INTERNATIONAL MARKETING

Cola Wars in China

By:
-

Antoine Andrawos
Nasser Shouman
Sherif El Gendy
Youssef Ishak
ESL 31D Global Management Track

April 2011

Under Supervision of:

Prof. Dr. Ahmed A. Shalaby

AGENDA

Wahaha Development
Wahaha CEO
The World of soft-drink industry
The Players in China
Chinas soft-drink industry
Market Analysis
Wahaha group key strategies
SWOT Matrix
Action Plan
2

Wahaha Development
Year

History

1987

Wahaha Was founded, starting with bottled soda water, Ice cream and
stationery to the children .

1988

starting to focus on children segment with its nutritious drink.

(Children in China 200 MM).(make children happy)

1990

Revenue was RMB400 MM profits was RMB70 MM.

1991

Wahaha launched its fruit-flavored milk followed by wahaha milk

enriched with vitamin A and D.

1992-1994

3000 companies entered the market for childrens beverages.

1996

Wahaha launched its Purified water, and they became market

leaders (carport revenue MRB 1 B)
Joint venture with DANONE

1997

revenues reached MRB 2 B, the water share was MRB 500 MM and
mixed congee was 100MM.

1998

Wahaha launched its Future Cola

2002

Wahaha market chair in carbonated drinks reached 18% with revenue

of MRB 8 billion and profit of 1.3 billion
3

Wahaha CEO
Zong 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

The World of soft-drink industry

The term soft drinks refers to
beverages that do not contain alcohol,
And includes:
- Packaged water
- Carbonated drinks
- Juices and juice drinks
- Ready to drink tea
- Sports and energy drinks
5

The World of soft-drink industry

2000

Global soft
drink
consumption
320.2 billion
liters

170 billion
liters

53
%

Carbonated drinks

77 billion
liters

24
%

Packaged water

73.2 billion
liters

23
%

Other category which included

juices, ready-to-drink tea,
sports and energy drinks

The Players in China

Coca Cola
The Worlds
largest softdrink company
And fifth
largest food and
beverage co.
Its 2001
revenues were
US$ 20.092
billion with a
net income of
US$ 4.969
billion

Pepsi Co

Nestle S.A

Group Danone

The fourth
The worlds
largest food and largest food and
beverage
beverage co.
company in the
world

Ranked sixth in
the global food
and beverage
industry

Its 2001
revenues of
US$ 26.935
billion including
beverage
revenue and
profit of US$
10.44 billion
and US$ 1.678
billion

In 2001it had
revenues of
US$ 14 billion
with net income
of US$ 127.7
million

Its 2001
revenues were
US$ 56 billion
with a profit of
US$ 4 billion

Chinas soft-drink industry

Year

Soft Drink
output
In millions of
tons

Carbonated Drinks
output
In millions of tons

Carbonated
Drinks as a
percentage of
total soft
Drinks

1994

6.29

3.14

50 %

1995

9.82

5.21

53 %

1996

8.84

4.29

49 %

1997

10.69

4.92

46 %

1998

12.00

5.40

45 %

1999

11.86

4.27

36 %

2000

14.91

4.62

31 %

2001

16.69

4.57

27 %

Chinas soft-drink industry

1980s multinational enter into the Chinese market
Annual growth 21% for last 20 years
Annual 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 2001
Total revenues exceeded RMB 40 billion in 2000
Soft drink become a regularly consumed product
Soft drink industry developed from carbonated drinks in 1980s
to packaged water in 1990s to tea in 2000s
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Market Analysis
Wahaha

Coca Cola

Pepsi

- Positioning

Health, wholesomeness,
happiness, quality and
reliability.

Think local, act

local and leverage
global.

Youth people.
(popular
entertainers)

- Market Chair
01

14%

42%

23%

carbonated
drinks, juice,
sports drinks,
water.

Carbonated drinks,
sports drink, tea,
juice, and water.

- Target markets Milk drinks, packaged

water, carbonated drinks,
tea, juice drinks, and
canned food and health
care products.

10

Market Analysis
Wahaha
- Product

- Price

Coca Cola

Pepsi

Future Cola
Modified taste for
Chinese people
(more sweet &
strong)

Coca Cola
(classic, diet, sprite,
Fanta)
Same global taste

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

Lower RMB 7/Unit

case

Same

Same

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Market Analysis
Wahaha
- 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

Coca Cola
-85%

distribution
penetration in cities
-150 cities > one
million ,then >0.5
million
-Power relation with gig
distributers in cities
(chain stores &
supermarkets)
- 10,000 sales force
- week present in rural
areas

Pepsi
-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

12

Market Analysis
Wahaha
- Promotion

-Use TV advertising to build brand

awareness (focusing promotion budget
on CCTV news channel during world
soccer cup)
-Exclusive sponsor CCTVs spring
party
-Spent RMP34 M in Future Cola launch
-Outdoor adv., point of sale adv.
-Use wall advertising
-Travelling film shows in villages
-Use celebrities, slogan banners on
roads.

Coca Cola
-Spent

$19 M in 2001
-Advertising campaign on
CCTV.
-Sponsor Celebrities (Pop
singers), Beijings victory to
host 2008 Olympics.
-Change the pack design to
host Olympics
-Use traditional symbols.

13

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 appetite
They 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.

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SWOT Matrix
Strengths S

IFAS
EFAS

Opportunities O
O1 Maine cities in China
O2 Similar culture countries
O3 Rapidly growth of non carbonated softdrinks
O4 MENA Market

Threats T
T1 Presences of Multinational Co.
T2 Low barer of entry
T3 Power of substitute

Weaknesses W

S1 Understanding Chinese culture diversity

S2 Relationship with distributers in rural
areas
S3 Joint venture (DANONE)
S4 wide range of products
S5 68 production line over China
S6 R&D
S7 Finial position

W1 Weak attendees in main cities

W2 Sales force

SO Strategies

WO Strategies
overcome the weaknesses by market
development O2 and O4

- Market development
- Market Penetration
- Product Development

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

15

Action Plan
The action plan will cover two
points
1. Protect and maintain their position
in the carbonated-drink market and
tackle the rural market
2. Steps should taken next with
Wahaha Future Cola and the
carbonated drink market.
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Action Plan
Protect and maintain their position in the
carbonated-drink market and tackle the rural
market

Strategy

Actions

Time
Boundary

Protecting &
Maintaining
leading
position in
rural market

Increase marketing activities in rural

areas
(sponsor for local events & ads)
offering bounce system to maintain
distributers loyalty

Q1 2003

Market
penetration

Tackle main cities Beijing, Hong

Kong, where Wahaha have good
reputation
Promotional campaign

Q2 2003

Q1 2003

Every quarter

17

Action Plan
Steps should taken next with Wahaha Future
Cola and the carbonated drink market.
Strategy

Actions

Time
Boundary

Expand in neighbor countries where

Market
development
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 existence

Q4 2003

Product
Prepare new production line for nondevelopment
carbonated soft-drinks
Start study to produce alcoholic
drink Beer

Q3 2003

Q1 2004
Q1 2003

Q3 2004

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Thank You

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