15. i. China market overview
1. Food/Beverage market overview
Chinese revenue on food in 2016 totals to $10893. The annual
growth rate of revenue is predicted to be at (CAGR 2016-2021)
of 22.7%which turns to a market volume of about $30302 in
2021. The level of user penetration stands at 12.2% but is
predicted to be at 21.2% by 2021. The average revenue for each
user is stated to be at $79.16. A global comparison indicates
revenue generation in china as to be $10893 in 2016.
b. Economy
China is rated second after the United States among the largest
traders with EU. The trade volume is at $570 billion in 2015.
The greatest challenge is the anti-dumping policy that is
enforced by the European countries. This calls for consideration
of Chinese economic diplomacy as well as a positive a positive
trade relation. United Kingdom for instance, has a considerably
large trade deficit with china and considers direct foreign
investment in china rather than trade and supports trade
liberalization. France and Italy have a trade deficit vis-à-vis
china of 10 billion Euros and 18 billion Euros respectively
which makes them a strong opposition of letting china have
MES.
China relies on world trade organization protocol in pursuing
the MES. China has pursued the goal through lobbying and not
negotiation. Other European countries have the fear of china’s
retaliation on a failure to obtain MES. Further, China may
consider closing part of its domestic markets to foreign
competitors. There may be a selective pressure specific to
industries by china engages with the international community
through economic diplomacy.
c. Competitors
3. Whether or not the food safety law will be able to put an end
to China’s food scandals remains to be seen, but regardless, the
increased demand for foreign food imports brought on by
16. domestic food scandals is expected to grow. Foreign food
imports have annually increased 15 percent in recent years, and
the amount of food imports has more than quadrupled in the last
ten years. By 2018, China is expected to become the top
importer of foreign food products, with the total value of food
imports set to reach RMB 480 billion (US$77 billion). Edible
vegetable oils, cereal and milk products account for roughly
half of all food imports.
3. Shanghai organic farm stores are growing in popularity, as
more people worry about contaminants in their food. The
Mahota is a leading organic food store in Shanghai, very
popular with the Shanghai expat community.
d. Demographics
Age structure
0-14 years: 17.1% (male 126,732,020/female 108,172,771)
15-24 years: 13.27% (male 97,126,460/female 85,135,228)
25-54 years: 48.42% (male 339,183,101/female 325,836,319)
55-64 years: 10.87% (male 75,376,730/female 73,859,424)
65 years and over: 10.35% (male 67,914,015/female
74,205,210)
Dependency ratios
total dependency ratio: 36.6%
youth dependency ratio: 23.5%
elderly dependency ratio: 13%
potential support ratio: 7.7%
Major cities - population
Shanghai 23.741 million; BEIJING (capital) 20.384 million;
Chongqing 13.332 million; Guangdong 12.458 million; Tianjin
11.21 million; Shenzhen 10.749 million (2015)
1. The largest group of population in China would be people
aged from 25-54, which is also the group of people considering
health food the most. So we decide to choose 25-54 years old
17. people as our target customer segment.
1. We choose Shanghai to be our place to expand our business
because as an international city of China, Shanghai has the
highest population of 23.741 million. It is a global financial
centre, and a transport hub with the world's busiest container
port with highest rate of adaptation to foreign cultures.
1. Explosive growth of China’s emerging middle class has
brought sweeping economic change and social transformation—
and it’s not over yet. By 2022, our research suggests, more than
75 percent of China’s urban consumers will earn 60,000 to
229,000 renminbi ($9,000 to $34,000) a year.
1. The evolution of the middle class means that sophisticated
and seasoned shoppers—those able and willing to pay a
premium for quality and to consider discretionary goods and not
just basic necessities—will soon emerge as the dominant force.
To make it easier to understand, we now call consumers with
household incomes in the 106,000 to 229,000 RMB range upper
middle class. In 2012, this segment, accounting for just 14
percent of urban households, was dwarfed by the mass middle
class, with household incomes from 60,000 to 106,000 RMB. By
2022, we estimate, the upper middle class will account for 54
percent of urban households and 56 percent of urban private
consumption. The mass middle will dwindle to 22 percent of
urban households
1. Chinese Culture
1. Hofstede Model
i.
i. Power Distance
2. At 80 China sits higher, it believes inequalities amongst
people are acceptable. There is no defense against power abuse
by superiors, and people are influenced by formal authority.
They should not have aspirations beyond their rank.
i. Individualism
3. At 20, China is highly collectivist culture where people act in
the interest of the group and not themselves. In-group
considerations affect hiring and promotions with closer in-
18. groups. Employee commitment to organization is low, but
relationships with colleagues are cooperative. Personal
relationships prevail over task and company
i. Masculinity
4. China is masculine, success oriented and driven. The need for
success is exemplified by fact many Chinese will sacrifice
family and leisure priorities to work. Migrated farmer workers
will leave their families behind in faraway places in order to
obtain better work and pay. Chinese students care very much
about their exam scores and ranking.
i. Uncertainty Avoidance
5. China is low on uncertainty avoidance. Adherence to laws
and rules may be flexible to suit the actual situation and
pragmatism is a fact of life. China is comfortable with
ambiguity, as seen in the language.
i. Long Term Orientation
6. How every society has to maintain some links with its own
past while dealing with the challenges of the future. China is a
very pragmatic culture. People believe that truth depends very
much on situation, context, and time. They adapt traditions
easily to changed conditions, a strong propensity to save and
invest, thriftiness, and perseverance in achieving results.
i. Indulgence
7. The extent to which people try to control their desires and
impulses. China is a restrained a society with its low score.
These societies have a tendency to cynicism and pessimism.
They do not put much emphasis on leisure time and control their
desires. Indulging themselves is somewhat wrong.
7. China’s restrained society mixed with its high masculinity
may lead to potential issues when introducing Trader Joe’s.
i. Other Cultural Dimensions?
8. Attitude towards food
1. The reasons why Brazilian and Chinese consumers buy
organic food are strikingly similar to what is found in Europe
and North America. Consumers’ attitude toward buying organic
food is strongly linked to beliefs about its healthiness, taste and
19. environmental friendliness. Also, consumer attitudes toward
buying organic food are positively related to what Schwartz’s
“Universalism” values in all studied cultures
1. John Thøgersen , Marcia Dutra de Barcellos , Marcelo
Gattermann Perin , Yanfeng Zhou , "Consumer buying motives
and attitudes towards organic food in two emerging markets:
China and Brazil", International Marketing Review, (2015) Vol.
32 Iss: 3/4, pp.389 - 413
i. A total of 47.9% of students reported the consumption of
colored vegetables such as spinach and carrots, and 32.5% of
subjects reported eating fruit daily
2. Gale and Huang attribute the rapid growth in supermarkets,
convenience stores and restaurants to the desire for
convenience, in addition to the growing preference for quality
over quantity.
2. The increasing usage of refrigerators and microwave ovens,
along with the increasing popularity of international food
brands such as Kraft and Nestlé, indicates the potential for a
growing acceptance of convenience and ready-to-eat foods.
2. In its Global Consumer Trends 2009: Sensory report,
Datamonitor found that Chinese consumers were highly
influenced by habit or their preferred brand when shopping for
food or beverage products
2. Today, Chinese consumers continue to place great importance
on the freshness and quality of ingredients, which are often
purchased in close proximity to one‘s residence from a variety
of farmers‘ markets, wet markets, street vendors, and grocery
stores. Most cooking is still done with fresh food purchased on
the same day it is to be consumed
2. The attraction of hypermarkets can be attributed to low
prices, convenient one-stop shopping, accessible locations, and
the integration of other retail facilities such as restaurants,
cinemas and coffee houses, which turn a shopping trip into a
day‘s excursion. According to TNS China, China‘s middle class
consumers visit hypermarkets once every 10 days, on average.
As of mid-2007, hypermarkets accounted for more than 45%
20. value share of the grocery sector in Shanghai,
Trader Joe’s In China
1. Market Entry Strategy
2. Product decisions -- features, positioning, brand and your
obtainable market share. Cite sources of estimates given, and
clearly state any assumptions that may have been made.
3. Pricing decisions -- strategies employed, etc. You will not
have detailed cost information, so you do not need to go down
to the level of a specific price. Remember, this is a preliminary
plan.
4. Distribution decisions -- intensity of distribution, use of
multiple channels, types of wholesalers and retailers, and
others.
5. Promotion decisions -- message, media, mix of promotion
types, and others.
Projects will be graded on the depth of analysis in reaching the
decision presented.