Shanghai M&G Stationery Inc (“SM&GS”) is a leading stationery brand in China with a market share of around 7%. SM&GS manufactures and sells student and office stationery in three business lines:
- Stationery business - which accounts for close to half of overall sales.
- Office-supply business - an emerging business-to-business arm that trades under the Colipu brand and generates over 40% of sales.
- Zakka business - an emerging retail business with over 500 stores, operating under the M&G Life and M&G Shops brands.
In 2021, we were the first investor to engage with SM&GS on its ESG practices. We held multiple discussions with the SM&GS team on its management of chemical safety, anti-corruption and bribery practices and carbon emissions, as well as external ESG scores and disclosures.
Following our engagements, SM&GS released its first ESG report in 2022. Based on our suggestions, it has built up its sustainability strategy and implemented it across its business units. The company has improved in key areas including chemical safety, by replacing and reducing its reliance upon substances which are not sustainable. In supply chain management, it has established ESG targets and introduced plans for its suppliers. It has created a business conduct and anti-corruption system and introduced enhanced disclosures.
SM&GS has established a highly competitive business, with potential for further growth. The outlook for office stationery supply is positive, and SM&GS is well-positioned to build upon the rapid growth already experienced in its direct supply business. We expect the company to benefit from its investments in recent years. It is well placed to capitalise on the structural domestic consumer trend towards premium products as disposable incomes continue to rise. This is underpinned by its R&D expenditure and premium product development, shared retail capabilities and timely consumer insights.