Rougemont Fruit Nectar Analysis

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MEMORANDUM

Success in the Chinese’ fruit beverage market is contingent upon distribution decisions made by firms in the market. Many companies have failed to prosper in this market due to poor distribution decisions. However, the Chinese fruit beverage market is attractive. The advantageous nature of this market is revealed by examining competitive rivalries, and the social, economic, and political forces that will affect your firm’s ability to successfully compete.

Because your firm’s product will be marketed to China’s high-end market segment, competition is low. Chengbao, is your firm’s only competitor. However, Chengbao’s product, unlike your firm’s product, requires consumption within five days. Also, Chengbao only targets high end hotels and restaurants, leaving out potential consumers who don’t frequent these establishments. As for substitutes, there are few threats, because there are no products available in the market that will have the same thick consistency as your firm’s product. Other products that are thinner in consistency aren’t being targeted towards the higher income market that your company is targeting, so these products will not be substitutes. Further, thicker juices are viewed as better quality in China. Economically, reforms in China resulted in the rise in income levels. As a result, Chinese consumers are beginning to demand fruit beverages in their daily diets at the expense of cheaper substitutes because of the perceived health benefits they offer. An issue that may detract from the attractiveness of this venture is the high threat of new entrants. As the Chinese government continues to deregulate their businesses, outside corporations are able to enter the Chinese market facing few barriers.

Beijing Oasis’ fruit nectars fit within the market’s needs. The Chinese market does not contain many firms who are able to offer real fruit juice. Most juices are diluted concentrates. Your company produces high-quality nectar that is unlike any other in China. The Chinese believe in “eating” juice, and not drinking it. The addition of real fruit into your firm’s high quality nectars fulfills the Chinese consumers growing demand for such products. Similar to your firm’s competitors, the fruit nectar produced your firm will not need preservatives, but unlike your firm’s competitors, your company’s product’s unrefrigerated shelf life is one year as opposed to five days. Your firm is also attracting potential consumers by releasing three of the most popular flavors – apple, pear, and peach. Taking the Chinese consumer’s health concerns and flavor preferences into consideration enables your company to fulfill this market’s needs.

Given the markups of the various channel alternatives, the price of the nectar at retail is highly contingent upon the distribution channel chosen by this firm. However, no matter which distribution channel is selected, the price of this company’s fruit nectar has the potential to be significantly higher than the competitive products in this firm’s target markets. At the end of the first year of product introduction, this firm can expect the retail price at medium to high-end restaurants to range from 18.55 Rmb ($2.24) to 22.77 Rmb ($2.75) per 700 millilitre bottle. In comparison, this firm’s closest competitor can price its’ high quality fruit juice at $.96 per millilitre bottle, due to the low cost of the Chinese government handling the distribution of their product. However, our product will be less expensive than Dole and Tropicana which will set their price between $3.62 and $4.23 per 350 milliltre bottle.

The fruit nectar product looks like a “go.” The Chinese population total is 1.2 billion. The number of Chinese living in rural and urban China is 840 million and 360 million respectively. Your firm is targeting the urban market, because urban consumption of fruit beverages is five times greater than rural consumption. Beijing and...
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