Should NutraSweet pursue entering the Greater China market? How should NutraSweet do this?
NUTRASWEET IN CHINA
PROBLEM STATEMENT
Should NutraSweet pursue entering the Greater China market? How should NutraSweet do this?
SWOT ANALYSIS
Strengths
) NutraSweet is an artificial sweetener that is one of the most widely recognized brand names in the United States and in the world.
2) NutraSweet's earnings per share is $ 6.36 and with huge capitalization and investments in diverse products.
3) Stacey has the approved budget of $ 500,000 to market NutraSweet in China.
4) NutraSweet has the flexibility on how to position their product in terms of functionality, either as sugar substitute or health product for diabetics.
Weaknesses
) The research conducted towards the Chinese consumers may not truly reflect the real sentiments of the consumers towards NutraSweet
2) NutraSweet has not decided on building its own distribution system and may rely on foreign agents for distribution.
3) NutraSweet is more expensive than ordinary white sugar.
Opportunities
) China is a big market and can provide higher profitability to the company.
2) China is the second or eighth largest economy in the world; depending on how it was gauged.
3) There is a perceived consumers' infatuation with Western brands.
4) Chinese maintain healthful lifestyle so the potential for NutraSweet to launch their product in China is strong.
Threats
) Sugar is a common household purchase as a sweetener and has been part of Chinese households for decades. Culture dictates that there might be difficulty in replacing traditional use of sugar with NutraSweet.
2) The Chinese market is so diverse and it is difficult to come up with a general characteristic to define them.
3) Artificial sweeteners are unencumbered by history of skepticism for saccharin and potential health hazards.
4) There is difficulty in attracting and retaining local employees and as such, NutraSweet is having doubts in investing into training their marketing and sales personnel for fear that the employees would not stay long in the company.
5) There are only very few foreign agents that operate in China.
6) Sugar use and consumption levels differed among 3 key markets - Shanghai, Guangzhou, and Beijing.
7) Arthur Andersen survey in China showed that most joint ventures from food and drink were not profitable.
8) Most MNCs in China are unprofitable despite substantial growth.
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4) There is difficulty in attracting and retaining local employees and as such, NutraSweet is having doubts in investing into training their marketing and sales personnel for fear that the employees would not stay long in the company.
5) There are only very few foreign agents that operate in China.
6) Sugar use and consumption levels differed among 3 key markets - Shanghai, Guangzhou, and Beijing.
7) Arthur Andersen survey in China showed that most joint ventures from food and drink were not profitable.
8) Most MNCs in China are unprofitable despite substantial growth.
9) Majority of the Chinese are considered "flat-bellied" and don't see the need for a diet regimen.
0) The Chinese culture also dictates that they are not that concerned with their teeth, hence they don't have that fear of tooth decay.
OPTIONS
) The company can postpone entry into the China Market.
a. Pros
i. The company will have more time to thoroughly evaluate the market.
ii. The company can study the experiences of the other multinationals, especially its competitors, and apply it to future product launches.
iii. Resources will not be wasted should the venture prove unsuccessful.
iv. The company will not be exposed to political risk and corruption, and difficulty in product distribution.
b. Cons
i. Delay in establishing presence may provide opportunity for competitors to establish themselves as the first mover,
ii. If competitors are already present by the time they enter the market, the company may not be able to immediately capitalize on the Chinese preference for the top brand.
iii. The table top sweetener is a new category, and provides greater opportunity for the company to establish itself as the number one.
iv. The company will not be able to tap the 60M middle class, a large potential market comparable to the US market.
v. The company will not be able to take advantage of the increase in the purchasing power of the Chinese.
2) The company can enter the Greater China market as a niche product for consumers with a medical need.
a. Pros
i. The successful experience in establishing medical awareness in Hong kong may be applied to the Greater China Market.
ii. Entering the Greater China market through the three key cities will provide a better knowledge of the overall Chinese market.
iii. A natural market consisting of diabetics and obese customers already exist.
iv. Hospital stores and drug dispensaries do not have the bargaining strength that retailers have.
v. Product information campaigns will be facilitated by health professionals who will easily understand and appreciate the product's benefits.
vi. Promotion to medical professionals through associations will not entail as much cost as a nationwide mass market campaign.
b. Cons
i. The Chinese tend to be slim and had historically not been preoccupied by tooth decay.
3) The company can enter the Greater China market as "food for a healthy lifestyle"
a. Pros
i. The positioning echoes its global positioning, thus may appeal to Chinese consumers' infatuation with brand power and American heritage.
ii. The company can capitalize on the Chinese preference for a healthful lifestyle in promoting the product.
b. Cons
i. The product might be directly compared to sugar which has low cost.
ii. The Chinese don't eat much sugar and maintain a healthy lifestyle, and so may find the product nonessential.
iii. "Nonsugar sugar" was foreign concept to the Chinese and thus it would prove difficult to educate the market.
iv. Research showed that there was really not a healthy product company that was doing well.
RECOMMENDATION
The group chose option 2: the company can enter the Greater China market as a niche product for consumers with a medical need.
The company cannot delay its entry in the China market, especially with factors such as an average of 10% economic growth, a quickly emerging middle class, and a high possibility in consumers' increase purchasing power. Postponement of entry may mean higher costs in the future and although the company will not immediately profit from the venture, research showed that companies who entered the market 5 to 10 years ago were doing best. The knowledge gained from market entry will allow NutraSweet to hone its future strategies.
SHORT-TERM
The Chinese consumers' attraction to brand names, especially the number 1 in any category gives NutraSweet an opportunity to establish itself as a first mover in the medical aid products under a new category of sweeteners.
The company will launch a product information campaign for medical professionals and will also tap their associations. Associations of diabetics and obese consumers will also be tapped. The company will focus on relationship building with the medical industry. Since poor dental health is a problem in China, the company may also create an awareness drive on the ill effects of sugar on the teeth to lay the foundation of need awareness.
The product will be packaged in sachet form with global brand and American image prominent on the sachet to appeal to the consumers' preference for American brands. The company will capitalize on the convenience of bringing the sachets anywhere with you.
The medical industry will be given free samples of the product. The doctors will taught to promote daily use of the product, with sweetening of milk and coffee or hot drinks as one of the more common purposes. Consumers will be taught to use the product in cooking through the provision of free recipe booklets and cooking demonstration classes.
The product will be distributed in the three key cities of Greater China, namely, Guangzhou, Shanghai, and Beijing, where the medical industry is more developed compared with the other cities. The company will create its own distribution structure. The product will use the distribution channels of hospital stores and drug dispensaries. Since the focus is on niche marketing, the product will still be sourced from the U.S. plant.
LONG-TERM
The long term goal will be to mass market the product in Hong Kong and Taiwan, and use the learnings from those markets to penetrate the market Greater China. Establishing distribution networks in the two countries will be easier, given the favorable business environments.
In Hong Kong and Taiwan, the product will be repositioned as a healthy family lifestyle food, targeting the affluent, health and weight conscious consumers. Aggressive promotion will be pursued, such as print and media ads, and the employment of product endorsers, and store promotions. Consumer awareness and education will be the focus of the campaigns.
