Marketing in China Master Kong Yu Wai Sum (Monica) Yu Wai Sum (Monica) Tang Lok Yiu (Yoyo) Tang Lok Yiu (Yoyo)

Content Overview of Beverage industry and Non- alcohol business trend in the world Overview of Beverage industry and Non- alcohol business trend in the China Introduction of Master Kong Competitors Master Kong’s Business model Brand and product What are the values Master Kong created for consumers? What makes Master Kong’s consumer happy and loyal Consumer marketSWOT analysisChallenges in ChinaNext Step in China

Overview of Beverage industry and Non-alcohol business trend in the world

People’s living pace is faster People are more stressful Development of economy leads to a better living standard  People demand healthier functional drinks Overview of Beverage industry and Non-alcohol business trend in the world

Functional drinks grow globally in a fast rate Eg. Sport drinks, Energy drinks, calcium boost drinks, Carbonated drinks market saturated Expected decline in carbonated products Overview of Beverage industry and Non-alcohol business trend in the world

Overview of Beverage industry and Non-alcohol business trend in China

Major categories of beverages in China Carbonated Drinks Eg. Coca-Cola Fruit and Vegetable Juice Eg. Huiyuan Juice Tea Drinks Eg. Master Kong Ice Tea Bottled Water Eg. Nongfu Spring

Overview of beverage market and Non-alcohol business trend in China Main Direction : Health drinks “Eleventh Five-Year Plan” : focused on adjusting the beverage product structure, and reduced the proportion of carbonated beverages Result ?

New categories of beverage entering the market (Functional drink) Eg. Sports drinks, energy drinks, vegetable protein drinks China market : Continue to grow due to demographic changes Overview of Beverage industry and Non-alcohol business trend in China

What is Master Kong?

Master Kong (Chinese : 康師傅 ) Taiwanese enterprise in China Founded in 1991 Headquarters in Tianjin, China Second most valued brand in China (TNS,2011) Who I am? (Logo of Master Kong)

Specialize in the production and distribution of : Who I am? Instant NoodlesBeveragesInstant Food Products

The Group is the market leader in instant noodles and ready- to-drink (RTD) teas Who I am?

Master Kong’s Competitors

Local Competitors Uni-President - Together with Master Kong, the two brands’ market share in the first and second-tier cities are almost 80% - Uni-president’s fruit juice enjoyed a great popularity in the market Competitors

Wong Lo Kat -The largest producer in the herbal tea industry. -Made from pure Chinese herbal medicine Wahaha -The company produces more then 100 varieties of products including milk drinks, drinking water, carbonated drinks, fruit juice and tea.

Competitors Multinational competitors Coca Cola Coca-Cola has enhanced its research in non- carbonates and built a research unit dedicated to traditional-Chinese-medicine drinks in China. Nestle Nestle continues to grow its business in China by investing in its portfolio of local and global brands.

Master Kong’s Business Model

Business Model Vision Honest, Pragmatic, Innovative Value Proposition To deliver delicious and safe food and beverages by an effective way Target customer segments A wide range of customers

Partner network A broad distribution and production network Offers flexibility on supply chain and pricing which enable Master Kong to respond to new products launch faster Cost structure Cost : Raw materials, Advertising, plants, operations Business Model

Distribution Channel : Value delivery network Direct sales; Indirect sales Past: Producer single Wholesaler/city Retailers Customers Recent: Producer Retailers Customers Postmen Business Model

Distribution channel ~ 500 sales offices warehouses Serving > 5,000 wholesalers + 73,000 direct retailers Contributed to the company’s rapid penetration in the smaller cities and its lead in market share Business Model

Brands and Products

Brands and Products Marketing Mix (4Ps) Product family branding Line of products are sold with the same brand name -Products gains recognition easily -One product can affect the overall brand Product life cycle -Master Kong beverages have existed in the market for a long time – but still growth phase -Innovative – understand consumer needs and introduce new flavors

Brands and Products Marketing Mix (4Ps) Product Mix ProductsBeveragesRTD TeasIced red teaGreen teaFlower teaOolong teaWater Mineral water Natural water JuiceDaily CApple juice Pineapple juice Gaujava juice Mango juice Carbanated Drinks Pepsi soft drinks Instant food Instant noodles CookiesMuffinsPuff Line depth refers to the number ofsubcategories acategory has width of product mix length of product line

Brands and Products Marketing Mix (4Ps) Price Neutral Pricing - The prices are set by the general market, with the prices just at competitors’ prices. Yihaodian.com

Brands and Products Marketing Mix (4Ps) Promotion Advertising -Invite celebrities to be spokesperson -Design Special characters to attract attention -Penguins ( an image of cool )

Brands and Products Marketing Mix (4Ps) Promotions Public relations – Charity works, sponsorships and events

Brands and Products Marketing Mix (4Ps) Promotion Sales promotion – free gifts, lucky draws, discounts

Brands and Products Marketing Mix (4Ps) Place Intensive distribution - convenient for consumers to access Extensive distribution networks in first-tier cities (Beijing, Guangzhou, Shanghai and Shenzen).

What are the values Master Kong created for consumers?

What value does Master Kong create for customers? Innovative products The leading innovator in the industry in terms of flavors, techniques and operational concepts. Transform the industry's "Made in China" image to be "Created in China". E.g. Introduced the classic braised beef noodles to the market in the early 1990s. The flavor has long been a favorite with Chinese people.

What value does Master Kong create for customers? Quality drinks Ready-to-drink (RTD) Tea Barley-flavored tea Healthy ingredients, natural and unconventional taste The release became an instant success.

What value does Master Kong create for customers? Unique lifestyle Tea drinking – Traditional Chinese culture Ready-to-drink tea -skip the brewing process -Healthy, yet more convenience -Adapt the traditional tea culture to modern lifestyle -Popular among new generation

How does Master Kong make its customers loyal and happy

How does Master Kong make customer HAPPY and LOYAL? Special customer experience Master Kong Iced Red Tea : - Young, Modern, Energetic image -Target customer : young generation - More open to new ideas Master Kong Iced Red Tea has an official website Interact with young customer

How does Master Kong make customer HAPPY and LOYAL? QR code, Funny Video, Fan meeting with stars Not only a ordinary drink – More fun

Master Kong’s Consumer Market

Master Kong’s Beverages : Serve a wide consumer base spread across geographies Young adults and health conscious consumers are targeted (16-35 year-old) Master Kong’s consumer market

Characteristics affecting consumer behavior Culture Rising consumer awareness about the health hazards of carbonated drinks - A shift towards RTD tea and juice. Surge in the health conscious population (E.g. Women )who prefer antioxidant property of RTD tea Master Kong’s consumer market

Characteristics affecting consumer behavior Economy Increase in disposable income in China Trigger the growth rate of RTD tea and Juice market Master Kong’s consumer market

Characteristics affecting consumer behavior -Product -Price - Package -Flavors

SWOT Analysis

SWOT overview STRENGTHS -Innovative -Broad Production and Distribution network -Long history and Good reputation -Massive advertising and promotional campaign -Large market share OPPORTUNITIES - Support from government policy - Advanced technology - Rising purchasing power of consumers -Huge potential market WEAKNESSES -Damaged brand image - Lower penetration in rural and lower tier cities THREATS -Fierce competition -Consumer’s taste is changing quickly -Cost of raw materials is rising

Strengths Innovative -The “New Taste for Traditional Drink” series were well-received by consumers. Broad Production and Distribution network - More accessible to consumers, larger flexibility Long history and Good reputation Massive advertising and promotional campaign Large market share SWOT analysis

Weakness Damaged brand image -The Master Kong’s mineralized water incident -Internet rumors Lower penetration in rural and lower tier cities SWOT analysis

Opportunities - Support from government policy - Advanced technology : reduce cost - Rising purchasing power of consumers -Huge potential market : rural area, bottled water market

Threats -Keen competition : similar products -Consumer’s taste is changing quickly -Cost of raw materials is rising SWOT analysis

Challenges in China

Facing the fierce competition in China, how can Master Kong maintain or increase it’s market share? How can Master Kong maintain their profit growth in the saturating market in first-tier cities?

Next step in China

Kong-Pep partnership -Purchase Pepsi Cola’s mainland business - Form a “strategic alliance” to beat competitor, Coca-Cola. -Both companies expand their soft drinks markets -Build a more diversified product profile

Expand it’s distribution network into the rural market The richest cities are nearing saturation Expand to rural market - next wave of growth. Current network : costly and inefficient to distribute products to the hard-to-reach rural outlets Next step in China