4 November 2009
Overall Analysis of the Chinese Market:
The first step in determining whether or not it is profitable for NutraSweet to enter into the Chinese market is to analyze both the strengths and weaknesses of the current market. First of all, it should be noted that 40% of China’s 1.2 billion consumers spend their disposable income on food purchases. Furthermore, China economy has the fifth largest purchasing power and the economy is growing at a rapid rate of 10% per year. More specifically, in Hong Kong the economy is growing at 5% per year and citizens have an average yearly income of $18,000. Additionally, due to the post-Cultural Revolution, the Chinese have a liking for western products that represent luxury, quality, and freedom. Clearly, all of these facts are beneficial in the eyes of NutraSweet marketers. Finally, as a nation, the Chinese people tend to use natural food products and eat a healthy diet which is harmonious with the NutraSweet product.
While these facts are encouraging for the NutraSweet product, there are many challenges facing thwarting penetration into the market. First and foremost, Chinese culture tends to have minimal sugar in their diets. It is reported that a Chinese citizen only uses 14 pounds of sugar on average per year. Comparatively, an America citizen uses 80 pounds of sugar per year. This large difference could prove an invaluable investment for NutraSweet, or it could prove to be a detrimental hindrance to NutraSweet successfully being introduced to the Chinese market. Moreover, the Chinese people would need to be educated on the benefits of the product, which would be costly for NutraSweet. Unfortunately, numerous other health-conscious products have been launched in Asian markets but have dismally failed. This is of high concern for NutraSweet. Also, it has been proven that most joint ventures from food and drink manufacturers in China were not profitable. Sweeteners have been deemed as a medical need in China, due to the use of it by diabetics. This image of sweeteners is detrimental to the health-conscious culture of the Chinese. Distributing the product is also a challenge for NutraSweet due to the reliance of foreign agents or need of building their own distribution centers. This is a costly venture for the company and could prove difficult for business, in hopes that the product is even profitable in such an unknown market.
Positioning NutraSweet in China
The key objectives of the NutraSweet Company are to build business in China, and develop consumer brands. The following positioning strategies can penetrate the market and accomplish these goals. First, NutraSweet could be used for medical purposes (diabetics and similar needs). Second, it can be a sugar substitute used by groups as a healthy family lifestyle food.
Positioning the sweetener as a medical aid is a viable option due to the image that already exists. In China, sweeteners are already seen a product used by diabetics and people who are obese due to the introduction of Equal in 1993. Although this is more of a niche market and pertains to a smaller demographic, the need certainly exists. This positioning also means the price could be increased due to the medical nature of the sweetener and the need of the consumer. There are some issues facing medical positioning. First, China, on average, is a thin and fit culture that has little need for this “medical” sweetener. Even though the sweetener is healthier than regular sugar, it is looked upon as being unhealthy because it is used by people with illness.
NutraSweet can also be positioned as an “everyday-use” substitute for sugar. Since the sugar quality is very low in China, the natural substitute can be seen as highly beneficial. The pricing platform is set with the “four f’s”: food, fun, family, and for you. The sweetener, in this context, can be positioned in grocery...