Marketing Hero in China - MengniuGroup Shenyang:Fung 1072373 Jeff 1051800Eric 1172551Olivia 1124839Lan 1083401

Background of Mengniu

Founded in 1999 Based in Inner Mongolia CEO – Mr. Niu Gensheng

worked at Yili for 17 years and brought experienced management team with him from Yili

23 production bases Annual production – 5.5

million tons

Background of Mengniu Leading dairy product manufacturer in China extraordinary growth and expansion in 8 years

time (from no.1,116 to no.1 in the market) 35% of liquid milk market share (2007) Competes with Yili and Bright Dairy & Food.

The three companies controlled approximately 60% of the market

http://www.youtube.com/watch?v=4r85CytIT1Q

Strategies of Mengniu Strengthening the market share Exploring and developing new markets Strengthening raw milk supply base Developing effective secondary brand names Developing a comprehensive portfolio of dairy

products Expanding production capacity Continuing to strive for employee and

management excellence

Products of Mengniu

Ultra-high-temperature (UHT) Milk

Milk Beverages

Products of Mengniu

Yogurt

Ice cream Other Dairy Products

CompetitiveStrengths of Mengniu

Steady supply chain International production system Continuously emphasizing R&D

initiatives Government program that promotes

consumption of dairy products for their health and nutritional benefits

Discussion Time (5mins)1) How did Mengniu manage to establish a good

brand image among Chinese consumers? Or what initiatives in marketing (promotions

and public relations) has Mengniu taken to promote its brands and products?

2) Which one is a better approach to managing products and growing your business in China, diversification strategy or a focused strategy? How about brand or product extensions?

Question 1

How did Mengniu manage to establish a good brand image among Chinese consumers?

Or what initiatives in marketing (promotions and public relations) has Mengniu taken to promote its brands and products?

Analysis for Q1 4P Analysis

product Golden brand name: eg. ‘Pure’ milk — 純牛奶 ‘Good morning’ milk — 早餐牛奶 ‘Good night’ milk — 晚上好牛奶 ‘Whatever’ ice cream — 隨便冰淇淋

product

Differentiation: Flavor Type Size

build greater loyalty and repeat purchasing by considering customer needs and wants

http://image.baidu.com/i?ct=503316480&z=0&tn=baiduimagedetail&word=%CC%D8%C2%D8%CB%D5&in=26902&cl=2&cm=1&sc=0&lm=-1&pn=18&rn=1&di=2472199100&ln=513

price

Discount price= company expected price

More sales promotion

Attract customers

place

Supermarket： package besides single product

Convenient to householdExpand the purchasing amount

promotion Cooperator/supplier : SHEN ZHOU V Spacecraft NBA BOAO Forum for Asia Fashion creator : Super girl Fashion follower: famous spokesman Charity: rural schoolBring higher brand value

Chinese astronaut special-purpose milk

the only NBA designated milk supplier

Official Cooperator of BFA

Fashion creator

Super girl

A big competition among girls. The champion can obtain a contract to be a new star.

Fashion follower

Charity in rural school

Question 2 Which one is a better

approach to managing products and growing your business in China, diversification strategy or a focused strategy? How about brand or product extensions?

Competitor Most competitive brand: “Yili” “light”

Foreign brand has withdrew from Mainland market:

Danone ( France) Parmalat (Italy)

Definition of Diversification

Diversification is a form of growth marketing strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets.

New Markets and Products

Exploring and developing new markets for our products

Developing effective secondary brand names

Market

Old market: Beijing, Shanghai, Shandong, Heilongjiang, Jiangsu and Guangdong.

New mainland market: Center China, southwest of China and northwest of China.

New overseas market: South Asia, Russia, Japan and Korea.

Definition of Brand extension

Brand extension is using the leverage of a well known brand name in one category to launch a new product in a different category

It is a new product.

It should use a well known brand.

The brand should have leverage with customers of the new category.

Extension or not? Advantage : Expedite the position of new

products Reduce the risk and the cost to

enter market risk: customer can understand,

accept and trust or not………. cost: to build a logo, to package,

to promote…… Strengthen the core brand

Extension or not? Disadvantage: Implication phenomenon Example: “Parker pen” Trade-off relationship Desalt characteristic of core

product

Parker’s fault Park is a top grade produce, it is a

symbol of status. People buy Park not only to write, but to show their status. But, in 1982,the new manager made a wrong decision, Park started to contest low grade market. It impaired the Park’s image as “the king of pens”. Two years later, Park still cannot enter the low grade market, what was worse, Park lose much of the top grade market shares.

Choose the right opportunity to extend

Extension product have much similarity with the core brand

Product extension is ineluctable when all the competitors have done it.

Costumers need more choices

Discussion Time (5mins)3) What are the advantages and disadvantages

for domestic brands vs. foreign brands?

4) Given the mounting competition and increasing number of brands, how to position and build a brand in China to grow your business?

Question 3

What are the advantages and disadvantages for domestic brands vs. foreign brands?

There are mainly two types of Chinese companies

State-owned enterprise: (E.g. SINOPEC, Bank of China, China

Mobile) Non-State enterprise: E.g.联想 (Lenovo) 李寧 (Li Ning),吉利汽車 (Geely Automobile Holdings

Limited)

Advantages of domestic brands:

-Monopoly (state-owned company) Foreign companies are difficult to enter

the market that domestic company monopoly in those industries.

(E.g. Banking, telecommunication)

-Government support (state-owned company)

To build a good relationship with the local government is essential in China.

It affects whether the company can operate smoothly

-Familiar with local culture and business environment

(state-owned and non-state company)

Local companies are familiar with what

Chinese customers’ Behavior

-Lower production cost (state-owned & non-state company)

Cheap labor cost enables products to

sell at a lower price than foreignproducts

Disadvantage of domestic brands:

-Bad reputation (state-owned & non-state company)

Chinese milk scandal damaged thereputation of China's food exports.

-Low quality product (non-state company)

Local companies lacks of skills in controlling merchandising, production process and product control

-Lack of social responsibility (state-owned & non-state company)

Entrepreneurs in China are much profit-oriented, product safety are less concerned.

-Lack of financial management (non-state company)

Increasing price of factors ofproduction causes bankruptcy of

manycompanies

-Lack of Research and development (non-state company)

Many Chinese companies do not have a

strong financialsupport and technology to have

researchand development of new products.

Successful examples of domestic brand

Sinopec (China Petroleum and Chemical Corporation ):

It is one of the Fortune Global 500 enterprise in the

worldIt is the major petroleum companies in ChinaBusiness covers nearly all aspects of the oil

industryEarning RMB 1,076.4 billion in 2006

Successful examples of domestic brand

Geely Automobile (吉利汽车 )

It is one of the TOP 500 enterprise in China. Earning about HK$ 0.315 billion in 2007Good Research and development allows self development

ofautomobile.Geely was the first Chinese automakers present at theFrankfurtMotor Show in 2005.Geely sells its products in some developing countries and

isnow planning to enter U.S.A and Europe.

Advantages of foreign brands:-Good reputation in customers’ mindForeign brand are recognized as

trendy,advanced and high quality by Chinesecustomers

-Advanced technologyForeign companies are able to

developnew products because they have

goodresearch and development.

-Better managerial skillForeign companies are more skillful

inoperating their business in a properway

Disadvantage of foreign brands-Unfamiliar with local culture and

business environmentForeign companies are less understand

on Chinese

-Difficult to built good relationship with Chinese government

It is essential to get permission fromthe government before they can

enterChina.(extra cost paid to local

government)

-Unfamiliar with the lawsE.g. It is delocalize for a company to enter

contract with the county government.在中國与縣級以下地方政府簽訂的合同沒有法律效力如不了解中國法律，只听信村長或地方政府領導人的話簽合同，則盈利好的企業也有可能在一夜之間倒閉

Tips to build guanxi with Chinese

-The best way to strengthen a guanxi network is to stay connected.-Send small gifts or ask for small favors to keep a relationship active.-Host an occasional get-together.-Remember the major Chinese holidays and send greetings.-Get to know your colleagues’ outside interests and find ways to support them, like getting tickets to a sporting event or concert.

-Communication problemsIt remains a significant languagebarrier betweenChinese and Western companies.Mutual linguistic understanding canoften be lacking.

-Fake Products ruin imageForeign brands are usually becometarget for others to imitate theirbrand name and productsAlso, companies have to cost a lot

toprotect their intelligence property

Foreign companies who fail in China

Reason: Bad Guanxi with the government香港最大的賣鐵公司──耀昌企業，在香港經營賺到十几億元，但轉向中國大陸發展后， 3、 4年間宣告破產。香港中小型企業聯合會會長佘繼標解釋說，中國大陸以前是官員張口要錢，現在是巧立名目收費。不同政府部門根据不同的規則堂而皇之找你要錢，這些規定嚴格來說都是違法的，但你又不得不給，否則便會面臨停工的下場。佘繼標苦笑道： "他們幫不了賺錢，但可以幫你停工。 "

Reason: Unfamiliar with the Chinese consumers

Google usage is far behind BAIDU in ChinaGoogle doesn’t satisfy Chinese BAIDU is a Chinese based search engine.People use BAIDU because of the MP3 searchfunction and other factors that Google treats

assickness factorsGoogle must get the local management team

inplace, delegate authority to them, and

localizeservices

Question 4 Given the mounting

competition and increasing number of brands, how to position and build a brand in China to grow your business?

Positioning Marketers try to build an image or

identity in the consumers’ minds for its products

Positioning is a relative competitive comparison their product occupies in a given market as perceived by the target market. (Perceptual Map)

Tips : Position should not be too crowd

A Brand Should Be… Help consumer to

identify & distinguish from competitors

Consistent Image Brand Personality

( Associated with Human Characteristics)

Unique

For the New China The General Market is too crowded No company can serve the whole

economy well choose a market segment which is

profitable (serve the niche) Economic Growth People have

more $ to spend Brand can be position in a higher

class (higher price)

Case Study : Milk Deluxe 特崙蘇

Milk Deluxe 特崙蘇 Sub-Brand of Mengniu Meaning in Mongolian is “Gold Medal Milk” Deluxe Reflect social status Selling at RMB$7/pack which is the 2-3

times of the ordinary Mengniu Smoother, Taste Better High Nutrition (Protein 3.3g/100ml ,higher

than national requirement by 13.8%)

Milk Deluxe 特崙蘇 First one to enter/open the High-end Milk

Market Best Geographical Location for Production High Quality Control (Satisfactory Results of

Testing of Melamine on 16/09/08 by HK Centre of Food Safety)

Award of New Product Development at the 27th IDF International Dairy Conference

The Best Lifestyle Brand in China中国生活方式最佳品牌

Production Line

Consumer Profile Mid – High Income

Class Yuppies/Chuppies (the

young generation of Chinese yuppies)

RMB$5000-RMB$9999/month

Enjoy Life Own Life Style Concern on their

Health

Brand Image

High Class Healthy High Quality Relaxation High Quality of Life

Positioning High Quality & High Price

Integrated Marketing Communications – Tools For Branding

Printed Advertisement

- Focus on Lifestyle- Successful Life- Concern Less on

Health

TV Advertisement

http://hk.youtube.com/watch?v=cN0CL3oPZxA

Integrated Marketing Communications – Tools For Branding

Web Site (Separate from Mengniu)

Customer Hotline

Integrated Marketing Communications-Online Community

Integrated Marketing Communications

- Sponsor Travelling TV Program

Integrated Marketing Communications

-Packaging

Increase Brand Loyalty-Membership Scheme

Member earn points by purchasing their product

Use the points to Redeem Present

Increase Brand Loyalty-Health Network

A health centre operate by Milk Deluxe in Beijing

For Members Gym Aerobics Yoga Hip Hop Dance Boxing Dance

Learn from Milk Deluxe to Build up Brand in New China

Serve the Niche Market (Profitable & Require Less Resources )

Know the Market ( Catch the Rising Chuppies)

Well Established Parent Brand Reputation (Mengniu)

Let the consumers to involve in your brand

increase Brand Loyalty (e.g Health Network + Membership

Scheme)

Learn from Milk Deluxe to Build up Brand in New China

Good IMC (Tools of Branding) - Online Community (Interactive

Platform allow users to exchange their opinions on different hobbies)

-Sponsor Relevant TV Program (Easier to access the target customers)

Customer Oriented (Customer Service Hotline)

First Mover Advantage

The Tainted Milk Crisis 17th September, 2008 China government announced 22 milk

companies had produced melamine(三聚氰胺 )-tainted milk The suppliers added melamine to the milk formula to

artificially inflate the reading for protein levels Several thousand babies in China are seriously ill, having

suffered acute kidney failure Reputation of Chinese milk market was plummeted Estimate Milk sales drop from 131 billions last year to 45

billions Foreign countries restrict Chinese milk to import

Shares in Mengniu Dairy tanked nearly 66 percent to a 33-month low of HK$6.85, dropped from its closing price of HK$20 before the event

The Tainted Milk CrisisMengniu’s response: All poisoned product have been

removed from the store and destroyed Other products were cleared of

melamine contamination in government tests

Strength the examine management Apologize for the incident and any

inconvenience caused to the public Take response for the kidney failure

patients

The Tainted Milk CrisisRecommendation:

Introduce business ethic Strengthen the quality control Invite 3rd party to hold independent

examine for the product Control the suppliers Reverse the reputation

The Tainted Milk Crisis

Opportunities:

Small companies are fail to survival Large company like Mengniu can

increase the market share by acquire the small companies

Entry barriers to new companies has been enhanced because the quality examine is strengthened by the government

Thank You

The End