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INTERNATIONAL MARKETING

By:- Antoine Andrawos- Nasser Shouman- Sherif El Gendy- Youssef Ishak

ESL 31D Global Management Track April 2011

Under Supervision of:

Prof. Dr. Ahmed A. Shalaby

Cola Wars in China

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• Wahaha Development• Wahaha CEO• The World of soft-drink industry• The Players in China• China’s soft-drink industry • Market Analysis• Wahaha group key strategies • SWOT Matrix• Action Plan

AGENDA

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Wahaha DevelopmentYear History

1987 Wahaha Was founded, starting with bottled soda water, Ice cream and stationery to the children .

1988 starting to focus on children segment with its nutritious drink. (Children in China 200 MM).(make children happy)

1990 Revenue was RMB400 MM profits was RMB70 MM.

1991 Wahaha launched its fruit-flavored milk followed by wahaha milk enriched with vitamin A and D.

1992-1994 3000 companies entered the market for children’s beverages.

1996• Wahaha launched its Purified water, and they became market

leaders (carport revenue MRB 1 B)• Joint venture with DANONE

1997 revenues reached MRB 2 B, the water share was MRB 500 MM and mixed congee was 100MM.

1998 Wahaha launched its Future Cola

2002Wahaha market chair in carbonated drinks reached 18% with revenue of MRB 8 billion and profit of 1.3 billion

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Wahaha CEO• Zong Qinghou (宗慶後 ), born 1945, is a Chinese entrepreneur,

founder, Chairman and CEO of the Hangzhou Wahaha Group the leading beverage company in China.Ranked China’s 3rd-richest manand 376th in the world by Forbes in 2009, Hurun Report estimated him to have personal wealth of US$12 billion in 2010 making him the richest person in China.

• Zong is a delegate to the Chinese National People's Congress.• He spent his first 15 years working in countryside, give him

experience about rural China • He back to his home in Hangzhou to work in factory as worker

then as sales • At age of 42 he became a sales manager with two sales men,

His job included delivering goods to retailers on his cycle • Now he manage Wahaha empire but still travelling more than

200 days per year “to keep fingers on the pulse of the market”

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The World of soft-drink industry

The term “ soft drinks” refers to beverages that do not contain alcohol, And includes:- Packaged water- Carbonated drinks - Juices and juice drinks- Ready – to – drink tea- Sports and energy drinks

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The World of soft-drink industry2000

Global soft drink consumption320.2 billion liters

170 billion liters 53 % Carbonated drinks

77 billion liters 24 % Packaged water

73.2 billion liters 23 %

Other category which included juices, ready-to-drink tea, sports and energy drinks

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The Players in ChinaCoca Cola Pepsi Co Nestle S.A Group Danone

The World’s largest soft-drink companyAnd fifth – largest food and beverage

co.

The fourth –largest food and beverage company in the world

The world’s largest food and beverage co.

Ranked sixth in the global food and beverage industry

It’s 2001 revenues were US$ 20.092 billion with a net

income of US$ 4.969 billion

It’s 2001 revenues of US$ 26.935 billion including beverage revenue and profit of US$ 10.44 billion and US$ 1.678 billion

It’s 2001 revenues were US$ 56 billion with a profit of US$ 4 billion

In 2001it had revenues of US$ 14 billion with net income of US$ 127.7 million

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China’s soft-drink industry

Year Soft Drink outputIn millions of tons

Carbonated Drinks outputIn millions of tons

Carbonated Drinks as a percentage of

total soft Drinks1994 6.29 3.14 50 %

1995 9.82 5.21 53 %

1996 8.84 4.29 49 %

1997 10.69 4.92 46 %

1998 12.00 5.40 45 %

1999 11.86 4.27 36 %

2000 14.91 4.62 31 %

2001 16.69 4.57 27 %

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• 1980s multinational enter into the Chinese market• Annual growth 21% for last 20 years• Annual output increased from 0.288 million tons (261

million liters) in 1980 to 16.69 million tons(15.141 billion liters) in 2001

• Per capital consumption increased from 0.3 liter per annum in 1982 to 8 liters per annum in 2001

• Total revenues exceeded RMB 40 billion in 2000• Soft drink become a regularly consumed product • Soft drink industry developed from carbonated drinks in

1980s to packaged water in 1990s to tea in 2000s

China’s soft-drink industry

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Market AnalysisWahaha Coca Cola Pepsi

- Positioning

- Market Chair 01

- Target markets

Health, wholesomeness, happiness, quality and reliability.

14%

Milk drinks, packaged water, carbonated drinks, tea, juice drinks, and canned food and health care products.

Think local, act local and leverage global.

42%

carbonated drinks, juice, sports drinks, water.

Youth people.(popular entertainers)

23%

Carbonated drinks, sports drink, tea, juice, and water.

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Wahaha Coca Cola Pepsi

- Product

- Price

Future Cola Modified taste for Chinese people (more sweet & strong)

Lower RMB 7/Unit case

Coca Cola(classic, diet, sprite, Fanta)Same global taste

Same

Pepsi Cola(Diet, Dew, 7Up, Miranda, Twist) Same global taste

Same

Market Analysis

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Wahaha Coca Cola Pepsi

- Place (distribution)

- In smaller areas, Rural areas.-Strong relationship High ability to reach remote corner in days - Compliance policy(long term gain, security deposit)- 2000 sales force followed with 1000 distributes

-85% distribution penetration in cities -150 cities > one million ,then >0.5 million-Power relation with gig distributers in cities (chain stores & supermarkets)- 10,000 sales force- week present in rural areas

-65% -Focused on key markets (Shangahi, Chongqing, Chengdu) higher share.--Power relation with gig distributers in cities (chain stores & supermarkets)- Not present in rural areas

Market Analysis

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Wahaha Coca Cola

- Promotion -Use TV advertising to build brand awareness (focusing promotion budget on CCTV news channel during world soccer cup)-Exclusive sponsor CCTV’s spring party-Spent RMP34 M in Future Cola launch -Outdoor adv., point of sale adv.-Use wall advertising-Travelling film shows in villages-Use celebrities, slogan banners on roads.

-Spent $19 M in 2001-Advertising campaign on CCTV.-Sponsor Celebrities (Pop singers), Beijing’s victory to host 2008 Olympics.-Change the pack design to host Olympics-Use traditional symbols.

Market Analysis

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Wahaha group key strategies • Targeted market toward Children (not covered from any company) 200 M in china. • Branding: Wahaha means to make children happy with attractive slogan

“drinking Wahaha boosts appetite”• They realized diversity is a key of success. • Product development: Water, Cola, Tea,…..• Growth drivers: Increase MS, Increase brand awareness, New launches & acquisitions (supports geographic expansion in

provincial markets), increase level of technology (Joint venture with Danone) Loyalty & stability of the distributors, Information system that enables info. In real time.

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SWOT MatrixStrengths – S

S1 Understanding Chinese culture diversity S2 Relationship with distributers in rural areas S3 Joint venture (DANONE)S4 wide range of productsS5 68 production line over ChinaS6 R&DS7 Finial position

Weaknesses – W

W1 Weak attendees in main citiesW2 Sales force

Opportunities – O

O1 Maine cities in ChinaO2 Similar culture countriesO3 Rapidly growth of non carbonated soft-drinksO4 MENA Market

SO Strategies

- Market development - Market Penetration - Product Development

WO Strategiesovercome the weaknesses by market development O2 and O4

Threats – T

T1 Presences of Multinational Co. T2 Low barer of entryT3 Power of substitute

ST Strategies

Overcome T2 by S6 and S3

WT Strategies Adapt business model according to country/customers needs(W1-T1)take corrective measure to W2 T2

IFAS

EFAS

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Action Plan

The action plan will cover two points1. Protect and maintain their position in the

carbonated-drink market and tackle the rural market

2. Steps should taken next with Wahaha Future Cola and the carbonated – drink market.

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Protect and maintain their position in the carbonated-drink market and tackle the rural market

Action Plan

Strategy Actions Time Boundary

Protecting & Maintaining leading position in rural market

• Increase marketing activities in rural areas (sponsor for local events & ads)• offering bounce system to maintain

distributers loyalty

Q1 2003

Q1 2003

Market penetration • Tackle main cities “ Beijing, Hong Kong, …”where Wahaha have good reputation

• Promotional campaign

Q2 2003

Every quarter

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Action PlanSteps should taken next with Wahaha Future Cola and the carbonated – drink market.

Strategy Actions Time Boundary

Market development

• Expand in neighbor countries where there are similar culture of Chinese people

• Expand in MENA using the boycott with USA products

• Using the JV with DANONE to entre the markets where DANONE has strong existence

Q4 2003

Q1 2004

Q1 2003

Product development

• Prepare new production line for non-carbonated soft-drinks

• Start study to produce alcoholic drink “ Beer”

Q3 2003

Q3 2004

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Thank You