Shanghai Jahwa

Section 1 - Executive Summary

Shanghai Jahwa, established as early as in 1898, is the largest domestically owned (joint held by shanghai Industrial Investment group and Shanghai Jahwa corporation) Chinese manufacturer of cosmetics and personal care products. In recent years, it has been part of a booming market with annual growth rates of more than 30 per cen. This spectacular growth rate has attracted and been fuelled by the entry of major multinationals, including major PondЎЇs(Unilever), Procter & Gamble, Shiseido, Kao, and other minor players. The marketing challenge for Shanghai Jahwa is to carve out viable and profitable positions in the marketplace, in the face of competition from some of the most powerful global players in the industry, and target consumerЎЇs increasingly perceived confusion with MaxamЎЇs two similar flagship sub-brandЎЄMaxam Tremella Pearl Cream and Maxam Hand Cream. The situation illustrates in the case is actually a marketing (brand management) issues with respect to extending a once successful brand of Chinese personal care products named into the shower cream product category. Unilever, P&G already have established competitive high end products on the market under its well-known Luxury brand. In addition, other international players are entering in the market. Competition is heating up, and if the company cannot come up with branding strategy for dealing with the more and more confusing brand of Maxam, it could cost the company a sharp decrease or even being swept out in market. In sum, taking into account of market position, brand extension, pricing and competitive pressures, the company has to consider a repositioning strategy for Maxam brand. Though sale revenue increase, facing a even flat profit margin, the company also requires to improve its contribution ratio of brand products. (Exhibit 1, Exhibit 2).

Exhibit 1. Income statement of Shanghai Jahwa (in million RMB)

Exhibit 2. Annual sales breakdown of Maxam Brand (in million RMB)

Section 2. Situation analysisЎЄidentifying the problem

Here, we summarize essential details about Shanghai Jahwa as follows:.

Products

Shanghai Jahwa has offered personal care and cosmetics products under several sub- brands: Liusheng, Mingxing and Chinf de Chinf. After regaining control of Maxam from its former Joint-Venture, The Company is now considering restores its Maxam brand, mainly focus on Maxam Tremella Pearl Cream and Maxam Hand Cream. The two main flagship products, the Maxam Tremella Pearl Cream and the Maxam Hand Cream, which account for almost 60 % of Maxam sales, have evolved in very different directions. The Tremella Pearl Cream is still popular in rural areas and is considered a mainstay of rural cosmetic use. The Maxam Hand Cream, on the other hand, is primarily an urban brand, which meets the need of urban women looking to soften their hands after they have been exposed to the cold and to detergents. However, in urban areas the brand is losing its appeal as foreign competitors roll out their international brands and products. The challenge is to renew the Maxam brand without losing the loyal customers of Tremella Pearl Cream.

Market position

Since its inception in 1981, Shanghai Jahwa spent little on marketing and promotion of Maxam brand, but under a central planned economy, Maxam brand achieved a very successful leadership position in domestic market, by 1991 Maxam held a market share of near 10 per cent, but until Maxam brand was repatriated to Shanghai Jahwa in 1994, its market share slides to 0.5 per cent.

Distribution

Cosmetics and personal care products usually sell at supermarket, shopping mall for urban market, and department store or even village shop for rural market. The function as distribution come at a price of 20%-- 60% or even higher portion of retail price of products. From 1988, Shanghai Jahwa developed a distribution relationship with a sale network of about 1,000 department stores. This gave the company a closer sense to the market.

Competitive landscape

The personal care or cosmetics market is rapidly developing and intensely competitive. In addition, the retail book market is intensely competitive. Currently market structure was best described by local producer (fly-by-night brand), national producer (Maxam brand) and MNC brand (P&G, Unilever, etc.). With strong marketing expertise, well-execution and abundant resource, clear target at 18-35 year old mid-income women cohort(this group are willing to spend up to 20% income on cosmetics), MNC brands were able to charge a price premium of 500% over local brand, control 60% urban market. Maxam flagship products face direct competition from Unilever and P&G, Unilever.

Essence of high end products offered by P&G, Unilever

Brand Products offerings Price Interval(RMB) Volume (100 ml.)

Oil of Ulan(P&G) nourishing Cream 38-45 100

moisturizing cream

Pond's(Unilever) moisturizing 32 100

whitening

sunblock

In addition, as the domestic competitors such as Dabao (national economic moisturizer), Yinhua (local brand) continues to grow and strengthen their competitive advantages; competition is both from high end to low end.

The goals for the company is to achieve all have in common that they are to enlarge the market share of Maxam Brand.

Apparently, it is time for Maxam to come up with new strategy to reposition its market, especially given the fact that Maxam brand was considered as ÐŽooldÐŽ±, ÐŽooutdatedÐŽ±, ÐŽolow technologyÐŽ± by urban younger consumers. Repositioning is necessary when the initial positioning of a product, brand is no longer competitive sustainable or profitable or better positioning opportunity arise . But repositioning should also take into account of the risk of losing loyal existing consumers, in this case, the rural market for Maxam. Before we discuss the details about strategy alternative, we first look at the market size and future prospects.

Estimated portion and potential female consumers with age in between 15ЎЄ45.

0-9 10--19 20-34 35-50 50+ Total