Nordic biogas company uses market research to make strategic decision on China market entry

The report concluded that the Chinese market had potential in the aspects of the availability of feedstock, biogas plant population, the infrastructure as it was in an early stage of development, along with an increasing market demand. However, the lack of government subsidies at the time in this area served as a handicap for development, especially for foreign technologies at a higher price point. Nevertheless, the situation of government support was believed to change in the near future. As a result, ARC Consulting recommended continuous penetration efforts on a smaller scale while at the same time watching the market closely for changes in order to be ready when conditions turn favorable. In addition, in order to stay close to the market while minimizing costs, a strategic cooperation with a business partner was considered as the optimal investment mode.

To answer the “where” question, an analysis of the key provinces was done to provide a holistic view of the potential for our client in China. The criteria used to rate the provinces were: Availability of feedstock, Level of development of biogas distribution channels, End market potential, Natural gas resource availability, and Entrepreneurial spirit. The result of the analysis showed that Shandong, Jiangsu, Guangdong, Zhejiang were the provinces with the highest (current) potential, while several other areas was considered to have high future potential.

The competitive landscape can be divided into alternative technologies and competitive companies.

Alternative technologies can be divided into 4 main categories: PSA, Water scrubbing, Chemical absorption, and others. The most frequently used technology is chemical absorption.

In terms of competitive players, only 2 key companies were detected in the market, and in general, the consensus was that the companies only had limited success so far.

Based on this information, the recommendation was to keep a passive role in the market while keeping a close watch on the market trends and regulatory changes. To ensure market presence and customer intimacy, it was advised to cooperate with a reliable partner to provide quality services to customers in the first year to highlight the importance of quality and reliability and to move away from only price considerations.

The strategic business partner can also be very helpful to identify possible local suppliers for key components that can help minimize costs. Together with the client, ARC Consulting assisted in outlining a strategic business plan on the Chinese market. The strategy was initially decided to build up a presence on the market and to focus on winning projects. After an initial time period of around two years, a direct sales organization was decided to be put in place with a localized supply base for key components. When the right market conditions arise, the client could also consider deploying a local manufacturing unit via a joint venture with a local partner, a WFOE or using a contract manufacturer.