Marketing Hero in China - Mengniu
Group Shenyang:
Fung 1072373
Jeff 1051800
Eric 1172551
Olivia 1124839
Lan 1083401
Background of Mengniu
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Founded in 1999
Based in Inner Mongolia
CEO – Mr. Niu Gensheng
worked at Yili for 17 years and
brought experienced
management team with him
from Yili
23 production bases
Annual production – 5.5 million
tons
Background of Mengniu
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Leading dairy product manufacturer in China
extraordinary growth and expansion in 8 years time
(from no.1,116 to no.1 in the market)
35% of liquid milk market share (2007)
Competes with Yili and Bright Dairy & Food. The
three companies controlled approximately 60% of
the market
http://www.youtube.com/watch?v=4r85CytIT1Q
Strategies of Mengniu
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Strengthening the market share
Exploring and developing new markets
Strengthening raw milk supply base
Developing effective secondary brand names
Developing a comprehensive portfolio of dairy
products
Expanding production capacity
Continuing to strive for employee and management
excellence
Products of Mengniu
Ultra-high-temperature
(UHT) Milk
Milk Beverages
Products of Mengniu
Yogurt
Ice cream
Other Dairy Products
Competitive
Strengths of Mengniu
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Steady supply chain
International production system
Continuously emphasizing R&D initiatives
Government program that promotes
consumption of dairy products for their
health and nutritional benefits
Discussion Time (5mins)
1) How did Mengniu manage to establish a good
brand image among Chinese consumers?
Or what initiatives in marketing (promotions and
public relations) has Mengniu taken to promote its
brands and products?
2) Which one is a better approach to managing
products and growing your business in China,
diversification strategy or a focused strategy?
How about brand or product extensions?
Question 1
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How did Mengniu manage to
establish a good brand image among
Chinese consumers?
Or what initiatives in marketing
(promotions and public relations)
has Mengniu taken to promote its
brands and products?
Analysis for Q1
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4P Analysis
price
place
product
promotion
product
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Golden brand name:
eg.
‘Pure’ milk — 純牛奶
‘Good morning’ milk — 早餐牛奶
‘Good night’ milk — 晚上好牛奶
‘Whatever’ ice cream — 隨便冰淇淋
product
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Differentiation:
Flavor
Type
Size
build greater loyalty and repeat purchasing
by considering customer needs and wants
price
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Discount price= company expected price
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More sales promotion
Attract customers
place
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Supermarket：
package besides single product
Convenient to household
Expand the purchasing amount
promotion
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Cooperator/supplier :
SHEN ZHOU V Spacecraft
NBA
BOAO Forum for Asia
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Fashion creator : Super girl
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Fashion follower: famous spokesman
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Charity: rural school
Bring higher brand value
Chinese astronaut special-purpose milk
the only NBA designated milk supplier
Official Cooperator of BFA
Fashion creator
Super girl
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A big competition
among girls.
The champion can
obtain a contract to
be a new star.
Fashion follower
Charity in rural school
Question 2
 Which
one is a better approach
to managing products and growing
your business in China,
diversification strategy or a
focused strategy? How about
brand or product extensions?
Competitor
Most competitive brand:
 “Yili”
“light”
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Foreign brand has withdrew from
Mainland market:
 Danone ( France)
 Parmalat (Italy)
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Definition of Diversification
 Diversification
is a form of
growth marketing strategy for a
company. It seeks to increase
profitability through greater sales
volume obtained from new
products and new markets.
New Markets and Products
Exploring and developing new markets
for our products
 Developing effective secondary brand
names
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Market
Old market: Beijing, Shanghai,
Shandong, Heilongjiang, Jiangsu and
Guangdong.
New mainland market: Center China,
southwest of China and northwest of
China.
New overseas market: South Asia,
Russia, Japan and Korea.
Definition of Brand extension
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Brand extension is using the
leverage of a well known brand
name in one category to launch a
new product in a different
category
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It is a new product.
It should use a well known brand.
The brand should have leverage with
customers of the new category.
Extension or not?
Advantage :
 Expedite the position of new products
 Reduce the risk and the cost to enter
market
risk: customer can understand,
accept and trust or not……….
cost: to build a logo, to package, to
promote……
 Strengthen the core brand
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Extension or not?
Disadvantage:
 Implication phenomenon
Example: “Parker pen”
 Trade-off relationship
 Desalt characteristic of core product
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Parker’s fault
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Park is a top grade produce, it is a symbol of
status. People buy Park not only to write, but
to show their status. But, in 1982,the new
manager made a wrong decision, Park
started to contest low grade market. It
impaired the Park’s image as “the king of
pens”. Two years later, Park still cannot
enter the low grade market, what was worse,
Park lose much of the top grade market
shares.
Choose the right opportunity to
extend
Extension product have much similarity
with the core brand
 Product extension is ineluctable when
all the competitors have done it.
 Costumers need more choices
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Discussion Time (5mins)
3) What are the advantages and disadvantages for
domestic brands vs. foreign brands?
4) Given the mounting competition and increasing
number of brands, how to position and build a
brand in China to grow your business?
Question 3
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What are the advantages and
disadvantages for domestic
brands vs. foreign brands?
There are mainly two types of Chinese
companies
 State-owned enterprise:
 (E.g. SINOPEC, Bank of China, China
Mobile)
 Non-State enterprise:
 E.g.联想(Lenovo) 李寧(Li Ning),吉利汽車
(Geely Automobile Holdings Limited)
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Advantages of domestic brands:
-Monopoly (state-owned company)
 Foreign companies are difficult to enter
the market that domestic company
monopoly in those industries.
 (E.g. Banking, telecommunication)
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-Government support (state-owned
company)
To build a good relationship with the
local government is essential in China.
It affects whether the company can
operate smoothly
-Familiar with local culture and
business environment
(state-owned and non-state company)
Local companies are familiar with what
Chinese customers’ Behavior
-Lower production cost (state-owned &
non-state company)
Cheap labor cost enables products to
sell at a lower price than foreign
products
Disadvantage of domestic brands:
-Bad reputation (state-owned & non-state
company)
Chinese milk scandal damaged the
reputation of China's food exports.
-Low quality product (non-state
company)
Local companies lacks of skills in
controlling merchandising, production
process and product control
-Lack of social responsibility (state-owned
& non-state company)
Entrepreneurs in China are much profitoriented, product safety are less
concerned.
-Lack of financial management (nonstate company)
Increasing price of factors of
production causes bankruptcy of many
companies
-Lack of Research and development
(non-state company)
Many Chinese companies do not have a
strong financial
support and technology to have
research
and development of new products.
Successful examples of domestic brand
Sinopec (China Petroleum and Chemical
Corporation ):
It is one of the Fortune Global 500 enterprise in the
world
It is the major petroleum companies in China
Business covers nearly all aspects of the oil industry
Earning RMB 1,076.4 billion in 2006
Successful examples of domestic brand
Geely Automobile (吉利汽车)
It is one of the TOP 500 enterprise in China.
Earning about HK$ 0.315 billion in 2007
Good Research and development allows self development of
automobile.
Geely was the first Chinese automakers present at the
Frankfurt
Motor Show in 2005.
Geely sells its products in some developing countries and is
now planning to enter U.S.A and Europe.
Advantages of foreign brands:
-Good reputation in customers’ mind
Foreign brand are recognized as trendy,
advanced and high quality by Chinese
customers
-Advanced technology
Foreign companies are able to develop
new products because they have good
research and development.
-Better managerial skill
Foreign companies are more skillful in
operating their business in a proper
way
Disadvantage of foreign brands
-Unfamiliar with local culture and business
environment
Foreign companies are less understand on
Chinese
-Difficult to built good relationship
with Chinese government
It is essential to get permission from
the government before they can enter
China.
(extra cost paid to local government)
-Unfamiliar with the laws
E.g. It is delocalize for a company to enter contract
with the county government.
在中國与縣級以下地方政府簽訂的合同沒有法律效力如
不了解中國法律，只听信村長或地方政府領導人的話簽
合同，則盈利好的企業也有可能在一夜之間倒閉
Tips to build guanxi with Chinese
-The best way to strengthen a guanxi network is to stay
connected.
-Send small gifts or ask for small favors to keep a
relationship active.
-Host an occasional get-together.
-Remember the major Chinese holidays and send
greetings.
-Get to know your colleagues’ outside interests and find
ways to support them, like getting tickets to a sporting
event or concert.
-Communication problems
It remains a significant language
barrier between
Chinese and Western companies.
Mutual linguistic understanding can
often be lacking.
-Fake Products ruin image
Foreign brands are usually become
target for others to imitate their
brand name and products
Also, companies have to cost a lot to
protect their intelligence property
Foreign companies who fail in China
Reason: Bad Guanxi with the government
香港最大的賣鐵公司──耀昌企業，在香港經營賺到
十几億元，但轉向中國大陸發展后，3、4年間宣
告破產。香港中小型企業聯合會會長佘繼標解釋
說，中國大陸以前是官員張口要錢，現在是巧立
名目收費。不同政府部門根据不同的規則堂而皇
之找你要錢，這些規定嚴格來說都是違法的，但
你又不得不給，否則便會面臨停工的下場。佘繼
標苦笑道："他們幫不了賺錢，但可以幫你停工。
"
Reason: Unfamiliar with the Chinese consumers
Google usage is far behind BAIDU in China
Google doesn’t satisfy Chinese
BAIDU is a Chinese based search engine.
People use BAIDU because of the MP3 search
function and other factors that Google treats as
sickness factors
Google must get the local management team in
place, delegate authority to them, and localize
services
Question 4
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Given the mounting competition
and increasing number of brands,
how to position and build a brand
in China to grow your business?
Positioning
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Marketers try to build an image or identity
in the consumers’ minds for its products
Positioning is a relative competitive
comparison their product occupies in a given
market as perceived by the target market.
(Perceptual Map)
Tips : Position should not be too crowd
A Brand Should Be…
Help consumer to
identify & distinguish
from competitors
 Consistent Image
 Brand Personality
( Associated with
Human Characteristics)
 Unique
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For the New China
The General Market is too crowded
 No company can serve the whole
economy well
 choose a market segment which is
profitable (serve the niche)
 Economic Growth  People have more
$ to spend
 Brand can be position in a higher class
(higher price)
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Case Study : Milk Deluxe 特崙蘇
Milk Deluxe 特崙蘇
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Sub-Brand of Mengniu
Meaning in Mongolian is “Gold Medal Milk”
Deluxe  Reflect social status
Selling at RMB$7/pack which is the 2-3 times
of the ordinary Mengniu
Smoother, Taste Better
High Nutrition (Protein 3.3g/100ml ,higher
than national requirement by 13.8%)
Milk Deluxe 特崙蘇
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First one to enter/open the High-end Milk
Market
Best Geographical Location for Production
High Quality Control (Satisfactory Results of
Testing of Melamine on 16/09/08 by HK Centre
of Food Safety)
Award of New Product Development at the 27th
IDF International Dairy Conference
The Best Lifestyle Brand in China中国生活方式最
佳品牌
Production Line
Consumer Profile
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Mid – High Income Class
Yuppies/Chuppies (the
young generation of
Chinese yuppies)
RMB$5000RMB$9999/month
Enjoy Life
Own Life Style
Concern on their Health
Brand Image
High Class
 Healthy
 High Quality
 Relaxation
 High Quality of Life
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Positioning
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High Quality & High Price
Integrated Marketing Communications
– Tools For Branding
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Printed
Advertisement
Focus on Lifestyle
Successful Life
Concern Less on
Health
TV Advertisement
http://hk.youtube.com
/watch?v=cN0CL3oPZx
A
Integrated Marketing Communications
– Tools For Branding
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Web Site
(Separate
from
Mengniu)
Customer
Hotline
Integrated Marketing Communications
-Online Community
Integrated Marketing Communications
- Sponsor Travelling TV Program
Integrated Marketing Communications
-Packaging
Increase Brand Loyalty
-Membership Scheme
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Member earn
points by
purchasing
their
product
Use the
points to
Redeem
Present
Increase Brand Loyalty
-Health Network
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A health centre
operate by Milk
Deluxe in Beijing
For Members
Gym
Aerobics
Yoga
Hip Hop Dance
Boxing Dance
Learn from Milk Deluxe to Build up
Brand in New China
Serve the Niche Market (Profitable &
Require Less Resources )
 Know the Market ( Catch the Rising Chuppies)
 Well Established Parent Brand Reputation
(Mengniu)
 Let the consumers to involve in your brand
increase Brand Loyalty
(e.g Health Network + Membership Scheme)
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Learn from Milk Deluxe to Build up
Brand in New China
Good IMC (Tools of Branding)
- Online Community (Interactive
Platform allow users to exchange their
opinions on different hobbies)
-Sponsor Relevant TV Program (Easier
to access the target customers)
 Customer Oriented (Customer Service
Hotline)
 First Mover Advantage
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The Tainted Milk Crisis
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17th September, 2008 China
government announced 22 milk
companies had produced
melamine(三聚氰胺)-tainted
milk
The suppliers added melamine
to the milk formula to artificially
inflate the reading for protein
levels
Several thousand babies in
China are seriously ill, having
suffered acute kidney failure
Reputation of Chinese milk
market was plummeted
Estimate Milk sales drop from
131 billions last year to 45
billions
Foreign countries restrict
Chinese milk to import
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Shares in Mengniu Dairy tanked
nearly 66 percent to a 33month low of HK$6.85, dropped
from its closing price of HK$20
before the event
The Tainted Milk Crisis
Mengniu’s response:
 All poisoned product have been removed
from the store and destroyed
 Other products were cleared of melamine
contamination in government tests
 Strength the examine management
 Apologize for the incident and any
inconvenience caused to the public
 Take response for the kidney failure patients
The Tainted Milk Crisis
Recommendation:
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Introduce business ethic
Strengthen the quality control
Invite 3rd party to hold independent examine
for the product
Control the suppliers
Reverse the reputation
The Tainted Milk Crisis
Opportunities:
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Small companies are fail to survival
Large company like Mengniu can increase the
market share by acquire the small companies
Entry barriers to new companies has been
enhanced because the quality examine is
strengthened by the government
Thank You
The End