2. Executive Summary
Juan Valdez Colombian coffee company hired a marketing
consulting firm to create a marketing plan to analyze how to
bring their Juan Valdez Premium Coffee into the Chinese market.
Two decades ago, the idea of trying to sell coffee in China would
have been difficult to imagine. First of all, the dominant drink in
China was and still is tea and has been so for hundreds of years.
Second, it was much more difficult due to regulations and laws
to import coffee into China to make it a financially viable endeavor.
Fast forward two decades and everything has changed. China’s
coffee consumption growth rate is at 15% compared to only the
worldwide average being 2%. Combined with the huge population
of China at approximately 1.3 billion people, foreign companies
have the potential to tap into a huge market of hundreds of millions
of people. And since 2013, the Chinese government has made it
much easier to sell products in China through Free Trade Zones
located in China. These zones provide a much easier environment
for foreign companies to do business in China. On top of that, now
you have companies such as Transcosmos who create a gateway to
the China market via an end to end solution that covers everything
from exporting Juan Valdez Premium Coffee from Colombia,
creating digital marketing, to shipping the product to customers.
How do customers learn about Juan Valdez Premium Coffee?
Transcosmos partners up with Business to Customer platforms
such as Tmall Global, which enable international brands to
access the Chinese market without a direct presence in China.
Through Tmall Global, a company can setup a flagship store on
their platform where anyone can easily purchase the product
and have it delivered to their home in a short period of time.
Therefore, the timing is perfect for Juan Valdez to enter the coffee
market in China by using Transcosmos, Tmall Global and the Zhejiang
FTZ. Juan Valdez offers Premium Coffee from organic coffee beans.
They offer many tastes that can become the next big hit in China.
The following is the marketing plan that can help make this a reality.
3. 5, References
1. Chinese Market Analysis
2. Competitive Analysis 13
3. Marketing Plan
4, Conclusion
a. Political and legal Analysis
b. Economic Analysis
c. Cultural and social Analysis
d. Technological Analysis
a. Market Segmentation
b. Entry Mode
5
7
9
11
17
18
Table of Contents
c. Marketing Mix 20
22
23
5. 1.Chinese Market Analysis
a. Political and Legal Analysis
does have a strong intellectual
property protection component;
however, this is not well enforced
and often violated. China has strict
foreign exchange regulations.
Therefore, transferring money in
and out of the country will require
administration approval and/or
registration depending on the
amount of money and what kind of
transactionitis.Concerningtaxes,a
foreign company may be required
to pay taxes that are related to
china-sourced income . Also, the
company may be required to pay
taxes if there is licensing involved.
A new tax on overseas purchase
was implanted in 2016. It will affect
cross-border e-commerce as well
as individuals purchase via a cross-
border e-commerce platform.
Lastly, labor law compliance is
important for both foreign and
local companies who hire Chinese
in their companies.
As a part of economic and social
reforms in china, the government
decided to proceed with multiple
Free Trade Zones (FTZ) in the
country to test the effectiveness
of such reforms. Many companies
such as Transcosmos took
advantage of the competitive
Introduction:
The key components of the
chinese market analysis include
the political, legal, economic,
cultural, social and technological
aspects that effect the target
market. China is considered the
second strongest nation in terms
of military power and economy. It
also has the biggest population at
1,3 billion people and growing.
Political Overview:
Politically, the People's Republic of
China is a communist state. There
is only one political party in China.
The Chinese Community Party
(CCP) has been leading China
for the last 60 years. The current
Prime Minster is Xi Jinping. He has
been serving since 2013.
The Chinese – Colombian
relations have been limited for
some time until the opportunity
for improvement came in 2015
after a meeting between the
Chinese PM Li Kequang and the
President Juan Manuel Santos
initiated preliminary talks aimed at
a free trade agreement. This is an
important step for both countries
considering the fact that China
has quickly become Colombia’s
second largest trading partner
after the United States.
LegalOverviewforCompanies:
Legally, a foreign company needs
to establish legal representation
in China before it can distribute
and sell products. All foreign
companies must adhere to local
laws, however, the easiest way for
a foreign company to work in China
is through a Chinese distributor.
Regarding products, the Chinese
authority needs to license, certify
or register the products before
anything is sold in China. China
services given in these FTZ's and
this contributed to their success
in the region. The FTZ features
a a separate set of Arbitration
Rules issued by the Shanghai
International Arbitration Center
(SHIAC). This enables several
reforms favorable to FDI in the
FTZ, including lower barriers..
/ 5 /
7. 1.Chinese Market Analysis
b. Economic Analysis
Overview:
In 1978 China reformed its
economy, initiating market reforms
along partly capitalist lines to
become the world's fastest-
growing economy.
China moved from an investment-
intensive, export-led model of
growth, to a consumption- and
innovation-driven one.
In 2015, China had 6.9 percent
gross domestic product (GDP)
growth. This is one of the best
compared to some of the world’s
largest economies.
According to the IMF, it forecasts
that China will continue being the
biggest contributor to the world
GDP.
China has expanded economically
at a rate never before seen in
history. Through this expansion, it
has helped 800 million people get
out of poverty. China also was able
to accomplish all of its Millennium
Development Goals (MDGs) by
2015.
With a population of 1.3 billion,
the consumption accounted for
52.7 percent of China’s GDP in
2015. China is the second largest
economy and is playing an
important and influential role in
the global economy.
Chinese consumers are also
increasingly trading up from mass
products to premium products.
According to a Mckinsey study,
50 percent now seek the best and
most expensive products. This is a
significant increase over previous
years. Chinese consumers are
also becoming increasingly
sophisticated.
/ 7 /
9. 1.Chinese Market Analysis
c. Cultural and Social Analysis
Overview:
Known as a tea consumption
country, coffee drinking has a short
history in China. Statistics show
that in 2014 the overall average
cup of coffee per capita per year in
China is only 5 cups. In rural China,
there is a large population who has
never had a cup of coffee in their
whole life. For the total population
of China, more than 50% have
never had coffee in their life.
Geographically, the coffee
consumption happens mainly in
the cities, especially in Tier 1 or Tier
2 cities. Also, in larger cities like
Beijing, Shanghai and Guangzhou
the foreign coffee brands are
dominating the market. Local
brands such as UBC, DIO and
Hogood mainly supply the lower
tier cities.
Coffee drinking is more of a status
symbol than a habit that the
Chinese enjoy. Coffee drinkers
usually enjoy the image of high
fashion and being connected
to something exotic and new.
The young people usually enjoy
meeting in the coffee shop for
a casual business talk or taking
advantage of the atmosphere
that comes with coffee. The
coffee consumption has been
continuously growing for the past
decade, at an average rate of
15%, while the worldwide average
growing rate is only 2%. This
growth gives a great appeal for
foreign coffee brands to enter the
market in China.
As coffee begins to become
popular, more people are now
looking for a better tasting coffee
that is higher quality. In China, the
startupcoffeeshopsareusuallythe
option in big cities. These startups
are starting to take customers
away who normally would go to
Starbucks. These startup coffee
shops usually sell their coffee
through social media like WeChat,
a popular social network app used
by the majority of people in China.
Anothertrend occurring nowis that
more consumers keep a coffee
machine at home. Interestingly,
instant coffee is the preferred drink
because it is easy to prepare.
Simultaneously, e-commerce
is booming in China. People are
seeking high premium products
from overseas. One e-commerce
platform that is popular is Tmall.
Customers trust Tmall, compared
to other e-commerce sites such
as Taobao who is known for selling
fake products. The major coffee
companies that sell online are
Nestlé, followed by Illy, Lavazza
and Maxwell.
Average Cups of Coffee Per Capita Per Year
/ 9 /
11. 1.Chinese Market Analysis
d. Technological Analysis
Overview:
A country with 721 million Internet
users and one of the world's
largest and fastest growing
e-commerce market attracts
many companies to invest in the
e-commerce market. Chinese
online retail market hit 630 billion
US dollars of sales in 2015 which is
the world's largest and almost 80%
bigger that the US market. China is
also the leading country in mobile
shopping.
The social media and other
online peer channels become
a powerful channel for initiating
online purchases. That is almost
50% of the digital users who use
social media to get reviews and
recommend products before
placing the order.
Tmall global is China’s booming
cross-border trade channel with
a year over year turnover growth
of 179 percent. Tmall has more
than 5,400 foreign brands with
over 2,000 categories of goods
from over 53 countries. 80% of
these brands are first timers to the
Chinese market.
Number of Online Shoppers in China from 2006 to 2015
(in millions)
/ 11 /
12. Quarterly GMV - China Commerce Retail
(in RMB billions, for 3 months ended)
Cross-Border Retail E-Commerce Buyers in China
2014 - 2020
/ 12 /
13. 2.Competitive
Analysis
Overview
To help us to identify and evaluate the Juan Valdez
coffee idea, we use the SWOT analysis to understand the
strengths, weaknesses, opportunities and threats involved
in this project.
This process generates information that is helpful in
matching Juan Valdez’s goals, programs, and capacities to
the social environment in the Chinese market.
Through this analysis, we can avoid potential mistakes in
the future.
Strengths
1. Quality of the product: Juan Valdez belongs to the
National Federation of Coffee Growers of Colombia since
1958, selling excellent coffee, grown at high altitudes
on small peasant holdings, carefully picked, and wet-
/ 13 /
14. processed.
2. Reputation of the brand: Juan Valdez is the only
internationally recognized coffee brand that belongs
to coffee growers and Colombia is recognized
around the world for its excellence.
3. Global expansion: Is a growing brand captivating
the world with Premium Colombian coffee with
presence in 22 countries.
4. Traceability: The National Federation of Coffee
Growers, ensures that the steps and the costs
involved in each step of the coffee cultivation and
commercialization process are carefully recorded in
a verifiable manner.
5. Transparency: Of the economic benefits for
coffee growers in Colombia, presenting to them not
only the price of purchase but also other individual
costs and the final price sold to clients.
Weaknesses
1. Competition: Brands known worldwide such as
Starbucks and Nestle. Other brands, mainly from
South Korea, have made their entrance in the coffee
shop market in China. The main players are Cafe
Bene and Maan Coffee which have a different market
segment in comparison to foreign brands.
2. Climate change: Weather plays a big role in the
production of coffee that is affecting the price and
availability.
3. Publicity: Juan Valdez is still an unknown brand
in the Asian coffee market.
4. Colombia bean: Is not an Arabica bean, which is
the common type of bean produced in China
5. Export: Must export the coffee from Colombia to
China instead of having production farms in China.
Opportunities
1. Growing market: One of the fastest growing
coffee markets for consumption at 16% per year
over the last 10 years. China consumes more than
Australia.
2. Instant Coffee: Juan Valdez has instant coffee
as one of its products, which is the preferred type
in China.
3. Coffee culture: Is young but growing and
developing.
4. Arabica beans: Chinese prefer Arabica beans,
which is what they grow in China. Fortunately, the
Colombian bean is quite similar to this type of coffee
bean.
/ 14 /
15. Threats
1. Tea: Is still the #1 drink in China by 10 to 1.
2. Competition: There is competition from
Starbucks and Nestle. Both are growing coffee in
the Yunnan province where the majority of coffee is
grown in China.
3. Starbucks: Starbucks controls 60% of the coffee
market in China.
4. Own Industry: China already has its own coffee
industry for the last 100 years.
5. Imports: China imports most of its coffee from
Vietnam.
Conclusion:
For strengths, Juan Valdez's biggest strength is the
quality of its products making emphasis on the high
premium coffee produced in Colombia.
For weakness, Juan Valdez hasn't built such a strong
brand positioning worldwide yet. The amount of
consumers that are aware of the brand and its quality
is still growing at a low pace outside America.
For opportunities, coffee consumption in China is
growing rapidly, which is why in the future China has
the potential to become a major coffee-consuming
country.
For threats, China is a world leading tea consumption
country. Coffee forms just a small part in the food and
beverage sector so there are a lot of substitutes and
local competitors.
/ 15 /
17. 3.Marketing Plan
a. Market Segmentation
Overview:
The target market is people who
live in cities. They are between 20
to 50 years old. People who are
over 30 years old are more loyal
to a certain taste of coffee. They
appreciate the taste of the coffee
more than just the atmosphere of
a coffee shop.
Next, the target market must be
online shoppers. The McKinsey
iConsumer China 2016 survey
shows that nearly 1/5 of digital
consumers buy from e-commerce
vendors outside China.
Offline coffee shops are usually
located in a busy area near office
buildings. Therefore, Juan Valdez
is targeting people who are
educated with a college degree or
higher.
Nearly one-fifth of Digital Consumers Buy
from E-commerce Vendors Outside China
/ 17 /
18. 3.Marketing Plan
b. Market Entry
Overview:
China is a very attractive coffee
market that has been growing for
the last few years. We recommend
Juan Valdez to expand their
business and distribution network
to take advantage of this huge
market opportunity. However,
enteringanewmarketcanbeahigh
risk. Therefore, we recommend
using Transcosmos and Tmall
Global as gateway to access the
Chinese market. This will reduce
the investment and time allocated
for the legal process.
Transcosmos:
Transcosmos is an outsourcing
company providing entire end-
to-end solutions for foreign
companies.
Juan Valdez should use
Transcosmos as it includes
everything from E-Commerce
website construction and
operation to fulfillment (receipt
of coffee, picking, repacking and
shipping), customer care, Web
promotions and analysis. The
Juan Valdez coffee will be directly
introduced to the Chinese market.
The Juan Valdez coffee will benefit
from digital marketing, social
media tools and techniques that
are adapted to meet and attract
Chinese customers.
Transcosmos will guarantee
the best efficiency in terms of
international fulfillment and
logistics solutions that are one
of the fasted and most reliable in
China. This will enable Juan Valdez
to position its packaged coffee in
the best possible way.
The Tmall Global platform, leader
of the Business to Customer site,
partners with Transcosmos. This
makes the perfect combination to
launch and operate the packaged
coffee online in one of the most
dominant E-commerce platforms
for the Chinese market.
Tmall Global:
Tmall Global is one of China’s
biggest cross-border B2C
platforms. It enables international
brands to access the Chinese
market without a direct presence
in China. With Tmall Global,
orders have the possibility to be
China B2C
Market Penetration
/ 18 /
19. sent directly to the customers
from abroad, and the payment
can be settled in the preferred
currency. The goods are directly
sent to China via express delivery
or consolidated shipment and
distributed through Tmall Global
bounded warehouses. Tmall
Global’s cross-border shipping
specialists ensure the delivery of
the products within 5-8 working
days. Juan Valdez can also open
a Flagship store in Tmall global for
exclusively selling of the premium
coffee range.
For setting up the store, Juan
Valdez has to paya deposit toTmall
Global. There will be an annual
service fee, and Juan Valdez has
to pay a sales commission to Tmall
Global for every transaction:
(Commission Fee = ((Product
Price) + (Logistics Fee)) * Applicable
Commission Rate )
Also note that Tmall Global has a
tax of 11-12% subject to retail price.
Zhejiang FTZ:
Juan Valdez is seeking to sell
its premium packaged coffee
via cross-border e-commerce
platform, FTZ has made this
possible. Hangzhou cross-border
e-commerce comprehensive pilot
areawasestablishedinMarch2015.
In September 2016, Zhoushan FTZ
in Zhejiang, was approved.
Tmall Global will benefit directly
from this policy, because it
is located in Hangzhou. All
merchandises such as packaged
coffee will be traded through Tmall
Global. Then it will be received
and stored in the FTZ in Zhejiang
to be distrusted to its duty free
warehouses located in Hangzhou
or Ningbo.
Flow Diagram on how Transcosmos,
Tmall Global and the FTZ works together.
/ 19 /
20. 3.Marketing Plan
c. Marketing Mix
Branding:,
The brand aims to simplify
consumers’ decision making and
to reduce the risk when buying a
product. The Juan Valdez brand
will make focus on the coffee
producers in Colombia. Its logo is a
square symbol of a peasant coffee
grower who is called Juan Valdez
with his donkey, Conchita. The
slogan is “Premium Colombian
Coffee”. These elements help to
create a distinctive image on its
products based on the origin of
the coffee. In order to maintain
the recognition of the brand
worldwide, the logo will remain
the same and will be integrated
into every social media page to be
consistent across all platforms and
create brand recognition.
Marketing communications:
The corporate identity of the
company will be enhanced
through internal and external
communications of the values and
organizations philosophy.
Juan Valdez can support the
brand and its positioning with a
strong communications program.
This will help the consumers
become aware of the brand and
its positioning proposition using
social media as a tool for customer
loyalty as well as a channel of
communication using apps like
WeChat or Weibo.
/ 20 /
21. Product:
The product is “Premium
Colombian Coffee”, which is a
tasty and long lasting flavor for the
lovers of high quality coffee. The
coffee is produced in Colombia
with specific aromas and unique
preparation.
The final products will be with
coffee bean, ground coffee and
instant coffee. We have different
types of flavors from a special
selection of 100% organic coffees.
Depending on the preference,
Juan Valdez offers strong coffees
as well as more balanced flavor
coffees. To the right is a table of
some of the products they sell.
Pricing:
Pricing the coffee is a crucial step
especially in a new market. The
company price policy is to use
dynamic incremental pricing and
position the product as a premium
brand.
The Chinese market is at a unique
point where the desire to buy
coffee is growing, especially for
premium coffee. Our strategy is to
sell the Juan Valdez coffee through
Tmall Global. For setting the price
we recommend evaluating the
volume and sales generated as
well as the strategic decision of
moving the Juan Valdez premium
brand to one of the fastest growing
markets in the world. Currently,
the closest competitors at Tmall
Global (Starbucks, Illy, Lavazza and
Nestle) have prices that vary from
30 to 50 euro for 1 kg of coffee.
The price for Juan Valdez will be
higher than the typical price for an
international coffee brand.
/ 21 /
22. 4.Conclusion
Cross-border e-commerce is rising globally. Because of the size of the market, China shows a strong growing
trend for the future.
New policy such as the establishment of the FTZs, from which cross-border e-commerce will benefit, make it
possible and easier for Juan Valdez Premium Coffee to enter the China market, via the online platform, Tmall
Global.
Tmall Global is able to make this happen with the partnership with Transcosmos. Transcosmos will be greatly
involved in activities including assisting with legal document requirements, the launching of the online flagship
store, as well as building customer care. Tmall Global and Transcosmos provide a complete solution and service
for foreign companies.
Therefore, we recommend that Juan Valdez can now start to share their premium organic coffee with customers
in China thanks to a less restrictive and costly solution.
/ 22 /
