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Prepared By: Abhijit Khuperkar, Data Specialist & Big Data Evangelist
China CPG: A Problem
Solving ChallengeApplication Of The Issue Tree Approach To Problem Solving
Presentation Outline
China CPG Industry Overview
Problem Solving Worksheet
The Issue Tree
Background
Background
► Problem Definition: Articulate the SMART* problem statement for a
given business problem using a problem statement worksheet
► Issue Tree Approach: Breakdown the problem into issues using the issue
tree approach. The issue tree contain mutually exclusive
comprehensively exhaustive set of issues for the defined problem
► Analysis: The terminal issues can be analyzed using a suitable research
methodology (not covered here)
The Challenge
The Methodology
► Business Problem: Suggest the ways and strategies for a global CPG
manufacturer to increase its market share in China
► Goal: Demonstrate developing a structured problem statement and
suggesting ways to analyze underlying issues of the problem using the
issue tree approach. (Actual analysis of issues is not in the scope here)
* SMART: Specific, Measurable, Action-oriented, Relevant, Time-bound
China Consumer: Key Facts
► China has second highest number of billionaires and 2 million millionaires
► China is not a “market,” but comprises of 22 distinct market clusters
► China has more e-shoppers (400 million) than the US population
► China drinks more beer and wine than any country and have made Starbucks’ #2 market in the world
► China's annual instant-noodle consumption is enough to feed all of Algeria three meals a day for a year
► China eats about 5,200 Eiffel tower's worth of pork a year
Source: http://www.tompkinsinc.com/10-facts-didnt-know-chinas-super-consumers/
► Slowing market growth: Maturing consumer market with last three consecutive years of growth deceleration. Smaller cities growing faster than urban markets
China CPG Market Trends
► Aspirational spend rising: Buyers are spending less in most categories, except personal care, but more on aspirational and lifestyle categories like travel, smartphone
► Pricing variability exists: Shoppers are willing to pay premium for beverages and personal care products while home care products are getting commoditized
► Convenience shopping grow: Convenience stores and online shopping grow over traditional groceries and hypermarkets. China has emerged world’s largest digital market
► Local brands lead: Local brands dominate with 70% market share and over 80% market growth.
Source: China Shopper Report 2015, Bain & Co and Kantar Worldpanel
Winning Strategies for CPG
Companies
► Target smaller cities: As larger cities mature, target shoppers in faster-growth, smaller cities who are still developing their aspirations for quality products
► Capture growing categories: Clearly understand your category dynamics. Penetrate fast growing categories like personal care, beverages, and milk products
► Use promotions: Offer promotional discounts on low price growth products like home care
► Invest in ecommerce: Invest to understand how to use China’s booming e-commerce market to reach and recruit new customers
► Develop new products: Develop new products that can address the needs of various consumer segments.
Source: China Shopper Report 2015, Bain & Co and Kantar Worldpanel
How can XYZ company increase its CPG market share in China over the next 2-3 years?
1. Background
2. Desired Outcome
3. Scope
4. Constraints
5. Stakeholders
6. Resources
• XYZ is world’s one of the largest and the fastest growing CPG companies. In it’s second largest market of China, XYZ competes with companies like Unilever, Energizer, and Colgate
• To increase its market share in China, XYZ is looking to target top CPG segments (hair care, skin care, pet nutrition, child care etc.) with greatest growth opportunity
• Ways to increase XYZ’s market share in China
• Identify top-x CPG categories with highest expected growth
• In-scope: China CPG market analysis by major CPG categories
• Detailed competitor data may be unavailable
• CPG SBU Sales and Marketing team of XYZ
• Secondary research from publicly available sources
• CPG industry sales by product categories
Problem Statement Worksheet
Problem Solving Framework
Market Development Strategies
(i) Target different customer segments (ii) Sell products to corporate buyers(iii) Enter new regions of the country
Diversification Strategies
Introduce new offerings in new markets
Market Penetration Strategies
(i) Price reduction (ii) Increase in promotion and distribution
(iii) Acquisition of a rival in the same market(iv) Modest product refinements
Product Development Strategies
(i) Invest in R&D of additional products (ii) Acquire rights to produce new product
(iii) Buy a product and "brand" it
The Ansoff Product-Market FrameworkN
ew
Ma
rke
tsEx
istin
g M
ark
ets
Existing Products New Products
China CPG: Issue Tree Snapshot
How can XYZ
increase its CPG
market share over
the next 2-3 years
Build sales of new products
Increase sales of the existing products
Acquire established brands
Grow sales in the
existing cities organically
Build sales in the new cities
Acquire local brands in new cities
Identify acquisition
targets
Identify acquisition targets
Build new product
sales organicallyB2
B1
Branch-2:
Build sales of new
products organically
Branch-3:
Expand sales
of new and
existing
products
inorganically
Branch-1:
Increase sales of existing
products organically
Issue
Issue
Issue
Method
Legend
Note: Method refers to potential approach to solving the underlying issue
China CPG: Issue Tree (Branch-1a)
Grow sales in existing cities organically
Offer loyalty program
Retain existing customers
Expand target audience
Acquire new customers
Market basket analysis
Develop incentives schemes
Tap cross-sell up-sell opportunities
Consumer survey and
segmentation
Product feature pricing
A
Increase product-price range
Cater diverse consumer needs
Consumption in larger cities is slowing as markets have matured
Chinese consumer is experimental and less sticky with a product
Consumers have high aspirations for quality products
Consumers have increasing preference for lifestyle products
B
C
D
A
B
C
D
C D
Grow sales by expanding target audience in the current markets Underlying trends
B1a
Issue
Method
Legend
Sub-issues
China CPG: Issue Tree (Branch-1b)
Grow sales in existing cities organically
Offer promotions
Increase per capita
consumption
Improve brand image and value
Ad and media planning
Design marketing campaigns
Demand supply forecasting
Increase stocks at retail stores
Increase product availability
Promote online sales
Invest in ecommerce
B1b
Chinese shoppers prefer shopping at convenience stores, minimart over supermarket or hyper-mart
Online sales expected to grow to 30-40% in 2020
Promotional discounts required on
low-growth categories to increase consumption
Abolition of one child policy can help augur per capita or per household consumption
Shoppers are willing to pay premium for branded and aspirational products e.g. in personal care
A
B
C
D
A
B
C
D
Increase per capita consumption and product availability in the current markets Underlying trends
Issue
Method
Legend
Sub-issues
Improve distribution
strength
Invest in supply chain
E
E
China CPG: Issue Tree (Branch-2)
Launch new products
Build new product
sales organically
Penetrate addressable
market
Identify attractive categories
Develop new
products, packages
Invest in R&D,Market research
Product benchmarking
Develop marketing plan and campaigns
Promote sales in existing cities
Capture online sales
Invest in ecommerce
B2
China has almost three quarters of consumers online totalling 400 million ecommerce consumers
Consumers tend to buy premium products with promotional offers
Attractive categories include
cosmetics, skin care products, fashion apparel, and food & nutritional supplements.
Two-thirds of Chinese consumers are willing to try new products
Consumers prefer large packages of frequently consumed home care products
A
B
C
D
Underlying trends
Issue
Method
Legend
Sub-issues
Organically build sales of new products in new markets
C
D
A
B
E
E
