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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

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Country market analysis china

Country Market Analysis: China

Kristin Cookson

Catherine Graham

Lauren Nickel

Jen Parsons

Eddie Wehmer

China s tea market
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


  • 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


  • 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


  • 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


  • 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


  • 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


  • 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


  • 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


  • 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


  • Location

    • Urban populations are growing rapidly

      • Shanghai: 13 million

      • Beijing: 12.2 million


  • 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


  • 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


  • 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


  • 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