Wahaha's expansion is no laughing matter
By Paula M. Miller (China Business Review)Updated: 2007-06-08 09:34
Wahaha started making its own cola in 1998. Feichang Kele (translated as Extreme Cola or, more commonly, Future Cola, for its sound) tastes like a cross between Coca-Cola and Pepsi, but bears a red and white label that strongly resembles the Coca-Cola Co.'s world-famous one.
After selling milk products successfully in the United States in 2003,
Wahaha, inspired by a US-based request, decided to try its luck in the US cola
market this spring.
After selling milk products successfully in the United
States in 2003, Wahaha, inspired by a US-based request, decided to try its luck
in the US cola market this spring. In late April, Wahaha shipped 170,400 bottles
of Future Cola to its US distributor, the Manpolo International Trading Corp., a
small import-export company located in New York's Chinatown. In June, Manpolo
distributed the entire first Future Cola shipment to the small Chinese-American
grocery store chain Hong Kong Supermarket, Inc., which has stores in New York
and Los Angeles - the first time a mainland Chinese cola had hit US stores.
Wahaha's goal is to have Future Cola sit on the same shelves as Coca-Cola and
Pepsi and sell for roughly the same price. But given its limited initial
distribution, it looks like American Future Cola fans will have to wait a while
before they will find it stocked at local convenience stores.
Competition
Wahaha considers its top cola competitors the
Coca-Cola Co. and PepsiCo, Inc. followed by the Taiwan-founded companies
Uni-President Enterprise Corp. and Tingyi (Cayman Islands) Holding Corp.
Coca-Cola dominates the mainland's soda market. According to PRC government
statistics, it held a 24 percent market share in 2003 compared to Future Cola's
7 percent share.
According to Shan, "Seven years ago, when Wahaha was preparing to launch Future Cola, people laughed because previously several Chinese companies had tried to sell cola, failed, and either went bankrupt or were bought out by Coca-Cola or PepsiCo." But in 2003, he claims, Wahaha's total beverage production [3.75 million tons] exceeded that of Coca-Cola in China.
Wahaha does not worry too much about domestic competition. It has had to battle imitations, however. Shan explained the company's strategy. "The best way to fight counterfeit products is to lower your own prices. This pricing strategy will make fake-product makers drop out. Wahaha also reports intellectual property problems to local police." According to Shan, Wahaha is able to keep costs low because the company produces its own bottles and caps.
Marketing a "patriotic" brand
Wahaha has employed three
main marketing techniques. First, its advertisements, especially for Future
Cola, promote its products as patriotic brands. Advertisements promote Future
Cola as China's own cola (never mind the foreign investment) and encourage
consumers to support the nation, by selecting Wahaha over foreign competitors.
Second, Wahaha carefully chooses which regions it will target for each product. Shan explained, "Some products, such as our water, sell better in the city and some products, like our cola, do better in the countryside. Consumers in all areas will choose Wahaha water, but consumers in large cities are unlikely to choose Future Cola.... Wahaha's focus on rural areas for Future Cola does not mean it has given up on cities - but city grocery stores have very high entry fees. For practical reasons, we wanted to introduce the product with lower costs."
The company's hottest-selling products in China are bottled water and vitamin-enhanced milk drinks.
Because Coca-Cola and Pepsi were already strong in China's cities, where fashion-conscious consumers have more to spend on food and drink, Wahaha launched Future Cola in the countryside in 1998. The relatively small price difference between Future Cola and the US brands makes a difference to many rural consumers (in China, Future Cola sells for about 2 yuan (US$0.24) per bottle - about 6 cents less than its US rivals), which is one reason that Future Cola has sold well in the countryside.
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