Juan ValdezPremium

ColombianCoffee

Team:Simón Zimmer

Yan Fang Nardjes Betina

Mohamed SayedahmedVanessa Caita

Vishnu Raj

InternationalMarketing Plan

Executive SummaryJuan Valdez Colombian coffee company hired a marketing consulting firm to create a marketing plan to analyze how to bring their Juan Valdez Premium Coffee into the Chinese market.

Two decades ago, the idea of trying to sell coffee in China would have been difficult to imagine. First of all, the dominant drink in China was and still is tea and has been so for hundreds of years. Second, it was much more difficult due to regulations and laws to import coffee into China to make it a financially viable endeavor.

Fast forward two decades and everything has changed. China’s coffee consumption growth rate is at 15% compared to only the worldwide average being 2%. Combined with the huge population of China at approximately 1.3 billion people, foreign companies have the potential to tap into a huge market of hundreds of millions of people. And since 2013, the Chinese government has made it much easier to sell products in China through Free Trade Zones located in China. These zones provide a much easier environment for foreign companies to do business in China. On top of that, now you have companies such as Transcosmos who create a gateway to the China market via an end to end solution that covers everything from exporting Juan Valdez Premium Coffee from Colombia, creating digital marketing, to shipping the product to customers.

How do customers learn about Juan Valdez Premium Coffee? Transcosmos partners up with Business to Customer platforms such as Tmall Global, which enable international brands to access the Chinese market without a direct presence in China. Through Tmall Global, a company can setup a flagship store on their platform where anyone can easily purchase the product and have it delivered to their home in a short period of time.Therefore, the timing is perfect for Juan Valdez to enter the coffee market in China by using Transcosmos, Tmall Global and the Zhejiang FTZ. Juan Valdez offers Premium Coffee from organic coffee beans. They offer many tastes that can become the next big hit in China. The following is the marketing plan that can help make this a reality.

5, References

1. Chinese Market Analysis

2. Competitive Analysis 13

3. Marketing Plan

4, Conclusion

a. Political and legal Analysis

b. Economic Analysis

c. Cultural and social Analysis

d. Technological Analysis

a. Market Segmentation

b. Entry Mode

579

11

1718

Table of Contents

c. Marketing Mix 20

22

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1.Chinese Market Analysisa. Pol it ical and Legal Analysis

does have a strong intellectual property protection component; however, this is not well enforced and often violated. China has strict foreign exchange regulations. Therefore, transferring money in and out of the country will require administration approval and/or registration depending on the amount of money and what kind of transaction it is. Concerning taxes, a foreign company may be required to pay taxes that are related to china-sourced income . Also, the company may be required to pay taxes if there is licensing involved. A new tax on overseas purchase

was implanted in 2016. It will affect cross-border e-commerce as well as individuals purchase via a cross-border e-commerce platform. Lastly, labor law compliance is important for both foreign and local companies who hire Chinese in their companies.

As a part of economic and social reforms in china, the government decided to proceed with multiple Free Trade Zones (FTZ) in the country to test the effectiveness of such reforms. Many companies such as Transcosmos took advantage of the competitive

Introduction:The key components of the chinese market analysis include the political, legal, economic, cultural, social and technological aspects that effect the target market. China is considered the second strongest nation in terms of military power and economy. It also has the biggest population at 1,3 billion people and growing.

Political Overview: Politically, the People's Republic of China is a communist state. There is only one political party in China.

The Chinese Community Party (CCP) has been leading China for the last 60 years. The current Prime Minster is Xi Jinping. He has been serving since 2013.

The Chinese – Colombian relations have been limited for some time until the opportunity for improvement came in 2015 after a meeting between the Chinese PM Li Kequang and the President Juan Manuel Santos initiated preliminary talks aimed at a free trade agreement. This is an important step for both countries considering the fact that China

has quickly become Colombia’s second largest trading partner after the United States.

Legal Overview for Companies:Legally, a foreign company needs to establish legal representation in China before it can distribute and sell products. All foreign companies must adhere to local laws, however, the easiest way for a foreign company to work in China is through a Chinese distributor. Regarding products, the Chinese authority needs to license, certify or register the products before anything is sold in China. China

services given in these FTZ's and this contributed to their success in the region. The FTZ features a a separate set of Arbitration Rules issued by the Shanghai International Arbitration Center (SHIAC). This enables several reforms favorable to FDI in the FTZ, including lower barriers..

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1.Chinese Market Analysisb. Economic Analysis

Overview:In 1978 China reformed its economy, initiating market reforms along partly capitalist lines to become the world's fastest-growing economy.

China moved from an investment-intensive, export-led model of growth, to a consumption- and innovation-driven one.

In 2015, China had 6.9 percent gross domestic product (GDP) growth. This is one of the best compared to some of the world’s largest economies.

According to the IMF, it forecasts that China will continue being the biggest contributor to the world GDP. China has expanded economically at a rate never before seen in history. Through this expansion, it has helped 800 million people get out of poverty. China also was able to accomplish all of its Millennium Development Goals (MDGs) by 2015.

With a population of 1.3 billion, the consumption accounted for 52.7 percent of China’s GDP in

2015. China is the second largest economy and is playing an important and influential role in the global economy.

Chinese consumers are also increasingly trading up from mass products to premium products. According to a Mckinsey study, 50 percent now seek the best and most expensive products. This is a significant increase over previous years. Chinese consumers are also becoming increasingly sophisticated.

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1.Chinese Market Analysisc. Cultural and Social Analysis

Overview:Known as a tea consumption country, coffee drinking has a short history in China. Statistics show that in 2014 the overall average cup of coffee per capita per year in China is only 5 cups. In rural China, there is a large population who has never had a cup of coffee in their whole life. For the total population of China, more than 50% have never had coffee in their life.

Geographically, the coffee consumption happens mainly in the cities, especially in Tier 1 or Tier 2 cities. Also, in larger cities like Beijing, Shanghai and Guangzhou the foreign coffee brands are dominating the market. Local brands such as UBC, DIO and Hogood mainly supply the lower tier cities.

Coffee drinking is more of a status

symbol than a habit that the Chinese enjoy. Coffee drinkers usually enjoy the image of high fashion and being connected to something exotic and new. The young people usually enjoy meeting in the coffee shop for a casual business talk or taking advantage of the atmosphere that comes with coffee. The coffee consumption has been continuously growing for the past decade, at an average rate of 15%, while the worldwide average growing rate is only 2%. This growth gives a great appeal for foreign coffee brands to enter the market in China.

As coffee begins to become popular, more people are now looking for a better tasting coffee that is higher quality. In China, the startup coffee shops are usually the option in big cities. These startups are starting to take customers

away who normally would go to Starbucks. These startup coffee shops usually sell their coffee through social media like WeChat, a popular social network app used by the majority of people in China.

Another trend occurring now is that more consumers keep a coffee machine at home. Interestingly, instant coffee is the preferred drink because it is easy to prepare.

Simultaneously, e-commerce is booming in China. People are seeking high premium products from overseas. One e-commerce platform that is popular is Tmall. Customers trust Tmall, compared to other e-commerce sites such as Taobao who is known for selling fake products. The major coffee companies that sell online are Nestlé, followed by Illy, Lavazza and Maxwell.

Average Cups of Coffee Per Capita Per Year

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1.Chinese Market Analysisd. Technological Analysis

Overview:A country with 721 million Internet users and one of the world's largest and fastest growing e-commerce market attracts many companies to invest in the e-commerce market. Chinese online retail market hit 630 billion US dollars of sales in 2015 which is the world's largest and almost 80% bigger that the US market. China is also the leading country in mobile shopping.

The social media and other online peer channels become a powerful channel for initiating

online purchases. That is almost 50% of the digital users who use social media to get reviews and recommend products before placing the order.

Tmall global is China’s booming cross-border trade channel with a year over year turnover growth of 179 percent. Tmall has more than 5,400 foreign brands with over 2,000 categories of goods from over 53 countries. 80% of these brands are first timers to the Chinese market.

Number of Online Shoppers in China from 2006 to 2015(in millions)

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Quarterly GMV - China Commerce Retail(in RMB billions, for 3 months ended)

Cross-Border Retail E-Commerce Buyers in China2014 - 2020

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2.Competit ive Analysis

OverviewTo help us to identify and evaluate the Juan Valdez coffee idea, we use the SWOT analysis to understand the strengths, weaknesses, opportunities and threats involved in this project.

This process generates information that is helpful in matching Juan Valdez’s goals, programs, and capacities to the social environment in the Chinese market.

Through this analysis, we can avoid potential mistakes in the future.

Strengths1. Quality of the product: Juan Valdez belongs to the National Federation of Coffee Growers of Colombia since 1958, selling excellent coffee, grown at high altitudes on small peasant holdings, carefully picked, and wet-

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processed.

2. Reputation of the brand: Juan Valdez is the only internationally recognized coffee brand that belongs to coffee growers and Colombia is recognized around the world for its excellence.

3. Global expansion: Is a growing brand captivating the world with Premium Colombian coffee with presence in 22 countries.

4. Traceability: The National Federation of Coffee Growers, ensures that the steps and the costs involved in each step of the coffee cultivation and commercialization process are carefully recorded in a verifiable manner.

5. Transparency: Of the economic benefits for coffee growers in Colombia, presenting to them not only the price of purchase but also other individual costs and the final price sold to clients.

Weaknesses1. Competition: Brands known worldwide such as Starbucks and Nestle. Other brands, mainly from South Korea, have made their entrance in the coffee shop market in China. The main players are Cafe Bene and Maan Coffee which have a different market segment in comparison to foreign brands.

2. Climate change: Weather plays a big role in the production of coffee that is affecting the price and availability.

3. Publicity: Juan Valdez is still an unknown brand in the Asian coffee market.

4. Colombia bean: Is not an Arabica bean, which is the common type of bean produced in China

5. Export: Must export the coffee from Colombia to China instead of having production farms in China.

Opportunities1. Growing market: One of the fastest growing coffee markets for consumption at 16% per year over the last 10 years. China consumes more than Australia.

2. Instant Coffee: Juan Valdez has instant coffee as one of its products, which is the preferred type in China.

3. Coffee culture: Is young but growing and developing.

4. Arabica beans: Chinese prefer Arabica beans, which is what they grow in China. Fortunately, the Colombian bean is quite similar to this type of coffee bean.

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Threats1. Tea: Is still the #1 drink in China by 10 to 1.

2. Competition: There is competition from Starbucks and Nestle. Both are growing coffee in the Yunnan province where the majority of coffee is grown in China.

3. Starbucks: Starbucks controls 60% of the coffee market in China.

4. Own Industry: China already has its own coffee industry for the last 100 years.

5. Imports: China imports most of its coffee from Vietnam.

Conclusion:For strengths, Juan Valdez's biggest strength is the quality of its products making emphasis on the high premium coffee produced in Colombia.

For weakness, Juan Valdez hasn't built such a strong brand positioning worldwide yet. The amount of consumers that are aware of the brand and its quality is still growing at a low pace outside America.

For opportunities, coffee consumption in China is growing rapidly, which is why in the future China has the potential to become a major coffee-consuming country.

For threats, China is a world leading tea consumption country. Coffee forms just a small part in the food and beverage sector so there are a lot of substitutes and local competitors.

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3.Marketing Plana. Market Segmentation

Overview:The target market is people who live in cities. They are between 20 to 50 years old. People who are over 30 years old are more loyal to a certain taste of coffee. They appreciate the taste of the coffee more than just the atmosphere of a coffee shop.

Next, the target market must be online shoppers. The McKinsey iConsumer China 2016 survey shows that nearly 1/5 of digital consumers buy from e-commerce vendors outside China. Offline coffee shops are usually located in a busy area near office buildings. Therefore, Juan Valdez is targeting people who are educated with a college degree or higher.

Nearly one-fifth of Digital Consumers Buyfrom E-commerce Vendors Outside China

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3.Marketing Planb. Market Entry

Overview:China is a very attractive coffee market that has been growing for the last few years. We recommend Juan Valdez to expand their business and distribution network to take advantage of this huge market opportunity. However, entering a new market can be a high risk. Therefore, we recommend using Transcosmos and Tmall Global as gateway to access the Chinese market. This will reduce the investment and time allocated for the legal process.

Transcosmos:Transcosmos is an outsourcing company providing entire end-to-end solutions for foreign companies.

Juan Valdez should use Transcosmos as it includes everything from E-Commerce website construction and operation to fulfillment (receipt of coffee, picking, repacking and shipping), customer care, Web promotions and analysis. The Juan Valdez coffee will be directly introduced to the Chinese market.

The Juan Valdez coffee will benefit from digital marketing, social media tools and techniques that are adapted to meet and attract Chinese customers.

Transcosmos will guarantee the best efficiency in terms of international fulfillment and logistics solutions that are one of the fasted and most reliable in

China. This will enable Juan Valdez to position its packaged coffee in the best possible way.

The Tmall Global platform, leader of the Business to Customer site, partners with Transcosmos. This makes the perfect combination to launch and operate the packaged coffee online in one of the most dominant E-commerce platforms for the Chinese market.

Tmall Global:Tmall Global is one of China’s biggest cross-border B2C platforms. It enables international brands to access the Chinese market without a direct presence in China. With Tmall Global, orders have the possibility to be

China B2CMarket Penetration

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sent directly to the customers from abroad, and the payment can be settled in the preferred currency. The goods are directly sent to China via express delivery or consolidated shipment and distributed through Tmall Global bounded warehouses. Tmall Global’s cross-border shipping specialists ensure the delivery of the products within 5-8 working days. Juan Valdez can also open a Flagship store in Tmall global for exclusively selling of the premium coffee range.

For setting up the store, Juan Valdez has to pay a deposit to Tmall

Global. There will be an annual service fee, and Juan Valdez has to pay a sales commission to Tmall Global for every transaction:

(Commission Fee = ((Product Price) + (Logistics Fee)) * Applicable Commission Rate )

Also note that Tmall Global has a tax of 11-12% subject to retail price.

Zhejiang FTZ:Juan Valdez is seeking to sell its premium packaged coffee via cross-border e-commerce platform, FTZ has made this possible. Hangzhou cross-border

e-commerce comprehensive pilot area was established in March 2015. In September 2016, Zhoushan FTZ in Zhejiang, was approved.

Tmall Global will benefit directly from this policy, because it is located in Hangzhou. All merchandises such as packaged coffee will be traded through Tmall Global. Then it will be received and stored in the FTZ in Zhejiang to be distrusted to its duty free warehouses located in Hangzhou or Ningbo.

Flow Diagram on how Transcosmos,Tmall Global and the FTZ works together.

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3.Marketing Planc. Marketing Mix

Branding:,The brand aims to simplify consumers’ decision making and to reduce the risk when buying a product. The Juan Valdez brand will make focus on the coffee producers in Colombia. Its logo is a square symbol of a peasant coffee grower who is called Juan Valdez with his donkey, Conchita. The slogan is “Premium Colombian Coffee”. These elements help to create a distinctive image on its products based on the origin of the coffee. In order to maintain the recognition of the brand worldwide, the logo will remain the same and will be integrated into every social media page to be consistent across all platforms and create brand recognition.

Marketing communications:The corporate identity of the company will be enhanced through internal and external communications of the values and organizations philosophy.

Juan Valdez can support the brand and its positioning with a strong communications program. This will help the consumers become aware of the brand and its positioning proposition using social media as a tool for customer loyalty as well as a channel of communication using apps like WeChat or Weibo.

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Product:The product is “Premium Colombian Coffee”, which is a tasty and long lasting flavor for the lovers of high quality coffee. The coffee is produced in Colombia with specific aromas and unique preparation.

The final products will be with coffee bean, ground coffee and instant coffee. We have different types of flavors from a special selection of 100% organic coffees. Depending on the preference, Juan Valdez offers strong coffees as well as more balanced flavor coffees. To the right is a table of some of the products they sell.

Pricing:Pricing the coffee is a crucial step especially in a new market. The company price policy is to use dynamic incremental pricing and position the product as a premium brand.

The Chinese market is at a unique point where the desire to buy coffee is growing, especially for premium coffee. Our strategy is to sell the Juan Valdez coffee through Tmall Global. For setting the price we recommend evaluating the volume and sales generated as well as the strategic decision of moving the Juan Valdez premium brand to one of the fastest growing markets in the world. Currently, the closest competitors at Tmall Global (Starbucks, Illy, Lavazza and Nestle) have prices that vary from 30 to 50 euro for 1 kg of coffee. The price for Juan Valdez will be higher than the typical price for an international coffee brand.

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4.Conclusion

Cross-border e-commerce is rising globally. Because of the size of the market, China shows a strong growing trend for the future.

New policy such as the establishment of the FTZs, from which cross-border e-commerce will benefit, make it possible and easier for Juan Valdez Premium Coffee to enter the China market, via the online platform, Tmall Global.

Tmall Global is able to make this happen with the partnership with Transcosmos. Transcosmos will be greatly involved in activities including assisting with legal document requirements, the launching of the online flagship store, as well as building customer care. Tmall Global and Transcosmos provide a complete solution and service for foreign companies.

Therefore, we recommend that Juan Valdez can now start to share their premium organic coffee with customers in China thanks to a less restrictive and costly solution.

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5.References

Sources:Cover :

https://stock.adobe.com/fr/stock-photo/old-fashioned-coffee-brewing/7791043

https://s-media-cache-ak0.pinimg.com/originals/4f/ab/16/4fab160020e936d63855808c8df20d00.jpg

Political:

https://upload.wikimedia.org/wikipedia/commons/c/c4/Badaling_China_Great-Wall-of-China-04.jpg

https://stock.adobe.com/fr/stock-photo/china-city/72528341

http://www.cctv-america.com/2015/05/22/china-and-colombia-eye-stronger-economic-ties-free-trade-agreement

https://en.wikipedia.org/wiki/Politics_of_China

http://www.cfr.org/china/crs-understanding-chinas-political-system/p28270

http://english.gov.cn/premier/news/2016/10/07/content_281475460405102.htm

http://english.gov.cn/premier/news/2015/06/11/content_281475125066777.htm

http://applist.cctvnews.cn/publish/website/data//data/2016/04/23/bizbites/78e8f364-215d-4192-b502-3b5801a95c3f.jpg

Economic:

https://stock.adobe.com/fr/stock-photo/shanghai-skyline-panorama-china/83404229

https://stock.adobe.com/fr/stock-photo/shanghai/25938084

https://www.google.fr/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwi01eCdx_TQAhXDLhoKHUM8DBsQFggjMAA&url=https%3A%2F%2Fwww.kpmg.com%2FCN%2Fen%2FIssuesAndInsights%2FArticlesPublications%2FDocuments%2Fchina-outlook-2016.pdf&usg=AFQjCNFhBOQJolEOWGqAyhmgkkoszrLAkw

Cultural:

https://stock.adobe.com/fr/stock-photo/shanghai-skyline-panorama-china/83404229

https://stock.adobe.com/fr/stock-photo/chinese-hardscape-a-park-with-a-pond/81743088

https://stock.adobe.com/fr/search?serie_id=72527922&

Technology:

https://www.statista.com/statistics/277391/number-of-online-buyers-in-china/

https://stock.adobe.com/fr/stock-photo/purchase-with-credit-card/121387172

https://asialinkbusiness.com.au/uploads/content/alibaba_e-commerce.png

https://assets.econsultancy.com/images/0007/4192/Screen_Shot_2016-04-21_at_15.27.31.png

Competitive Anlaysis:

https://stock.adobe.com/fr/search?serie_id=93097260

https://s-media-cache-ak0.pinimg.com/originals/4f/ab/16/4fab160020e936d63855808c8df20d00.jpg

https://stock.adobe.com/fr/stock-photo/still-life-coffee-with-map-of-colombia/86336708

http://www.travelandescape.ca/wp-content/uploads/2012/07/iStock-China-tea-ceremony.jpg

https://stock.adobe.com/es/stock-photo/woman-shopping-online-with-credit-card-and-computer-internet-shopping/101487416

https://stock.adobe.com/es/stock-photo/chinese-tea/22701527

https://stock.adobe.com/es/stock-photo/colombia/26555632

Market Segmentation :

https://stock.adobe.com/es/stock-photo/asian-business-woman-with-cup/53821120

http://www.mckinsey.com/industries/retail/our-insights/how-savvy-social-shoppers-are-transforming-chinese-e-commerce

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Market Entry:

https://www.statista.com/statistics/323077/tmall-quarterly-gross-merchandise-volume-gmv/

http://ww1.prweb.com/prfiles/2011/11/03/10521604/TranscosmosCorporate%20Logo.jpg

https://en.wikipedia.org/wiki/Flag_of_China#/media/File:Flag_of_the_People%27s_Republic_of_China.svg

https://upload.wikimedia.org/wikipedia/commons/thumb/2/21/Flag_of_Colombia.svg/1280px-Flag_of_Colombia.svg.png

Marketing Mix:

http://image.slidesharecdn.com/juanvaldez-120430161105-phpapp02/95/juan-valdez-1-728.jpg?cb=1335802321

http://www.juanvaldezcafe.com/es-co/productos/nuestros-cafes/cafe-de-origen/origen-antioquia/

http://www.juanvaldezcafe.com/es-co/productos/nuestros-cafes/cafes-premium-selection/

http://www.juanvaldezcafe.com/es-co/productos/nuestros-cafes/cafes-premium-selection/cafe-colina/

http://www.juanvaldezcafe.com/es-co/productos/nuevas-preparaciones/cafe-soluble-liofilizado/descafeinado/

Misc.:

https://www.dutycalculator.com/dc/135870123/home-garden/groceries/coffee-roasted/import-duty-rate-for-importing-roasted-coffee-bean-from-australia-to-china-is-15/#

http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/chn/show/0901/2014/

https://icocoffeeorg.tumblr.com/post/131751774255/new-ico-study-coffee-in-china

http://www.sprcoffee.com/Market.html

https://apps.fas.usda.gov/gainfiles/200206/145683932.pdf

http://daxueconsulting.com/local-coffee-brands-china/

http://www.china.org.cn/business/2014-06/13/content_32658468.htm

http://www.mincit.gov.co/englishmin/publicaciones.php?id=4537

http://english.agri.gov.cn/hottopics/five/201603/t20160308_166645.htm

http://www.ebrun.com/art/202503.shtml

http://tariffdata.wto.org/TariffList.aspx

https://www.linkedin.com/pulse/top-8-legal-issues-regarding-entering-china-market-edward

http://www.apec.org.au/docs/xia.pdf

http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1174&context=auilr

https://en.portal.santandertrade.com/analyse-markets/china/economic-political-outline

http://transcosmos.com/about/

http://www.strategicsourceror.com/2015/09/rising-coffee-consumption-in-china.html

http://www.worldbank.org/en/country/china/overview#2

http://www.juanvaldezcafe.com/en-us/our-coffees/

http://www.bbc.com/news/world-asia-pacific-13017877

http://www.oecd.org/eco/surveys/China-2015-overview.pdf

http://www.mckinsey.com/industries/retail/our-insights/here-comes-the-modern-chinese-consumer

http://revenuesandprofits.com/alibaba-vs-walmart-fiscal-year-2016/

https://en.wikipedia.org/wiki/Shanghai_Free-Trade_Zone

http://dailycoffeenews.com/2015/11/16/growth-of-the-chinese-coffee-market-carries-unknown-global-implications/

http://www.differencebetween.net/object/comparisons-of-food-items/differences-between-arabica-and-colombian-coffee/

http://www.telegraph.co.uk/news/world/china-watch/culture/chinese-coffee-drinking/

http://www.freshcup.com/chinas-growing-coffee-culture/

https://www.federaciondecafeteros.org

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