Export Marketing Plan:

S & K Farming

Kristen Bak

Stephanie Vincie

Andrez Guillen

Vay Nim

MKTG 475 Monday 7pm

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Executive Summary

The goal of this project was to develop an export marketing plan to launch products into China

from Southern California. The name of the company we created was called S & K Farming and

the industry that we planned to pursue was agricultural, particularly the exportation of citrus

fruits. Our product line consisted of oranges, lemons, tangerines, limes and grapefruit. The

products are geared to Chinese consumers who are seeking a health conscious lifestyle.

The project tasks were divided into six sections: market segment, size of market, product mix,

market entry/promotional mix, localization requirements, and pricing/logistics.

1. Market Segment- After identifying our business, we had to research the best market

segment in China to export the citrus fruits. The country of Shandong was chosen due to

the large agricultural influence and prosperous citizen income.

2. Size of Market- With the population of China over one billion people and counting, S &

K Farming has the opportunity to solidify its place in this growing economy. S & K

Farming will be focusing on middle and upper income ranges.

3. Product Mix- S & K Farming will be exporting oranges, lemons, tangerines, limes and

grapefruit year round. We decided that the product line will consist of bulk and pre-

packaged fruit. Once S & K Farming becomes successful with its current product line in

China, the addition of fruit juices will be added in the future.

4. Market Entry/Promotional Mix- In this section, the market entry approach chosen was the

waterfall strategy. We also implemented various promotional mixes to reach our target

market segment which included internet and mobile marketing. Advertising, public

relations, and sales promotions were also included in the promotional mix.

5. Localization Requirements- The main focus for Chinese consumers is health and safety.

S & K Farming will have to continue to follow food safety procedures to remain a

reputable exporting fruit company.

6. Pricing/Logistics- S & K Farming will keep its price as low and fresh as possible. After-

sale support will be provided so that the retailers and/or consumers can contact them

whenever they have any questions or concerns.

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I. Target Market

Due to China’s ever-growing population, their government is constantly looking for ways

to make ensure that there is enough food in circulation to feed the population. To make sure that

there in fact is and will be enough food for the entire population China not only grows and

produces their own food, but they have to import certain foods as well, especially produce. This

opportunity alone gives S & K Farming a way into their consumer market through exporting

oranges and other citrus fruits to China.

In order to get business with China, the S & K Farming company will highlight to China

the important elements that they bring to the table on their end of the deal. They will focus on the

fact that they will always produce and export enough oranges to meet China’s minimum quotas,

and that they will always deliver on-time to eliminate the worry of leaving the Chinese people

without fresh produce. As far as locations of exportation, S & K Farming will not necessarily

limit itself on where the oranges are exported to in China, but they will ultimately hone in on the

areas that will surely bring in the highest traffic, hence revealing their target market.

The markets showing most potential for S & K Farming are the southern province of

Guangdog, Hong Kong, and the country of Shandong. The transportation of U.S. fruit through

Hong Kong now accounts for the majority of all U.S. fruit consumed in China. Although Hong

Kong was named the number one U.S. fruit importer, S & K farming have identified Shandong

as the idea target market with the most potential due to the fact that it is an agricultural industry

with room to blossom. Geographically, Shandong is a coastal province of the East China region.

S & K farming will select Shandong as part of their target market because of the country’s focus

on agricultural production. Some of the other industries in Shandong include oil and foodstuffs

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and pharmaceutical products. Being one of the wealthier provinces of China, Shandong’s

economic development focuses on large enterprises and they are also the top industrial producer

in China. Another part of S & K Farming’s target market will be Chinese consumers who are

seeking a health-conscious lifestyle.

Surveys show that consumers in China have a high level of awareness of food safety

incidents. S & K farming will target these health conscious people and attempt to create a bond

where the consumers can trust that they are getting a healthy and safe product. S & K Farming

will have success in exporting oranges to this consumer market in China especially since the

country has seen several scares involving disease ridden food. S & K Farming will highlight the

importance of being able to eat their oranges and not have to worry about getting sick from them.

S & K will have to invest heavily in quality control in order to avoid this crisis and be able to

guarantee the safety of their consumers.

II. Market Size

With a population of over one billion people and counting, S & K Farming has the

opportunity to solidify its place in this growing economy. With a middle class rapidly emerging

in China, our market size will be focused towards that growing market along with an emphasis

on citizens in the upper income range. In addition, we will also focus on selling our citrus fruits

to different regions within China. We plan to sell navel oranges in Northern China, in the

countries of Henan and Shanxi, since the navel oranges produced there are considered low grade

compared to those from Southern California. Dissecting the country by different types of

oranges, prices and packaging sizes will also allow us to expand our market size. Our major rival

to the market is only Florida, which leads the nation in orange production with a 63% market

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share and California is second with a 34% market share. In 2011, the state of California exported

$155 million worth of oranges to China, according to California agricultural production statistics.

Since our products will be produced from California, we feel that this is the market that we need

to dominate to become successful.

Even though the exporting amount dropped 14% in 2011 (California Agriculture

Statistics Review), California was still able to export 10.9 million dollars’ worth of lemons to

China. In the United States, California is the largest producer of lemons, producing more than

92% of the nation’s lemon production (Agriculture Marketing Center). Just like with lemons, we

have a region in China that we would specifically want to market our lemons. The City of

Beijing is known as one of the most unique and dynamic cities in the world, however, China’s

domestic lemons have been known to resemble an orange more than a lemon. With a vibrant city

life and increasing residual income, this would be a great place to market our high quality

lemons. We will market towards 4 and 5 star hotels and restaurants that use them as garnishes for

food and drinks.

Even though China is the world leader in grapefruits, they still need to import from other

countries to meet the demand. With California ranking number two in the United States in

grapefruit production (approx. $50,000,000 worth), we have the supply. With 12,000 metric tons

of grapefruit imported in 2012, China seems to have the demand. Unlike our previous citrus

fruits, the S & K Farming’s grapefruit is not going to be marketed for taste benefits but rather its

health benefits. China’s growing middle and upper classes have become aware and attracted

toward these health benefits. In addition, we want to focus on selling our products to juice

factories, grapefruit accounts for 30 percent of Beijing’s juice market. Targeting wealthier cities

such as Beijing, Hangzhou or Chongqing should be ideal for this exotic citrus fruit.

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By exporting our product mix to different regions within the country, we successfully

placed the product where it should be. Our market size is made up of demand and supply. High

income cities such as, Beijing and Hangzhou, provide us with our supply for high end

grapefruits, while northern China cities Henan and Shanxi are more susceptible for S & K

Farming’s quality oranges. In each case, Florida remains our greatest competition for market

share, but S & K Farming have set sights on a market size that stable and growing.

III. Product Mix

Along with launching of oranges into China, a few more products will be entered as well.

The product mix, also known as product assortment, refers to the total number of product lines

that a company offers to its customers. The product mix consists of four dimensions which

include width, length, depth and consistency. The width of a company’s product mix pertains to

the number of product lines that a company sells. Product mix length pertains to the number of

total products or items in a company's product mix. Depth of a product mix pertains to the total

number of variations for each product. Product mix consistency pertains to how closely related

product lines are to one another in terms of use, production and distribution.

S & K Farming will be exporting oranges year round. The width of the product line will

consist of oranges, both Navel and Valencia’s. Navel oranges will be available for exporting

from the months of November until May. Valencia oranges will be available for exporting from

the months of February until October. Included in the product line will be lemons, tangerines,

limes and grapefruit. Lemons, tangerines, limes and grapefruit will be available for exporting

year round. The width of the product line is five and the length of the product mix is seven. All

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of these product lines can be marketed to the health conscious consumer who is looking to find a

guilt-free and healthy treat to eat.

The product line will consist of bulk and pre-packaged fruit. The oranges, lemons and

limes will have the option of the bulk fruit, where consumers can choose which fruit they want to

purchase based on size and color, and pre-bagged in quantities of six. The grapefruit and

tangerines will be sold only in bulk. The farmers at S & K Farming will ensure consistency in

fruit production by using soils from sand and adobe clay. The farmers will also protect fruit trees

against frost, wind and sunlight to ensure all fruits taste great and have consistent quality. The

farmers will also take in consideration the importance of water quality and use exact nutrients

measurements to grow the sweetest and juiciest fruits in all of Southern California. Once S & K

Farming becomes successful with its current product line in China, the addition of fruit juices

will be added in the future.

IV. Marketing and Promotional Mix

S & K Farming will use the waterfall strategy when entering the Chinese market. The

waterfall strategy is used when a product is launched in one country at a time and new markets

are entered only after sales are established in the previous market. S & K Farming is already

successful in Southern California and will be broadening into China. In China, there is changing

demographics, rising incomes and increased consumer spending which helps to make the

Chinese market look more attractive. The first objective for S & K Farming’s market entry

strategy will be doing some extensive background research on the sale of oranges and other

citrus fruits in the Chinese market. Next, S & K Farming will determine the best channel partners

for selling the fruits through an agent and register trademarks in China prior to any exporting.

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Finally, S & K Farming will carry out due diligence on prospective partners and employees for

their market entry strategy. An indirect channel will be used that consists of the manufacturer, a

wholesaler, supermarkets, and the finally the consumer who will receive the product. S & K

Farming will sell all fruit to a selling agent who will sell to wholesalers. An indirect channel is

ideal for S & K Farming because it will relieve the company from worrying about problems of

distribution and shift focus to concentrating fully on production.

S & K Farming will use an intensive distribution channel where the major supermarkets

in Shandong will carry the fruits. An intensive distribution channel will be an effective

marketing strategy because the supermarkets in the area will carry all the products and

consumers will encounter the product in every supermarket they go to. The promotional mix for

S & K Farming will consist of advertising, public relations, and sales promotions. For the public

relations promotional mix, S & K Farming will be posting on Chinese language portals and

online websites. This will be an effective function because most Western news websites are

blocked in China therefore posting on Chinese websites is imperative to get the most exposure. S

& K Farming will also have language options on their website in English or simplified Chinese.

S & K Farming will also localize their website by using About Us and Contact Us pages, making

it easier for journalists to write stories about the fruit being imported into the country.  For the

advertising promotional mix, S & K Farming will be using internet and mobile ads. The ads will

be created to involve appealing to the Chinese population’s public life because Chinese

individuals like to take a break from their mundane lives and socialize in the community

together. By appealing to Chinese public life, trust will be established. This in turn will allow the

fruit from S & K Farming to be portrayed as a global brand. S & K Farming will be using sales

promotion as a short-run tool to stimulate immediate increases in demand. Free samples and

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coupons will be the main types of sales promotion that will be used. A table will be placed in the

entrance of every supermarket with an individual passing out free samples of the fruits along

with coupons to get discounted prices. The types of sales promotions that will be use include

informing, persuading and reminding the target audience of the products S & K Farming is

selling.

V. Product Modification or Localization Requirements

Since S & K Farming will be exporting a fruit into China, there are no localization

requirements that will be needed. The oranges will simply be exported in shipping boxes “as is”.

The only product modification that S & K Farming will face is the health implication that the

Chinese government stresses on all food imports. The Chinese government has had a long-time

ban on U.S. fruit imports due to their fear of diseases and pests. Thus, the main area of focus for

the Chinese consumers will be the health factor. Due to the past health scares the issue of food

safety is critical. S & K Farming will go to great measures with product checking and labeling to

ensure food safety to the Chinese consumers. To keep the consumers safe, the Chinese

government has placed strict rules regarding management of the food supply chain. The ability

of S & K Farming to build a reputation for food safety and quality for their citrus fruits is critical

to its success. Due to these new laws and regulations, S & K Farming will continue to adhere to

all food safety protocols and procedures to remain a reputable food exporting company.

VI. Pricing, Logistics and After-Sales Support Policies

Pricing is one of the most critical issues for our project. The price of oranges is $.99 cents

for five pounds of oranges, according to Superior Grocers. We can use that price for our

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estimated average price. After in-depth calculation based on the estimated average price, figure 1

below describes the prices that will be charged.

Figure 1 represents calculations based on average costs to export citrus fruits to China from Irvine, California.

(Per Pound) Domestic Influence

Domestic Selling Price $    0.198 $    0.198

Insurance and Shipping $           - $    0.016

=CIF Cost $           - $    0.214

+ Tariff (6%) $           - $         0.01

= Landed Cost $           - $    0.227

Imported Margin (25%) $           - $       0.06

+ VAT 10% on full cost plus margin $           - $       0.03

= Wholesale Cost $           - $    0.312

Wholesale Margin 33.3% $           - $    0.104

VAT 10% on Margin $           - $       0.01

Retailer cost $           - $    0.426

+ Retailer Margin (50%) $           - $       0.21

+ VAT 10% Margin $           - $           -

= Retail (Consumer Price) $    0.198 $    0.639

Due to the fact we got the price from a domestic retailer, it is reasonable to expect a

reduction on the cost for the oranges up to 10% for the direct costs when we can get the products

from the farmers. OSHA indicates that "studies show that the ratio of indirect cost to direct costs

varies widely, from a high of 20:1 to a low of 1:1." (Manuele 2011). In order to reduce the risk

from currency exchange, we have decided to use the forward rate exchange rate even though we

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know that Yen, Chinese currency, can be seen as a fixed rate currency. Payment will need to be

made by cash in advance for the 50% and/or open account of 45 day terms or following the

contracts. Another important issue is how we can transport our products from America to China.

Because this is our first move to the global market, it is necessary for us to select the best method

to move transport our products. After doing researches on logistics, we decided to cooperate with

Beijing Hezhong Inc. We decided to choose Beijing Hezhong Inc because during the past several

years it has attained significant performance in the logistic service field. It has over 100 transport

vehicles and two storehouses totaling 20,000 square meters. In order to provide better service to

its customers, Beijing Hezhong Inc. has built a national system of logistic networks and a private

logistic information system. In 2003, the Committee of China Food Industry awarded Beijing

Hezhong Inc. with recognition as a model base station of food logistic in China and model

training base station of food logistic in China. Next, we will need to have customer service

offices in both China and Irvine, California so that customers can reach us whenever they want.

Moreover, the agents in China will be responsible for not only the information but also the

payments from customers.

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