JAMESON WHISKEY

Assignment Summary

Jameson whisky is the successful Irish whiskey brand that had succeeded in global

markets. Even in the recession times across Europe Jameson is the only brand that has

increase in its sales. We succeeded to launch our product successfully in different

markets globally by successfully positioning our brand. Now the company has decided to

launch Jameson whiskey in Chinese market and this report gives a detailed insight into

the factors that are needed to be considered by the company in launching its brand in

China.

Why China?

China is the highly populated country in the world. It constitutes 22% of the world’s

population. It is the developing country contesting with US in regards to power and

markets. China has a lot of younger population aged between 25-40 (Data monitor 2010).

We can see a huge change in the cultural patterns of drinking in younger generation when

compared to the older generation. The aspects of drinking are highly regarded in Chinese

history. The corporate culture has increased in China because of its growth in markets all

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around the world. During the past decade several social and economic changes have

boosted the sales of alcoholic beverages in China. China’s fast paced economic growth

and high incomes have led to urbanization and lots of people are willing to spend on high

end alcoholic beverages. The Chinese governments are also encouraging foreign

companies by reducing import taxes and VAT on foreign products.

The younger generation is open to changes and this is a very favorable aspect for us to

launch our product.

MARKET DESCRIPTION

As we mentioned earlier China is the highly populated country in the world, as a result it

offers a huge market for launch of our Jameson whiskey. According to a survey on liquor

consumption in China the spirits consumption in China grew by stunning 52% between

2005-2009(BBC 2009). As this an encouraging aspect for us regarding launching our

product there is a prediction that the spirit consumption rate going to increase by

2014(The globe 2010). The international spirits category is relatively low when compared

to the domestic industry, but there is a lot of scope for the global brands to prosper in

China. Alcohol production in China dates back to 12th century and now there are about

100000 alcohol manufactories in China in which 1/3rd is occupied by the spirits

companies. Foreign spirits make up 10% of the markets (business insights 2010). This

offers us a huge market to target. There is an expanding elite consumer segment in China

has boosted sales of foreign spirits. There is a huge market for us to create an impact and

change the drinking habits of the Chinese people.

The east and north east regions dominate overall alcohol consumption rates in China.

Growth opportunities continue to increase for the global brands because of its younger

generation. Foreign spirits are limited to premium end in the spirit industry due to

restricted distribution channel and fierce domestic competition.

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COMPETITION

We are going to face a lot of competition by the domestic brands. Locally produced spirit

called “baijiu” holds the top position in China. It is the most popular and best selling

liquor in terms of volume in the world. Baijiu is the few remaining Chinese spirits

companies in which the foreign capital has very low hand. It is the most consumed spirit

in China.

Foreign competition is dominated by the Scottish group and Chivas brothers owned by

Pernod Ricard and the Diageo Group. Other foreign spirits in Chinese markets include

the Japanese spirits and Russian vodka. A good understanding of the consumer is

important for the success of foreign brands in China. Foreign brands are perceived as

luxury in China. So it is going to be a task to compete with the domestic brands which are

available at very low prices in China. We may also face competition from counterfeit

brands. These are so prevalent in country that some alcoholic beverages manufacturers

are forced to take special measures to preserve their brand image.

DISTRIBUTION

Retail sales dominate the spirits markets in China mainly in independent food stores,

specialist retailers and supermarkets. Low cost super markets such as Wal-Mart and

Carrefour are providing mostly one stop distribution channels even for the high end

brands (emagazine 2009). Specialist retailers act as a gateway mainly between traditional

old buyers and foreign spirits. Spirits are mostly sold via retail outlets than any other

means. Foreign spirits are mainly considered as high end and luxury item which are given

as gifts on Chinese holidays. As China lack national spirit chains the supermarkets and

retail outlets play an important role in distribution. In addition to this local retailers and

night clubs mostly depend on local specialist retailers to supply their needs at discounted

prices.

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MARKETING

Foreign spirits consumption is mainly regarded as luxury or high end in China. To market

our brand in China we need create awareness of spirits among Chinese people. Most of

the people in China do not relate the foreign brands as compared to the local brands. So

the marketing of our brand must be done in such a way that the people can relate to our

brand. Chivas sales in 2006 have been increased by 50% in China all thanks to the “this is

the Chivas life” campaign by the Chivas group (Datamonitor 2010). This ad campaign

became successful and the people started to change their drinking habits. An ad campaign

has to be designed in a way that the local people can relate to our brand.

There are certain restrictions in China regarding advertising of spirits. No more than 2

ads are permitted per brand in an hour in the prime time (word press 2009). However

these are not adversely effecting the promotion of foreign brands. The high end spirit

market is extremely brand sensitive. We have to build our brand awareness among the

people of china from ground zero. We have to seek strong relationships with the local

supermarkets and specialist retailers as they are the main supply chain of spirits in China.

LAWS IN CHINA ON SPIRITS

Chinese governments provide a favorable environment for the foreign spirit companies in

china. Recent evidence is that of the Scottish whiskey for which the Chinese government

has agreed to recognize the brand. By this it prevents the fake companies to come in the

markets.

The Chinese government is also encouraging companies by reducing the consumption

taxes and importing taxes which is a good sign for our company to launch our brand in

china. It appears to be a good sign for the competitiveness of the foreign brands.

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COUNTRY RISKS

There is a need to look into Counterfeits in alcohol industry in China. It is not only

restricted to alcohol industry. But there were many legal issues concerned with alcohol

industry regarding counterfeits. Recently there was a legal issue regarding counterfeiting

of Chivas group brands. The governments are supporting the foreign brands and

enforcing strict laws to counter the counterfeits.

China's political situation was stable and the people lived and worked in peace and

contentment, which created necessary social conditions for attracting foreign investment.

So these conditions favors to our company.

The initially established market economy system and the gradually perfected laws and

rules created favorable legal environment for our company. The economic rate of

increase during 1998-2001 was about 7.5%, which was still the highest in the world. The

economic rate of increase of 2002 is 8% and is expected to be about 8% in the years to

come. Meanwhile, the macro-economic environment was fairly stable. The government

has, in recent years, energetically taken positive financial policies to stabilize exchange

rate and reduce deposit interest rate so as to promote the development of economy.

China's economic development level was also improved with a high speed; the per capita

GDP was nearly US$1,000. The Gross Domestic Product in 1997 was RMB7, 446.3

billion Yuan, RMB7, 939.6 billion Yuan in 1998, RMB8.205.4 billion Yuan 1999,

RMB8.940.4 billion Yuan 2000, RMB9, 593.3 billion Yuan in 2001 and RMB10.2398

trillion Yuan in 2002 and become the sixth largest economic entity of the world.

GDP and Population of six Asian countries

GDP in key sectors (%)

Countries Population

(Million)

GDP

($ Billion)

GDP/capita

($)

Agriculture Industry Services

China 1281.00 1237.10 7.262 13.80 52.90 33.30

Japan 127.10 3978.80 3.745 1.30 24.70 74.10

India 1043.30 515.00 3.319 23.60 28.40 48.00

Korea 47.60 476.70 925.1 3.20 40.00 56.30

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Indonesia 211.70 172.90 827.4 14.60 45.00 40.60

Thailand 61.60 126.40 524.8 9.00 44.30 46.70

(Chatterjee & Nankervis 2007, p.4)

Consumer prices in the world's second largest economy rose 6.2% from a year earlier,

down from 6.5% in July. Food prices have been the main reason for the rising costs in the

country. Separately, the Bureau said China's industrial output had risen 13.5% in August

year-on-year, slightly down on growth in July (BBC 2011).

After the global financial crisis in October 2008, the Yuan has largely fluctuated between

6.82 and 6.89 to the U.S. dollar. Lian points out that China, the world’s third largest

economy and one of the fastest growing, is important to a global recovery.

Blaming the RMB rate for the huge U.S. trade deficit is unjustified because the Chinese

currency has gained more than 21 percent against the U.S. dollar (Lian 2011).

So with high GDP, good inflation rate are very helpful and suit for our company’s future

in China.

In China, Transparency International study that measures the perceptions of international

business people on global corruption, China scored 3.4 on a scale of 0-10, where zero is

"highly corrupt" and 10 is "highly clean" surveyed in 2005. So China is not very clean

nor highly corrupted country. So with this low corruption rate as compared to other Asian

countries, our company will face problem in China but very few.

Corruption perception index for five Asian countries

Countries Score World rank Surveys used

Singapore 9.3 5 13

Japan 6.9 24 15

Malaysia 5.0 39 15

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China 3.4 71 16

Thailand 3.6 64 14

(Chatterjee & Nankervis 2007, p.7).

The amount of labor force with improved diathesis was sufficient. The cost advantage

caused by abundant cheap labor forces provided tremendous opportunities for foreign

investors. On the other hand, China also possessed related number of skilled labor forces

that have accepted favorable training and education, and can meet the requirements of

foreign investment on high-tech industries. So there is an advantage to get the labor at

very low price.

The area of China's land is more than 9.6 million square km, and is only next to that of

Russia and Canada. China is characterized by both the continental monsoon climate and

complicated and diversified climate. Also China stretches from the south to the north

equator belt, sub-torrid zone, warm temperate zone, temperate zone and cold temperate

zone. These are the favorable conditions to our company. We’ll get the land to open a

new branch there even at low price so that we can control the middle and eastern Asia

and can save the transport charges from Ireland to the Asia. The climate conditions favors

to people of China to drink alcohol throughout the year which favors us as well with

respect to production.

In recent years, China's infrastructure has been greatly improved, and the infrastructure

constructions like transport, telecommunication, water, electricity and gas supply, etc.

have been basically matured, and the capacity and quality of energy, raw material and

component supply were also obviously elevated, providing a favorable external

production management conditions for foreign investment. With these facilities we need

not to worry about selling our whiskey to different regions of China (2004).

CONCLUSION

From the above stated report we conclude that there are very favorable and encouraging

conditions for us to launch our brand in china. A huge proportion of young generation,

people willing to spend on high end products, the economic growth and the change in

tastes of people are going to be a huge boost up for us launching our brand in China. The

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global markets will continue to be highly competitive. China is a huge emerging market

in recent times and by having a right marketing strategy and good ad campaign we can

taste the success of our brand in china.

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