Country Market Analysis: China

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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Place • Retail • Mostly small retailers • Chinese prefer close contact with vendors; large focus on relationships • Market Entry • Difficult for 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 for foreign companies to succeed • Foreign trade increased from $20.6 to $325 billion in past 10 years; growth expected to continue

11. Place • Location • Urban populations are growing rapidly • Shanghai: 13 million • Beijing: 12.2 million

12. Promotion • Advertising • 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

13. 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

14. 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

15. 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

16. FinalQuestions?