1. Fairlife in China
Business 425
Professor Sanjay Lanka
Audrey Castonguay
Marie-Claire Desroches
Jean-Sebastien David
Spencer Peak
Table of contents
History……………………………………………………………………………....….….. 3

2. 2
Overview…………………………………………………………………………….…...…. 3
Internal Analysis……………………………………………………………………....…..... 3
- Porter’s five forces…………………………………………………………………. 3
- Strengths and weaknesses…………………………………………………………. 5
External Analysis…………………………………………………………………………… 10
Competitors………………………………………………………………………………… 14
Challenges…………………………………………………………………………………. 14
Brazil………………………………………………………………………………………. 14
- Target Market……………………………………………………………………... 14
- Internal Analysis ………………………………………………………………..... 15
- External Analysis …………………………………………………………..…….. 23
- Trade agreements…………………………………………………………………. 25
China………………………………………………………………………………………. 26
- Target Market……………………………………………………………………... 26
- Internal Analysis………………………………………………………………….. 26
- External Analysis………………………………………………………………...... 30
Selection of the country……………………………………………………………………. 33
Product…………………………………………………………………………………….. 34
Exportation………………………………………………………………………………… 35
Target market……………………………………………………………………………..... 37
Pricing…………………………………………………………………………………….... 41
Distribution……………………………………………………………………………….... 42
Promotion………………………………………………………………………………….. 43
Conclusion…………………………………………………………………………………. 50
Sources…………………………………………………………………………………….. 51
Coca-Cola’s history
Born in 1886, a soda fountain beverage called Coca-Cola was sold in a small store in Vicksburg,
Mississippi. First bottled in 1894, the brand Coca-Cola experienced rapid growth and through the
years expanded as a global company, (The Coca-Cola Company, 2015)

3. 3
Now, Coca-Cola Company is the largest beverage enterprise in the world, actually owning 26
brands, worth approximately 17 billion-dollars. Coca-Cola is known as one of “the world's most
valuable and recognizable brand”, (The Coca-Cola Company, 2015). Other well-known brands
such as Coke, Sprite, Powerade and Minute Maid are part of the Coca-Cola Company’s
portfolio.
The Coca-Cola Company is present in more than 200 countries around the world, distributing 1.9
billion servings a day through the largest distribution system in the beverage market, (The Coca-
Cola Company, 2015).
Fairlife’s history
As a result of a joint venture between The Coca-Cola Company and Select Milk Producers, a
new dairy product called Fairlife LLC was launched in the beginning of 2015 in the United
States. In this venture, The Coca-Cola Company’s major role is handling the distribution of the
product (Fairlife, 2015).
Select Milk Producers has been established in 1994 “with the goal of producing exceptional
quality milk while changing the face of the dairy industry through cutting edge innovation,
dedication to animal care and comfort, and a commitment to agricultural sustainability”,
(Fairlife, 2015).
Overview of Fairlife’s products
Fairlife specializes in the production of enriched beverage and non-dairy milk alternatives.
Marketed as ”premium” milk, Fairlife’s price is twice as expensive as a jug of typical milk. This
new drink is said to have “50 percent more protein, 30 percent more calcium, half the sugar than
regular milk, and it is lactose free” (Marketing Magazine, 2015).
Offered in four different byproducts (reduced fat, chocolate, fat free and whole), Fairlife is
filtered “to separate the various components in milk. Then, more of the favorable components are
added, while the less favorable ones are taken out” (Marketing Magazine, 2015).

4. 4
Internal analysis - Porter’s five forces
Threat of New Entrants
LOW- Coca Cola has loyal customers and a large brand recognition. The product differentiation
we have now is utilizing our new “fairlife” image and keeping the coca cola off the main
packaging material. Previous customers have a high brand recognition but we already have our
foot in the door in every industry. Being in every country has its advantages. Since our company
is already in the market, introducing a new product makes it easier.
Bargaining power of suppliers
The supplier power of coca cola is good because we have bought the rights to the suppliers. The
coca cola system has a large number of suppliers that work only for coca-cola. (Porter, 1998) We
have no requirement to contend with substitute products for other companies that may be
supplied to. Since our suppliers are specifically for us, our industry is the only, and highest
priority. Coca Cola suppliers provide the system with materials, including ingredients, packaging
and machinery, as well as goods and services, (Porter, 1998).
Bargaining power of buyers
They have a lot because the drink industry is so visible and accessible. The buyer group is large
and purchases large amounts of product everyday. Since the competition is high, it's important to
remember that we maintain a high diversity of product to meet every need. That being said, the
buyer has options but a large number of people who are loyal to the coca cola brand. Since we
face our competitors head on, we give the buyer the largest amount of opportunity as possible.
This forces coca cola to always be conscientious of the customers wants and needs. The
Customer has full information with the product their drinking to allow them to make the best
choice and allow them to be the final decision makers.
Substitute products
The substitutes in the coca-cola industry are numerous. They limit Coca-Cola’s potential returns
by placing a ceiling on the prices that they can charge to make a profit. As the price-performance
alternative offered by substitutes becomes more attractive, it becomes even more difficult for
those firms to make a profit. Demand for substitutes can also reduce the demand for industry

5. 5
products and services. Substitutes can create intense competition during normal economic times,
and reduce potential profit increases during positive economic times. Identifying substitutes
involves searching for other products or services that can perform the same function as the
industry’s product or service. A lot of these products are simple, cheaper alternatives such as
milk or water while juice is also in the category.
PepsiCo. is coca-cola’s highest threat that the customer may substitute coca cola with. This is
important as it keeps the market fresh and responsive to the needs of many different types of
people. Since pesi is always earning lots of money, they are a key substitute that threatens coca
cola everyday.
Rivalry of existing competitors
Pepsi and Nestle are both big competitors that drive competitive moves through prices and
advertising. The price battles are unstable and negatively influence Coca Cola industry
profitability. Advertising battles positively influences our industry as they increase demand and
enhance differentiation of products, (Porter, 1998).
Structural factors affecting industry rivalry
Slow industry growth- Because Coca Cola will be entering this new focus, they will have to
focus on capturing some of the market share.
Diverse competitors- Coca Cola will be entering a new terrain where the number of available
niches is astounding. From flavored milk, to dehydrated milk, to lactose free milk; every
customer has a specific niche and accessing the consumer trends while producing what the
customer desires could prove difficult.
Internal analysis - Coca-Cola’s strengths and weaknesses
Strengths Weaknesses

6. 6
-#4 most valuable brands/Large market
share in beverage
-Large distribution network
-Global expansion
-Strong brand identity/marketing
-Consumer loyalty
-Negative publicity
- Health issue
-Low diversification of their portfolio
-Low on health beverage/Criticism on the
product
Strengths
The Coca-Cola Company has been named the fourth most valuable brands by Forbes magazine,
regardless of the industry. (Forbes, 2014) In the beverage industry, Coca-Cola holds the largest
market share. In spite of a strong competition from PepsiCo, The Coca-Cola Company stays the
leader of the market.
Over the years, Coca-Cola has established a large distribution network that has proven to be very
efficient. Its distribution network has expanded globally, with more than 250 bottling partners
around the world. Coca-Cola is in charge of the manufacturing and selling of concentrates,
beverage bases and syrups, while owning the brand and taking care of the marketing operations.
The responsibilities of the bottling partners are to “manufacture, package, merchandise and
distribute the final branded beverages to our customers and vending partners”. (The Coca-Cola
Company, nd)
As mentioned in the paragraph above, The Coca-Cola Company has already expanded globally.
Launching a new product in international markets represents less risk, since the company is
already established and successful.
Coca-Cola benefits from a strong brand identity. People recognize the brand and some of them
have, through the years, developed a positive perception and a preference for The Coca-Cola
Company’s products. In emerging markets like Brazil or China, Coca-Cola is perceived as an
innovative brands and that “resonates with them because they are all about striving for

7. 7
innovation”. (Financial Post, 2011) Coca-Cola can continue to reinforce a positive image of the
company, since being a valuable company allows you to put more money into advertising efforts.
That said, it is possible to state that the consumers of Coca-Cola’s products tend to be loyal to
the brand, which represents a strength of the company. It ensures continuity in the sales of the
company and an opportunity to introduce new products that will be adopted by consumers.
Weaknesses
The Coca-Cola Company has experienced some negative publicity, especially when it was
accused of using pesticides in its product. Fairlife has also suffered from negative critics after its
advertising campaign, claimed sexist by some people. Some critics would mention Fairlife has
also suffered from sexist advertising. Negative publicity can affect the brand’s image and, at a
certain point, have an impact on sales. Since Coca-Cola isn’t one of the healthiest of drinks, it
can be associated with elevated blood pressure and other negative health risks.
Coca-Cola’s portfolio is not considered diversified. Coca-Cola has to diversify its products since
sales in carbonates are not as good as they used to be. Although, it is possible to observe that The
Coca-Cola Company is expanding its line of products by acquiring and launching new products
such as sports drinks, water, juice and now milk.
Continuing on the topic of Coca-Cola’s line of product, the small amount of healthy beverage is
one of The Coca-Cola Company’s weaknesses. As mentioned above, having a healthy lifestyle is
now a trend and carbonates are not considered healthy which leads to less consumption. With
Fairlife, Coca-Cola attempts to launch a healthier and more nutritious product. However, some
concerns were raised about the veracity of Fairlife’s benefits. Some nutrition experts say that
milk is actually good and healthy, and they don’t see why we would want more protein or less
sugar in milk. (Daily News, 2015)
Internal analysis - Fairlife’s strengths, weaknesses, opportunities and threats
Strengths

8. 8
Associated with Coca-Cola Company: The Coca-Cola company is one of the most recognized
brands in the world. By associating itself to the company, the notoriety of Coca-Cola is
transferred in part to Fairlife and the company attracts loyal consumers of Coca-Cola.
Large distribution network: Coca-Cola’s distribution network is efficient and globally expanded.
It makes it easier to distribute Fairlife and reach consumers, since Fairlife has Coca-Cola as a
distribution partner.
Uniqueness of the product: Fairlife can differentiate itself by the uniqueness of its premium milk.
This represent a competitive advantage in markets, since for now, there is no competition.
Weaknesses
New on the market: The product can still experience failure if it is not adopted by consumers and
when expanding globally, the fact that the product is unknown represents a risk.
Negative publicity: Fairlife has experienced a scandal when creating advertising that was
considered sexist. The new advertising has to respect social norms if Fairlife wants a good brand
image.
Low brand recognition and consumer loyalty: Being a new product, Fairlife is still not
recognized by all consumers and most people are not considered loyal consumers of the product.
Opportunities
Global market through the Coca-Cola Company: Fairlife has it easier to expand globally since it
has Coca-Cola as a distribution partner.
Diversification of products: If consumers have a good attitude toward Fairlife , the company can
expand its line of products and believe that these new products will be adopted as quickly by the
consumers.
Health consciousness increasing: People pay more and more attention to products that are
considered healthy and that represents an opportunity to market a premium non-dairy beverage.
Threats
Competition in health products: Knowing that there is a growing trend in the consumption of
healthy products, Fairlife can expect competition on premium milk.

9. 9
Low responsiveness to the product: Being a new product, even in the U.S., there is a chance that
consumer won’t adopt Fairlife’s products. Also, Chinese consumers are showing a lack of
interest for American brands, claimed unsophisticated. It is actually fast-food oriented but this
lack of interest could transfer itself on other brands like Coca-Cola and Fairlife.
Growth slowing down in China: The issues of the real estate market in China are slowing down
the growth of the country’s economy. In the long-run this can represent a slowdown in
consumption since a bigger part of the Chinese consumer's income will be spent on rent for
example. (Wall Street Journal, 2015)
Amount of sugar in the product: Lactose-free drinks tend to contain more sugar. If Fairlife wants
to market the product as healthy, the company has to reinforce the perception that it actually is.
They also have to make sure that the product is considered safe by the government of China and
that it fits the regulation of the country.
External analysis - PESTEL
The following analysis is going to focus on the macro-environments of The Coca-Company in
the beverage industry. The table presents the main issues in the political, legal, economic, socio-
demographic, environmental, and technological environment in which the company evolves.
Political/Legal
-Trade agreements
-Legislation in the global market
-Regulation on food and beverages
-Intellectual protection
Economic
- Change of consumer’s behavior due to recession
- Cost of raw materials and labor
- Consumption of dairy products increasing

10. 10
Socio-demographic
-Growing population in global market
-Interest in healthier lifestyle
Technological
-Easier to increase production, at lower costs in certain markets
-Easier to reach international consumers
Environmental
-Use of chemicals in the products
-Use of water
-Opposition from social groups facing these subjects
Political and legal
The Coca-Cola Company has to be aware of the trade agreements established between the United
States and other countries where they want to do business with. They also have to be conscious
that rules are legislating these agreements. Organizations like The World Trade Organization
facilitate the foundation of trade agreements between countries to create market opportunities
and help the growth of the members’ economy.
When doing business in foreign countries, companies need to consider the laws that regulate
imports, exports, manufacturing and all economic activities related to the industry in question.
Countries like China have strict regulations and The Coca-Cola Company needs to know them
and act accordingly.
Being part of the food and beverage industry, the company needs to stay between the regulations
of the U.S. Food and Drug Administration, for example. Strict rules are applied to food and
beverages since they are perishable products, and no risks can be taken when it is a question of
public health.

11. 11
The Coca-Cola Company wants to protect its products and processes. The use of patents,
trademarks and licensing can be helpful to achieve that. Coca-Cola needs to find the right type of
protection for every products or processes.
Economic
Recession can affect the economic environment in which The Coca-Cola Company interacts. A
decrease in people’s income can modify their consuming habits. In a context of recession, people
tend to cut on inessential products, and soft drinks might be considered inessential to some
consumers. In the same vein, a stable economic situation can represent an increase in sales of
drinks.
A change in the price of raw materials or a higher cost of labor can influence the economic
situation of a company. For example, an increase in the price of sugar or an increase in wage
rates can affect the total cost of production. Since the company is sometimes exporting raw
materials from other countries, economic factors such as price changes, currency exchange rate,
and tariff can affect the trade between these countries and the production costs.
The increasing in the consumption of a certain products can lead to economic gain. In The Coca-
Cola Company’s case, an increase in the consumption of dairy products in the emerging markets,
leads to an opportunity of economic growth. These countries, also having a special interest for
the non-dairy milk alternatives and the enriched beverages, open up an opportunity of
globalization for Fairlife, (Euromonitor, 2015)
Socio-demographic
There is a new trend that can be observed in the American, and global society. People pay closer
attention to their health and promote an active lifestyle. Since soda beverages are not considered
part of a healthy alimentation, such a trend can affect the consumption of The Coca-Cola
Company’s product. Many people tend to turn to diet or enriched beverages or simply turn to
bottled water.

12. 12
The demographics of a country can influence the social environment in which evolves a
company. A growing population represents a bigger market for the company. For example, in the
majority of emerging markets, the population is increasing at a fast rate, which can represent
good opportunities for The Coca-Cola Company. The aging of population also has an impact on
the food and beverage industry. Older people tend to be more conscious when it comes to health
and considering nutritional factors in the products they consume.
Technological
Technological development can increase the efficiency of the company’s equipment, facilitate
the operations, and increase the production and distribution. Innovation in machinery can also
decrease the need for labor and the total cost of that labor. Furthermore, as a global industry, The
Coca-Cola Company can benefit from manufacturing products at lower cost in emerging
markets.
Progress in technology, especially in telecommunications, makes it easier to reach larger
markets. Advertising and promotion is facilitated by access to computers, cell phones and
television. International markets are now accessible through multiples point of contacts, and the
U.S. market can be exploited in new and interesting ways.
Environmental
Allegations of the use of chemicals in a product can impact the environment in which a company
evolves. Such a scandal can raise doubts regarding the safety of consuming the product, and in a
long run, impact the sales. The Coca-Cola Company has had to deal with allegations regarding
the use of pesticides in some of their products in China, and has to be careful in the future facing
such environmental issues, (Forbes, 2008)
Moreover, The Coca-Cola Company uses water as the main ingredient in all of its products. It is
also used in the production process, for rinsing, heating, cooling and washing (The Coca-Cola
Company, 2010). The large use of water can raise some environmental issues, and push multiple
social groups to share their opposition.

13. 13
Competitors
In the United States’ beverage market, The Coca-Cola Company leads in the market, followed by
PepsiCo. Fairlife, being a niche market for The Coca-Cola Company, has Nestlé as a main
competitor, since it is the leader of the milk market.
Challenges
Many companies when going through the process of globalization tend to keep the product the
same and not adopt it to the target market. The Coca-Cola Company needs to make sure that
Fairlife meets the need of its future customers and a way to achieve that is to modify the product
to fit the trends and consumption habits of the country.
A challenge that Coca-Cola is probably going to encounter in the launch of Fairlife in emerging
markets is the fact that both Brazil and China have experienced some scandals surrounding food,
and that the consumers are more reticent vis-à-vis dairy products. The company needs to reassure
the customers and provide proof of the quality and safety of the product.
With Fairlife, Coca-Cola hopes to reach a mass market and launch a product that “rains money”.
That said, The Coca-Cola Company must make sure to use the right strategy for bringing a niche
product into a mass market product. The company can achieve that through strong brand
communication since the emerging markets give a lot of value to the name Coca-Cola.
Brazil
Target Market
Brazil has the sixth largest population of people aged over 60 in the world, and the number is
forecast to reach 32 million by 2020. The Brazilian dairy market is led by milk, which accounts
for over 48% of the total market. In addition to those numbers, the middle class has recently just
received an increase in disposable income per capita. This has led to a middle class who is
seeking greater added value and higher quality products.
Internal analysis - Porter’s five forces
Threat of new entrants

14. 14
Recently the Brazilian government published a new law to inform milk producers about milk
prices that will be paid by them and their companies. The dairy market in Brazil is difficult to
enter, risky, there is a lot of policies and it's super competitive. The market treats new entrants
with little regard as it is so competitive. Because of the lack of entrants, the Brazilian economy is
constantly be stimulated by domestic companies. The internal nature of the market share leads to
less trust for foreign companies.
Determinants of Supplier Power
Bargaining power of suppliers is a very important factor to be considered in any industry, as they
are the main strength of the company. Coca Cola is known for it’s strong relations with the
suppliers around the world due to it’s immense buying power and because in every product they
buy or sell, quality is always there.
The Southwest and South are the top milk producing regions in Brazil. The three biggest
producing states are Rio Grande do Sul, Parana and Santa Catarina, (Brazil Annual Dairy Report
,2011). Specialized producers that invest in technology and obtain higher quality milk are
concentrated in the States of Minas Gerais, Paraná, São Paulo, and Goiás. These states account
respectively for 48, 21, 9, and 8 larger producers amongst the one hundred major ones in 2011
(Milkpoint, 2011). In 2006, Brazil had 1,350,809 dairy producers. Most of them small were
small: 51.6%. Only 3.3% had an installed capacity of over 200 thousand liters/day, (Brazil
Annual Dairy Report ,2011). The dairy industry in Brazil is not very concentrated, since the
annual intake of the five largest companies represented only 27.5% of the total milk acquired in
2005 (16.7 billion liters).
The dairy industry is characterized by the socio-economic position of the dairy farmers. The
majority of them are small-scale producers. They have a weak and vulnerable position on the
market. The high fixed cost of the market means that they are limited. Those dairy farms can
adjust to the market but in a gradual way. At the same time, the suppliers are highly depending of
the money they have from the milk industry. Milk is produced everyday and is a regular source
of income to most of those small producers. It is a high-labor intensive production and it requires
people for the transport and the processing of milk. Thus, it provides many employment

15. 15
opportunities and it is considered highly important for the rural areas. It generated about 3.6
millions of permanent jobs in 2005, (Schelhaas, H, 2006). According to the Brazilian
Confederation Of Dairy Cooperatives in 2004, Brazil’s dairy cooperatives recognized the
presence of internal constraints such as the lack of economies of scale, lack of focus on export
market, a lack of financial resources to invest in processing facilities and high transaction costs.
They have made a lot of improvement since 2004 but we can still considered the power of dairy
farms in Brazil as low, (H. Schelhaas, 2006).
In the last years, productivity of the domestic milk chain was observed from 1996 to 2010, from
1,138 liters/cow/ year in 1996 to 1,340 liters/cow/year in 2010, (RG Spers, 2013). It is then an
increase of 15% which is a good news for Coca Cola. They have also gone through the process
of specialization in the hope of improving the quality of milk. The producers are then being more
competitive in the market and the consumer health is ensured. Brazil also created National
Program to Improve in Milk Quality (PNQL). Thus, the milk is now reaching the established
standards for milk production, labeling, quality and even mandatory refrigeration and bulk
transportation or raw milk, (Schelhaas, H. , 2006). The low cost and the rapid adoption of
modern production technologies made the Brazil’s dairy producers competitive compared to the
other countries (Shaun, N. , 2014).
Determinant of Buyer Power
Brazil’s economy is now becoming much stronger and diversified. It’s one of the most attractive
developing markets because of the middle-class who presently accounts for 55% of all of the
population. According to Euromonitor International's Countries & Consumers database, around
27 million Brazilian households have a disposable income of US$15,000 a year or more.
Around 10% of Brazilian households have an annual disposable income of between US$2,500-
5,000 (Euromonitor International’s, 2014). This middle-upper class has developed similar
consumer in accordance with a lot of Western European countries. Most of them are living
downtown, making them easier to reach.

16. 16
The dairy consumption is estimated at 150 liters per capita per year. They are expanding in
volume but also gaining sophistication, health, and a better quality orientation, (Brazil Annual
Dairy Report, 2011). Furthermore, the urban population, accounting for most of the consumption
of processed drinking milk in the country, is projected to grow by 11 million people over the
2010-2015 period. By the end of 2015, per capita expenditure on drink milk products will reach
US$67 in Brazil, exceeding the level projected for developed markets such as France (US$52)
and Germany (US$45). By then, Brazil will no longer be known as an emerging economy in
milk product terms, (Brazil Annual Dairy Report, 2011).
Drinking milk products is perceived as healthy, a quality source of protein, calcium and
vitamins. As disposable incomes grow, consumers are also increasing their consumption of milk
products, (Euromonitor International, 2014). These consumers have more interest in spending
money on a product that has been fortified with calcium and vitamins, while also reduced fat
content. Cow’s milk have recorded a value growth of 8% in 2014. The consumption of shelf-
stable flavoured milk also continues to grow, (Euromonitor International, 2014).
The competitive landscape remains fragmented. There is a lot of segments to reach and a large
number of local manufacturers. Slowly, we can see that international manufacturers are gaining
penetration and increasing their market share. They are doing this by introducing new niche
products, especially those that are healthier, (Euromonitor International, 2014). Thus, it is
important to choose the right target market and understand them.
Currently, consumer confidence is at its lowest level of the past four years. This is caused by the
deteriorating economic growth outlook and persistent inflation. Brazilian consumers are worried
about the consequences of high prices and job security. Additionally, Brazil struggled with a
milk scandal. This led to product recalls, government relaxation of import restriction and tariffs
to try to overcome immediate supply shortages, (Brazil's Dairy Industry Struggles, 2013)
Consumers bargaining power is very high. There is a lot of possible substitutes and they are
aware of the price and the quality. They consumption is growing, but their needs are becoming
more and more specific.

17. 17
Threat of substitute products
There are definitely a lot of threats when it comes to substitute products, not only just in Brazil,
but also all over the world. The dairy market in Brazil has to worry about non-dairy alternative
products, flavored milk dairy drinks, and new products like Fairlife.
Non-dairy milk alternatives and fortified flavored milk drinks are offering higher protein levels
and are also lactose-free. Protein has many health benefits one which includes muscle recovery.
Lactose on the other hand has always been linked to digestive health problems. Therefore the
market Cokes is investing in is booming and non-dairy drinks are expected to generate an
additional US $1.5 billion over 2014-2019, (Euromonitor International, 2014).
Drinking milk products are expected to register retail value sales growth of almost 16% in
current terms in Brazil. This is a really strong performance and it has been driven in part by
rising milk prices as a consequence of the milk shortage that occurred back in 2011. Flavored
milk drinks are expected to see the strongest growth in both retail volume and current value
terms within drinking milk products, (Euromonitor International, 2014).
Fairlife is a new product that Coca-Cola is launching and it promotes higher protein levels and
it's also lactose free. Coca-Cola is one of the best companies at staying ahead of the game and
Fairlife is being promoted as a lifestyle product rather than just a milk drink. If any company
stands a chance at turning ordinary milk into a cool new healthy dairy beverage, it is likely to be
Coca-Cola.
Rivalry among existing firms
As mentioned in the supplier power, the rapid growth of the middle-class and the increase in the
rate of technology of Brazil’s economy has led to higher demand. Therefore, dairy companies
like Danone, Lactalis and Nestle saw significant opportunities, (Brazil's Dairy Industry
Struggles, 2013).
BRF Brasil Foods was leading in drinking milk products, recording a value share of 15%. The
company share by global brand owner is shown on this graph.

18. 18
According to this graph of Euromonitor International, the dairy market remains a fragmented
sector. There are a large number of local sellers acting regionally. However, multinational
companies are gaining market share by introducing new niche products. Most of those products
are healthier and their product perceived as premium for wealthy consumers. Drinking milk
products recorded current value growth of 10%, with sales reaching R$31.6 billion. Flavored
milk drinks continues to lead growth in 2014, with sales rising by 18%, (Euromonitor
International, 2014).
Lactalis is expected to increase its competition in drinking milk because the company has already
acquired two important brands. They recently bought Parmalat making the European firm the
second-largest dairy company in Brazil. The French group said “there is plenty of room to grow
in Brazil, [because] use of dairy products is still relatively low” (The Wall Street Journal, 2014).

19. 19
As shown in these graphs, the Brazil has a more segmented market compared to China. The top
players in Brazil control over 38% of the market, while in China it is as high as
50%(Euromonitor International, 2014).
The rivalry among the firms is then high but fragmented. Slowly, several multinational
companies are trying to get into the market and acquire brands to get even larger.
Opportunities
-Dairy products for the elderly
-Consolidating the dairy market
-Sales increased
-Lands
Threats
-Milk propriety
- Health issue/Quality
-Brazilian currency
-Competitors
-Substitutes
-Negative association

20. 20
Opportunities
Making dairy products designed for the elderly population would be an excellent opportunity.
Brazil does have the sixth largest population aged over 60 in the world. Like stated earlier, that
number is forecasted to surpass 30 million by 2020. The elderly population will have a need for
fortified foods that aid in bone and joint health as well as immune support. Dairy lends itself very
well to fortification as it naturally already carries important minerals such as protein, calcium
and vitamin D, and therefore is an acceptable product to enhance the nutritional value of
(Datamonitor, 2014).
Competition and consolidation are words that come up when describing the dairy market. In
Brazil the top three companies control over 38% of the market. Ultimately this makes it difficult
for smaller companies to compete due to a lack of economies of scale, infrastructure and access
to modern grocery channels as well as limited advertising and marketing spend (Massey
University).
Studies suggested a link between digestive problem and lactose. Thus, Coca-Cola is in the right
direction with Fairlife. The sales of similar products positioned around high protein, lactose-free
and low calories in US have also been booming. In Brazil, the sales of drinking milk products
increased by 10% in 2014 to reach 31.6 billion and the flavoured milk drinks continues to lead
growth with sales rising by 18%, (Euromonitor International, 2014).
Also, Brazil have plenty of available land area, relatively cheap inputs and a lack of weather or
environmental restrictions.
Threats
There are several threats to the milk industry in Brazil. The first one concerns the properties of
the milk. It is a liquid consisting of 90% water. Because water is so heavy, it’s difficult to
transfer. The price of shipping liquid in high quantities is an expensive endeavour. The milk is
also produced on a daily basis. It requires high-cost transportation. Since the milk will perish
after a few days, it must be processed quickly and efficiently. Quality regulations are extremely
important. Lower performance could cause damages.

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The Brazil government does not maintain milk stocks, so the strong demand coupled with a late
start in the producing season could led to high milk prices. Also, Coca Cola needs to consider the
appreciation of the Brazilian currency and, thus the low competitiveness of Brazilian dairy in the
world market.
There is still place in the market, but the rivalry is high and the market is segmented. The
consumers are sensitive to the quality and the price of the product. They also have a preference
for some brands. There is several substitute for the milk product: almond milk, soy milk, normal
milk and flavored milk to mention a few.
A global brand like Coca-Cola should also make sure that any negative association with them are
not associated with Fairlife. Distancing itself from Fairlife and the unhealthy side of ‘’Coke’’
should be a thing to consider. Turning a niche product into a cool, new and healthy beverage will
be challenge.
External analysis - PESTEL
Economic
The inflation in Brazil is a thing to consider before getting into the market. David Beker, chief
Brazil economist for Bank of America Merrill Lynch, said “Inflation is very high and it’s going
to remain high for a while. This economy is facing a major adjustment in prices and this
realignment in part is something that is going to push inflation very high. My number for the
year is 7.5 percent” (Biller, David, 2014). The middle class is concerned rising prices. Their
purchasing powers are affected negatively by the inflation and the national competitiveness is
getting eroded.
Analysts maintain that Brazil’s slower economic growth is caused by the structural constraint
such as the infrastructure deficiencies, the high labor costs and low skill levels, a high tax burden
and barrier to international trade. The Rousseff Administration did recognize these constraints on
growth. Thus, they cut taxes and encouraged private investment by building operates roads,
railways, ports and airports, (PEST Analysis of Brazil, 2014). Furthermore, the top corporate tax
rate of 34 percent includes a 15 percent corporate tax, a corporate surtax, and a 9 percent social

22. 22
contributions tax on net profits. There are other federal, state, and municipal taxes. Over the past
five years, Brazil’s economic freedom has advanced by less than 0.5 point. Improvements in
financial freedom and freedom from corruption have been offset by deteriorations in the area of
regulatory efficiency, including business freedom and labor freedom, (Index of Economic
Freedom, 2015).
Political
In june 2013, protests were taking place in Sao Paulo about bus fares. The underlying cause of
the protestations was the government's failure to meet citizens’ rising expectation. Since the
middle-class have grown very fast, many left poverty and expect further improvements in their
living standards. Public education, health and transportation service are low quality and the
economy and rising cost of living made them angry and unsatisfied about Brazil government. (J.
Meyer, Peter, 2014). Although since june 2013 the protestation have been less frequent. There is
then not much political instability in the country for the moment. According to a 2014 poll, 47%
of Brazilians would still vote for Rousseff.
Many Brazilians also believe public funds are disappearing in corruption and unnecessary
spending. About 200 legislators are facing criminal charges but they are still allowed to keep
their seats in Congress. As we can see in this graph, the freedom from corruption has a negligible
effect on business freedom. The open market is better than before. Brazilians are rating the
Rousseff Administration very low. They don’t think the government is doing their job right, (J.
Meyer, Peter, 2014). Opening a new small business might require payments to representatives
and officials. According to a survey made by Transparency International, Brazil is ranked 72nd
out of 180 countries about corruption.
Legal

23. 23
The U.S. and Brazil have usually enjoyed cooperative relations. The countries have 20 active
bilateral dialogues for policy coordination on issues of mutual concern. U.S. Department of State
maintain that “Brazil is not just a rising power, but a diverse, vibrant, and democratic rising
power, proves that democracy and development can, should, and do go hand in hand. And as
Brazil’s remarkable growth continues, it offers new possibilities for the U.S.-Brazil partnership –
through trade, through investment in both directions, and through sharing knowledge and a
common commitment to education and innovation’’(U.S. Department of State, 2012).
Although, trade policy are being an issue in the U.S.-Brazilian relations. Since 1990, Brazil’s
trade policy has prioritized regional integration through the Common Market of the South
(Mercosur) and negotiations with the World Trade Organization (WTO). The block was created
with the intention of a full economic integration but only a few customs unions have been
achieved. Mercosur has evolved into a more protectionist arrangement instead of an open
market, (J. Meyer, Peter, 2014). According to Brazilian analysts, the international trading system
should reconsider the current policies. There are many disagreements between the two but
despite those differences, the trade between them has grown considerably over the past years, (J.
Meyer, Peter, 2014).
Social-Demographic
Brazil’s potential for growth is extremely high. The growing middle-class and the gap between
the rich and the poor is declining considerably. The country experienced a rapid economic
growth from 2004 to 2010 driven by a boom in international demand (China), for Brazilian
goods. This expansion created a fast-growing middle class which now accounts for a majority of
the population, (J. Meyer, Peter, 2014).
Technological
Compared to country like U.S. or China, Brazil possesses a weaker technological infrastructure,
as well as investment but efforts are being made to push the development of technology centers
and build better infrastructure. Because of the Fifa World Cup 2014, many roads and highway
have improved (Shaun, N. , 2014). Telecommunication services are also well developed in
Brazil.

24. 24
Trade agreements
The United States engages with Brazil on trade and investment through a number of initiatives.
In 2011, Obama and Rousseff signed the Agreement on Trade and Economic Cooperation to
enhance cooperation on trade and investment between the Western Hemisphere’s two largest
economies. Good exports totaled 68$ billion and good imports 44$billion, (International Trade
Association, 2014)
The U.S. Brazilian trade includes a bilateral tax treaty to encourage cross-border investment,
removal of tariffs and subsidies on renewable energy products, a start to discussion between the
two for a free trade agreement and other long and short-term measure to improve the trading
between both.
Brazil is the largest and most successful agricultural economy within the Mercosur trading bloc.
The government is always under pressure to limit the imports from the dairy farms. For that
reason, and for convenience, it would be better for Coca Cola to make the dairy production and
process in Brazil for its product Fairlife.
China
Target Market
China has the largest population in the world. Because it's so large, it has been one of the places
that most businesses have entered. Marketing Fairlife to china would be both lucrative and
provide China with a new and innovative drink. In China, society is extremely family oriented.
With the growth of the middle class, families establish a basis of a strict moral code to maintain
their place in society. Drinking milk is a luxury that is both affordable and healthy. Marketing
Fairlife imbued with family values will help the product sell to the growing middle class in
China.
Internal Analysis- Porter's 5 forces
Rivalry among existing firms

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The top three Chinese dairy companies—Yili, Mengniu and Bright—now take up close to 60
percent of the market share in sales for liquid milk in 2012.
But these “Chinese” companies also have partial foreign ownership or own foreign ventures
themselves. Several companies from the U.S., EU and New Zealand have also entered the
Chinese liquid milk market by exporting final products and selling through online grocery
services such as Yihaodian or large retailers such as Tesco Plc (China’s Dairy Dilemma, 2014).
Looking at the top 10 dairy companies, we see what to expect in terms of the reachable market
share.
Determinant of Buyer Power
“The Chinese government implemented a series of policies designed to expand the dairy sector
because of its perceived health benefits as a source of calcium and protein.” (China’s Dairy
Dilemma, 2014). The Chinese government is seen to promote milk for the health of their
citizens. This is largely in our favor as the government can easily sway public opinion. Having
relatively low level of consciousness for the customers could be both good and bad. Because of
their inability to make their own decisions, we will have to heavily lobby to the government to
have them promote our product more than others.

26. 26
Determinants of Supplier Power
Cows: With greater consolidation, China’s dairy industry, now dominated by big domestic and
foreign financiers, has opted to import foreign breeds as they produce almost double the milk of
Chinese hybrids and local breeds. Since 2009, China has imported 250,000 cows, with 100,000
(25 ships worth) imported in 2012 alone (see figure 9). Breeding cow imports from Australia
have risen by 25 percent to over 15,000 cows and from New Zealand by 13 percent to more than
9,600 cows. (China’s Dairy Dilemma, 2014).
Alfalfa Costs: The alfalfa exports to China are also creating public interest concerns in major
exporting regions. It costs dairy farms in California’s central valley twice as much to transport
alfalfa to Southern California than to ship the crop to Beijing from the same location. Moreover,
it is resulting in water scarcity. The amount of alfalfa shipped to China in 2012 could supply the
annual needs of roughly 500,000 U.S. families (China’s Dairy Dilemma, 2014).
Small producers, whose feed and other production costs continued to rise to keep up with greater
demand, were squeezed. To keep operating costs low, dairy processors helped spawn a vast
network of milk-collecting stations, traders, truck drivers and other middlemen to source milk
from different regions. As large processors exerted downward pressure on prices through the
supply chain, problems with adulteration began to appear. Initially, this took the form of extra
water added to milk to increase the volume sold, but over time other substances were added as
well, culminating in the melamine scandal in 2008.

27. 27
Threat of new entrants
China’s dairy scene today is still largely based on production in the northern grazing areas and
consumption in the wealthier more urbanized South. According to Rabobank, 84 percent of raw
milk production in 2012 was concentrated in the North (Inner Mongolia, Heilongjiang, Liaoning)
while 67 percent of consumption took place in Southern urban centers. While total milk
consumption continues to grow, the growth rates are not the same for liquid milk, milk powder
and infant formula. According to the USDA, Chinese consumption of milk powder both skim
milk powder (SMP) and whole milk powder (WMP) almost doubled from 1.06 million
metric tons (mmt) in 2008 to 1.9 mmt in 2013 (see Figure 6) (China’s Dairy Dilemma, 2014).
Substitute offerings
There are many other options for the public to consume, but due to a serious of food scandals,
domestic companies are trusted less and less.
Summary 2 Coca-Cola China Ltd: Competitive Position 2013
Product type Off-trade value share Rank
Soft drinks 13.1% 1
Bottled water 4.0% 6
Carbonates 64.5% 1
Juice 13.7% 1

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RTD tea 2.1% 8
Source: Euromonitor International from company reports, company research, trade interviews
The past decade has seen dairy consumption in China soar, from a per capita consumption of 7
kg in 2004 to 19 kg in 2014. By now it’s common knowledge that China’s demand for food is
growing as its population becomes more affluent in line with rising urbanisation. Also, the
Chinese diet is changing, moving away from grain-based foods to a more varied diet that
includes more dairy. Over 2014-2019, China will be drinking milk products that pose the greatest
absolute growth, making up 70% of new dairy sales (Euromonitor International, 2014).
External analysis- PESTEL
Political
Political risks (stability): China works with a one party state in five year terms which bring stable
political environment. The Communist Party of China is leading the state while the People’s
Republic of China decide on the economic strategies.
Labor cost: Labor cost in the Special Economic Zones are lower than in other regions of the
country. These zones can be controversial because of hard labor conditions and can lead to a bad
image for the company. For example, Apple is in hot water since the exposure of the suicides in
Foxconn tower. The fast growing cities such as Shenzhen cause expropriation of many citizens
from their houses. This kind of measure can create confrontation between communities and the
government. The growing population of the country coupled with sources of information can
lead to widespread social unrest.
Corruption: China is officially following the Foreign Corrupt Practices Act. This act makes
bribery illegal for any country doing business with the US companies. Out of all the developing
countries, China as the best transaction governance capacity regarding the laws in place.
Tax discrimination (SEZ): China has seven special economic zones that could be referred as
potential locations for FairLife; Shenzhen, Zhuhai, Shantou, Xiamen, Hainan, Shanghai (Pudong
new area) and Tianjin (Binhai new area). These zones happens to follow liberal laws more than

29. 29
traditional chinese laws. It offers benefits like duty-free trades and gives way more latitude to
foreign companies (How Do Special Economic Zones, 2015).
International law: Because China follows civil law, they are bound by the same laws that affect
other countries who follow civil law. However, china has been known to put up a facade of
actual laws and events while acting on their own intuition. (Suter) This lack of transparency is
difficult for other countries because they’re constantly unsure with China’s take on international
obedience.
Economic
The global economy of China is currently in growth and is expected to keep on growing for the
next years to come. It is the biggest destination for Foreign Direct Investment, taking the lead
from the US with $US billions 127.56 in 2014. Of all developing countries, China has the lowest
external debts, and the most international reserves. Even if the currency is appreciating, it stays
competitive to other markets.
Joint-venture: Having a partnership with government may make things way easier to make
business. The possibility of a joint venture makes is cheaper to start from scratch in the market.
The chinese infrastructure and distribution could be used by the company to reduce costs. Like
mentioned earlier, Coca-Cola is already well established in China and it is a powerful tool
against competition. Additionally, teaming up with some people inside china is a good idea
because they will have more insight on how the rules and laws are carried out within the country.
They will know which hoops to jump through and whose pockets will need to be lined. A
partnership within china for Fairlife would benefit both businesses and increase popularity with
the general chinese population.
Technological
Copyright and patents are hard to get for milk, even for process patent. Even if licensing is
encouraged in China, a survey from USCBC showed that “licensing associated with joint-
ventures and intellectual property” were two of the five most common problems. China is known
for copying other products are rebranding them (Licensing in China, 2014).

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Sociocultural
China established 35 years ago a “one child policy” to control birth across the country. Even if
the pressure of this policy is getting more relaxed, the population of China is growing old. The
young people only represent a low percentage of the total population. The information about the
population is an important aspect to consider before entering a market to make sure we are
aiming the right consumer for our product (China's cities need more babies, 2015).
Legal
China is an official member of the WTF since december 11th 2001. Because of the lack in
transparency into their legal system, we are often not sure how and to what extent criminals are
prosecuted. The legal system in china is special because of the existence of so many Special
Economic Zones. Companies now know to enter these zones to do business. If Fairlife were to
go to China, Coca-Cola would utilize the SEZ and implement their own systems and regulations.
Environmental
The growth in consumed goods and buying power to such large population brings pollution to
new heights. China is already living with environmental problems, partly because it is relying on
coal energy. However, China has made considerable strides in reducing their pollution in the past
10 years. As an annual meeting, officials stated that they “resolutely declare war against
pollution as we declared war against poverty” ( China strengthens environmental laws, 2014).
Selection of the country: China
China has the largest population in the world. Because it's so large, it has been one of the places
that most businesses have entered. Marketing Fairlife to China would be both lucrative and
provide China with a new and innovative drink. With the stability of the Yuan(¥), China stands
to continue growing and becoming more and more successful. Compared to Brazil, China
represents a better opportunity because its infrastructure are more stable. This represents an
advantage since it will be easier for Fairlife to transport, store and sell the product for example.
Chinese has known multiple food scandals and that has led the consumer not to trust domestic
companies while foreign companies are trusted more, since they are perceived as safe. In China,

31. 31
Coca-Cola is seen as a luxury brand. The dependability of the brand has left Chinese citizens
with a positive view on Coca-Cola and little reason to doubt the brand.
We also decided to bring Fairlife to China because of the number of lactose-intolerant
individuals. Fairlife is structured to be healthier than real milk, while remaining lactose free.
Because of the inherent qualities of milk, it is a product that is inherently family oriented.
Because milk is known for being critical to a child's development, China’s family oriented
structure further promotes the reason for selecting China.
Because of China’s one-child policy, many children had extensive pressure from their family to
do good in school and excel. One child would have a mom, dad, two sets of grandparents and
extended relatives focused on their well-being. This “Little Emperor” syndrome can be useful
when helping us market to the guardians of these children. Drinking milk is a luxury that is both
affordable and healthy. Marketing Fairlife imbued with family values will help the product sell
to the growing middle class in China, knowing that they experience a growing income and are
open to the adoption of new products, especially Western products.
Product
The adjustment of the product to fit the needs and unique characteristics of the foreign country’s
market is essential in the process of globalization. Because each culture is different, each country
has their own set of beliefs and standards. Consumers from different countries do not answer the
same way to colors or shapes; they have specific needs that differ from other markets.
Marketing Fairlife’s products in China will certainly require changing some aspects of it. Fairlife
is going to offer the following four sub-products: fat free, reduced fat, whole and chocolate non-
dairy beverages packaged in 1.5 liters bottles.
According to Euromonitor, there is a lack of packaging law in China. The lack of such national
law is not beneficial to the healthy development of the food in China. Thus, Fairlife packaging
needs to show that it’s a foreign product and part of Coca-Cola brand. The packaging and
production will be done in New Zealand due to better quality and lower packaging prices. In

32. 32
addition to the 1.5L bottle, single servings will also be created for the Chinese market. These
pack sizes are more popular and they facilitate the ‘’on-the-go’’ lifestyle. It will also be the
perfect size for the little emperor to bring it in his lunch.
The container will also be changed to cartons. According to Dr. Benjamin Punchard, head of
packaging research at Euromonitor, ‘’Liquid cartons will take share from flexible plastic, the
other main pack type used for liquid dairy in China’’. He also explained that liquid cartons are
considered to be a quality pack type that engenders a feeling of trust in the product. With the
melamine scandal still in memory, packaging that converts quality, robustness and trust are
positioned to do well.’’
Because the chinese are still cautious of the milk produced within China, the labeling will inform
the consumer that the milk is produced in New Zealand . It will also mention that the product is
lactose free, since most Chinese are lactose intolerant. The bottle should also be red since this
color is associated with happiness and good fortune in China.
Exportation
Our product needs to be coming from another country because of the lack of trust of consumers
towards chinese milk. The 2008 food safety scandal was a disaster for the population of China,
as high melamine in milk created renal problems. Melamine was added to milk to increase the
protein content, but the impact was far more negative than positive. As milk is one of the most
exported product from New Zealand, we will use the milk from local producers, and bottle,
package and export from Coca-Cola Amatil’s (CCA) plants in New Zealand toward China. CCA
was established in the country in 1987, and has plants in Auckland, the biggest port available.
This allows us to have a quick transaction between production, manufacturing and shipment.
Once arrived in Ningbo, the product will be moved to Swire, our partner’s distribution center
where it will be reassigned to their customers list through South Asia. The Coca-Cola company’s
strategic distribution power is a unique tool for Fairlife. Swire is already distributing Coca-Cola
products since 1989. It is, in fact, the biggest and oldest bottler for the company in China. Its
long presence in China assures us a good relation with the local government, and an important
knowledge of the consumer culture and behavior.

33. 33
The provinces of Zhejiang and Jiangsu are two major locations close to Shanghai for an easy and
fast distributing process. Zhejiang facilities are located in Xiasha and Wenzhou and represent 50
million consumers, as the production plant of Jiangsu is located in Nanjing and represent 57
million consumers. Sixty percent of both plants are owned by Swire, our main partner, which
assures us a stable management. On the exporting country side, New Zealand contains 12
seaports and 14 container terminals spread across the country. The best option is Auckland,
which is the biggest commercial port in the country and its location allow an easy route towards
China.
Therefore, the best option for Fairlife is to import milk from New Zealand to China, via the
Ningbo port in the province of Zhejiang, where our partner Swire is located. Ningbo is one of the
biggest ports in China, and is well located for our distribution plans. Our targets are consumers
from South Asia, mainly Shanghai. The transit estimate time between the port of Auckland, New
Zealand, to the port of Ningbo is 22 days with a distance of 5780 miles to travel. With an
approximate 90 days shelf-life of good milk, it gives us plenty of time to get the product on the
shelves before turning bad. According to CargoRouter, there is 10 possible routes between both
countries. More shipping options are an advantage in case of bad weather during transport or
possible political instability that would imply military presence in the water.

34. 34
Source: Swire
Target market
Geographic
An existing disconnect between areas of China makes it is possible to geographically separate
the country in two regions: North and South. The northern part is mostly a producing and
manufacturing area, as the consumption is concentrated in the urbanized south. Being aware of
that fact, it is essential to market the product to the southern and urban consumers. Two cities
located on the Southeast coast of China will be the target geographic market: Hangzhou and
Shanghai. Those cities were chosen for two main reasons. First of all, the proximity of these two
cities and their close location to one of the largest ports of China named Ningbo, makes
Hangzhou and Shanghai ideal to import a product like Fairlife into the country. Second of all,
Hangzhou and Shanghai are two of the six cities in the world with the biggest average household
spending growth. (Euromonitor, 2014) This creates an opportunity to target a market which is
open to consuming and which will expand in the next couple of years. It is actually proven that
increased wealth can change some preferences, such as beverage and snack food preferences.
Being aware that China experiences spectacular economic growth, it is easier to launch a new

35. 35
product like Fairlife knowing that the consumers are open to adopt new brands and products.
(China Business Review, 2011)
Demographic
The target market is aged between 20 and 39 years old. This age group was selected in order to
reach the parents’ segment. The product will be presented to parents in a way that will encourage
them to buy this milk because it is good for their children. Referring to the diffusion of
innovation curve, it is possible to separate the age group in two: the 20-29 years old as the
innovators and early adopters, and the 30-39 years old as the early and late majority. The 20-29
years old are part of the first generation of “Little Emperors”. They are eager to consume, they
have the fastest income growth of all age groups, they tend to adopt a more Western lifestyle and
are brand conscious. The concept of “Little emperors” will be precisely explained in the
psychographic section below. The 30-39 years old segment will sequentially adopt the products
as other parents start using and appreciate the products. They will do so because they want what
is best for their child and this is exactly the card that Fairlife should play to get people to buy
their product.
Psychographic/behavioral
The Asian culture is extremely family oriented. This is exactly why Fairlife needs to target the
Chinese parents. Let’s then call our target market the spoiling urban parents.
In 1979, the Chinese government implemented a one-child policy to stop China’s enormous
population growth and food shortage. (Telegraph, 2014) As a result of that one-child policy, a
phenomenon called the “Little Emperors” emerged in the country. The “Little Emperor
Syndrome” can be described only child being the center of the attention of the whole family,
parents and grandparents included, creating a generation of spoiled children. Those “Little
Emperors” were raised in an economic growth period, where their parents and grandparents
invested in the best education, food and clothing so that their only legacy can become the best
version of itself. (Time, 2013) Those children never experienced competition with siblings, never
experienced low quality products and were always the only ones that mattered. This phenomenon
started many years ago, but will probably still last for many years. The one-child policy was

36. 36
abolished in 2013, but the birth rate didn’t really increase at a fast pace as expected by analysts.
(Wall Street Journal, 2014) This means, in a marketing perspective, that the spoiling of only
child will continue further on and it still represents an opportunity for Fairlife to target the
parents’ segment by introducing its product.
This first people of that generation are now becoming parents and are replicating the education
they received from their parents. That means there is a big market for quality products to sell to
parents in order to provide the best for their “Little Emperors”. As mentioned earlier, the
generation of “Little Emperors” becoming parents is our first segment market knowing that they
are more inclined to adopt the products, but that doesn’t mean that the older parents need to be
forgotten. They are still part of the target market since they have the same motivation as the
younger parents: providing what is best for their only child. Studies have shown that there is a
commercial opportunity for premium baby products. Actually, “the market for prepared baby
food has jumped in value by 94% in real terms since 2001, and the total retail sales of milk
formulae has increased from RMB7.1 trillion in 2001 to RMB15.4 trillion in 2006”
(Euromonitor, 2007) Fairlife can provide that premium product for those families: a non-dairy
beverage that is good for the baby’s growth and health.
This syndrome is observed mostly in the urban areas of China, since the one-child policy
targeted those areas at the first place. That reiterates the importance to target an urban
population, which we can find in Hangzhou and Shanghai.
In the long-run, targeting the parents will lead the “Little Emperors” to be familiar with the
product and as they will become parents, they will continue to provide that product to their
children. It is a known fact, that their buying power will be large and if they are familiar to to the
product and have a good perception, we might create an army of faithful consumers. This
represents a growth opportunity for Fairlife in the long-run.
As for their consumer behavior, our target market prefers western brands to the domestic brands.
Especially in the milk industry, following the scandal that has changed the confidence of Chinese
consumers in the Chinese milk products. The spoiling urban parents value quality of the

37. 37
products, over the price. They are conscious about the quality of the food and their main
consideration is the protective benefits of the products (Doctorff, 2012). The Chinese parents
spend around 50% of their income on their child. They “have the financial capacity and the
willingness to spend as much as they want on their children”. (Euromonitor, 2007)
Even though family is at the center of the attention of the target market, it is important to
acknowledge the fact that they are hard workers. They want to be perceived as successful and
consider career important.
As of technology, they are keeping up with the latest technology, even that the 20-29 years old
cluster is ahead of the trends. They are very active on social media and a large majority own
smartphones. Our target market is using Kaixin, Weibo, Youku and QQ. (Adage, 2010) These
are all social medias sources specific to the Chinese market. They are strong user of the new
media outlets like Internet, but they are still reachable through traditional medias such as
newspaper and television. (China Business Review, 2011) Television is actually the most
popular media for Chinese consumers. (Ebiquity, 2014)
Persona
Li Xiu Ying is 29 years old. She is the mother of an only child that is 5 years old. Li has grown
as a single child and has been raised in an environment where she was the center of attention.
She was fed with the best food, dressed the best way and attended the best schools. As a mother,
she wants to provide a similar environment for her baby. She is health-conscious and isn’t afraid
to spend on quality products, especially when it comes to food. Reading the newspapers, she has
been aware of the food scandal in the milk industry and since then she pays special attention the
country of origin of the products she buys. When grocery shopping, she analyzes the package to
be sure that the product was made outside of China and that there is no lactose in the beverage.
Her son is actually lactose-intolerant.
She has adopted a Western lifestyle even if she stays true to her Chinese value such as family,
harmony, wisdom and loyalty. She has been using Coca-Cola products, because she values
international brands and has trust in American products.

38. 38
Li works as the human resources manager in the family business her grandfather started. When
she comes back from work, she makes dinner for her family, which they enjoy at the table all
together. Afterwards, she watched her son play, which she consider quality time and when he
gets to sleep she takes time to watch the news on television. She spends most of her day at work,
but on the weekends, she tries to stay home and enjoy some quality time with her son and
husband. Li is aware of the newest trends on social media. She is a active on Weibo, and she
mainly accesses that platforms through her smartphone.
Pricing
Fairlife’s pricing in China will incorporate many different factors. Since the product is being
manufactured in New Zealand, additional costs will have to be calculated into the overall price of
the milk. Because of the ability of cows in New Zealand, Fairlife will benefit from cheaper
production costs and the “foreign” brand from which they can market. If Fairlife were to be
produced within china, the quality of the product may not be trusted. Having a polycentric view
of prices allows the price of Fairlife to fluctuate as supply and demand also fluctuate. Since the
Intra corporate exchanges in the production process are important to the marketing plan, we’ve
made an effort to generate a real-world basis for pricing Fairlife.
Joint venture with Swire-Cost benefits
Manufacturing and packaging Fairlife in New Zealand and importing through the Ningbo port
allows us to partner with a company that Coca Cola also partners with: Swire. Utilizing their
distribution channels ensures that our product will reach the target customers. Fairlife will be

39. 39
sold in Easy Joy, Usmile, Meiyijia, Tianfu and 7-eleven. Utilizing market skimming when
entering China’s market will guarantee Fairlife a premium standing compared to other milks.
While standard milk is sold for 20 yuan(¥), Fairlife will be sold at ¥26. Offering a premium price
will demonstrate the supremacy of the product but still remain competitive with other milk
prices. Because we will be manufacturing and packaging the product in New Zealand and
shipping the milk to Swire, the gross profits will be divided fairly between Fairlife and Swire.
Because Swire is only the middle man for receiving the product from the port and getting to the
consumer, their profit margin is lowered. Entering the finished product into China guarantees
that people see Fairlife as a trusted foreign brand.
Environmental forces
Because china’s housing market is sinking lower and lower (Fung, WSJ) chinese people have a
hesitation to spend mass amount of money on anything that can't see an instant perceivable
change. However, this won’t affect the milk market as children health is still being prioritized.
Distribution
The fact that CCA as plants located in Auckland makes the exportation easier. Once the product
is bottled and packaged, it will be shipped immediately from the Auckland port.. Once in China,
the product is in the hands of our partner, and simply need to be distributed to the consumers.
The reason for our partnership with Swire is mainly because of their distribution power. As was
mentioned before, Swire has been distributing Coca-Cola products in the region of Zhejiang
since 1989. The path between Fairlife and the first level of consumers, meaning the wholesaler,

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retailers and restaurants, has already been made through years of successful litigation with
similar Coca-Cola products. The products will then be consumed by our main target in Shanghai
and Hangzhou. Our target cities to launch the product is closely related to our distribution plan.
Because of the demographical and geographical factors in the country, our first targeted area will
be the southern part of China. These factors leads us to our main geographical areas: Shanghai
and Hangzhou. Having two production plants right next to our main targeted cities reduce the
time before delivering and consuming. As our product is milk, is it a major importance that every
steps between bottling and consuming are as small as possible. The speed of processing will
influence quality of the product.
Promotion
In a global world, managers sometimes think that tactics used in developed country can also
work in any other country. It is also important to consider that new trends or very old trends
might work better in some areas like China. Thus, it is important to know the target market, its
habits, lifestyle, value and what it watches or listens to. Many huge website are banned in China
(i.e. Wikipedia, The Wall Street Journal, LinkedIn, Facebook) and a few services that Google is
offering. (i.e. Google Chrome) (Frizell, 2014). The values they believe in and their “routine’’ is
almost a complete different world compared to U.S or another developed country.
The best way to promote Fairlife in China would be the use of television ads, blogs and social
media and big billboard print. By using an agency already based in China, Fairlife would benefit
from their knowledge of the target market. A good choice could definitely be DDB Group China.
It was one of the smallest ad agencies a few years ago and it’s now one of the most popular
(Chairman, 2010). The agency was able to integrate the new digital media and the old one with
scale and confidence. They have as client big western companies such as McDonald’s Corp. and
Volkswagen. Another good choice would be Saatchi & Saatchi. It is very important to consider
creativity in the process for Fairlife’s ad since they have many big competitors. People need to
talk about them.
Content

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The concept of the ad would focus on emotion and creativity. The ad need to focus on the “safety
first’’ value. Since the melamine scandal, Chinese consumers do not trust the government or the
national firms to provide safe food and drinks for consumption. Chinese like foreign products
because these are seen as unique, safe and luxurious (Ogilvy & Mather, 2010). If Coca-Cola
localizes its product too much, it might become a more expansive version of Chinese products.
They need to make sure the product is known as “foreign’’ and related to the Coca-Cola’s brand.
Fairlife should find the right balance between western and Chinese with a good mix both
cultures. (Ebiquity, 2014). One of the important factors to have a successful ad in China is to
create an emotive campaign. These campaigns are twice as likely to increase profits as rational
campaign because they exploit the “hidden’’ power of advertising (Laker, 2010). We pay little
attention to ad but when they appeal to our emotions, the chances we remember the product are
far more likely (China Internet Watch, 2014). Our past emotional experiences influence our
choices as a consumer. By creating an ad based on what the Chinese mom do best, showing their
struggles and finish the message with a safety image and the key message, “Because your kid
deserves the best’’, we could definitely reach our target market. Fairlife could be incorporated
only at the end to keep an intrigue and add a bit of curiosity to the ad. Like we saw in the best
Indian publicity, the insurance company is playing with the emotions and we don’t even talk
about the product. No rational arguments are clearly used. Also, the struggles of the Chinese
mom should incorporate things related to the “child’s learning’’. Chinese women value
systematic learning for their child. For mothers, the most meaningful and fun activities are ones
that can enrich their child’s experience(China Internet Watch, 2014). As we can see on this
graphic, Chinese moms spend most of their money on health and safety. If Fairlife is seen as a
product that can improve health and be safe at the same time, these moms won’t have problem to
pay a bigger price.

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Television
The first media used would be the television. Although, we need to consider the rising
communications costs in China. They will force advertising budgets to increase. There are a few
big channels such as China Central Television (CCTV), Beijing TV, and Shanghai Media Group.
These groups have power and the influence. This power is not totally commercial: for example,
CCTV remains the central government main media voice and serve social, political and cultural
functions(The China Observer, 2015). The demand for ad will exceed supply on popular TV
channels. Coca-Cola might already have good contacts in China, which should help a lot but they
should consider that marketing is often a lower priority for them.

43. 43
Source: SAIC – ZenithOptimedia Global Ad Spend Forecasts, December 2013
Toiletries, food and pharmaceuticals are the top advertising categories in TV ad investment. The
coverage in China reached 97% in 2009. TV receives the largest audiences and should keep
maintain its advantage as a primary media as we can see on the graphic.
It is important to choose the right moment to reach the biggest audience. As an example, Coca-
Cola chose the Chinese New Year’s Eve to release a big publicity (The China Observer, 2015). It
would also be important to choose a famous Chinese mom. This could be found on the popular
social media website such as Weibo.
These television ads should also be brought to the Internet since many Chinese look at the TV on
their computer.
Social media and Internet
The number of Internet users in China reached 420 millions in 2010(Marketing to China, 2012).
The rapid increase in users was caused by rising disposable incomes, beneficial trade-in policies
for electronic appliances and IT infrastructure development. The 3rd generation network in China
has allowed access to more users(Marketing to China, 2012). In 2010, 66% of Chinese had

44. 44
access to Internet by using mobile devices (Zhang, L. 2011). Network services and applications,
autos, and IT products are the top online advertising categories, together accounting for nearly
fifty percent of the Internet advertising market. That doesn’t mean that there is no place for food.
As we can see on the graphic the spending in advertising should increase to 33% by 2016, almost
as much as TV ad spending (Zhang, L. 2011). This is more spending for Internet than the U.S.A
does. Data from the Chinese Marketing and Media Study suggest that the Internet accounts for
33% of all media use among 18- to 34-year-olds in Shanghai, compared with just 28% for
television (Zhang, L., 2011).
Also, about 58% of China’s Internet users are blogging. The number of active bloggers is
reaching 38%.
This is happening mainly because of the popularity of microblogs such as Weibo. Microblogs are
more popular in China because they include traditional blog but also instant messaging and

45. 45
mobile communication platforms. Thus, Fairlife should create a micro-blog to promote the new
product, deliver the brands main message and build and maintain relationships with consumers.
To launch the website, they could create a contest to promote the key message of Fairlife “Best
moms always give their bests for their kids. Tell us what you did best today for your child?’’. A
few months ago, Weibo launched a contest called ‘’Hot mom contest’’ where many young
mother of little emperor were sending picture of them with their kid. It went viral. The idea is not
to promote the product but the state of mind related to Fairlife : One wants the best for their child
(and Fairlife will help you achieve that). Using product placement on Weibo by choosing good
mom ambassadors would be a good thing to market Fairlife. Being able to reach the early
innovator by Weibo should be a number one goal for the managers to make sure Fairlife is
getting known faster. There are many personalities “for sale’’ on Weibo with powerful influence
whose purpose is to sell their posts to brands. The use of celebrities with children could also be a
good way to reach the target market.

46. 46
As we can see on these graph, Weibo is definitely a good social media to use for a company
trying to get known(Chairman Media, 2015).
The second most used social media would be WeChat. According to WeChat, “WeChat is a
powerful mobile communication tool. It supports sending voice, video, photo and text messages.
You can also do group chats, or you can find new friends nearby to talk to.It is the most popular
mobile app in China with over 460 million monthly active users. According to TechinAsia, “The
newest data from Tencent, China’s social media web giant, shows that its WeChat messaging
app now has 468.1 million active users (MAUs) in Q3 2014. That’s up from 438 million MAUs
in Q2.” So, it is a communication tool with a lot of users and no real competitors in China
(Chairman Media, 2015). The penetration rate of wechat is up to 80%(Chairman Media, 2015).
A good way to use WeChat as a marketing tool would be to create ads in-store, creating a
community, giving coupons, add a customer service online or special event (Shake your phone to
attempt). Another way to market the product, already been used by Coca-Cola could be to create
vending machines (with Fairlife in it) with QR codes allowing people to pay with Wechat. They
could also give a code with a Fairlife product that allows users to attempt private event or limited
free products on Wechat.
It is also important to think about mobile first. It would be great to create an application or a
contest on a app or make sure that the website is working perfectly on the mobile device. The
number of people who accessed the Internet on a mobile device is growing. The usual Chinese
mom doesn’t have much time to blog on her computer. She is going to look at news or website
on the way back home on her phone or in the morning. Smart phones are definitely a big
business in china. A good way for Coca-Cola to use it would be to target stars and make sure
they are showing that they like Fairlife, creating a community related to the product, creating
“Ad in-store’’, give a customer service for the non satisfied clients.
Conclusion
Entering Fairlife into china has been a very strategic goal. After rejecting Brazil as an option, we
accepted China for a variety of different reasons. Because China’s population is the greatest in

47. 47
the world, we stand to reach the most amount of consumers. Fairlife’s inherent structure makes it
perfect for those in China. Because it is lactose free, and high in protein, many people would be
able to access it. Utilizing Swire as a distribution partner was also very strategic. Because Swire
already has an existing network for retail stores, we may simply enter the market through
already-existing structures. Priced at ¥26 per liter guarantees Fairlife a superior aspect among all
other milks in the market. Marketing from this standpoint allows us to reach out projected target
consumers. Marketing toward the mother of “little emperors” further promotes the way in which
Fairlife is held in high esteem. Because Fairlife is marketed as the best of the best for the child,
mothers who like to spoil their children are more inclined to purchase it. Utilizing a variety of
social media outlets will guarantee visibility to the Chinese public. Overall, Fairlife is excited
about the potential to enter such an exciting and prospective marketplace.
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