MKT 5647 Game Theory & Strategic MarketingGroup Presentation Topic: Marketing New Zealand Milk Products in China- New Zealand Mega Farm ()*

Agenda1.) China MarketUnderstand the Game in ChinaMajor Players

2.) Strategic PlanExpand Game Scope (New Player: International Hotels in China)Make Rules (New Zealand Standard Milk)Complementor (New Player: Quaker)New Channel (Infant Milk Powder)

3.) OverviewOverviewFinancial ForecastReference & Appendix

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*China Market

*Understand the GameConfidence on China made milk is weak because:Consumers have safety concerns : melamine crisis (2008 Chinese milk scandal)Public wasnt notified after melamine-laced products foundNew Dairy Safety Standards are weaker than those in the west, this will hurt competitiveness of local industry Premier Wen calls on a child sickened by tainted milk powder at Beijing Children's HospitalBusiness administration officers check dairy products in a supermarket in Rizhao, in east China's Shandong province.Sobbing mom hold photo of baby killed by melamine-tainted milk in China.

*Understand the GameBaby Milk Powder in China:Quantity on import milk powder is increasing on each yearMilk powder consumption is huge, more than 70 million children aged 0 3 in Chinatop 5 international brands took over 50% of the market International Nutrition (Dumex) , Mead Johnson (Enfagrow, Enfapro, Enfachild, Enfaschool), Abbott Nutrition International (Gain, Similac), Nestle (Lactogen, Neslac), and Wyeth (Promise, S-26, Bright Promil)

Milk Industry: quality StandardsTotal milk production volume is increasingThe milk quality standard is decreasing in ChinaThe quality standard is quite poor comparing with developed countries Major PlayersSource: @http://www.wabei.cn/news/201107/592807.html

Major Players2009: @http://www.mengniu.yikejie.com/news/itemid-24.shtml @http://www.baobei360.com/Articles/Html/2011-09-10/49759.htmlTop 4 dairy firms(more than 50% market shares): brand & profit

Refhttp://www.taoniu.com/ruye/shichang/2011/0823/45883.htmlIn the UHT milk market, Bright milk only list No.5 In the milk powder market, bright milk still be not in top 10 brand Major PlayersChina dairy industry ranking in UHT & milk powder

Major PlayersBright Milk Product Development

Recent Situation Future PathMarket share: follows Yili & MengNiuProduct line: UHT milk and milk powderOnly high awareness in East ChinaSteadily sales volume and profit

Provide the imported milk from second half year of 2011R&D: new baby milk powder with Synlait Milk Inc.Will invest 1.4billion in raw milk and pastures

Ref 2011() http://www.dailyfair.org/cn/newsbrowse.asp?id=4660Major Player: Bright Dairy

Major Player: Bright Dairy New Zealand Milk listed top 3 in Imported dairy products in china; However, China only listed No. 14 of dairy products exports from New Zealand; It shows that New Zealand milk is attractive China still have large potential to import more from New Zealand; Great chance for Bright Milk

*Strategic Plan

*Expand Game ScopeHotel Industry in China:

Rapid growth in economic environment and hotel development

Star-rated hotels increased from 3,856 to 14,099 from 1999 to 2008

Growing number of conferences and exhibitions

International and domestic travelers looking for experienced stay with quality food & beverage

Dairy products with high consumption in Hotel (e.g. Cheese and butter & Ice-cream)

*Expand Game ScopeRight Place: Hotel chains operate in different regions of China with market penetration and expansion opportunity

- Customers are ready for more diverse foreign products and services in upscale hotelRight Environment: - Chinese Government promote milk consumption

- Hotel development in terms of management contract and franchising filled with latent investment opportunity for foreign investors

Right Time: The milk scandal in 2008 weakened market positions of major industry players (e.g. Mengniu & Yili)

Consumers expect safe and quality dairy products

- New generation with growing purchasing powerI have a dream to provide every Chinese, especially children, sufficient milk each dayWen JiabaoChinese Premier

*Expand Game ScopeMajor International Brand Hotels in China:ForecastChina is projected to be the worlds number one tourist destination by 2020ImplicationThe need for hotel rooms, amenity and food & beverage should meet the standards StrategyInvestment that capitalizes in Chinas dairy and hotel industry in complementary ways

*Expand Game ScopeFirst Step:- Supply cheese and butter to International hotel chain in China Relatively low price Target customers: International & domestic travelersPrice:- Oceania Price (FOB port): USD 3.5/kg- Mega Farm Price (FOB SH): USD 3.3/kg

*Make Rules.

Oriental Daily, 20/06/2011

Chinese Milk Nutrition Standard 2.8g protein/ 100ml

*Make RulesNext Step:Introduce UHT MilkCooperate with Local Dairy BrandCustomer Base on Hotel Chains

Australia Milk Nutrition Standard 3.0g protein/ 100ml

*Make RulesBoth of them are CEIBS MBA Graduates!!

*Make RulesProduct:UHT Milk under Bright Dairy BrandFeaturing our Farm LogoUsing Australia Milk Nutrition StandardPlace:International hotel chainsConsumer Market Rules:Mega Farm become the exclusive supplier in New ZealandInvolve in promotion on our productsFOB SH Price: CNY 5/kg raw milk

*ComplementorThe overwhelming popularity of French Fries should thanks to tomato KetchupWhere is our Ketchup?

*ComplementorA.C. Nielson research of Oatmeal in China : Duration: Oct/2008 Oct/2009Consumption: 73,533 Tons Assume China population 13B : 0.057 kg / personSell Turnover: 18.6 BillionAnnual Growth: 15% The market is still at the early start in ChinaTop Player of Oatmeal in China MarketInternational Oatmeal brandM&A by Pepsi in 2001Entered China at early 2000Existing 3 major category in Quakers:Normal-Oatmeal Instant-OatmealOatmeal-related products

*ComplementorWhat benefit from collaborator? Bring in more players, to create a larger pie Leverage the resource

Actual DataPrediction (15% growth)Year2009201020112012Annual Consumption (Unit: Tons)730,53384,56397,247111,835Quaker (Assume 20% share) (Unit: Tons)14,70716,91319,44922,367Other Brand (Assume 80% share) (Unit: Tons)58,82667,65077,79889,468

2012 sales in 3 line (Unit: Tons)Normal-Oatmeal(Unit: Tons)Instant-Oatmeal(Unit: Tons)Others-Oatmeal(Unit: Tons)22,3677,4567,4567,456

Normal-Oatmeal(Unit: Tons)Joint Promotion with new line (20%)(Unit: Tons)7,4561,491

Quaker (Portion: 25%)(Unit: Tons)Mega Farm Milk(Portion: 75%)(Unit: Tons)Transform to KGPrice to Bright Dairy Sales / KG (15% off)Annual Sales in 20121,4914,4734,473,000CNY 4.25CNY 38,020,500

Chart1

14706.6

58826.4

22,367

89,468

1

Actual DataPrediction

Year2009201020112012

Annual Consumption (Unit: Tons)735338456397247111835

Quaker (Assume 20% share)(Unit: Tons)14707169131944922367

Other Brand (Assume 80% share)(Unit: Tons)58826676507779889468

2012 sales in 3 line (Unit: Tons)Normal-OatmealInstant-OatmealOthers-Oatmeal

22367745674567456

Normal (33.3%)Joint Promotion with new line (20%)

74561491

Quaker (Portion: 25%)Mega Farm Milk(Portion: 75%)

14914473

Quaker (Portion: 25%)Mega Farm Milk(Portion: 75%)Consumption in kgPrice to Bright DariySales / KGAnnual Sales in 2012

149144734,473,000[$CNY] 8.50[$CNY] 38,020,500

tonskgkg/people

73533735330000.057

1,300,000,000

1

2

3

*ComplementorWhat if Quaker reject the partnership? Be your own complementorsXMake good use of existing resourcesWhat is Quakers need?Educate the marketPepsi China Tingyi Holding Corp. 51% Soft drink business9.1% StockUtilizing the brand of Bright DairyCost-effective joint promotion on packaging to boost the market demandBundle Strategy to achieve lock-in effect e.g. Price discountLack of channel

*New Channel Bright Dairy Strategic target, 2011Synlait Milk - 2011 Forecast, 2010 Bright Dairy Annual Report

*Overview

*OverviewNew Zealand Mega FarmTarget to high-end MarketB2B BusinessProduce Milk product to HotelsSupply Raw Milk to Bright Dairy

Key Value on Consumer:Foreign BrandFood SafetyMega Farm

*Overview

*Financial ForecastSales Breakdown

MarketMarket Consumption (kg)Market ShareTotal Sales (Million kg of raw milk)1st YearButter & Cheese Hotel4,452,80025%1.11Total1.112nd YearButter & Cheese Hotel4,898,08030%1.47UHT Milk Hotel274,292,48015%41.14UHT Milk Hi-End Bright Dairy Consumer225,105,00030%67.53Total110.143rd YearButter & Cheese Hotel5,387,88845%2.42UHT Milk Hotel301,721,72830%90.51UHT Milk Hi-End Bright Dairy Consumer276,879,15045%124.60Extra UHT Milk by Joint Promotion4,473,000100%4.47Total217.54

*Financial ForecastProfit Forecast

MarketTotal Sales (Million kg of raw milk)Profit/ kgProfit ($Million)1st YearButter & Cheese Hotel1.11CNY 0.16CNY 0.17TotalCNY 0.162nd YearButter & Cheese Hotel1.47CNY 0.16CNY 0.22UHT Milk Hotel41.14CNY 1.2CNY 49.55UHT Milk Hi-End Bright Dairy Consumer67.53CNY 1.2CNY 81.04TotalCNY 130.813rd YearButter & Cheese Hotel2.42CNY 0.16CNY 0.39UHT Milk Hotel90.51CNY 1.2CNY 109.41UHT Milk Hi-End Bright Dairy Consumer124.60CNY 1.2CNY 149.51Extra UHT Milk by Joint Promotion4.47CNY 0.45CNY 2.01TotalCNY 261.32

*Reference & Appendix http://baike.baidu.com/view/45642.htm http://baike.baidu.com/view/1842506.htm Bright Dairy 2010 Annual Report: http://www.brightdairy.com/UploadFile/file/2010.pdf Synlait Milk http://www.synlaitmilk.com/ "" http://news.xinhuanet.com/employment/2007-01/27/content_5660331.htm http://news.chinaluxus.com/Imp/20101222/21293_1.html http://money.163.com/09/0122/09/508L2MLA002524U1.html http://yxyxp2008.gdgwiki.com/archives/621#more-621

http://finance.ifeng.com/stock/special/rbdz/20110317/3687409.shtml http://www.sh.xinhuanet.com/2011-03/16/content_22297975.htmDairy Product price on Dairy Food Associationhttp://www.idfa.org/resource-center/market-information/dairy-market-prices/

Cheddar Cheesehttp://www.ams.usda.gov/mnreports/md_da128.txt

Butter Pricehttp://www.ams.usda.gov/mnreports/md_da124.txt

China Retail Milk Price,http://www.cpic.gov.cn/fgw/ProxyServlet?server=e450&urls_count=1&url=agri/jiage_pingjun/mianfei/A_A3_B2_nn_0.html

World Dairy Situation 2010, International Dairy Federationhttp://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World%20Dairy%20Situation%202010.pdf

Reference & AppendixSource: Hotels & Motels Industry Profile: China, Datamonior, 2010China Hotels & motels industry segmentation

Reference & AppendixSource: http://pe.hexun.com.tw/2011-07-18/131526344.htmlBright Dairy Acquisition History

Reference & AppendixSource: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World%20Dairy%20Situation%202010.pdfButter price in selected countriesCheese price in selected countries

Reference & AppendixSource: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World%20Dairy%20Situation%202010.pdfButter consumptionCheese consumption

Reference & AppendixSource: The World Dairy Situation 2010 http://www.svenskmjolk.se/Global/Dokument/Dokumentarkiv/Marknadsrapporter/World%20Dairy%20Situation/World%20Dairy%20Situation%202010.pdfLiquid Milk consumption

Reference & AppendixSource: National Tourism Administration http://www.cnta.gov.cn/html/2011-3/2011-3-25-10-10-08822.html2010 Chinese Tourism Statistics

20101212(%)1-12(%)UNITDECGROWTH(%)JAN-DECGROWTH(%) 1 146.02 4.12 13 376.22 5.76 199.19 3.56 2 612.69 19.10 693.99 1.98 7 932.19 2.57 213.65 11.65 2 317.29 2.00 39.19 7.49 514.06 14.64 457.64 3.30 5 566.45 9.41 160.34 2.88 2 127.64 20.23 228.04 1.87 2 609.45 2.34 36.25 11.88 392.89 2.10 33.01 6.80 436.47 13.89 36.29 5.36 458.14 15.47 20.16 2.91 267.38 20.15 9.34 9.12 106.89 9.67 2.44 5.48 26.46 -3.69 4.34 9.28 57.41 16.52

Reference & AppendixChina Hotels & Motels Market Value Growth by yearSource: Hotels & Motels Industry Profile: China, Datamonior, 2010

Reference & AppendixChinese Dairy Market Value Growth by yearSource: Dairy Industry Profile: China, Datamonior, 2010

Reference & AppendixSource: http://pe.hexun.com.tw/2011-07-18/131526344.htmlProfit by Product

Cost/kgPrice/kgProfit/kgButter & CheeseUSD 3.275USD 3.30CNY 0.16

Raw MilkCNY 3.8CNY 5CNY 1.2Promotional Raw MilkCNY 3.8CNY 4.25CNY 0.45

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