Country Market Analysis China Kristin Cookson Catherine Graham

Country Market Analysis: China Kristin Cookson Catherine Graham Lauren Nickel Jen Parsons Eddie Wehmer

China’s Tea Market § Ready-to-drink tea market in China § Expected to have the most sales volume of any country from 2005 -2007 § Expected to remain second highest country in overall sales of ready-to-drink teas through 2007 § Economy growing at 10% over last 18 years

Price § Setting the Price cont. § Competitors in China price products relatively lower than in the U. S. § Coca-Cola in China: $. 23 per unit § Master Kong and Uni-President are two main competitors § Packaged ready-to-drink teas tend to be more expensive than freshly made teas § Many consumers are financially unable to purchase such products

Price § Setting the Price § Distribution of wealth § Small middle class that continues to grow § Large lower and upper classes § Avg. Income per capita § City dwellers: $1, 023 § Rural areas: $316 § People in the to top 10% income bracket account for 30. 4% of total consumption § This leads to the Chinese being more price sensitive than Americans; Chinese tend to choose less expensive products § Clearly better product quality may sway them to pay more

Price § Setting the Price cont. § Distribution § Need for many intermediaries § Each tier adds significant markup ranging from 5 -17% § Would need to price products higher in order to make up for the high cost § Some companies achieve lower prices by surpassing intermediaries and selling directly to retailers

Product § Taste § Culture § Tea is usually served without sugar, milk or lemon § Popular flavors include green tea, black tea, and oolong tea § Diet & Nutrition § Diet depends on region § May need many different flavors depending on what regions tea is sold in § Packaging § Size § Due to limited shelf space in the popular small retailers/mom and pop stores, packaging must be reasonably small

Product § Packaging cont. § Label Design § Language § Mandarin is national language § Taught in all schools § Many different dialects spoken, depending on geographical region; many use same basic set of characters § While they may not be able to understand other verbal dialects, are able to communicate in writing § Little or no English is spoken or read § 90. 9% literacy rate § Would allow for writing on labeling

Place § Production § If choose to import: § More costly and complicated for companies to import products due to many restrictions by: § § § People’s bank of China (PBOC) State Administration for Exchange control (SAEC) Ministry of Foreign Trade and Economic Cooperation (MOFTEC) § Would not be able to import from West due to mountainous terrain § Company would have less control over their capital

Place § Production cont. § Many foreign companies locate in large cities to avoid extensive distribution system § Inventory levels are based on allocation rather than market demands § Transportation § Varying terrain would make distribution throughout country difficult § Big cities located on coast; allows for water transportation § Highways § 28. 8% paved § 1. 49% paved expressways

Place § Retail § Mostly small retailers § Chinese prefer close contact with vendors; large focus on relationships § Market Entry § Difficult foreign companies to enter marketplace § Political and legal restrictions give them little/no rights to import or manage distribution networks § Foreign suppliers must form joint ventures with local companies § Due to large economic growth, it is becoming easier foreign companies to succeed § Foreign trade increased from $20. 6 to $325 billion in past 10 years; growth expected to continue

Place § Location § Urban populations are growing rapidly § Shanghai: 13 million § Beijing: 12. 2 million

Promotion § Advertising media breakdown § 44. 7% TV § 35. 2% print § 3. 4% radio § 16. 7% other § Media Exposure § TV: 84% of population watches TV § § Avg. 184 minutes/day 209 government-run stations 3000 local stations Satellite is increasing range and availability of TV § Internet: 79. 5 million people have access

Promotion § Advertising cont. § Scheduling § Advertising spots must be bought 2 to 10 months in advance § Restrictions: § Comparative advertising § Superlatives § Must “safeguard the dignity and interests of the State” § Censorship standards vary throughout China

Promotion § Sales Promotion § After-sale benefits and services will sway consumers to purchase products § Trade shows available, but costs are high and only local audiences are reached § Event Sponsorships § Sporting events are popular channels for promoting products § Beijing will be hosting the summer 2008 Olympic games

Promotion § Public Relations/Publicity § Due to government regulated television stations, PR is highly monitored § Several organizations play an active role in controlling print or television content § Personal Selling § Enticing consumers to come in to the store to make purchases are popular methods of personal selling in larger cities § Consumers feel most comfortable purchasing from people they are acquainted with in order to build and maintain close personal relationships § Personal relationships are highly valued by the Chinese

Final Questions?