Cola Wars in China Case Study Essay
Cola Wars in China Ryan Criscione Alfred State College Cola Wars in China Wahaha Group was founded in 1987 and since then has become China’s leading soft drink producer. In fact, the company maintains a leading position in a number of product categories such as; water, milk drinks and mixed congee, and tea and juice drinks (Cravens, 2009). The Wahaha Group began as a children’s company and even though it is still considered one today, the company has really evolved into something much more.
Dominating product categories all across China and taking on consumer giants, this local company has displayed good management as well as company goals to get where it is today. Unlike many other Chinese companies of large size, The Wahaha Group maintains a solid cash position and no long-term bank debt (Cravens, 2009). This has allowed the company to enter multiple markets, The Wahaha Group specifically focuses to extend into food and beverage categories in which there was no dominate player (Cravens, 2009). This allows the company to take over these markets and establish itself as a dominate force in that particular category.
The size of the company has allowed it to make acquistions of other poorly run larger companies. In turn this benfits The Wahaha Group because it can be supported by geographic expansion and allowed Wahaha to produce locally in various markets (Cravens, 2009). Since Wahaha is a local company, their marketing strategy is much of the same. Wahaha’s dominate presence in China allowed the company to contact distribution companies and have those companies carry Wahaha products, much like Coca-Cola does. Wahaha has branded its name by maintaining a leading position in a number of different beverages categories.
This ensures that local consumers know who they are and how reliable they have become. The company does a fantastic job advertising and ranks in among the top 10 advertisers in China’s $11. 2 billion advertising market while being the only beverage company in the top 10 (Cravens, 2009). Coca-Cola trails Wahaha beverages considerably in the advertising market in China. 75% of Wahaha’s marketing budget was spend on television advertising in an attempt to build brand awareness as well as recognition. The rest of its budget focused on print advertising elaborating product benefits as well as promotions (Cravens, 2009).
Wahaha’s advertising strategy has targeted the mass market. The prices of Wahaha products were generally lower than those of competitors such as Coca-Cola. Wahaha continued to make its own branding advertising its product. Wahaha was the first among Chinese companies to use celebrity product endorsement to promote its products. Wahaha does a phenomenal job targeting its audience. The company focused its attention on the mass market, and not just the wealthier urban consumers (Cravens, 2009). This company strategy has contributed greatly to the company’s success.
Originally the company targeted mostly kids with milk and juice drinks. However, the target customers for soft drinks are in the 11-40 age range (Cravens, 2009). Since Wahaha had come out with its soft drink products it has allowed the company to advertise to a larger range as well as a bigger demographic. Coca-Cola has had to reposition how it advertises its products due to Wahaha’s growing success. Coca-Cola has had to consider options like lowering its prices and use more celebrities to promote its products. However, it took Coca-Cola a fair amount of time to react to the success of the local giant.
This is due to the fact that Coca-Cola has already made high profit in urban areas (Chan, 2006). In 2004 Coca-Cola felt the need to expand its market into rural areas in an attempt to maintain its market share in China (Chan, 2006). Coca-Cola then proceeded to open its market in about 100 small towns and gave refrigerators to retailers for free. Wahaha’s joint venture with Groupe Danone was an excellent decision for both companies. It provided a chance for Wahaha to obtain world-class production technology as well as protect itself from local and international competitors (Cravens, 2009).
The joint venture was more beneficial in Wahaha’s favor because it allowed the company to release Wahaha Future Cola with the help of Danone’s capital (Cravens, 2009). Wahaha was also able to introduce advanced production lines for bottling water, milk, and tea (Cravens, 2009). Both companies have seen its revenue and profits grow considerably since the joint venture took place in 1996. The joint venture prospered greatly until 2007 when the companies began to battle dozens of legal jurisdictions (Tucker, 2009). Danone accused Wahaha of setting up lucrative parallel businesses (Tucker, 2009).
This has resulted in Danone preparing to quit the joint venture in 2009. However, the dispute ended last year and now both companies continue to move forward with the joint venture still intact. Product Strategy Since evolving from a milk and fruit company back when the company was founded, Wahaha has grown into a local consumer giant. The company’s unique marketing and advertising strategy helps Wahaha maintain its leading position in many different beverage markets. Wahaha’s product strategy has evolved heavily into the soft drink industry, which dominates the beverage market.
By branding its product and establishing itself as a local company, Wahaha has gained awareness as well as loyalty from its consumers in China. The main strategy to Wahaha’s success previous to the entering the soft drink industry was to continue to extend its brand into the food and beverage categories in which there was no dominate player (Cravens, 2009). Competition Wahaha is faced with many different strong multinational competitors. Wahaha’s angle is to win over consumers by establishing itself as a local brand.
The initial takeover of Wahaha soft drink products in rural areas was the first step in attempting to take over the dominance of Coca-Cola who happens to be the world’s largest soft drink company. Coca-Cola continues to dominate in urban areas however, Wahaha has generated more awareness recently to attempt to gain an edge in those urban areas. Market Orientation Wahaha has identified its target audience as the mass market and not just the wealthier consumers. The company has proven this by setting its prices lower than its competitors. The soft drink industry targets consumers in the 11-40 age range.
This is where the bulk of Wahaha’s consumers come from. However, the company has made attempts to produce fruit and milk products to market to young children. References Chan, S. (2006). Future cola in china. Beijing: Berekly. Retrieved from http://are. berkeley. edu/~sberto/FutureCola. pdf Cravens, P. (2009). Strategic Marketing. (Adapted for Alfred State College, MKTG 6003). New York: McGraw-Hill Tucker, S. (2009). Danone to quit joint venture with wahaha. Hong Kong: Food & Beverage. Retrieved from http://www. ft. com/intl/cms/s/0/849e7eda-ad87-11de-bb8a-00144feabdc0. html