Research On The Marketing Strategy Of K Company's Health Products in China Ⅲ
Nov 25, 2024
Chapter 3 Analysis of the Current Situation and Existing Problems of K Company
3.1 Introduction to K Company
K Company was founded in Los Angeles, USA in 1980. The company's first product was a protein mixed drink. As a nutritional product, it can achieve people's weight loss needs through calorie control; at the same time, the company has been selling and promoting through direct selling since its establishment. Its brand inspiration comes from oriental herbs. The founder hopes to improve people's weight problems and health conditions by drawing on the power of plant herbs.
WECISTANCHE FACTORY GMP, DRUG-FREE, HACCP, HALAL, KOSHER AND ORGANIC CERTIFICATE
After the company was founded, it gradually expanded its global market from the United States. South America, Europe, Asia and other regions have shown strong growth. K Company was listed on the New York Stock Exchange in the United States in 2004. In 2005, K Company launched marketing in China through direct sales. After the first store (branch) was established in Qingdao, more than 50 branches were opened in various provinces and cities across the country. In 2010, on the occasion of K Company's 30th anniversary, its first global raw material production base broke ground in Hunan, China, and it reached a sponsorship agreement with Messi and Barcelona Football Club that year, sponsoring more than 110 international athletes, sports teams and professional sports events worldwide. In 2011, with the continuous enrichment of products and the expansion of sales areas, K Company's global retail sales reached a record high of US$5.4 billion. With the growth of performance, K Company also pays attention to global public welfare, improves the health of children around the world through foundation projects, and works with local governments and public welfare organizations in various countries and regions to improve human nutrition and living conditions. According to the 2022 DSN Global 100 list (DSN Global 100) published by the famous American direct selling magazine Direct Selling News, based on the revenue of each company in fiscal year 2021, K Company ranked third with a performance of US$5.8 billion. K Company adheres to the product concept of "from seed to table", and controls all links from raw materials, production, transportation, sales to consumer use, so as to ensure the quality, purity and natural safety of raw materials, and achieve the quality and safety of end products through the integration of raw material supply chain. The brand is committed to providing the most advanced, safest and most effective products to thousands of customers, starting from a seed in exclusive farms all over the world, through strict screening and advanced production technology, until every link of the entire industry chain to the consumer's table, strictly controls food quality and safety. K Company has introduced the world's leading tablet and powder food-grade production equipment and fully automatic packaging lines in its Chinese factory. The production environment meets the requirements of the health food industry of the Ministry of Health of China, and the production process adopts current advanced technologies such as direct powder tableting and transparent film coating.
In recent years, in order to improve product quality standards, K Company has continuously increased its investment in product research and development; taking 2020 as an example, the company has made a huge investment of nearly US$25 million in related scientific fields such as product research and development, technical operations, scientific and technological affairs, quality assurance/control, product safety and product compliance. At the same time, about 11 million yuan of funds have been invested in nutrition affairs, product licensing and strategic procurement. The company now has more than 300 scientists worldwide, including more than 30 doctors, and has established a nutrition advisory committee composed of experts in various fields such as nutrition and health to provide nutrition knowledge, physical exercise and healthy living consultation and training for its global marketers and customers. Among them are many world-leading industry experts, such as Dr. Louis Ignarro, who was awarded the Nobel Prize in Medicine in 1998 for discovering "nitric oxide" and its many health effects on the human body. In summary, under the guarantee of the five major factors of "people, machines, methods, materials, and environment", K Company produces products that meet the USP (United States Pharmacopeia). Globally, the Chinese market has always been the focus of K Company. As early as 1997, it began to invest in China. In 1998, it established a production base in Suzhou, Jiangsu. The current headquarters is located in Shanghai Raffles Square. Due to accurate product positioning and early market entry, it has captured a large number of consumers and loyal fans.
K Company's performance in China can be described as booming. Since K Company obtained its direct sales license in 2005, the company's performance has grown from nothing to a peak of RMB 6.19 billion in 2018 (as shown in Figure 3.1).
However, with the intensification of market competition, especially the rise of Internet e-commerce forces, and the drastic personnel turmoil in K Company after 2017, its performance has continued to decline since 2018, and the decline has not stopped until 2022.
Fig.3-1 Sales and growth rate trend ofK Company in China from 2005 to 2022
3.2 Introduction to K Company's China Product Matrix
K Company currently has 58 SKUs in China, which are mainly divided into four categories. The first is the daily nutrition series, which includes 48 SKUs, the second is the target nutrition series, which includes 20 SKUs, and the third is the sports nutrition series, which covers fewer products, only 4 SKUs; finally, there are 8 SKUs sold to China through overseas imports, that is, "overseas purchase" products.
From the perspective of product nature classification, 19 of them are health products, including products with health effects. The main health effects of the products are improving immunity, losing weight, relieving fatigue, moisturizing the intestines and supplementing trace elements, etc.; the remaining 39 products are ordinary foods. From the perspective of product nature, 33 of them are powder products, 15 are tablet products, 4 are capsules, 3 are effervescent tablets, and the remaining 3 are ready-to-eat pastries, soft candies and beverages.
According to the company's official information, since its establishment in 1980, K Company has used protein mixed drinks (commonly known as "milkshakes") and nutrient supplement tablets as its core products. Through the combination of these products, it achieves nutritionally balanced and low-calorie meal replacements, thereby forming a calorie gap in the human body and ultimately achieving the goal of weight loss. This healthy and efficient way of weight loss, coupled with the form of direct sales, quickly spread to many countries and regions around the world in the last century and the early 21st century. In the field of meal replacements, K Company's market share is a leader in the world; in the 2022 global brand market survey by the internationally renowned research company "Euromonitor International", K Company was rated as the world's first brand in the comprehensive category of meal replacements and protein nutritional supplements. In 2021 alone, K Company sold more than 1.9 billion cups of milkshakes and used about 34.2 tons of high-quality protein in its products. These nutrients are enough to fill about 34 international Olympic standard swimming pools.
According to the company's internal data, in the 2021 annual turnover, milkshake products accounted for an absolute share of 41.3%, which is the main product of the company's performance. If related products that assist in weight control are added, the annual turnover can reach 65%.
3.3 Current status and problems of K company's marketing strategy
K company's market performance in China has turned from rising to declining, highlighting the decline. In addition to the pressure from national policies, industry supervision and marketing environment, there are actually certain problems with its own marketing strategy. This article conducts field research and visits, communicates with K company employees and some marketing personnel, and analyzes K company's existing marketing problems from the perspective of marketing 4P after summary.
3.3.1 Current status and problems of product strategy
As a health care and nutrition company for end customers, products are the core of the enterprise. Only by truly improving product competitiveness, meeting the changing needs of consumers, and keeping up with the pace of market development and change can it be possible to create continuous income and profits for the company. K Company has the following main problems in its product strategy:
1. Single product category, unable to meet the growing consumer demand
As analyzed above, K Company currently has 58 SKUs, and after merging the different flavors and packaging of similar products, it is found that the company has only 36 products. Since entering China in 2005, the company has only added 20 products after 17 years of development, starting with 16 products, with an average of one product added per year. Moreover, most of the products have not been upgraded after they were launched, and the product ingredients are still the same as when they first entered China. During this period, only the product packaging and taste were adjusted.
Compared with the main competitors in the market, K Company has a huge gap in product diversification. Take Amway, a direct sales company and health care giant from the United States, for example. Amway has 93 official nutritional products in China alone; plus the well-known home technology, home care, personal care, skin care, fashion and beauty products, consumers can buy a total of 424 Amway products in China. Similarly, for By-Health, which focuses on health products and has emerged in recent years, there are a total of 124 health and nutritional products of various categories under the "By-Health" brand alone, covering all age groups, different functions, and products for different sales channels (such as e-commerce specials). In addition, By-Health also owns sub-brands such as Jianliduo, YEP, and Life-space through research and development and acquisition. Its product matrix is very large, which can almost meet all health needs of infants, children, teenagers, adults, and middle-aged and elderly people. Therefore, K Company is quite different from its competitors in terms of product quantity and product diversification. In terms of product functions, the richness also needs to be improved. From the perspective of product effects, weight loss products account for 30 products, which has a direct impact that when nearly 90% of consumers mention K Company's brand and products, "weight loss" has become their only impression. In contrast, health and nutritional products with other functions rarely have "explosive" products that can quickly gain the love and recognition of large-scale consumers. The indirect consequence is that consumers have a stereotyped impression of the brand, which affects the development of the entire brand.
Looking at the entire product line of K Company, in the context of the current changing and continuously upgraded consumer demand, the products have not been updated in a timely manner. According to Euromonitor's survey of health care product consumers in the Chinese market, the post-90s generation has become a large consumer of health care products, and their top three health and health care needs are: emotional health (26%), body management (22%), and sleep health (14%). It can be seen that in addition to covering the field of body management, K Company's products have almost no involvement in the two major areas of emotional health and sleep health.
It can be seen that both the number of products and product functions need to be improved and optimized to meet the ever-changing market and consumer needs.
2. The product packaging is backward, the convenience of use is poor, and it is not easy to spread; the product form is poorly innovative.
All the packaging of K Company has changed only the text, pictures and product descriptions of each product since it was launched since the company was founded, and the packaging form has not changed much.
Traditional health care product packaging is mostly bottles and cans, and the same is true for K Company's products. The product label is attached to the outside of the white can, which easily makes people associate it with "drugs". At the same time, among K Company's 58 products, 33 are powders, 15 are tablets, and 4 are capsules; this "drug"-like product form combined with outdated packaging, in the early stage of the development of the health care product market, due to information asymmetry, is conducive to companies to associate health care products with drugs to a certain extent, thereby allowing consumers to buy more. At this stage, when market competition is particularly fierce, consumers' needs are more diversified, especially with the rise of young consumer new forces, consumers are more inclined to use methods such as soft candies, instant foods, and drinks to use health foods and nutritional products efficiently, conveniently, and fashionably; at the same time, more consumers choose products with young and fashionable packaging that highlight personality, which can also satisfy young consumers' desire to share, and can be shared on social media at any time, highlighting their personality and value proposition.
We can find from the comparison between K Company's mainstream products and those of competing companies that product packaging has lagged behind consumers' mainstream aesthetics.
