MKT 5647 Game Theory & Strategic

Marketing
Group Presentation

Topic: Marketing New Zealand Milk Products in

China
- New Zealand Mega Farm ( )

Agenda
1.) China Market
- Understand the Game in China
- Major Players

2.) Strategic Plan

- Expand Game Scope (New Player: International Hotels in
China)
- Make Rules (New Zealand Standard Milk)
- Complementor (New Player: Quaker)
- New Channel (Infant Milk Powder)

3.) Overview
- Overview
- Financial Forecast
- Reference & Appendix
2

China
Market

Understand the
Confidence
on China made milk is weak because:
Game

Consumers have safety concerns : melamine crisis (2008 Chinese milk

scandal)
Public wasnt notified after melamine-laced products found
New Dairy Safety Standards are weaker than those in the west, this will
hurt competitiveness of local industry

Sobbing mom hold photo

of baby killed by
melamine-tainted milk in
China.

Premier Wen calls on a

child sickened by tainted
milk powder at Beijing
Children's Hospital

Business administration
officers check dairy products in
a supermarket in Rizhao, in
east China's Shandong
province.
4

Understand the
Baby
Milk Powder in China:
Game

Quantity on import milk powder is

increasing on each year
Milk powder consumption is huge,
more than 70 million children aged
0 3 in China
top 5 international brands took
over 50% of the market
International Nutrition (Dumex) ,
Mead Johnson (Enfagrow, Enfapro,
Enfachild, Enfaschool),
Abbott Nutrition International
(Gain, Similac),
Nestle (Lactogen, Neslac), and
Wyeth (Promise, S-26, Bright
Promil)
5

Major Players
Milk Industry: quality Standards

Source: @http://www.wabei.cn/news/201107/592807.html

Total milk
production
volume is
increasing
The milk quality
standard is
decreasing in
China
The quality
standard is
quite poor
comparing with
developed
countries

Major Players
Top 4 dairy firms(more than 50% market shares):
brand & profit

2009 : @http://www.mengniu.yikejie.com/news/itemid24.shtml

@http://www.baobei360.com/Articles/Html/2011-09-10/49759.html

Major Players
China dairy industry ranking in UHT & milk
powder

In the UHT milk

market, Bright
milk only list
No.5
In the milk
powder market,
bright milk still
be not in top 10
brand
Ref http://www.taoniu.com/ruye/shichang/2011/0823/45883.html

Major Players
Bright Milk Product Development

Major Player:
Bright Dairy
Recent Situation

Market share: follows Yili &

MengNiu
Product line: UHT milk and
milk powder
Only high awareness in East
China
Steadily sales volume and
profit

Future Path

Provide the imported milk

from second half year of
2011

R&D: new baby milk powder

with Synlait Milk Inc.

Will invest 1.4billion in raw

milk and pastures

Ref 2011 ( ) http://www.dailyfair.org/cn/newsbrowse.asp?

Major Player:
Bright Dairy
New Zealand Milk
listed top 3 in
Imported dairy
products in china;
However, China
only listed No. 14
of dairy products
exports from New
Zealand;
It shows that New
Zealand milk is
attractive
China still have
large potential to
import more from
New Zealand;
Great chance for
Bright Milk

Strategic
Plan

12

Expand Game
Scope
Hotel
Industry in China:
Rapid growth in economic environment and hotel development
Star-rated hotels increased from 3,856 to 14,099 from 1999 to 2008
Growing number of conferences and exhibitions
International and domestic travelers looking for experienced stay with quality
food & beverage
Dairy products with high consumption in Hotel (e.g. Cheese and butter & Icecream)

13

Expand Game
Scope
Right Environment:
- Chinese Government
promote milk consumption

I have a dream to provide every

Chinese, especially children, sufficient
milk each day
Wen Jiabao
Chinese Premier

- Hotel development in
terms of management
contract and franchising
filled with latent investment
opportunity for foreign
investors

Right Place:
- Hotel chains operate in
different regions of China with
market penetration and
expansion opportunity
- Customers are ready for
more diverse foreign products
and services in upscale hotel

Right Time:
- The milk scandal in 2008 weakened market positions of
major industry players (e.g. Mengniu & Yili)
- Consumers expect safe and quality dairy products
- New generation with growing purchasing power

14

Expand Game
Major International Brand Hotels in China:
Scope

Forecast
China is projected to be the worlds number one tourist destination by 2020
Implication
The need for hotel rooms, amenity and food & beverage should meet the standards
Strategy
Investment that capitalizes in Chinas dairy and hotel industry in complementary ways

15

Expand Game
Scope
First Step:

- Supply cheese and butter to

International hotel chain in China
- Relatively low price
- Target customers: International
& domestic travelers

Price:
- Oceania Price (FOB port): USD 3.5/kg
- Mega Farm Price (FOB SH): USD 3.3/kg

16

Make Rules
Chinese Milk Nutrition Standard 2.8g protein/ 100ml
.

Oriental Daily, 20/06/2011

17

Make Rules
Australia Milk Nutrition Standard 3.0g protein/ 100ml
Next Step:
-Introduce UHT Milk
-Cooperate with Local Dairy Brand
-Customer Base on Hotel Chains

18

Make Rules

Both of them are CEIBS MBA Graduates!!

19

Make Rules
Product:
-UHT Milk under Bright Dairy Brand
-Featuring our Farm Logo
-Using Australia Milk Nutrition Standard

Place:
-International hotel chains
-Consumer Market

Rules:
-Mega Farm become the exclusive supplier
in New Zealand
-Involve in promotion on our products
-FOB SH Price: CNY 5/kg raw milk

20

Complementor

The overwhelming popularity of French Fries should thanks to tomato Ketchup

Where is our Ketchup?

21

Complementor
A.C. Nielson research of Oatmeal in China :
Duration: Oct/2008 Oct/2009
Consumption: 73,533 Tons
Assume China population 13B : 0.057 kg / person
Sell Turnover: 18.6 Billion
Annual Growth: 15%
The market is still at the early start in China
Top Player of Oatmeal in China Market
International Oatmeal brand
M&A by Pepsi in 2001
Entered China at early 2000
Existing 3 major category in Quakers:
Normal-Oatmeal
Instant-Oatmeal
Oatmeal-related products

22

Complementor

What benefit from collaborator?

Bring in more players, to create a larger pie
Leverage the resource
Actual
Data
2009

Prediction (15%
growth)
2010 2011 2012
111,83
730,533 84,563 97,247
5

Year
Annual Consumption
(Unit: Tons)
Quaker (Assume 20% share)
14,707 16,913 19,449 22,367
(Unit: Tons)
Other Brand (Assume 80%
share)
58,826 67,650 77,798 89,468
(Unit: Tons)
2012 sales in 3 NormalInstantOthersline
Oatmeal
Oatmeal
Oatmeal
(Unit: Tons)
(Unit: Tons) (Unit: Tons) (Unit: Tons)
22,367
7,456
7,456
7,456
NormalJoint Promotion with new line
Oatmeal
(20%)
(Unit: Tons) (Unit: Tons)
7,456
1,491
Quaker (Portion:
25%)
(Unit: Tons)

Mega Farm
Milk(Portion: 75%)
(Unit: Tons)

Transform to KG

1,491

4,473

4,473,000

Price to Bright
Dairy
Sales / KG (15%
off)
CNY 4.25

Annual Sales in
2012
CNY 38,020,500
23

Complementor

What is Quakers need?

Educate the market
51% Soft drink business

Pepsi
China

Tingyi Holding
Corp.
9.1% Stock

Lack of channel
Utilizing the brand of Bright Dairy
Cost-effective joint promotion on
packaging to boost the market demand
Bundle Strategy to achieve lock-in effect
e.g. Price discount
What if Quaker reject the partnership?
Be your own complementors
Make good use of existing resources
24

New Channel

Bright Dairy Strategic target, 2011
Synlait Milk

- 2011 Forecast, 2010 Bright Dairy

Annual Report

Final Step
-Become the supplier for the infant milk
powder product

25

Overview

26

Overview
New Zealand Mega Farm
-Target to high-end Market
-B2B Business
-Produce Milk product to Hotels
-Supply Raw Milk to Bright Dairy

Key Value on Consumer:

Foreign Brand

Food Safety

Mega Farm

27

Overview
Customer & Complementor
Produce UHT Milk
with Mega Farms
name

Consumer Market
Produce own
Milk Product

Customer

Supply raw milk

Exclusive Supplier
from NZ

Produce Infant Milk

Powder with Mega
Farms name

Joint Promotion

Contact

Complementor
28

Financial
Forecast

Sales Breakdown

Market

1st Year

Butter & Cheese Hotel

Market
Consumption
(kg)

4,452,800

Market Share

25%

1.11
Total

2nd Year

1.11

Butter & Cheese Hotel

4,898,080

30%

1.47

UHT Milk Hotel

274,292,480

15%

41.14

UHT Milk Hi-End Bright

Dairy Consumer

225,105,000

30%

67.53
Total

3rd Year

Total Sales
(Million kg of
raw milk)

110.14

Butter & Cheese Hotel

5,387,888

45%

2.42

UHT Milk Hotel

301,721,728

30%

90.51

UHT Milk Hi-End Bright

Dairy Consumer

276,879,150

45%

124.60

Extra UHT Milk by Joint

Promotion

4,473,000

100%

4.47
Total

217.54

29

Financial
Forecast
Profit Forecast

Market

1st Year

Butter & Cheese Hotel

Total Sales
(Million kg of
raw milk)

1.11

Profit/ kg

CNY 0.16

CNY 0.17
Total

2nd Year

CNY 0.16

Butter & Cheese Hotel

1.47

CNY 0.16

CNY 0.22

UHT Milk Hotel

41.14

CNY 1.2

CNY 49.55

UHT Milk Hi-End

Bright Dairy
Consumer

67.53

CNY 1.2

CNY 81.04

Total
3rd Year

Profit
($Million)

CNY 130.81

Butter & Cheese Hotel

2.42

CNY 0.16

CNY 0.39

UHT Milk Hotel

90.51

CNY 1.2

CNY 109.41

UHT Milk Hi-End

Bright Dairy
Consumer

124.60

CNY 1.2

CNY 149.51

Extra UHT Milk by

Joint Promotion

4.47

CNY 0.45

CNY 2.01
Total

CNY 261.32
30

Reference &
Appendix

http://baike.baidu.com/view/45642.htm

http://baike.baidu.com/view/1842506.htm
Bright Dairy 2010 Annual Report:
http://www.brightdairy.com/UploadFile/file/2010.pdf
Synlait Milk
http://www.synlaitmilk.com/

Dairy Product price on Dairy Food Association

http://www.idfa.org/resource-center/marketinformation/dairy-market-prices/
Cheddar Cheese
http://www.ams.usda.gov/mnreports/md_da128.txt

" "
http://news.xinhuanet.com/employment/2007-01/27/content_5660331.htm

Butter Price
http://www.ams.usda.gov/mnreports/md_da124.txt

http://news.chinaluxus.com/Imp/20101222/21293_1.html

China Retail Milk Price,

http://www.cpic.gov.cn/fgw/ProxyServlet?
server=e450&urls_count=1&url=agri/jiage_pingjun/mianfei/
A_A3_B2_nn_0.html

http://money.163.com/09/0122/09/508L2MLA002524U1.html

http://yxyxp2008.gdgwiki.com/archives/621#more-621

http://finance.ifeng.com/stock/special/rbdz/20110317/3687409.shtml

World Dairy Situation 2010, International Dairy Federation

http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv
/Marknadsrapporter/World%20Dairy%20Situation/World
%20Dairy%20Situation%202010.pdf

http://www.sh.xinhuanet.com/2011-03/16/content_22297975.htm

31

Reference & Appendix

China Hotels & motels industry segmentation

Source: Hotels & Motels Industry Profile: China, Datamonior, 2010

Reference & Appendix

Bright Dairy Acquisition History

Source: http://pe.hexun.com.tw/2011-07-18/131526344.html

Reference & Appendix

Butter price in selected countries

Cheese price in selected countries

Source: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World

%20Dairy%20Situation%202010.pdf

Reference & Appendix

Butter consumption

Cheese consumption

Source: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World

%20Dairy%20Situation%202010.pdf

Reference & Appendix

Liquid Milk consumption

Source: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World

%20Dairy%20Situation%202010.pdf

Reference & Appendix

2010 Chinese Tourism Statistics

2010 12

12

(%)

1-12

(%)

UNIT

DEC

GROWTH(%)

JAN-DEC

GROWTH(%)

1 146.02

4.12

13 376.22

5.76

199.19

3.56

2 612.69

19.10

693.99

1.98

7 932.19

2.57

213.65

11.65

2 317.29

2.00

39.19

7.49

514.06

457.64

3.30

5 566.45

9.41

160.34

2.88

2 127.64

20.23

228.04

1.87

2 609.45

2.34

36.25

11.88

392.89

2.10

33.01

6.80

436.47

13.89

36.29

5.36

458.14

15.47

20.16

2.91

267.38

20.15

9.34

9.12

106.89

9.67

2.44

5.48

26.46

-3.69

4.34

9.28

57.41

16.52

Source: National Tourism Administration

http://www.cnta.gov.cn/html/2011-3/2011-3-25-10-10-08822.html

14.64

Reference & Appendix

China Hotels & Motels Market Value Growth by year

Source: Hotels & Motels Industry Profile: China, Datamonior, 2010

Reference & Appendix

Chinese Dairy Market Value Growth by year

Source: Dairy Industry Profile: China, Datamonior, 2010

Reference & Appendix

Profit by Product
Cost/kg

Price/kg

Profit/kg

Butter & Cheese

USD 3.275

USD 3.30

CNY 0.16

Raw Milk

CNY 3.8

CNY 5

CNY 1.2

Promotional Raw
Milk

CNY 3.8

CNY 4.25

CNY 0.45

Source: http://pe.hexun.com.tw/2011-07-18/131526344.html