Article on Malibu:
"Move over, Coke and Pepsi. This summer, local consumers will have another carbonated drink to reach for when they want to quench their thirst. US cola brand Malibu is ready to conquer China's carbonated beverage market.
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The company is not as large as the other two soda giants, which account for 60 to 70 per cent of the country's soft drink market. And although Malibu can only lay claim to 3 to 5 per cent of the mainland market, it's now preparing to expand across the nation.
"That's still a big opportunity for Malibu, since the nation's total soft drink market stands at 7.5 to 8 million tons a year," says Xiao Jiangong, vice-president of Malibu-Cola Beverage Co Ltd.
Malibu's capacity is now 150,000 tons per year, compared with its target of 300,000 tons annually.
"We're only targeting markets in North China now, such as Beijing, Tianjin and Hebei Province. But we plan to expand to Shanghai, Guangzhou and Shenzhen this year," Xiao tells China Business Weekly.
He adds that with the expansion of the company's distribution network, the firm will eventually set up another two factories in Northeast China and western parts of the country.
Xiao says Malibu's competitive edge is in providing diversified products that Coca-Cola and Pepsi generally do not focus on. Its retail prices are also considerably lower than the other two cola kings.
"In addition to our traditional cola, we offer five flavours: orange, lemon-lime, cherry, lemon squeeze, and 'sun-tea'. So far, they have been accepted by young consumers," Xiao says.
He adds that Coke and Pepsi mainly focus on traditional products, and tend not to prioritize new flavours. But the market has been becoming more diversified, he says.
"It is time to sell something different now."
In the United States, for example, about 2 per cent of consumers only drink cherry-flavoured cola, Xiao says.
Malibu will also work hard to promote its diet cola, because the company has seen increasing demand for it, he adds.
Malibu products are typically 20 per cent cheaper than Coca-Cola and Pepsi. A 500-mililitre bottle of Malibu Cola, for instance, sells for 1.6 yuan (US$0.2) at most supermarkets, compared with 2.3 yuan (US$0.29) for a bottle of Coke or Pepsi.
"We target young people, such as teenagers and people in their twenties. These are consumers with considerably lower incomes," Xiao says.
A number of factors can influence purchasing decisions, but he says price usually plays a significant role. "A small price difference does not really matter, which is why we have been shooting for that 20 per cent price gap."
Xiao admits brand loyalty is a factor, but adds that although some consumers might be loyal to Coke and Pepsi products, they are unlikely to stick with these two brands when they look for different flavours.
He says Malibu products have sold well since they hit the market in North China last September.
"In Shijiazhuang, the capital of Hebei Province Malibu's first market the brand is now well-known in most middle-income households. In Beijing and Tianjin, the brand has been growing by over 30 per cent in the past several months," Xiao says. He believes Malibu will start performing well in other cities this summer. He says the company currently spends very little money on advertising, but is able to keep costs down and offer better value to consumers.
"It might take us longer time to catch on with Chinese consumers, but we believe this is the right strategy for Malibu at the moment."
He adds that Malibu has its own flavour concentrate factory, which imports emulsion concentrate directly from the United States. Five litres of concentrate can usually produce 2 tons of finished product.
"We can cut costs even further through that process between the concentrate and the finished product."
Xiao says Malibu's expansion depends on supermarkets' sales networks. Malibu is now available in Wal-Mart, Carrefour and Hymall more than 150 stores nationwide.
The brand will expand its sales network to other supermarkets, such as Metro and Lotus, and some domestic supermarkets, including Lianhua and Hualian.
"This year is critical for Malibu. We want to complete our distribution network throughout the country. And starting next year, we will put more emphasis on sales volume," Xiao says.
Malibu also focuses on comparatively poorer cities through its alliance distributors.
"Many years ago, a lot of Chinese drank sweet 'bubble drinks', but now people in the cities tend to drink Coke and Pepsi products. There still aren't many products between the two, however. Malibu is filling in the blanks," Xiao says.
Malilbu's factory in Sanhe, a city in Hebei Province, only has one production line, but Xiao claims that a second canning line will open soon, when the utilization rate of the first line reaches 70 per cent.
Domestic beverage firms such as Wahaha and Jianlibao have also stepped into the carbonated drink market. They haven't performed as well as expected, however.
Malibu-Cola Beverage Co Ltd is wholly owned by US company Calcol Inc. It was established last year with registered capital of US$10 million."
(China Daily 05/29/2006 page3)
