Market Launch of a Yoghurt in China. Status-Quo of Group Danone's Research and Development Organization


Project Report, 2019

29 Pages, Grade: 1,0


Free online reading

Table of contents

List of figures

1 Introduction and objectives

2 Characteristics of the Chinese market
2.1 Anatomical peculiarities
2.2 Demand for yoghurt & sour milk products
2.3 Demographic and socio-demographic information
2.4 Geography and infrastructure
2.5 Cultural characteristics
2.5.1 Hierarchy orientation
2.5.2 Collectivism
2.5.3 Orientation towards social status
2.5.4 Flexibility
2.5.5 Materialistic orientation

3 Status quo of Group Danone’s R&D organization
3.1 Innovation process organization
3.2 Organizational structure

4 Competitive comparison
4.1 R&D organization
4.2 Market strategy

5 Conslusion
5.1 Optimization approaches for Danone's R&D activities
5.2 Success factors for marketing and sales

6 Bibliography

List of figures

Fig. 1 Market development based on Consumer Market Outlook (Statista, 2019)

Fig. 2 Urban-rural population allocation (National Bureau of Statistics of China, 2018a-c)

Fig. 3 Income difference between urban and rural areas (National Bureau of Statistics of China, 2018d)

Fig. 4 Expenditure on living standards, food and health (National Bureau of Statistics of China, 2018e-f)

Fig. 5 Group Danone's R&D approach (Group Danone, 2019c)

Fig. 6 Group Danone's company structure (Group Danone, 2019i)

Fig. 7 Comparison of the relevant key figures (Group Danone, 2019j, p. 13, 49, 88; NestléS.A.,2019, p. 44-49)

1 Introduction and objectives

Getting a foothold as a major industry player among China's consumers is the 21st century gold rush for companies around the globe. The size of China's population is attractive, coupled with rising prosperity and good employment perspectives, the hectic pace of activities of global corporations makes China one of the most competitive consumer markets on the planet. With almost 15.5 million tons per year, China is the world's largest importer of dairy products (FAO, 2019, p. 132). Compared to 2010, the per capita consumption of yoghurt products will double by the end of 2020 (Statista, 2019).

As a globally active nutrition corporation Group Danone also wants to enter this market and is planning to launch a yoghurt. Group Danone is a multinational food and beverage corporation headquartered in Paris, France, with four different product categories: Essential Dairy and Plant-based Products, Waters, Early Life Nutrition, and Advanced Medical Nutrition (EIT Food iVZW, 2019). In order to enable a successful market launch of the new product, this consulting report first examines the relevant aspects of the Chinese market and Chinese culture that are of particular importance for a market entry. Afterwards the current situation of the research and development organization within Group Danone is analyzed. In order to be able to make a comparison with other market competitors, the research and development organization is compared with known findings of the competitor Nestlé. In addition, Nestlé's market entry strategy is used as a strategic benchmark.

In the final section, the insights gained are translated into recommendations for possible optimization for Group Danone's R&D organization and the outline of a promising market entry strategy into the Chinese FMCG market is presented.

The aim of this work is to extract the necessary findings that are crucial for the successful introduction of a yoghurt to the Chinese market.

2 Characteristics of the Chinese market

This chapter presents relevant factors that have a significant impact on the R&D organization and the successful introduction of a yoghurt in the Chinese market. The facts and characteristics presented provide the basis for the conclusions at the end of this paper.

2.1 Anatomical peculiarities

It is unusual to start a market analysis with a non-business context. In this case, however, it seems necessary to highlight and present an anatomical aspect of the Chinese population separately. Fact is: Approximately 90% of the Chinese population suffers from lactose intolerance, colloquially an incompatibility of dairy products (Yang, et al., 2000, p. 1129).

However, osteoporosis is a major health problem in Asian countries, caused by inadequate calcium intake. Milk and dairy products are the best sources of calcium, so that, despite the anatomical limitations of digesting dairy products adequately, a higher intake of milk and dairy products is also officially propagated in China (Dölle & Prof. Dr. Zuberbier, 2007, p. 482).

Lactose intolerance is the incompatibility with lactose, which is based on an enzyme defect of lactase (primary lactose intolerance). Lactase deficiency is the most common inherited "enzyme defect" worldwide. The lactase is localised in the mucous membrane of the small intestine and splits the lactose into glucose and galactose, which can then be absorbed directly (ibid., p. 482).

2.2 Demand for yoghurt & sour milk products

Yoghurt and other sour milk products are naturally slightly sour tasting foods obtained from milk thickened by lactic acid bacteria.1 Together with drinking milk and cream cheese, yoghurt and sour milk products form the so-called white line in the milk range.

As explained in the previous subsection, the consumption of dairy products for the prevention of osteoporosis is promoted by the government. Since Group Danone is planning to launch a yoghurt on the Chinese market, the demand and consumption figures for yoghurt and sour milk products are examined in more detail below. For this purpose, the following products are taken into consideration:

1. Yoghurt (natural and with added fruits or flavours)
2. Other fermented milk products (e.g. kefir, curd cheese, milk-based drinks, milk-based spreads, desserts, etc.)

In 2019, sales in the yoghurt and sour milk products segment will amount to approximately €33,680 million, an increase of 8.7% over the previous year and a 53.4% share of sales in the Chinese dairy products segment. This makes China the world's largest sales market for yoghurt and sour milk products, ahead of Brazil (€14,872 million) and Indonesia (€13,445 million). A market volume of € 42,198 million is forecasted by 2023. The average revenue per person in the yoghurt and sour milk products segment is €23.37 in 2019. This figure has almost tripled since 2010. By 2023, the average revenue per person is expected to increase to €28.91. The market volume in terms of quantity this year is 13,027 tons. In 2023 this will amount to 14,780 tons according to the forecast. Average per capita consumption in the yoghurt and sour milk products segment will be 9.0 kg in 2019. This figure has almost doubled since 2010 (4.7 kg) (cf. Fig. 1).

Abbildung in dieser Leseprobe nicht enthalten

Fig. 1 Market development based on Consumer Market Outlook (Statista, 2019)

2.3 Demographic and socio-demographic information

The high demand described above is due not only to government health promotion but also to the fact that China, with 1.39 billion people (National Bureau of Statistics ofChina, 2018a), is the world's largest population.

The average life expectancy is 76 years and four months. Similar to Europe, Chinese women (79.43 years) have a higher life expectancy than Chinese men (73.64 years) (National Bureau ofStatistics ofChina, 2015).

The Chinese government has recognised 56 ethnic groups. In addition to the nine languages, there are various regional dialects and unofficial languages of ethnic minorities. There is no official national religion in China. The largest faith group is the Buddhists, followed by Christians and Muslims. However, the majority of believers assemble in a wide variety of Chinese popular religions (Central Intelligence Agency, 2019).

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Fig. 2 Urban-rural population allocation (National Bureau ofStatistics ofChina, 2018a-c)

The phenomenon of rural exodus also exists in China. 59.6% of the population lives in urban areas. At the end of 2009, this rate was 48.3% (National Bureau of Statistics of China, 2018a). There are 297 urban areas in total. Urban areas include all cities with more than 200,000 inhabitants (National Bureau of Statistics ofChina, 2018b). 55.6% of the Chinese population is employed. 56% of the working population have a job in an urban area (National Bureau of Statistics of China, 2018c).

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Fig. 3 Income difference between urban and rural areas (National Bureau of Statistics of China, 2018d)

There is a strong discrepancy in disposable per capita income between urban and rural areas. While the per capita income in urban areas was €5,029.74, rural residents had only€1,873.08 ofdisposable income per capita. This represents a wage gap of62.8% (National Bureau ofStatistics ofChina, 2018d)2.

To cover the cost of living, 66.5% of per capita income is spent in urban areas. In rural areas, 82.9% of income is needed to cover the cost of living. Expenditure on food, tobacco and liquor is 18.4% of income in urban areas and 24.9% in rural areas. Health care and medical services account for 5.2% (urban) and 8.5% (rural) of income (cf. Fig. 4).

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Fig. 4 Expenditure on living standards, food and health (National Bureau of Statistics of China, 2018e-f)

2.4 Geography and infrastructure

With 9.6 million square kilometers, China is the fifth largest country in the world. The national border comprises 22,457 km of land border and 14,500 km of coastline. The vast majority of the population lives in the eastern half of the country. The west with its vast mountain and desert areas is still sparsely populated. Although it ranks first in the world in terms of total population, the overall density is lower than in many other countries in Asia and Europe. A high population density is found along the valleys of the Yangtze and Yellow Rivers, the Xi Jiang delta, the Sichuan Basin (around Chengdu), in and around Beijing, and in the industrial area around Shenyang. The country has a total of 533 airports, 131,000 km of rail network, 4.9 million km of road network and 110,000 km of navigable inland waterways. Seven of the ten largest container ports are located in China (Central Intelligence Agency, 2019).

2.5 Cultural characteristics

A central factor to be successful in China is the basic understanding of the Chinese culture, which influences the population in their daily life. Cultural Dimensions and values are directly reflected in daily consumer behavior and purchasing decisions. Chinese culture is characterized by five values (Ma & Becker, 2015, p. 3).

1. Hierarchy orientation
2. Collectivism
3. Orientation towards social status
4. Flexibility
5. Materialistic orientation

2.5.1 Hierarchy orientation

Hierarchical thinking has a long tradition in China. Numerous studies show that hierarchical orientation is much more pronounced in China than in other cultures (e.g. the USA or Germany) (Singh, et al., 1962, p. 128).

One reason for this lies in the influential Confucian philosophy, which emphasizes five basic hierarchical relationships (Sun, 1993, p. 13), namely the relationship between

1. Ruler and subordinate,
2. Parents and children,
3. Husband and wife,
4. Olderandyoungersiblingsand
5. Older and younger friends.

The principle of a clear hierarchy has long been applied throughout society, be it in the public administration sector, in the family or in education. Even communism, which actually emphasizes equality, has not changed this. It was adapted and interpreted in a Chinese hierarchical way (Holtbrügge & Puck, 2005, pp. 19-22).

2.5.2 Collectivism

Collectivism can be defined as a system of norms and values that gives the highest priority to the interests of the community. Less emphasis is placed on the individual; people act person-oriented. The single individual must subordinate its interests to the common good, for example by renouncing children, in order to steer the demography of society as a whole in the desired direction. Consequently, the relationships between people in China are also much more important, the contacts more intensive, the networks larger. Against the collectivist background, harmony has become a catchword. Every member of society is expected to show consideration for the feelings and opinions of others, modesty, politeness, respect and, in appropriate situations, obedience. Anyone who violates this must expect criticism and exclusion (Hofstede & Hofstede, 2007, pp. 205-206).

2.5.3 Orientation towards social status

Because of the collectivism in Chinese society, the orientation towards social status is even more important than in other cultures. A group (e.g. a family) is perceived from the outside as a very closed unit. The individual knows that his or her behaviour will affect the whole group. Status is expressed in the gain of miânzi (face) as a measure of social significance. Mianzi decides whether a person and his family are respected. Face respect is therefore one of the most important Chinese cultural norms and plays a central role in successful communication and cooperation with Chinese people. Face is gained primarily through social relationships, formal positions, education, wealth and virtue. One only preserves or loses face within a circle of important reference persons, the guänxi. Outside of this circle of people one does not necessarily have to save or give face. Chinese therefore try to win and give miânzi in a kind of exchange relationship and to form a network of resilient social relationships (guänxi), which they can fall back on for theirgoals (Chen, et al., 2016, pp. 1208-1211).

2.5.4 Flexibility

Flexibility has a long tradition in China and is a basic requirement for survival in society. It is expressed in the form of three characteristics: adaptability, pragmatism and serenity. In China, people have to adapt to family and society simply because of the strong collectivism. Adaptability to the social environment is highly valued and expected. The Chinese also have a distinctly pragmatic orientation. This refers to paths taken, people and things. A solution does not have to be perfect; the main thing is that it works at the moment. The Chinese also react to unknown and uncertain situations with great serenity, patience and optimism. They can spontaneously accept and embrace an unpleasant change (Holtbrügge & Puck, 2005, pp. 26-27).

2.5.5 Materialistic orientation

The materialistic orientation has become a central value in China in the last twenty years. Compared to the other values described above, materialistic orientation is relatively new but influential in his strength. In communist China there was originally no acceptance of materialistic orientation. With the economic boom, materialistic orientation has become a matter ofcourse in society. Materialistic orientation is not only accepted, it is even welcomed by most. This is especially true for the younger generations. The motto "Fight to become rich!" has become the goal in life for many Chinese. There are several reasons for this: On the one hand, material security guarantees a livelihood into old age. In the absence of a viable social security system, everyone is forced to make provisions for emergencies and pensions. This includes the fact that Chinese people have to save money for possible treatment costs in case of illness. On the other handChina has also become a consumer society. The Chinese are now the number one consumer of luxury products worldwide. The market research institute IPSOS has determined in 2013: Over 70% of Chinese consider their material possessions as a measure of personal success (Yang & Stening, 2016, pp. 701-709).

Danone Nutricia Research is Group Danone’s global research and development organization (Group Danone, 2019b).

Worldwide Danone Nutricia Research connects science and food according to the company vision “One Planet, One Health”. The Danone R&D teams of 1,700 employees work from two international research centers in Palaiseau (FR) and Utrecht (NL), five specialized centers and 55 branches. They partner with more than 200 recognized scientific communities, suppliers and innovators and through these collaborations, create unique consumer experiences and bring health and well-being at every stage in life.

3.1 Innovation process organization

Following the conviction that nutrition plays an increasingly important role in people's lives, Danone R&D has placed consumer needs at the center of its innovation efforts. It is from here that all product ideas are initiated (Group Danone, 2019c).

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Fig. 5 Group Danone's R&D approach (Group Danone, 2019c)

Pre-competitive research is carried out via a cooperation network at international and national level to confirm the presumption of evidence (Group Danone, 2019d). As the core ofthe innovation process, Danone Nutricia conducts clinical studies to ensure the safety, tolerability and efficacy of the products in the respective target groups (Group Danone, 2019e).

The findings from the pre-competitive and clinical studies are integrated into product development. The product development team at Danone Nutricia Research is responsible for translating the nutritional needs of patients and consumers into actual products that deliver health benefits. The multidisciplinary research teams are able to translate ideas into nutritional products that are available in a broad range of different formats (Group Danone, 2019f).

After all the scientific findings have been incorporated into the product, tests are carried out on participants in order to obtain information that is necessary for a special product experience in addition to the health aspects. The experience is not limited to the taste, but also includes aspects such as the packaging format and relevant information for consumers (Group Danone, 2019g).

Following the sample tests, the transfer to series production takes place. Before mass production can begin, it must be ensured that the products can be manufactured in large quantities while maintaining product quality and safety. Process technology aims to answer two main questions. Firstly, can the production facilities manufacture specific products or does the production process have to be adapted and secondly, are there ways to improve the production process (Group Danone, 2019h).

Once all steps in the innovation process have been completed, the product is ready for the market. From this point on, market development with subsequent product launch begins.

As already mentioned in the introduction, the structure of the Danone Group is based on four divisions, 'Essential dairy & plant based', 'Waters', 'Early Life Nutrition' and 'Advanced Medical Nutrition', which operate independently of each other.

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Fig. 6 Group Danone's company structure (Group Danone, 2019i)

Research and development, on the other hand, operates across all divisions. This type of organization ensures that research results from one division are also available to all the others. This specific characteristic of the organizational structure enables Group Danone to ensure that research and development results are equally available to all divisions and to generate synergy effects. In conjunction with the workflow organization of the innovation process, this enables the innovation process to be initiated both centrally and decentrally. With this type of organizational structure, the described innovation process gains enormous speed and can be carried out cost-efficiently. This enables Group Danone to adapt product developments to market conditions more quickly than is the case with competitors.

The result of this type of Group Danone’s R&D organization is as follows: In 2018 a total of 1,070 new products were developed worldwide (Group Danone, 2019a, p. 19). The R&D budget was €335 million during this period (Group Danone, 2019j, p. 66). Thus, the average cost of developing a new product to market readiness was €313,000. In order to place the R&D expenditure incurred in a comparable context, the relevant market figures and researched findings on research and development at Nestlé are explained in more detail in the next chapter.

4 Competitive comparison

Nestlé is one of Group Danone's biggest market companions. With total sales of €83.9 billion3 (Nestlé S.A., 2019, p. 44), the Swiss group clearly stands out from Group Danone, which in 2018 had total sales of €24.6 billion (Group Danone, 2019j, p. 88), but Group Danone is the worldwide leading company for fresh dairy products (ibid. p. 13). At Nestlé, sales of dairy products accounted for 11.5% of total sales (Nestlé S.A., 2019, p. 48) and at Danone 55,1% (Group Danone, 2019j, p. 49). China is currently the most important market for both companies besides the USA. In 2018, Nestlé's sales there reached €6.4 billion (Nestlé S.A., 2019, p. 44) and Danone's sales result was €2.2 billion (Group Danone, 2019j, p. 88).

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Since company founder Henri Nestlé was engaged in the further development of Justus von Liebig's first instant product for toddlers between 1865 and 1868, the research and development of safe food has been an integral part of the corporate DNA of the food company Nestlé (Nestlé Ltd - Innovation, Technology and Research & Development, 2018, pp. 6-7).

Since Nestlé's beginnings more than 150 years ago, the company's R&D organization has undergone an impressive development. Today, more than 5,000 experts in 40 R&D centers at 23 international locations represent the world's largest private organization forfood and nutrition research (Nestlé Ltd, 2018).

Similar to Group Danone, the consumer is the focus of all innovation efforts at Nestlé. The fundamental dimensions of the innovation process are similar, as is the organization of partnerships with public and private research institutes. However, where the two companies differ fundamentally is the organization of the innovation processes. Unlike Group Danone, innovations at Nestlé come from research centers in Switzerland. 25% of the company's own research facilities are located in Switzerland, where 58% of the global R&D budget is spent. New products are streamlined from here for global rollout to specialized local R&D facilities, where they are adjusted for the target market (Nestlé Suisse S.A., 2019).

Another significant distinguishing feature is the subdivision of the R&D organization by division. While Group Danone's R&D operates on a cross-divisional basis, Nestlé has divided its R&D into the Nestlé Institute of Health Sciences, which researches the basis for understanding human nutrition and finding appropriate, targeted solutions for people with the ultimate goal of improving people's quality of life (Nestlé Institute of Health Sciences, 2019), and the Nestlé Nutrition Institute, which provides science-based information and education to health professionals, scientists, nutritionists and stakeholders in all parts of the world (Nestlé Nutrition Institute, 2019).

The differences in the R&D organization become particularly clear when the results are compared. Nestlé has invested around €1.6 billion in research and development in 2018. During the same period, approximately 1,300 new products were developed (Nestlé S.A., 2019, p. IV). This means that Nestlé spent slightly more than €1.2 million per product innovation in the last period under review. Compared to Group Danone, Nestlé has a 3.9 times higher investment burden per product.

4.2 Market strategy

Nestlé already took its first steps in China at the beginning of the 20th century and was the first European food company to establish itself there. After an interim withdrawal from the market due to the planned economy from 1949 onwards, Nestlé re-entered the market in 1990. Due to its many years of experience, Nestlé has outstanding local expertise. In China, for example, Nestlé has changed its brand name to "Quechao", which means "sparrow's nest" and alludes to the company logo. As the eating habits of the Chinese population are traditionally strong, core products are adapted to local tastes to increase product acceptance. Nestlé recognized early on that nutrition and health are not viewed separately in China. This is taken into account in various product lines that have been developed to provide calcium, for example (see section 2.1). Despite increasing prosperity, the majority of the Chinese population has low purchasing power levels. To avoid product rejection due to uncertainty, Nestlé therefore often relies on trial sizes (Tank, 2011, pp. 20-22).

In addition to viewing China as a sales market, Nestlé has also identified its importance as a manufacturing country. Nestlé has established more than 33 manufacturing facilities and has invested in a large number of local companies in order to benefit from their market position. In addition, the Swiss company has managed to cooperate closely with the Chinese government in implementing the National Nutrition Plan. Under this partnership, Nestlé collects and analyses health data and develops appropriate products that are marketed with government support. This is a unique opportunity for a European company and is the result of many years of successful relationship building (guänxi). As a result of this cooperation, Nestlé has the potential to dominate the Chinese market for many years and develop it into the company's largest market in record time. By manufacturing its products in Chinese companies, Nestlé also protects itself against the consequences of an escalation in the trade dispute between China and the USA (Qian, 2018).

5 Conslusion

In the previous chapters the characteristics of the Chinese market were considered, the R&D organization of Group Danone was analyzed and a benchmarking to Nestlé, Danone's largest competitor in the Chinese market, was carried out. The final section of this paper is devoted to the conclusions drawn from the knowledge gained so far. As described as a goal at the beginning of this paper, the following conclusions and recommendations refer to measures that are necessary for a successful market introduction of a yoghurt in China.

5.1 Optimization approaches for Danone's R&D activities

The insight that a yoghurt for the Chinese market must be lactose-free in order to have any chance of market success is obvious. However, this can only represent a basic product. As the nutritional and health philosophies in China go hand in hand, there is an opportunity here to develop products to serve nutritional deficiencies in specific population groups and regions. To study these needs in detail, targeted partnerships with local health centers, universities and similar institutions need to be intensified. Given that Nestlé has already won cooperation with the Chinese government to implement the National Nutrition Plan4, this is essential to avoid leaving the field entirely open to the competitor at this point. In addition, the research results and people involved can be used as multipliers for the products developed in-house, so that they can be used by treating physicians in patients' diet plans as an accompaniment to the treatment of certain symptoms, but also to ensure that they are firmly established in people's nutritional plans for health care. In addition, many Chinese regions have developed their own culinary style, which is reflected in the use of certain ingredients to create unique flavors. In order to find acceptance among consumers, the products offered should be based on the taste of the region or the targeted population group. In a country with the area and population of China, there is a potential for many product variations that Group Danone can implement cost-effectively with its current R&D structure and that meet the needs of the segments.

Especially in Asian countries suffering from the worldwide flood of plastics, a growing awareness for environmental protection and sustainability is evolving. In connection with the steadily increasing prosperity of the population, this awareness of the consumers in China will also play a more important role in the purchase decision in the coming years. It therefore seems to make sense to include this topic in development efforts and to take measures already now to meet this emerging demand. As a first approach, this includes plastic-free packaging. One approach would be to introduce filling in glass, including the establishment of a deposit system. Due to the size of the country, however, this would initially only make sense in urban areas with a dense infrastructure and short transport routes. A more interesting approach would be the use of renewable regional raw materials for the production of disposable packaging. For this purpose, experiments with bamboo, which in addition to its enormously high growth rates also has a long-life span in reproduction, would be a suitable option. Furthermore, production experiments with the waste products (leaves/stalks) of soy and rice cultivation should be attempted.

The production of a lactose-free milk product involves additional and cost-intensive production steps. This means a permanent reduction in profit margins. At this point it is worth considering investing in research to breed a dairy breed that produces lactose-free milk. The success of these efforts would permanently reduce the production costs for lactose-free dairy products worldwide and would provide a significant competitive advantage on a worldwide scale.

5.2 Success factors for marketing and sales

The recommendations for R&D activities already indicate that local strategies are needed to introduce yoghurt in China. Although Western products are highly regarded in Chinese society, this is generally true for luxury and capital goods. For fast-moving consumer goods, especially food, Chinese consumers often resort to domestic manufacturers and products.

To meet this consumer behavior, food products must be sold under a local brand. This can be done by establishing a new brand, which is time and cost intensive and does not guarantee success, or by investing in an existing brand that already has a market presence. For the second alternative, a direct investment with a majority shareholding makes most sense, as this can have a significant influence on the market strategy. The same applies to cultural differences, as the local management already has the respect and authority both internally and externally. Market entry efforts thus benefit from existing structures, relationships (guänxi) and market positions. Especially when dealing with retail trade, which is dominated by local chains, these structures are of crucial importance for the success of the market entry.

Since importing yoghurt from abroad does not make sense due to the costs of production and transport and the limited shelf life, production facilities in China are also required. Here too, direct investment in the acquisition of a local site must be considered, as this is the only way to monitor and guarantee food safety and quality in accordance with Group Danone's requirements.

Another component is logistics within the country. The size of the country and the regional specifics of the country, such as regulations in special administrative zones, are arguments against the establishment of a separate logistics system. Therefore, a partnership with an established logistics company that can operate nationwide and can also cover fulfilment in the area of online trade should be considered. According to a McKinsey study, China will be the world's largest online shopping market with a volume of€650 billion by 2020. In order to benefit from the purchased services, participation without direct co-determination rights should be considered at this point.

The cultural characteristics of the country have a great influence on the marketing of products. For example, target groups also react positively to people in high hierarchical positions in advertising because of the hierarchy orientation. Due to the high degree of collectivism, Chinese consumers buy in order to belong to a group, not to stand out from it, as is common in Western cultures. Because of the special role of gifts, it often makes sense to position offers on the market as gifts and to offer appropriate packaging and product variants. China is unpredictable in many areas. When entering the Chinese market, flexible regulations and spontaneous decisions by authorities and partners must be expected. Own flexibility in planning and the possibility to rethink are therefore success factors.

Conspicuous regional differences in consumer behavior exist, for example, between the inhabitants of large cities north and south of the Yangtze. According to market research studies (Holtbrügge & Puck, 2005, p. 102), the purchase of consumer goods in Shanghai and other major southern cities is examined more closely than in northern China. Consumers here also attach greater importance to high quality and low prices. In contrast, spontaneous purchases are more common in northern Chinese cities such as Harbin or Shangyong. Although the average monthly income is lower there, a higher absolute amount is also spent on fashionable clothing and cosmetics. In line with these large regional differences in consumer behavior, the Chinese Market strongly segregated.

Therefore, for a successful market entry, regional and target group specific products have to be developed and the production and distribution of the products has to be ensured. Due to the segmentation, marketing cannot be standardized for the whole country, but must be designed differently for the individual market segments. Due to the high differences in income, it makes sense to focus first on urban areas, from where competition is more intense due to the wider range of products on offer. Rural areas could become exciting from the moment when research and development has achieved relevant results on the recommended regional specifications.

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[...]


1 Unless otherwise indicated, all facts and numbers in this subsection refer to Statista's Consumer Outlook Report 2019 (Statista, 2019).

2 The currency translation from Chinese yuan to Euro was based on the exchange rates of Morn- ingstaron 27 December2019, 13:35 UTC.

3 The currency translation from Swiss Franc to Euro was based on the exchange rates of Morn- ingstar on 29 December 2019, 23:44 UTC.

4 The Chinese National Nutrition Plan sets detailed goals for 2020 and 2030 such as cutting anemia rates among children under five years old and pregnant women, cutting the prevalence of stunted growth among children under five years old, and raising the breast-feeding rate among infants undersix months old. (The State Council, 2017)

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Title
Market Launch of a Yoghurt in China. Status-Quo of Group Danone's Research and Development Organization
College
University of Applied Sciences Frankfurt am Main
Grade
1,0
Author
Year
2019
Pages
29
Catalog Number
V980322
ISBN (Book)
9783346334565
Language
English
Tags
market, launch, yoghurt, china, status-quo, group, danone, research, development, organization
Quote paper
Philipp De la Haye (Author), 2019, Market Launch of a Yoghurt in China. Status-Quo of Group Danone's Research and Development Organization, Munich, GRIN Verlag, https://www.grin.com/document/980322

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