KeepCup - Case Study
From the Asialink Business China Country Starter Pack
When KeepCup realised their distributors in China were selling their products for three times the recommended retail price, they were astounded.
Many people when they consider selling a product in China think of offering low prices. When Australian business KeepCup realised their distributors in China were selling their products for three times the recommended retail price (RRP) they were astounded and wanted to know why.
It was simple – "Our pricing, which is calculated on an index of the local price for a cup of coffee, was way too low for China and impacting sales," says Katherine Underwood, KeepCup International Account Manager for Asia Pacific.
Established in 2009 as a family business, the organisation's objective is to reduce disposable coffee waste through the world's first barista standard reusable cups. Manufactured in Melbourne, and now selling in over 60 countries, the company recognised the value that locally producing in Australia could bring, while allowing them to retain quality and reduce their environmental footprint.
"It is vital to get your price right, don't undervalue your product," outlines Katherine. "China is an interesting market, on the one hand they are price sensitive, on the other, a lack of trust exists among Chinese consumers towards Chinese manufactured goods. There is this strong desire for manufactured Western goods, particularly Australian."
A strong and trustworthy relationship with your distributors is fundamental -but is an ongoing and sometimes challenging process.
The three Chinese distributors, each focused on a different type of market – cafe, retail and corporate clients, expressed that the product was undervalued and needed to be sold at a premium. To price otherwise, would encourage the Chinese consumer to perceive the product as manufactured in China and consequently of lower quality, a perception not valued highly by the target market of specialist coffee drinkers.
Having sold over three million cups globally since 2009, KeepCup trusted and listened to their Chinese distributors keeping the higher price. With the efforts of the distributors, sales have tripled in China over the past six months with the brand growing across the country in the last year.
However, as a result of the Chinese economy's rapid growth, distributors can be sensitive and worried of losing control of their market. A strong and trustworthy relationship with your distributors is fundamental in China but is an ongoing and sometimes challenging process. "You need to make them feel imperative to your brand and to do so from the beginning. They have to all feel reassured that everyone is working together, not against each other." reinforces Underwood.
KeepCup does this by providing along with their standard distributor agreements, a 'Letter of Authorisation' for each distributor, making it official with the company stamp which distributor is responsible for a certain Chinese market. "Communication is also key which we do regularly with phone calls and using WeChat." says Underwood. "Nonetheless, we need to maintain control of our product from Australia so being reactive to market demands and handling our brand marketing, while setting sales targets to maintain growth is crucial."
Looking to grow your knowledge and capabilities for success in China? Check out other market-leading Asialink Business research & resources on offer to help you on your way.