Date
17 October 2018
Vatti's pledge to refund buyers of its products should France win the World Cup would cost the firm 79 million yuan, a small sum compared to its huge marketing expenses. Photo: Vatti
Vatti's pledge to refund buyers of its products should France win the World Cup would cost the firm 79 million yuan, a small sum compared to its huge marketing expenses. Photo: Vatti

Vatti’s World Cup bet on France: a win or a loss?

Vatti Corp., a leading vendor of kitchen appliances that sponsored France in the just-concluded FIFA World Cup, had promised to fully rebate customers who bought its products under the Champion Plan from June 1 to July 3 should France become the champions of the tournament.

Since France did win the World Cup, many investors are now worried that Vatti may suffer a huge loss as a result of its pledge. The rebate is expected to cost the company 79 million yuan (US$11.83 million).

As one of China’s top three kitchen appliance makers, Vatti posted a revenue of 5.7 billion yuan and a net profit of 510 million yuan last year.

During the period, marketing costs reached 1.43 billion yuan, the company’s second-largest expense after 3 billion yuan for production.

Actually, the 79 million yuan rebate is only 5 percent of Vatti’s marketing expenses last year. So the promotion cost is a steal if the effort succeeds in boosting brand awareness and the company’s image.

Separately, the mainland securities watchdog announced over the weekend that Xiaomi (01810.HK) would be excluded from the Stock Connect trading channel. As a result, the shares slumped nearly 10 percent on Monday.

The move is aimed at protecting mainland investors who appear to lack understanding of the company’s dual-class share structure, according to the China Securities Regulatory Commission.

But this is widely considered an excuse considering that Chinese authorities have already given the green light to the smartphone maker’s earlier plan to list at home by issuing Chinese depositary receipts.

The CDR listing plan was suspended after a market sell-off.

So the more likely reason for excluding Xiaomi from the Stock Connect is to prevent mainland investors from buying the shares through the cross-border trading channel and ensure that there will be enough domestic demand when the company goes ahead with its CDR listing later on.

This article appeared in the Hong Kong Economic Journal on July 17

Translation by Julie Zhu

[Chinese version 中文版]

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RT/CG

Hong Kong Economic Journal columnist

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