INTERNATIONAL MARKETING

INTERNATIONAL MARKETING

By:Antoine AndrawosNasser ShoumanSherif El GendyYoussef Ishak ESL 31D Global Management Track April 2011Under Supervision of:Prof. Dr. Ahmed A. Shalaby1Cola Wars in China

1Wahaha DevelopmentWahaha CEOThe World of soft-drink industryThe Players in ChinaChinas soft-drink industry Market AnalysisWahaha group key strategies SWOT MatrixAction Plan

AGENDA

2Wahaha DevelopmentYearHistory1987Wahaha Was founded, starting with bottled soda water, Ice cream and stationery to the children .1988starting to focus on children segment with its nutritious drink. (Children in China 200 MM).(make children happy) 1990Revenue was RMB400 MM profits was RMB70 MM.1991Wahaha launched its fruit-flavored milk followed by wahaha milk enriched with vitamin A and D. 1992-19943000 companies entered the market for childrens beverages.1996Wahaha launched its Purified water, and they became market leaders (carport revenue MRB 1 B)Joint venture with DANONE 1997revenues reached MRB 2 B, the water share was MRB 500 MM and mixed congee was 100MM.1998Wahaha launched its Future Cola 2002Wahaha market chair in carbonated drinks reached 18% with revenue of MRB 8 billion and profit of 1.3 billion

3Wahaha CEOZong Qinghou(), born 1945, is a Chinese entrepreneur, founder, Chairman and CEO of theHangzhou Wahaha Group the leading beverage company in China.Ranked Chinas 3rd-richest manand 376th in the worldbyForbesin 2009,Hurun Report estimated him to have personal wealth of US$12billion in 2010 making him the richest person in China.Zong is a delegate to the ChineseNational 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 industryThe term soft drinks refers to beverages that do not contain alcohol, And includes:Packaged waterCarbonated drinks Juices and juice drinksReady to drink teaSports and energy drinks

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The World of soft-drink industry2000Global soft drink consumption320.2 billion liters170 billion liters 53 %Carbonated drinks77 billion liters24 %Packaged water73.2 billion liters23 %Other category which included juices, ready-to-drink tea, sports and energy drinks

6The Players in ChinaCoca ColaPepsi CoNestle S.AGroup DanoneThe Worlds largest soft-drink companyAnd fifth largest food and beverage co.The fourth largest food and beverage company in the worldThe worlds largest food and beverage co. Ranked sixth in the global food and beverage industryIts 2001 revenues were US$ 20.092 billion with a net income of US$ 4.969 billionIts 2001 revenues of US$ 26.935 billion including beverage revenue and profit of US$ 10.44 billion and US$ 1.678 billionIts 2001 revenues were US$ 56 billion with a profit of US$ 4 billionIn 2001it had revenues of US$ 14 billion with net income of US$ 127.7 million

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Chinas soft-drink industry YearSoft Drink outputIn millions of tonsCarbonated Drinks outputIn millions of tonsCarbonated Drinks as a percentage of total soft Drinks19946.293.1450 %19959.825.2153 %19968.844.2949 %199710.694.9246 %199812.005.4045 %199911.864.2736 %200014.914.6231 %200116.694.5727 %8

1980s multinational enter into the Chinese marketAnnual growth 21% for last 20 yearsAnnual 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 2001Total revenues exceeded RMB 40 billion in 2000Soft drink become a regularly consumed product Soft drink industry developed from carbonated drinks in 1980s to packaged water in 1990s to tea in 2000s Chinas soft-drink industry 9

Market AnalysisWahaha

Coca Cola

Pepsi

- Positioning

- Market Chair 01

- Target marketsHealth, 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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WahahaCoca 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

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

SameMarket 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 millionPower 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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WahahaCoca Cola

- Promotion

-Use TV advertising to build brand awareness (focusing promotion budget on CCTV news channel during world soccer cup)Exclusive sponsor CCTVs spring partySpent RMP34 M in Future Cola launch Outdoor adv., point of sale adv.Use wall advertising-Travelling film shows in villagesUse celebrities, slogan banners on roads. Spent $19 M in 2001Advertising campaign on CCTV.Sponsor Celebrities (Pop singers), Beijings victory to host 2008 Olympics.Change the pack design to host OlympicsUse 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 appetiteThey 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. 14

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 positionWeaknesses W

W1 Weak attendees in main citiesW2 Sales forceOpportunities O

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

- Market development Market Penetration Product DevelopmentWO 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

IFASEFAS

15Action PlanThe action plan will cover two pointsProtect and maintain their position in the carbonated-drink market and tackle the rural market 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 PlanStrategyActionsTime BoundaryProtecting & Maintaining leading position in rural marketIncrease marketing activities in rural areas (sponsor for local events & ads) offering bounce system to maintain distributers loyalty Q1 2003

Q1 2003Market penetration Tackle main cities Beijing, Hong Kong, where Wahaha have good reputationPromotional campaign Q2 2003

Every quarter17

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

StrategyActionsTime BoundaryMarket 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 existenceQ4 2003

Q1 2004

Q1 2003Product development Prepare new production line for non-carbonated soft-drinks Start study to produce alcoholic drink BeerQ3 2003

Q3 200418

Thank You

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