Wahaha Hanghzou Analysis

Wahaha Hanghzou is one of the major local soft drinks providers in China. The company initially started as a children's nutritious drink provider in 1988. Since Wahaha was the first company, which directly targeted children, the product was an immediate success and generated revenue of RMB400 Million by 1990. Soon the Wahaha group expanded its product range, entering the flavored-fruit milk drinks market. With the help of its nationwide production, well-known brand and well-established distribution network the company achieved high retail coverage.

Soon the company, encouraged by its success, the company introduced purified water products, which rapidly achieved leading market share in the country. The revenue share of purified water reached to RMB500 million in 1997. The next year the company general manager and founder Zong Qinghou decided to enter the soft drinks market. Despite concerns and speculations form the market observers the new product launch was again a success and the company’s product Future Cola and other soft drink beverages have about 18% of the market share.

The success of the company was not only the result of successful management strategy, but also by gaining more knowledge and expertise by acquisition of large poorly performing companies and obtaining world class production technology by making partner the French food company, Groupe Danone. This partnership not only provided Wahah Hanghzou group the technology, which was not only comparable with the leading soft drink giants, like Pepsi Co. and Coca Cola, but also provided the company the expertise and knowledge of this level of production.

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Forces Working Against Wahaha Hangzhou: Before entering the soft drinks market Wahaha Hangzhou’s main competitors were local Chinese companies, which the company easily dominated and attained leadership. But the case of soft drinks and beverages was quite different, as here the company has directly challenged the global leaders and giants in this sector, i. e. Pepsi Co. and Coca Cola. The overwhelming success of Wahaha has not only surprised the multinationals, but also compelled them to reconsider their marketing and production strategy and tactics.

Despite the concerns regarding these multinational competitors, a couple of local competitors like Tiawan-founded Uni-President Enterprise Corp. and Tingyi Holding Corp are also emerging as strong competitors. In China the major forces working against Wahaha Hangzhou are Pepsi Co. and Coca Cola Co. These two giants altogether enjoy the largest percentage of Chinese soft drinks market. (Miller, 2004) Nestle is also among the most prominent multinational players in the country. Coca Cola Co. is by far the largest soft drink producer with 24% of market share in 2003.

(Miller, 2004) In order to gain access and dominate the local markets in different regions the company has adopted a “think local, act local, but leverage global” policy. This policy means that the company will modify its products and introduce new products in order to penetrate the local markets. In this way the company has decided to respond to the local preferences and local competitors. Therefore in the wake of this policy the local subsidiaries of Coca Cola have launched several local products, particularly in soft drinks category, targeting local customers.

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