Nutrasweet in China-Sb Essays

Nutrasweet in China-Sb Essays Nutrasweet in China-Sb Essay Nutrasweet in China-Sb Essay -Case Study Analysis-| NutraSweet in China| Sandra Burga| MARKETING MANAGEMENT 658. 22 Professor Stephen Rapier Pepperdine University MARKETING MANAGEMENT 658. 22 Professor Stephen Rapier Pepperdine University I. History Back in 1994 NutraSweet’s Consumer Products division (CPD) considered entering the growing China market. Their intent was to take advantage of the growing Chinese market and expand their brand developing a new sector of brand followers. The CPD perceived three main opportunities: leverage the product brand, leverage marketing manufacturing competencies and capitalize on China’s post-Cultural Revolution. One of the enticing driving factor’s for NutraSweet (NS) was the low sugar consumption numbers in China, based on this perceived notion NutraSweet was posed with a couple of questions: Should NutraSweet enter the Chinese Market? If so, what will be the Risk vs. Profit opportunities? In addition, they also needed to consider their timing and strategy to enter the market. In doing so, they will have to carefully consider their Positioning and their Indirect versus Direct Distribution. NutraSweet assigned Eve Stacey a recent Harvard Business School grad, formerly of Ingredients Division, to head the project. According to the information provided for the case, Ms. Stacey was given only 3-months to prepare recommendations. There is no additional information provided on the case that tells us if Ms. Stacey was already familiar with the Chinese culture or if she had a good understanding of the market as it related to NutraSweet. What we know if that she sought the help of a company called SRG to do door-to-door interview of 200 Chinese consumers. Overall, this was a very small sampling of the Chinese market to be able to access the need. Back in the early nineties, NutraSweet’s Consumer Products ivision was responsible for tabletop sweeteners under the brand names of Equal ®, Canderel ®, and NutraSweet ®, brands already known to the US market. NutraSweet came about accidentally in 1965 when a chemist discovered it while working in a lab at Searle. Searle was a small pharmaceutical company later acquired by Monsanto. The Monsanto Company is a Fortune 500 manufacturer of performan ce chemicals, agricultural, food ingredients and pharmaceutical products. Headquartered in St. Louis, Missouri The laboratory accident that launched NutraSweet grew into a $1 billion dollar business for Monsanto. Because Searle was a pharmaceutical company, NutraSweet was initially marketed as an over-the-counter product, not as a food product. Monsanto consolidated the tabletop sweetener business during a reorganization period in which it faced many positioning challenges. In the United States NutraSweet was marketed as a mainstream product using a similar marketing strategy as Equal ® which had a low calorie sugar-like sweetness. In the European and Latin American countries the marketing was based around the concept of â€Å"lifestyle† consumption. In less developed markets it was marketed as a niche product for consumers with a medical need. NutraSweet consumer products sales by region in 1994 largely came from the large demand in the US with 58%, followed by Europe with 29%. As shown in the pie chart below, based on the small market share (4%) there seemed to be a great opportunity to expand into the Asia to increase the market share. II. Key Points A. Market Drivers and Growth Foreign Investors pumped billions into China’s economy back in 1994, the Chinese economy was booming. Citizens were spending 40% of their disposable income on food. This attractive fact seemed like a great opportunity for NutraSweet back then. Although expected to decrease with increasing cost of living, Monsanto was eager to enter the market. There was an emerging middle class with projected increase in purchasing power. NutraSweet saw an opportunity in the Chinese consumers’ infatuation with Western brands which represented: quality, freedom, excitement luxury. Multinational Corporations (MNCs) view China as: a set of distinct markets, culture, and tastes, regions varied by geography population with 3-key markets to explore: Shanghai, Guangzhou, and Beijing. B. Customer Analysis * Market Demographics China consumed 14 pounds of sugar/person versus 80 pounds of sugar/person in the US. This interesting fact posed the question, â€Å"How can we make this product attractive to a society where consumers for the most part are skinny and do not eat that much sugar? †. This presented a cultural challenge to tackle in the marketing process for Stacey and Monsanto. * Market Behaviors Chinese consumers spent little on housing and none on transportation to/from work, most used 40% of their disposable income on food. 20% of the 60 million (12 million) habitants owned 80% of the country’s wealth. The â€Å"Middle Class† was emerging and estimated to double in 2 years, meaning the target market would be as big as the US target market. In addition, as mentioned before, the Chinese consumers were obsessed with American products, fact that supported NutraSweet’s strategy. * Market Needs Values The primary distribution channels for NutraSweet were drug dispensaries therefore people perceived sugar substitutes as socially unacceptable. In addition, sweetness tolerance across China varied from region to region. Consumers saw no need for a tabletop sweetener since sugar was used mostly for cooking. Market Segmentation One of the strategies NutraSweet considered was to Market it as â€Å"food for a healthy lifestyle†. They saw an opportunity to expand their customer base through education about â€Å"healthy eating† (Yoshino, 1996). Their main target group was 25-40 year old women in the higher household income category. Other perceived users were predomin antly children and health/weight conscious individuals. C. Competitive Analysis Sweet ‘n Low was NS’s U. S. major competitor but â€Å"†¦the tabletop sweetener business was still fairly local with different competitors in different parts of the world. Part of their advantage was that the tabletop sweetener category was new to China. Part of their challenge was that sugar was inexpensive, infrequently purchased, and received little consumer attention. The question now was, if sugar was not consumed as much by the chinese, why would they consume a sugar-like substitute?. In the past â€Å"Healthful† drinks failed to catch on in China i. e. Diet Coke which failed in 1980’s. â€Å"The real competitors were other consumer product markets fighting for a share of mind and a share of discretionary income through an unbelievable media† (Yoshino, 1996). * The China Lure In 1994, foreign investors poured $81. 4 billion into China† (Yoshino, 1996). The GDP grew from $298 billion in 1980 to $508 billion in 1994, the 10% annual growth over next 25 years forecasted China’s economy to be worth $6 trillion dollars. The 60 Million consumer base was forecasted to double over the next decade. A more aggressive study predicted 150 million Chinese with purchasing power parity annual incomes of $18,000 by year 2000. D. Financial Analysis The average household income was $685/yr, the breakdown includes a $581 for a businessman, $420 for a factory worker and $213for an agricultural laborer. Hong Kong Was considered potentially more profitable than any other market in Asia, their business was less than $1 million due to social stigma. The average household income of 6 million inhabitants was $18,000 with an expected economy growing at 5% annually. * Taiwan A was a more developed market that could have served as a testing ground before entering China. However, Equal was rejected by major distributors and partially delisted. The average income was of $12,500 with a population of 21 million and a economy growing at 7% annually. E. Marketing Objective and Strategy Target Market The Main target group was 25 to 40 year old women in higher household income category. The perceived users were predominantly ch ildren and health/weight conscious individuals. Mothers in Guangzhou preferred it more than childless women * Positioning (Messaging) Getting goods to the market/consumer was a central challenge for MNC. NutraSweet leaned towards using a foreign agent to enter the market such as Inchcape, East Asiatic Co. and Simm’s. * Marketing Mix a) Product or Service Strategy The 4 F’s† of NutraSweet: FOOD, FUN, FAMILY, FOR YOU!. Tooth decay big problem in China. Sugar quality was poor (didn’t dissolve well) worms in their sugar! ) b) Consumer expectations 25% of Beijing’s consumers thought it would be an expensive item to be given as gift. 12% of Guangzhou consumers consider it as everyday item. 70% of consumers expect to find product in supermarkets c) Pricing Strategy The price decision had to balance low average incomes, the nonessential nature of the product, and white sugar’s low price with the need to position NutraSweet as a premium product that should not be directly compared to sugar. Pricing decision is important because of the multi-tiered distribution structure, NutraSweet needed to get to Chinese customers. d) Promotional Strategy 1/3 preferred sachet and 2/3 preferred table form, ? liked in jar format. Beijing: 1/3 thought packaging was too common or â€Å"clinical†. Shanghai (15%) Beijing(30%) saw product as â€Å"confusing† â€Å"not credible†. Most were skeptical about its use in relationship to gain weight. e) Distribution The primary distribution channels for NutraSweet were drug dispensaries in HK, typically people found sugar substitutes as socially unacceptable  as they relate to sick people. Their options were to explore multi-tiered distribution system OR build their own distribution systems OR use foreign agents subcontracting wholesalers and retailers. An option was to follow Equal’s strategy in the US and Abroad. The options included: marketing it as a mainstream product sold through retail food channels or marketed as a medical aid for diabetics and obese consumers. Consumed as part of everyday life in Europe and Latin America it was marketed as â€Å"healthy food† expanding customer’s base through educating others about healthy eating. F. SWOT Analysis * Strengths NutraSweet is a widely recognized brand name; it had flexibility in positioning their product. The Chinese market favored â€Å"Western† products. NutraSweet was already a familiar taste in already used Chinese products although it was not publicized. NutraSweets EPS has been steadily rising (1995 @ $6. 36) * Weaknesses Research conducted may not depict the Chinese culture accurately. Research conducted may not be a truthful representation of the action Chinese consumers will actually take. Management had a narrow focus view of NutraSweet’s possibility of success in China * Opportunities NutraSweet can be marketed as â€Å"food for a healthy lifestyle†. Chinese market is an untapped, growing market with a growing disposable income. NutraSweet can expand their customer base through education. China is a unique place with distinct markets, culture and tastes * Threats NutraSweet is a substitute to white sugar and is more expensive. Health concerns about the use of Aspartame in NutraSweet. Chinese consumers do not consume the same amount of sugar as the average person in the US. There’s competition against MNC’s wanting to enter a developing market like China G. Challenges * How can NutraSweet be attractive to a society where consumers for the most part are skinny and do not eat that much sugar? * Was choosing SRG to conduct their door-to-door interviews of 200 random costumers a good idea? * How can NutraSweet compete for consumer’s share of mind and share of discretionary income? * Shall NutraSweet be launched in Taiwan or Hong Kong instead of China? * Was NutraSweet priced and positioned appropriately for the Chinese consumers? How well prepared is NutraSweet to integrate themselves into the Chinese market (i. e. staff, management, understanding of Chinese rules)? Recommendation * Extend the test period to beyond 3-months and create a test market * Better cultural understanding: the management team could have continued marketing it as a medical aid for diabetics which was already culturally accepted * Investigate in depth existing com panies that did not succeed and learn from them * Tailor the packaging and messaging toward the Chinese Consumers. Or repackage it and detach it from the stigma * Educate consumers about the uses and benefits of NutraSweet for diabetics * Partner with companies who can use NutraSweet as their main ingredient instead of being a stand-alone name REFERENCES Yoshino, Michael and Knoop, Carin-Isabel (1996). NutraSweet in China (A), Cambridge: Harvard Business Review Koetler Keller. (2012). Marketing Management 14th edition. New Jersey, US