal competition inside China forces firms to look outward, why Southeast Asia becomes a natural first testing ground, and how factory-style operations reshape local markets. The conversation covers why many Chinese brands delay localization, how fast natural selection plays out among entrants, and why the most dangerous competitors are those that adapt quietly. Jianggan also explains how low interest rates, capital controls, and brand acquisitions shape expansion strategies, and what founders and investors in Southeast Asia should learn from this wave of competition.

02:43 Chinese companies expand overseas because home competition is extreme: Price wars and thin margins inside China leave little room for profit, pushing firms to seek better returns in foreign markets.

05:51 Chinese F&B brands operate like factories: Centralized production, standardized processes, and deep digitization allow operators to scale faster and sell at lower prices.

07:13 Lack of localization signals early-stage entry: Chinese-only menus and Mandarin-speaking staff show brands are prioritizing speed of rollout over local integration.

09:52 The real threat comes from firms that localize well: Operators that quietly adapt language, menus, and customer experience are the ones most likely to outcompete incumbents.

12:12 Natural selection happens fast among entrants: Weak brands exit quickly as rent and competition bite, while stronger players iterate and survive.

21:05 Low interest rates push capital into expansion: With limited returns from domestic savings, business owners reinvest capital into overseas operations to seek growth and diversification.

41:38 Buying global brands creates hidden advantage: Chinese firms acquire established Western brands, improve supply chains, and stay invisible to preserve trust, pricing power, and regulatory safety.

Jeremy Au: Hey, Jianggan, good to see you.

Jianggan: Hey, I'm not sure whether to say good morning or good evening anymore. Where are you?

Jeremy Au: Yeah, recording from the US traveling for work. But it's good to discuss it. It's interesting to see, obviously, US-China relations continue to be an issue. Obviously, China continues to be pushing hard, and America continues to be pushing hard. So lots of news and lots to dig in. Jianggan, I think the topic that we want to talk about is...

Jianggan: Yeah. Okay.

Jeremy Au: you know, somebody was commenting recently about why are there so many Chinese restaurants now in Singapore and Southeast Asia, right? And you and I discussed and said, actually, this is quite interesting, leading indicators of something that's happening. So Jianggan, can you explain a little bit more about what's going on?

Jianggan: I think first, if you're in the US, you should probably go and try Luckin Coffee and Mixue, both the largest coffee and bubble tea chains in China. They have opened up in New York City. So that shows the ambition of some of the leading players. But for a lot more F&B players in China, Southeast Asia becomes a natural extension for them to expand for a couple of reasons. I think first, obviously, the region is historically quite linked to China in terms of the cuisine types, in terms of taste, in terms of the raw materials you could source. And for certain parts, they can easily tap into the supply chain in China, or the Chinese suppliers could easily set up factories in the region. So that allows them to actually expand faster. So if you look at the Chinese F&B players which have been setting up in Southeast Asia, many of them don't feel like what you imagine as a sort of F&B player simply cooking nice meals for you. They are factories. They are industrialized, very calculated operations that are geared towards efficiency. And obviously, when they come about, it creates a shock because not many people in the market have been able to operate in that way in terms of digitalization, in terms of process mapping, in terms of centralized supply chain and stuff. So that creates a shock in the region. I think Singapore, Malaysia, and Thailand are particularly impacted.

Jeremy Au: Yeah, you know, I think there's so much to unpack there because obviously I think that's the American side, which is about Mixue and Luckin Coffee in 2025 expanding with their stores. And I think there's something to unpack there especially about those two companies. But let's just talk about Southeast Asia first about that, because I think it's like you said, a big shock because for a lot of Singapore F&B retailers, I think...

Jianggan: Mm. Mm. Mm. Mm. Mm. Yeah.

Jeremy Au: I think there's a societal angle and there's a business angle, right? And I think the business angle is quite straightforward, is these Chinese restaurants seem to be selling cheaper, right? Doing faster turns and just having better locations and seem to be backstopped by investor capital that lets them potentially from their perspective run losses or whatever it is. But they feel like they're getting outcompeted on economic side. And then on the social side, I think there's a lot of debate because...

Jianggan: Mm. Mm. Mm. Mm.

Jeremy Au: Singapore obviously is a multi-ethnic society, but for people who are not Chinese or Chinese speaking, then the experience can be a bit kind of like difficult, right? Because first of all, it's not halal; that's one. Another one is the staff may be speaking Mandarin, right? And then the menu and ordering system is all in Mandarin anyway. There's no like localization of this entire F&B experience to our English majority country.

Jianggan: Hmm. Hmm. Mm. Mm. Mm. Mm.

Jeremy Au: speaking language dynamic and so it feels also a bit exclusive or walling off for racial or language minorities in Singapore. So I'm just kind of curious how you think about that.

Jianggan: Well, I think a lot of these brands, when they come out of China, they look for markets where... Someone was asking me the other day, saying that, what's the decision criteria for them to decide where to go and where to dedicate resources? And I think for lots of the medium-sized and smaller ones, it can be a bit random. Sometimes it's the whim of the boss. And for some of the larger ones, it's a calculated move. And they always evaluate all the factors and then decide what makes sense for them. I think for most of them looking for scale, Singapore might not be a good destination because at the end of the day, we don't have the scale, right? We only have like six million people. But for many of them, it's a good place to prove that, okay, first, we can operate internationally. And the second is that if you do it well, I think the margin on a per store basis can be quite decent. And you don't need to open that many stores to earn a good margin. However, the question is that when you try to adapt into a local market and how much you should localize and through which pace. So the same brands, I mean, in Singapore, they use the Chinese menu, et cetera. And then one day I was in Bandung in Indonesia and I went to a Chinese-operated F&B and it's all in Chinese as well. And it was halal. And I realized that there were lots of local diners there who obviously couldn't speak Chinese. And they were asking about us that, what's happening? And they said, okay, people are still coming for our business. So I don't see a need for us to completely localize the menu and stuff. So I think that reflects the problem, right? Because many of these businesses see what is needed. And as long as the business is coming in, so their sense about all the societal problems and all this potential shock to the local ecosystem, all this backlash, they don't really see that because this is not what the decision makers are exposed to on a daily basis. I think that's the same reason why TikTok Shop was initially banned in Indonesia for a while, because the management was not sensitive to the effects that they were causing to the local system. And I think that was also why initially when some of the Chinese brands went to the US and in Europe they face backlash because, I mean, they know that they need to deal with the government, they need to deal with the local society, they need to deal with all these issues. But I think when they come to another market, if the founder and co-founders don't have the personal feeling from the other side, they kind of make a judgment. So it's a learning process. And obviously some of them adapt faster, some of them adapt more slowly. The problem is that, okay, if you don't localize, you still get lots of business. And I think for lots of them, I mean, they don't see the other side.

Jeremy Au: Yeah, I think that my perspective is that over time, these Chinese companies will localize more because if they offer English on the menu, for example, then they'll open up their diner audience to a larger group of people.

Jianggan: Mm. Mm.

Jeremy Au: and they're going to get more customers, right? So I think the economic incentives are there for them to localize more over time. But of course, I think the question, you know, I'm also sympathetic to the point of view, which is that when you're expanding to a new market, obviously, you just start with whatever you have. So localization is difficult at the start as well.

Jianggan: Mm. Mm. Mm.

Jeremy Au: But I think, like you said, the game theory dynamics is that everybody's just thinking about themselves and how to expand to Singapore or Indonesia as fast as possible, but they don't see how, as a group, they are kind of causing all these issues.

Jianggan: Yeah. Yeah, they don't feel it. I mean, they know that in theory you need to localize. But in practice, how do you do that? Which part do they need to localize? And if you kind of think and feel from the people at the receiving end who might find it a little bit tricky and weird, it's very hard for you to make the right judgment. When I was doing international tech companies in multiple markets with Rocket Internet, it was the same thing, right? Where you are operating the same business in 40 countries and all the countries are saying that, we need to localize this, we need to localize that. But the head of product sitting in one location, say in Europe, it would be very hard for him to make the judgment because resources are limited and time's limited. So which are the ones I should really sort of prioritize? And which are the ones I say that, okay, let's leave that for later once we figure out how to do the initial sort of ramp up? Then we figure out how to do these fine details. I think in China, people are used to that restaurants having a very high churn, right? So if somebody comes and opens like a chain restaurant, 500 stores, if the market don't like them, next six months, they will be out of business. But I think for lots of markets in Southeast Asia or in other continents, things are a little bit more stable. I think consumers are not used to this kind of change happening all the time and it can be a bit disorienting.

Jeremy Au: You know, pause for a moment, let me move my wife's laptop that is pinging with notifications. Let me move it further away.

Jianggan: Okay. Okay. Yep okay let's keep going yeah.

Jeremy Au: Okay, I'm back. Okay, let's just keep going. I think it's a good thread, actually. So we'll start resume in three, two, one. You know, what shocks me as important is that the dimension where they seem to be doing well enough, even though they're not localizing. And I think, to give you an example, if you look at KFC or Chick-fil-A, imagine if they came to Singapore and their menu was entirely in Chinese, right? That would be insane, right? Because nobody would buy anything from this American MNC that doesn't have English or takes into account these local preferences, right? But I think that the Chinese F&B...

Jianggan: Mm. Mm. Mm. Mm. Mm.

Jeremy Au: entrance, they make enough money based on the cost structure and the digitization, etc. that even though they make this mistake of not serving half of the Singapore population, you know, they're still able to do something. And also, I think another part about it is, yeah, sorry, go ahead.

Jianggan: I think from an ecosystem point of view, so this year we have been dealing with, we've been actually talking to a lot of brands, operators, retailers who are being impacted by Chinese competitors. And I think you should feel threatened by the ones who know how to localize. So if they don't know how to localize, I think it's a good thing for the local players because if you exclude half of the population as your customers, eventually I think you will have problems. But the ones which know how to localize. And the thing is that, I mean, we counted like 138 or something Chinese F&B brands in Singapore. That was beginning of the year. And I think by end of the year, things will probably have moved. There should be a few which have already folded. And there should be a few more, and just by purely going to the malls, there should be a few malls which have opened up. So they are going through an evolution process. They are going through a natural selection process. The problem is that I think for the incumbents, I think in F&B and in other sectors, you are dealing with, I wouldn't say a monster, but you are dealing with a competition that evolves very fast, that iterates a few times a year. So just purely looking at sort of the negative aspects of some of the players would probably make your decisions less nimble. And you should look at the ones which are actually doing well to see that, they have this playbook in China. And they come here, and in Singapore, in Thailand, in Malaysia. And a certain part of the playbook they have to sort of ditch, right? Because you can't really copy the whole playbook here. But there are certain things which they adapt from their existing playbook that work well in the local market that actually allow them to almost like sell unnoticed, right? Because many of them you probably don't even know it's a Chinese brand. There's this high-end Japanese restaurant, I think, Carpenter Street or something. A friend brought me once there and he said, the boss is from Beijing. And it's very famous, like high-end small chain in Beijing and now they open a store in Singapore and they are competitive. So these are the ones you should look at and then see what's their playbook. And obviously if they can adapt part of the playbook into this market, maybe you can adapt part of that playbook as well.

Jeremy Au: Yeah, I like what you said, which is that first of all, if they are not speaking English, it's actually a good sign for the local players because they haven't adapted yet, right, and localized enough yet. So I thought it was so funny. And then on the other hand, like I said, I also agree with you that it's a Darwinian natural selection process. I think all of the Chinese brands will eventually figure out how to localize. And I think this problem will get better over time because the Chinese brands are competing against one another. And whoever localizes first...

Jianggan: Mm. Mm. Mm.

Jeremy Au: will eat up the other Chinese brands market share, right? So I think there's a lot of incentive for them to figure it out eventually. And this reminds me of when I was traveling in Italy and I was eating obviously Chinese food, fantastic Chinese food, all the Wenzhou people are in Italy making luxury goods in the Chinese factories in Italy. But...

Jianggan: Yeah, yeah, yeah, yeah.

Jeremy Au: Obviously, I was going to all these Japanese and Thai restaurants, and they were all being run by Chinese folks as well, which I found really funny because I was like, OK. They figured out that they could serve all these Asian cuisines, but the owners and the chefs are all Chinese, actually.

Jianggan: Mm. Mm. I lived in Paris for a year. And the funny thing is that a bunch of my friends like to eat Japanese food. So I used to go with them like, I think almost once every week. And the funny thing is that at every place I was asked, I mean, it's always small establishments. I was asked the people there, what's the wonderful world you are from? I think it's diverse. Many of them are from like, you know, Zhejiang, Wenzhou, right? And from China. But I saw a lot who are, we are Cambodian Chinese who migrated like 20, 30 years ago. Or we are from Saigon, but we are Chinese. I think there were like two instances where people say, we're from Laos, but we're ethnic Chinese. They're all operating Japanese restaurants in Paris. And presumably, they have an upstream supply chain also run by that ecosystem. So I don't know. It's actually quite interesting.

Jeremy Au: Wow. You know, I always find it hilarious, but also it's true, right? Because, I mean, if you think about it, there aren't that many Japanese people to run all those Japanese restaurants, because every city, every town wants a Japanese restaurant. But there aren't that many Japanese in the world to fill those restaurants, right? I mean, if you go to New York or America, I'll say that it's a little bit different in the sense that there'd be a Japanese chef at the front. But actually at the back, you know, I think there's a lot of Latinos or...

Jianggan: Mm. Mm. Mm.

Jeremy Au: Latin Americans who are in the food industry. And in fact, if you look at some of the videos, I was watching this documentary of Chinese restaurants in the South. Again, the owner and maybe the front of staff, the house, maybe ethnic Chinese or Chinese Americans. But the kitchen is mostly Latin Americans who are working in the kitchen. So that's a slightly different inversion of that story.

Jianggan: Mm. Mm. I think it's natural evolution, right? Because when you look at the migration patterns, think about Japan in particular, in 1920s, there was a huge incentive for Japanese farmers to move out to actually earn money from other places. That's why you have so many ethnic Japanese. I personally probably have like 15 Japanese or Brazilian friends. So there are a lot of them. And I think after the war, we would have the Koreans. So I have a good friend who is Korean, who was actually born in Spain. And they said there are large fishing communities of ethnic Koreans in Spain because they moved there in 1950s. And their kids were born there. They have like European passports, but they speak Korean and they're very tight-knit Korean community there. So then I think from 1970s 1980s when China opened up you have a lot of people who moved overseas because we have the opportunity. You see that I think this East Asian thing is completely weird. I mean you have a flow, right? So manufacturing initially moved to Japan. They moved to Korea, Taiwan, etc. They went to China. From a point of view, the East Japanese moved in the 1920s. I think the Chinese would move to Southeast Asia. And then you have the Koreans, a lot of them moving in the 1950s. They have different waves. Yeah, I think there's something to study about East Asia. And now, if you look at East Asian societies, they all are plagued by declining birth rates. And I mean, of course it's universal, but in East Asia it's more pronounced than anywhere else. So there are certain things with these societies which made, I think, global supply chain, the manufacturing, and also some of the patterns that we see, business migration and stuff, what we see today. It's not just a Chinese thing. I think it's the East Asian thing. It's just... There was an interesting discussion I had with the CEO of a listed Mexican company beginning of the year in Singapore. And after an hour and half discussion, he was saying that, now I reflect about that. What we see about the Chinese businesses doing in Mexico is very similar to what the Korean businesses were doing like 15, 20 years ago. But the problem is that now there are much more Chinese than we ever had with Koreans. So disruption is much higher.

Jeremy Au: I think that's very true and I think maybe a thing I'll add to that is I think the Korean system also similar to Japanese were much more vertically integrated. Although, you know, there was obviously that big push, I feel like the Chinese expansion and disruption is much more entrepreneurial, you know, perfect competition, right?

Jianggan: Mm.

Jeremy Au: Another aspect about it that's also quite interesting is that the Chinese market is so perfectly competitive, right? I mean, we call it involution today, right, as a phrase, but it's a perfect competition in the Chinese markets where everybody's fighting a price war to hit. And from an economist perspective, it's a good thing, right? I mean, in textbook, we always say, hey, in a market where there's perfect competition, it's efficient, it's good for consumers, and it's good for government because...

Jianggan: Yeah, but it's more efficient. Yeah. And nobody earns unnecessary profit.

Jeremy Au: correct from an economist perspective. Of course, now it's interesting where the West is telling China is, hey, you need to more imperfect competition. You need to have more margins in your structure. The Chinese are also kind of saying that as well from a top-down perspective. So it's kind of interesting debate.

Jianggan: Yeah. I think just now you mentioned about all the similarities between all these East Asian societies. We look at Japan and Korea, historically when they managed to organize the whole nation's resources to do something, it's extremely efficient. Japan had their reform from feudal societies to modern society in the 1860s. I think within like 20 years they became a global power, so because they could mobilize and organize the people in that way. And I think same for Korea after the Second World War and when you appeared where, I mean, you can say it's dictatorship, but it's essentially channeled resources towards certain industries. China didn't have that for a long time. I mean, during the Second World War, mean, one of the key reasons why you couldn't fend off the Japanese for long time is that, I mean, when you have, army regiments from different provinces, they couldn't communicate with each other. So this is what the government did a lot in 1950s, is to make sure the whole nation speaks the same language, the same common set of infrastructure. And that's what unleashed all this competition for scale in the 1990s, and especially after China joined the WTO in the early 2000s. Once, the problem, I mean, historically, if you look at what the West has been dealing with, right? I mean, so in 1980s, all these Japanese companies, which were very competitive. Then the Korean and certain sectors of Taiwanese companies. But again, the problem is that when you look at all the Chinese companies, it's just at a completely different scale. I mean, it's the same playbook, right? Centrally aligned resources and towards certain sectors and through internal competition, you create national champions. And because the scale of the market in China now, it's very hard for somebody to create competing forces unless you are very determined. You can mobilize a lot of resources over a long period of time. And this is what people call the political will. So if you can have the industrial policy uninterrupted for 15 years, you probably can achieve something similar. But the problem is that I want to say it's a problem of democracy per se, because democracy is still the... What is it? The least bad system. But in terms of efficiency, it's definitely behind a system where resources are centrally planned and channeled.

Jeremy Au: And so I think to recap, you know, kind of like the push and pull factors of the F&B wave that seems to be a flood from the recipient country's perspective. I think obviously the pro factors, like you said, is new markets, higher margins, good case studies for people to figure out how to expand new markets. And then the push factor, like you said, is involution, perfect competition, very low profit margins in the domestic market. I think another one I'll add is that actually, I think the...

Jianggan: Mm. Mm. Mm. Mm. Mm.

Jeremy Au: interest rates are not high in China, right? It's a function of the central policy to keep interest rates low for saving accounts. And so, if you are a business owner, right? Putting it in the bank and lending to other people doesn't really make sense, but you might as reinvest it into your own business, right? To generate profit. And if you can, you can also put that capital to work outside China, right? As well, so it's not only a way to get...

Jianggan: Mm. Mm. Mm. Mm. Mm.

Jeremy Au: better return than the opportunity cost of a very low interest rate they can get in China, but also diversification outside of Chinese assets as well into non-Chinese assets as well.

Jianggan: It's like a sector across sector, industry across industry. When we sort of this year, we did lots of facilitation between of the exchanges between Chinese platforms, retail businesses with the international counterparts. And what Chinese players are often most jealous about almost, I think most of the other markets is that, look, you guys are doing the same business and you guys don't have to work as nearly half as hard as we do. And you guys have higher profit. So I'm not sure how to understand this undertone. Is that OK? Eventually, they will say that, OK, I mean, we should get into this market because otherwise, I mean, competing in China is just too fierce. And also, competing in China, you have to do a lot of defensive measures, which means that a lot of that organizations have actually put on things which are not productive but defensive. Because if you don't do things there and a potential competitor will just emerge and try to of undercut you. And this is a situation you don't see in, I mean, you don't see in nearly the same sort of ferocity in most of the other markets. So that's why they're saying that, okay, some of the businesses are saying that, okay, we should expand into this market because it's better margins. The problem is that when too many of them think of the same way, and even if a small subset of them could figure out how to do it, that causes disruption to the status quo. And is that good thing for the society? I don't know. I mean, short term, disruption is always painful, just like any new technology. But eventually, will the local ecosystem evolve with it? I don't know. It remains to be played out in most cases.

Jeremy Au: Yeah, you reminded me that actually a big part about it as well is that there's a Chinese regulations on outbound direct investment, right? So obviously most of us think about foreign direct investment in like, how do we attract more capital into, for example, Singapore, right? And Singapore has a whole government agency to bring in foreign direct investment into Singapore. But what's unique about China is that there's outbound direct investment regulations that prevent...

Jianggan: Mm. Yeah.

Jeremy Au: capital to move out of China to invest in. So what you just reminded me of is that I've heard from folks that for Chinese families and business owners that want to diversify out of China because they want to have more wealth outside, they need to figure out how to move capital out. And one of the ways to do that is to buy or build companies outside China and of course, preferably is not in a sensitive industry. So F&B is definitely not a sensitive industry. There's no national security concerns about leaking or losing Chinese trade secrets, right? And so building these F&B assets in...

Jianggan: Mm.

Jeremy Au: Southeast Asia, is also relatively politically neutral and not sensitive from a Chinese perspective. It's a good way to get approval from the Chinese regulator to transfer money to start those new businesses.

Jianggan: Yeah, because you can perfectly justify that it's for productive use. So what happened before, I think, in early to mid 2010s is that a lot of people moved their assets outside China, mean, by buildings, by insurance companies. And I think initially the government back then encouraged this. So lots of people moved billions of assets outside China. And somehow, I think since late 2010s, the government started restricting that, so saying that it can't just move assets outside China. Especially a lot of these assets, I wouldn't say that they come from sort of ethical, also unlawful means, but historically when wealth was accumulated in early 2000s, and a lot of the systems were not there. So there's lots of gray area, which I think the government would want to like know, retain a way to be able to trace back and investigate. And of course, that doesn't cause any comfort amongst the business people. Because you never know, right?

Jeremy Au: Yeah, I mean, you know, the US does have some similar controls, right? I mean, for them, they have the reverse cipher CFIUS, which, you know, basically strongly limits the ability of American investors to invest in Chinese companies or Chinese owned companies. So I think there's a pattern there on capital controls, for sure. And I think basically now we're starting to talk about the buying of Western or international brands and companies, which you and I have looked at has become quite an interesting dynamic, right? Because, for example, you talk about Luckin Coffee and Mixue, for them, they are entering America directly with their own company stores, with their own brand. But you and I also were discussing brands that have been bought by the Chinese, right? And I think the one that came out recently was the iRobot, right? The...

Jianggan: Mm. Mm. Mm.

Jeremy Au: Roomba, the internal, indoor cleaning robots that go on your very cutely and then bump into stuff and clean the floor. I got myself one of those Roombas from iRobot back in the day, especially in America, where it's difficult to clean. But now they've gone bankrupt and they've gotten acquired by the Chinese, which is, and they got acquired by the Chinese supplier, actually. So I thought that was an interesting dynamic.

Jianggan: Yeah. Yeah. Yeah, I think the supply was actually manufacturing for them and because they couldn't pay their debt and that accumulated to hundreds of millions of dollars, if I remember correctly. But I also think that's a deliberate strategy, right? So because Roomba as a brand still has some value. For many of the Chinese companies in these kind of sectors, electronics, et cetera, so they are good at manufacturing, but they have historically not been very good at brand building. Those are two different skill sets. And many of them would want to get into brands, but the question is how, right? So if you have something which is already established, something that has broader sort of consumer recognition, and hopefully acquire some of the expertise with it as well. And then you use the supply chain expertise you would have, use the product expertise you would have, and combine the two, and it could create a pretty powerful combination. And I think we're talking about Shark Ninja beforehand, and you were saying, wow, it's Chinese. And you were telling me that Ogawa, so I said, wow, Ogawa is Chinese.

Jeremy Au: We better recap those brands for everybody, right? So not everybody knows those two, but I think Shark Ninja obviously is quite famous. I mean, they have the Ninja Air Fryer, brand, also the Shark brand. So lots of the direct consumer goods in your kitchen, appliances, vacuum cleaners, you know, like it's almost like a Dyson competitor from my perspective as well. And if you had asked me honestly, as of yesterday or even two hours ago, I would have said that it was an American brand because I was reading an article...

Jianggan: Yeah. Yeah. Mm. Mm. Mm.

Jeremy Au: How do you go about them on the Verge?

Jianggan: It was American brand.

Jeremy Au: It was an American brand, I was thinking it is still an American brand. I think what you've informed me and we fact-checked this is that it's now owned by the Chinese, right? And so that makes a lot more sense now because for me, I've always been so impressed by, everything they deliver, especially when you compare them against Philips or these other like Dyson, for example. They're delivering products that are, frankly, very price competitive, very good value, and they actually often have some bonus features that's actually quite helpful and they're able to iterate this really quickly and so I was always really impressed by this company until you told me that they're owned by Chinese then I was like okay that makes a lot more sense this feels a lot more like Xiaomi...

Jianggan: Yeah, yeah. And the sector they operate in, the sort of home appliances sector. I think historically, manufacturing moved to China. And of course, when manufacturing moved to China, and the upstream sort of suppliers started establishing themselves in China as well. And you would have clusters. So for instance, a lot of the small appliances would come from the area near Shenzhen, Foshan is a city near Guangzhou. It's known for its rice cookers, all these air fryers and stuff. And they would go to Suzhou next to Shanghai. This is where I think quite a number of famous robotic vacuum cleaner brands are located. Literally, you can work from one company to another company. There's one company called Dreamy. And from Dreamy, you work to, I think, EcoVax. That's working distance. It's in the same township. So we have this clustering. And then you have the people trying to figure out, I have all the suppliers. And obviously, that allows you to iterate your products fast. Because whatever you do, the next day you can get raw materials. You can start trying out. So when many of these are clustered together and you create competing brands and many of them actually start, some of start with the Chinese domestic market and when they become very big and people from outside have barely noticed them and when it started coming out, at the same time competing against each other and it creates a force which is a bit weird and disorienting for incumbent brands outside China. I mean this year we have heard from some of the competitors that Oh, we look at them two years ago, we didn't feel it was a threat. And last year, we realized that their products is now on par with us because the R&D and production cycle for lots of the international brands actually go, I don't know, at two or three years, right? And for many of these Chinese companies, because they're so close to the supply chain, they can do it three, four times a year. And this year, some of the brands felt, some of the incumbent brands felt more threatened. Why? Because this guy started pushing our people. Pushing our best people. And then you see the similar story happening in other sectors, but in home appliances, it's probably more pronounced. And a pathway of acquiring existing brand and reforming their supply chain operations with the Chinese core. This seems to lots of people a low risk way since they, I mean, building a brand is hard. Many of them couldn't figure out how, but maybe with TikTok Shop now in the US, there's a different story, but historically, not historically, but for the last few years, buying a brand and then reform the products, reform the supply chain, it's a very viable strategy.

Jeremy Au: Yeah. And I think there's actually a good point back to circle back to iRobot, right? Because iRobot, you know, I mean, wasn't as if they were bought up. Sorry, give me a second. Jianghan, just be careful. Don't touch your, you tend to, it's starting to touch your mic. I don't know why you're fidgeting, but yes to the sound. So just don't do that. Yeah. Okay. We resume in three, two, one. You know, I'm glad you brought up about, you know, iRobot and Ecovacs because, you know, this cluster,...

Jianggan: Mm. yes. Okay.

Jeremy Au: of it is that the simple fact is that iRobot was already manufacturing in China. Obviously it was founded in America, the IP was built in America, but of course they were already manufacturing in China. But they were also already suffering because there were other Chinese companies, you said, Ecovacs and I think I believe Roborock as well, you know, they are highly competitive and they were...

Jianggan: Mm. Mm. Mm. Mm.

Jeremy Au: And so I iRobot is already struggling on this. And I think what was interesting about this, based on my memory, that I think that Amazon had tried to buy them because it's part of the rescue effort. But unfortunately, it died because under the US administration, think the Biden administration, regulators raised concerns about it. So as a result, Amazon didn't get to buy iRobot. And I think it kind of makes sense, because Amazon has Kiva Robotics, which is indoor warehouse robots. So I think iRobot, Roomba probably has a lot of patents and some synergistic components to it. And obviously, Amazon also has a smart home devices category for like...

Jianggan: Mm-hmm.

Jeremy Au: Bluetooth speakers and all the other stuff. I think it made sense for that. I think what's interesting is that really you call it antitrust or whatever that stoppage on a regulatory front of Amazon's acquisition of iRobot kind of created an opening for the Chinese supplier to buy out iRobot, which is really quite interesting from a game theory or sequencing perspective.

Jianggan: Mm. Mm. Mm. I think, yeah. Well, I have lots of opinions about regulators in different parts of the world, but I do think that from regulator point of view, I think many of them are using the of the linear mindset, right? So they're applying saying, okay, I don't know what exactly do they evaluate, but it seems that the playbook of evaluation doesn't factor in all this changing dynamics that we are seeing in this world. So we still see, less so now with Trump in place, but still a lot in Europe, right? So in the last administration, we see a lot of cases where there's anti-trust concerns. But we look at it and say, obviously, combination doesn't really create anything that's any competitive, because to the contrary, it actually creates opportunities for others to come in and disrupt. Because I think nowadays the channels and the way to reach out to consumers are very different compared to the past. So it's not when you control or distribute channels, then you will form a monopoly. There are ways to disrupt. And I think especially coming from a Chinese angle where you see even big players like Alibaba can be disrupted so quickly because they move towards the brands and neglected the mass consumer segment that Pinduoduo came about. But on the other hand, I don't feel the regulators because I've never worked as one. I don't know in their position what's the best thing to do. What I looked at, what the Chinese regulators did is that, which is probably not optimal playbook as well, is initially do nothing because they don't know what to do. And eventually, if the sector goes out of control, they shut everything down. So is that a better playbook? I don't think so. But I don't know. So many of the decisions at that time, if you use this kind linear thinking, it kind of makes sense. But we're dealing with a changing world. And how do you make the regulators sort of adapt to the changing times? I think that's tough topic.

Jeremy Au: Yeah, for sure. And I think that's important because, you know, we started talking about whether Chinese companies should build their own global markets or whether they should buy local companies, right. And one of the examples that we used to just talk about was Ogawa, right. So Ogawa is a massage chair brand that sounds very Japanese. It looks very Japanese. I opened up my branding pamphlet. And when I did a massage chair, you know, I was comparing OSIM, which is a Singaporean brand...

Jianggan: Mm. Hmm. Mm. Mm.

Jeremy Au: obviously manufacture a lot in China, versus Ogawa. And actually, at the end of the day, I honestly felt like the Ogawa experience was better. So I bought an Ogawa chair. Now I remember I installed it. And then I pressed the on button. And then you have a smart, welcome sound. So this soothing female voice came on to say, massage starting now. But she's talking in a slightly Chinese accent. And I was like, what is happening? I thought it would be like either a...

Jianggan: Yeah, yeah, yeah, yeah.

Jeremy Au: American sound or somebody speaking of a Japanese accent. But I was like, this sounds like nobody who is American or whatever, or Japanese, or have chosen somebody of a Chinese accent, right? And that gave me the tip or hint to start a research. And it turns out that Ogawa was bought by the Chinese. It was actually a Malaysian Chinese brand that set up the Ogawa Japanese brand. And then in 2013, it was bought by the Chinese in Xiamen, right?

Jianggan: What? did-

Jeremy Au: And so it's actually a Chinese company that's operating the Ogawa, you know, Japanese sounding brand name.

Jianggan: Talking about this sector, obviously, OSIM started in Singapore, it has been a luxury brand for that. It was very popular for period of time. And then I think the founder, think it was OSIM, he moved on to build a few other luxury brands. He has Bacha, he has TWG and these two premium souvenir brands from Singapore. And you find that across different markets, sorry, different airports and different landmarks across the world. So once we actually went to a talk with a friend who's in the retail business, and that friend has asked him a question saying that, hey, how do you feel that you can, drawing back from all same story, et cetera, et cetera. How do you think that you will compete against the Chinese competitors who now can do manufacture everything, design everything at much more cost efficient way as you do? I think the answer was along the lines that we do not compete against them. We create brands that tell a story that doesn't depend so much on the sort of cost efficiency. And this is something that we feel that we still have a edge. But if you want to compete on products which the efficiency and also the sort of cost effectiveness is the most important factor. Eventually it be probably pretty hard to compete against somebody who's set up in China who can tap into the supply chain, who can tap into that market. Which also means, I think I also see some of the foreign sort of hardware entrepreneurs actually setting themselves up in in Shenzhen and I think that could be a pretty viable playbook, right? So if you understand your consumer base well, if you understand what would take to them and move yourself closer to the supply chain to figure out how to quickly iterate products that would allow you to be competitive and allow you to be able to scale. I think that could be a viable strategy. I've dealt with so many businesses in Shenzhen, they are pretty open so they don't they don't necessarily have to work with customers who are only Chinese. And historically, I've been working with people from all over the world, right? Middle East, Africa, et cetera.

Jeremy Au: Yeah, I thought it was interesting because, like you said, from a founder perspective, OSIM, TWG, tea and Bacha coffee are all actually relatively similar in the sense that they're targeting, from my perspective, like upper middle class to upper class consumption, which is, know, luxury massage chair, luxury tea, luxury coffee. And frankly, I think they've done a tremendous job, especially if you look at the TWG and Bacha coffee. Now, obviously, I don't know the economics...

Jianggan: Mm. Mm. Yeah. Mm.

Jeremy Au: of how they're doing, you know, from a P&L perspective. But I was talking to this Indonesian and she was very much saying like, hey, you know, I got to leave for the airport early and I was like, why? And she was like, because I need to go swing by the Bacha coffee to get some Moroccan coffee, right? And I was like, seriously, like, it's not Moroccan coffee, right? It's Singaporean coffee. Well, Singaporean. But you know, I think that...

Jianggan: Well, I mean, it's a brand they really bought from Morocco, but it was just a brand, right? I mean, it's the same playbook, right?

Jeremy Au: Yeah, yeah. So yeah, so you know, they're kind of doing what the Chinese companies are doing, right, which is they buy a brand and then they, build it and then they get, know, and they've done a really good job localizing to the luxury taste.

Jianggan: Yeah. Yeah. But I personally think that either he was right that this is the sector which is very hard to build, which makes these two brands have sustained advantage because you don't need that many luxury sort of tea and coffee brands at airports and landmarks. Or it could be also the economics is it's good, but it's not that attractive. So that you don't attract actually competitors coming into in pharisees way to try to, I if the margins super fat, mean, brand building is easy, then I think in a Chinese context, you would have people coming in to compete against you. But maybe this market is prominent, but it's not huge. So that's why the Chinese players who have the sort of cost advantage will not be willing or to compete in this market, which is good for the incumbents.

Jeremy Au: Why don't you talk about the Luckin coffee exploring potential acquisition of blue bottle coffee?

Jianggan: When Starbucks was put up for sale in China, and eventually they went with, what's it named, Boyu, Boyu is actually linked to the previous president of China. I think one of his sons actually started the capital. So of course they had lots of connections, lots of resources to help with the brand. And the Luckin's main backer and major shareholder, Centurion Capital, also tried to bid for Starbucks because everyone knows that, okay, even though their business in China is facing challenges. Part of their challenges is because of their own inflexibility in innovation, but also a lot of these challenges also with the macroeconomics. When consumption is stagnant and people obviously, their consumption trends down to things which offer the same quality but much lower price. acquiring the Starbucks brand and infuse them with with some of the playbooks. So for instance, if you could update your app once every two weeks instead of once every four months, and obviously you create some upside that you could leverage with the established brand. I think for Blue Bottle, Blue Bottle captures the segments, which I think would be harder for Luckin as a brand to tap into. But because Luckin has built its own supply chain, and I've seen footages of its is sort coffee processing plant and actually in my province next to Shanghai, it's huge, gigantic. And if they could leverage some of their resources to actually sort of make Blue Bottle even more efficient, but at the same time, do not lose the sort of brand affinity that it currently has, I think it could be very interesting. I'm not sure whether you can draw parallel between this versus like a Chinese car company buying Volvo, for example, or what else have they bought? MG is the most mass-market brand.

Jeremy Au: you Well, GE appliances was bought by Haier, which is the washing machines, the fridges. And I think that's actually quite beneficial for the Chinese buyer, because GE obviously used to represent General Electric. And so if you're an American person and you're looking at a fridge and you see GE appliance, and it's priced very competitively, it's fighting against Samsung, it's fighting against other fridges, and you're like, this is an American brand. It's under the General Electric...

Jianggan: Mm. Mm. Mm. Mm. Yeah.

Jeremy Au: actually the whole brand of the whole company is owned by Haier, which is a Chinese manufacturer.

Jianggan: Yeah, so you see this playbook being played out and now it's sort of moving up to, mean, from sort of the daily white ghosts and stuff into something which I think brand affinity actually means some emotional value more than just, okay, this thing's durable...

Jeremy Au: Yeah, and I think that's interesting because, you know, Blue Bottle Coffee, for example, is owned currently by Nestle, right, I believe. And so obviously, and so I mean, obviously, from a Nestle perspective, running a coffee shop business doesn't feel like it's fit to their overall, you know, I don't know, company portfolio. So I think it makes sense that there's some story to be had about an acquisition or transfer happening.

Jianggan: think majority won by Nestle...

Jeremy Au: And I think for Luckin Coffee, would be a really good deal for them, because this gives them kind of a bit of a bar-bell strategy, which is they have Luckin Coffee, which is focused on Gen Z, mobile app, low cost. And then you have Blue Box Coffee, is maybe a little bit older. I mean, the supply chain at the back end has a lot of similarities as well.

Jianggan: Mm. Mm. Mm. Yeah, there's lots of similarities and also you can still improve the sort of app ordering and digital experience of Blue Bottle. This is what the Chinese companies have been very good at, right? And you can play with the brand and beauty in the short video age because lots of this popular sort of Western brands, they're very good at Instagram. And I think the Chinese players, they're good at TikTok and short videos. So I think eventually you will converge, mean, whoever in the market, they're entrepreneur and they look at a new sort of marketing tool. don't know, mean, hundreds of them trying to figure out the same thing, two of them will figure out and they create formidable brands.

Jeremy Au: Yeah, think the crux of it is that I think the Chinese, when they buy these companies, I think they're going to stay more quiet because one is they want to avoid all the regulators, So I think the more quiet they are, the better. And two is if they're able to keep it quiet, there's a brand premium, right? So people will say, hey, GE Appliances, even I 80 % of the time still think it's owned by the Americans. I always have to remind myself when I see an appliance because it's got the exact same logo, right?

Jianggan: Good. Yeah, yeah...

Jeremy Au: I always keep reminding myself, hey, this is actually owned by the Chinese now. So that gives them pricing premium, gives them a little bit of strategic dynamics there. So I think the Chinese acquisitions of companies tend to be, I think from my perspective, more below the radar versus I think normally when you do M&A, the American companies are like Netflix and Paramount and all these big debates that are happening. They're much more larger, very headline news.

Jianggan: This is an interesting point. I'm not sure eventually. So because the current generation of most successful Chinese business owners, they do not speak English. mean, Jack Ma is a notable exception, right? But he doesn't speak anymore. So these guys, do not speak English. And they grew up in an ecosystem in China where speaking up means trouble, right? So they prefer to keep quiet. I'm not sure whether this new generation, people who are actually younger than us, they either take over the family business or they build new businesses which are globally competitive. And I'm not sure whether one day these people will be willing to say that, okay, now I'm proud of my business. I am actually using the playbook for America, right? So I am actually willing to represent my own business, sort of go into events, meet with politicians and stuff. Whether that playbook will eventually harmonize, I don't know. But for now, seems that because the context and an ecosystem is so different, and most of the businesses by nature, most of the business owners by nature would prefer to keep low profile. But that might change. I don't know.

Jeremy Au: Yeah, things may always change as well. And yeah, I mean, I think you gave a good example of the Volvo acquisition, right? Away from Ford to a Chinese manufacturer. Yeah, you can imagine a lot more. I can imagine a lot more M&A activity for these goods, but I think the big difference between Blue Bottle Coffee and another American car brand that's struggling...

Jianggan: Mm. Mm.

Jeremy Au: is that think American car brands will be seen as a national security. think risk would be vetoed by regulators in today's climate. I don't think the Volvo deal would go as easily today in 2025, 2026 as it did like what, decade ago. But for food, think F&B, just think it's transactions can still happen.

Jianggan: And also I think if you look at the car sector and you look at EV in the US, the only viable player is Tesla. And of course, Tesla is formidable, but that's the only player which is viable. I think I said something about industrial policy. I'm not sure whether it's a success or failure. I'm not sure whether the whole sector in China now have hundreds of brands will eventually converge into three to to find large brands because only that is sort of competitive, right? So I don't know, I think somehow the two ecosystems evolved in very different ways and now they're competing against each other in global stage. The US player, you typically have like, one or two very large successful brands who have very competitive products. And the Chinese on the other hand, you have like a pack of different brands competing against each other and in different markets and sometimes undercutting each other and causing huge disruption. So how this sort of different ecosystems will play out when they encounter each other in other markets, I think offers lots of fascinating stories for lots of local businesses to actually learn and adapt.

Jeremy Au: Yeah. On that note, I think there's so much to take away. And I think we keep going. whatever about this, but we're going to keep it for the next time. So on that note, I'll see you next time.

Jianggan: Yeah, forever. Yeah. Yeah. Yeah, have a good end of the year.