Johnson & Johnson China Personal Care product Market Entry.ppt

Strategy for Personal Care Products in Chinas Emerging Markets:Final Report,Johnson&Johnson China,Version 2.0,2,Background and objectives of this study3Emerging Market defined5Overview of the Chinese Personal Care market13Challenges for entering Emerging Markets18Case Studies of companies acting in Emerging Markets22Summary of findings and conclusions80Recommendations89Appendix 1:Additional company information93Appendix 2:Personal Care market segment analysis95Back-up:Definitions and miscellaneous information126,Strategy for Personal Care Products in Chinas Emerging Markets:Content,Section,Page,3,Background and objectives of this studyEmerging Market definedOverview of the Chinese Personal Care marketChallenges for entering Emerging MarketsCase Studies of companies acting in Emerging MarketsSummary of findings and conclusionsRecommendationsAppendix 1:Additional company information(click.xls file)Appendix 2:Personal Care market segment analysisBack-up:Definitions and miscellaneous information,Strategy for Personal Care Products in Chinas Emerging Markets:Content,4,The following document is the final report of a case study analysis focussing on Personal Care producers serving the Emerging Markets,Background and Objectives,Background,Objectives,As Chinese economy evolves Tier 1 markets mature and Tier 2 to 4 markets get more attractiveIn response to these market changes MNCs in the Personal Care market start thinking about expansion strategies beyond their traditional Tier 1 marketsOffering products for Emerging Markets is seen as an attractive strategyHowever those markets require a new go-to-market approach in adapting products and cost structures for competition in low price markets,The objective of the following report is to provide insights into conditions for acting in Chinas Emerging MarketsIt aims to support preparation for entering Emerging Markets through information onConditions for acting in emerging marketsGo-to-market models chosen by selected companiesIndication of cost structures and business priorities for companies that act in the Emerging Markets,This document provides support for further internal evaluation and analysis.Recommendations are indicative and aimed at triggering the ongoing discussion about priorities for the emerging markets.,5,Background and objectives of this studyEmerging Market definedOverview of the Chinese Personal Care marketChallenges for entering Emerging MarketsCase Studies of companies acting in Emerging MarketsSummary of findings and conclusionsRecommendationsAppendix 1:Additional company informationAppendix 2:Personal Care market segment analysisBack-up:Definitions and miscellaneous information,Strategy for Personal Care Products in Chinas Emerging Markets:Content,6,Emerging Market-Growth of income and consumption,%,RMB,The wage increase in China is growing quickly and disposable income will rise.,Source:Industry Reports,National Statistics&CGEY Analysis,Annual Wage,Growth,RMB,Private Consumption,GDP,Consumption versus GDP,Chinas Average Annual Wage Growth(1998-2002),As private spending power is increasing throughout China private consumption is growing at rapid pace,7,Increasing income also for large group of lower income earners,#of households,Income in RMB,Increasing income in major cities,Income Spread for 1997,Income Spread for 2002,Increase in disposable incomefor low income groups,Source:CGEY Analysis,Overall rising income and the number of people earning more leads to a potential new market and overall increased disposable income.,Whilst the majority of population still draws lower income range,rising income levels result in growth of disposable income in lower income groups as well,8,Emerging Market-Increase of lower level household income,Source:Industry Reports,National Statistics&CGEY Analysis.Note:For a list of Tier 1 and 2 cities and Tier/Region split see back up at the end of this document.,The number of households above RMB3,000 monthly income outside the major cities in China is more than twice compared to the major cities-and growing fast.,Number of households earning more than RMB 3,000in million households 2001 and 2006(estimate),Income uplift in the area of lower level household incomes is also reflected in the expected increase of households earning more than RMB3000,9,Tier 1 Cities,2002 Distribution of Population,Income,and GDP by cities in China,Tier 2 Cities,Location of Tier 1&Tier 2 Cities,Tier 1 Cities,Tier 2 Cities,Tier 3 Cities,Tier 4 Cities,Rural Areas,The bulk of Chinas disposable income lie inTier 3,Tier 4 and rural areas.,80%,80%of Chinas disposable household income lie outside Tier 1 and 2 cities,Emerging market-growing potential markets outside Tier 1 and Tier 2,Source:Industry Reports,National Statistics&CGEY Analysis.Note:For a list of Tier 1 and 2 cities and Tier/Region split see back up at the end of this document.,10,Where income is available,and what it is spent on,%reference product sales by cities,Top 3 cities(Shanghai,Beijing,Guangzhou),Next ten cities,Other Cities,Significant percentage of product sales potential lies outside the few top cities typically targeted by MNCs in China.,%of total households by cities,%of total high income households by cities,An attractive market with high income and spending lie outside the top 13 cities,Emerging Market-Beyond the top 13 cities,Source:Industry Reports,National Statistics&CGEY Analysis.Note:For a list of Tier 1 and 2 cities and Tier/Region split see back up at the end of this document.,(Figures in 2001 data),11,Wallet Share of Personal Care for Rural Populace,Wallet Share of Personal Care for Urban Populace,Wallet Share of Rural versus Urban Populace,The%of disposable income spent on personal care is higher is rural areas than in urban areas.,The rural populace spend comparatively more on personal care than their urban peers,Emerging Market-Share of Wallet for Personal Care in rural areas,Source:Industry Reports,National Statistics&CGEY Analysis.Note:For a list of Tier 1 and 2 cities and Tier/Region split see back up at the end of this document.,12,We regard three combined market movements as drivers for the Emerging Market in China,Summary:Emerging Market drivers,Overall income increase leading to growing private consumptionsGrowing number of households with lower level income that experience a significant income increase(earning above RMB 3,000)Growing number of households outside of the top 13 cities with larger/growing income,Household income increase,Tier 1,Number of householdsabove RMB3000/m,Tier 2,Tier 3,Tier 4,Higher incomein less developed regions,Assumption:Higher household income will lead to higher consumptions for personal care products.,1,2,3,1,2,3,Emerging Market,13,Background and objectives of this studyEmerging Market definedOverview of the Chinese Personal Care marketChallenges for entering Emerging MarketsCase Studies of companies acting in Emerging MarketsSummary of findings and conclusionsRecommendationsAppendix 1:Additional company informationAppendix 2:Personal Care market segment analysisBack-up:Definitions and miscellaneous information,Strategy for Personal Care Products in Chinas Emerging Markets:Content,14,E:EstimateSource:Euromonitor 2003,CGE&Y Analysis,The Chinese Personal Care market continues to offers great opportunities for manufacturers.,Chinese Personal Care market growth 1997-2007E(Total retail sales,in mRMB),CAGR 1997-2002:10.4%,CAGR 2002-2007:7.2%,The Chinese Personal Care market is expected to continue its strong growth albeit at a slower pace,Overall Personal Care market growth,Personal Care Market in China enjoyed strong growth in the past six years With rising affluence and growing product awareness,this market will keep growing with fast pace However saturation in developed markets will reduce speed of growth,Estimate,RMB 57,046m,RMB 80,762m,15,While Disposable Paper,Skin Care,and Baby Care will show the strongest growth among the categories,Feminine Hygiene will continue to be the largest category,Baby Care,Feminine Hygiene,Skin Care,Hair Care,Disposable Paper,Bath&Shower,2002,2007E,Overall 7.2%,Total:RMB 57,046mRMB 80,762m,Source:Euromonitor 2003;CGE&Y Analysis,Estimated Personal Care market growth by category Compounded Annual Growth Rate(CAGR)2002-2007 in%,Personal Care spit by categorycategory market shares 2002 and 2007E in%,Due to combination of market share and growth Skin Care can be regarded as the growth driver in the coming 5 years.,16,Source:Euromonitor 2003,CGEY Analysis,Baby Care,Feminine Hygiene,Skin Care,Hair Care,As the markets mature we expect the three smaller segments develop a larger share.,Feminine Hygiene,Skin Care,and Hair Care make up 78%of the total Personal Care Market,Dominating segments within the Personal Care market,Feminine hygiene is the largest market segment due toIncrease in awareness of personal hygieneSearch for convenience in busy lifestylesSkin care is the second largest market segment due toImprovement of living standard in ChinaMore attention to personal appearance,78%,36%,22%,20%,11%,9%,2%,Disposable PaperProducts,Bath&ShowerProducts,Overall Personal Care market by product category Year 2002,in%Total:RMB 57,046m,17,70%of the Personal Care market lies in developed regions and individual segments share within regions reflect geographical preferences and market maturity,Personal Care market 2002 by geography in%,Source:Euromonitor 2003,CGEY Analysis,East China,North and Northeast China,South China,Mid China,Southwest China,Northwest China,26%,24%,21%,13%,10%,6%,TotalRMB 57,046m,14,539,13,942,12,089,7,077,5,768,3,632,RMB,%,70%,34%,24%,17%,7%,16%,31%,17%,31%,8%,11%,42%,21%,15%,11%,9%,33%,21%,23%,42%,24%,22%,10%,5%,9%,8%,Feminine Hygiene,Skin Care,Hair Care,Disposable Paper,Bath&Shower,45%,19%,16%,12%,7%,2%,2%,1%,2%,1%,2%,Baby Care,Personal Care market 2002by market categories per geography in%,Link back to regional split,18,Background and objectives of this studyEmerging Market definedOverview of the Chinese Personal Care marketChallenges for entering Emerging MarketsCase Studies of companies acting in Emerging MarketsSummary of findings and conclusionsRecommendationsAppendix 1:Additional company informationAppendix 2:Personal Care market segment analysisBack-up:Definitions and miscellaneous information,Strategy for Personal Care Products in Chinas Emerging Markets:Content,19,Segments,Feminine Hygiene,Skin Care,Hair Care,Bath&Shower,DisposablePaper,Baby Care,Demographic Shift,Segment Development,High educational effort required to break the dominance of the Towel product segment,Increasing income leads to higher consumer spendingTier 2 and Tier 3 cities are closing up to where Tier 1 cities were 3 years ago,Skin Care,Disposable Paper,and Baby Care are expected to show the strongest growth potential but competition is increasing in all segments,Growing competition in the Personal Care market,Strong growth prospectsLarge share also in less developed region,Saturation in developed regions slowing overall growthSubstitution of strongest segment(2 in 1)starting,Grow slowly as most Chinese consumers continue to favour bar soap,Rapid growth on the back of nappy and tissue growthEarly update in less developed areas,Still in developing stagesEducation and brand building key to overcome luxury image in less developed regions,Competition,Several top players with similar market shareMany small local players,Several stronger players but none above 10%market shareMarkets in less developed regions also with stronger share,One very strong MNC playerMany runners upMany small local players,Two MNCs in higher end marketMany small local players mostly in lower end(+bar soap)market,Strong local playersHeavy competition on price,One dominant playerBut local players gaining slowly,20,Market maturity,competition&profitability remain key considerations as shifting demographics generate new markets,Entry barriers to new markets,Shifts in demographics,Are we entering the right Market?,Formulating solutions to key issues in entering new markets in China help companies gain market share and build brand equity.,Can we Achieve Profitability?,Market Maturity-Existence of new markets may show potential growth areas,however educating the market is another consideration.-Maturity of market life cycle,Key Questions,Key Considerations,Intensity of CompetitionOne or few dominant players may already exist in the market-The market may be very fragmented with intense competition between multiple parties,ProfitabilityDealing with losses due to counterfeiting and intellectual property challenges may drive profits down.Managing,creating and sourcing distribution is comparatively high cost,21,Entry into emerging markets place high investment requirements in time and resources to get the execution right,Operational and executional challenges,Shifts in competition and customer base,Frequent shift in strategic objectives Growth into new markets and product categories place demands on expansion into new verticalsPlace new capability and resources requirements on companies to change quickly,Are we going in the right direction?,Are we profitable?,Are we meeting demand?,Is our supply chain effective?,Do we attract the best people?,Returns from market slow in coming Companies holding onto to position in market but not profitableCompetitive pricing in new markets reducing market size,Lack wide distribution and losing customer baseDistributors squeeze marginsHigher cost marketing to boost brand promotion effortsSales teams efforts have huge and diverse regional segments to cover Low-cost products,Little cost-savings coming from tighter supplier networks Multiple production sitesLong OTD lead-time for raw materials and other production supplies,Best talent is not willing to leave first-tier Senior management and innovators will not want to relocated to Chinas less developed regionsForced to offer high-cost incentivesLose synergies by splitting production and with marketing and management functions,How companies manage these operational challenges distinguish successful performance in emerging markets from the unsuccessful.,22,Background and objectives of this studyEmerging Market definedOverview of the Chinese Personal Care marketChallenges for entering Emerging MarketsCase Studies of companies acting in Emerging MarketsSummary of findings and conclusionsRecommendationsAppendix 1:Additional company informationAppendix 2:Personal Care market segment analysisBack-up:Definitions and miscellaneous information,Strategy for Personal Care Products in Chinas Emerging Markets:Content,23,5 companies have granted interviews out of which 5 case studies have been prepared,In-depth Case Studies,Companies Contacted,Interviews conducted,Multinational CompaniesHenkel Cosmetics China(Haier Mian)Major Domestic CompaniesC-BonsPeopleFrog PrinceGanon/TJoy,5,Case Studies Prepared,5,24,Five in-depth case studies have been prepared,In-depth Case Studies,25,Each of the in-depth ca