MCM Wines in China: Taking on the Dragon

Abstract

In July 2009, businessman and entrepreneur, Martyn Mills of MCM Wines, reconsidered his marketing strategy. He had been exporting his own wine to China since 2003 and had recently signed an agreement with the prestigious South African wine estate, Groot Constantia, to export its wine to that country as well. However, conducting business in China was complex and expensive and, earlier that year, he had partnered with a new importer in China to help combat certain of the challenges. Mills wanted to support his new business partner as much as he could in promoting MCM wines; however, he had a limited budget. Given this fact, how could he grow his market in China, he wondered?

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

Resources

Exhibit 1a. Background on China

The People's Republic of China consists of five autonomous regions – Guangxi, Tibet, Ningxia, Xinjiang and Inner Mongolia; four municipalities – Beijing, Tianjin, Chongqing and Shangai; two special administration regions – Hong Kong and Macao; and 22 provinces (see Exhibit 1b for a map of China). It also claims Taiwan as a 23rd province, although Taiwan regards itself as an independent state – The Republic of China (ROC). 1 The major cities in Mainland China are the capital Beijing, as well as Shanghai, Tianjin, Shenyang, Wuhan, Guangzhou, Chongqing, Harbin and Chengdu. Most of China's people live in the eastern segment of the country.

Mandarin is the national language. It is spoken by 70% of the population and taught in all schools. Two-thirds of the Han ethnic group, which makes up 91.9% of the total population, speak Mandarin. Ethnic groups in south-west and south-east China speak one of six other major Chinese dialects, including Cantonese. Other languages include Mongolian, Tibetan, Uygur and some Turkish and Korean languages. 2 The monetary unit of China is the yuan (¥), but the currency is officially known as the renminbi (RMB). The rate of exchange in May 2009 was RMB0.80: R1.

Infrastructure

From 1949 to 1986, transportation development in China received low priority. The inadequate transportation systems hindered the movement of goods to the user, and this began to impact negatively on economic growth in the country in the 1980s. Accordingly, the Chinese government put in place the 8-7 National Poverty Reduction Program from 1994 to 2000 to prioritise the upgrading of the country's rural highways.

Since then, attention had been given to upgrading of all transportation systems, including highways and roads, railroads, ports, water highways and airlines. While much had been achieved, much remained to be done. In 2005, logistics costs in China made up between 25% and 30% of overall product costs, according to a report from the US law practice Benesch, Friedlander, Coplan & Aronoff LLP. 3

References

1. ChinaToday.com, ‘China Population Statistics and Related Information’, available from www.chinatoday.com (accessed 8 May 2009).

2. US Department of State, ‘Background Note: China’, op. cit.

3. Outsourced Logistics, ‘Logistic Costs from Asia Could Drop’, 7 July 2005, available http://outsourced-logistics.com (accessed 29 May 2009).

Exhibit 1b. Map of China

Source: en.wikipedia.org.

Figure

Exhibit 2. SA Wine Exports by Country (Litres)

Country

Total May 2007 to April 2008

White

Red

Blanc de noir/rosé

Total May 2008 to April 2009

United Kingdom

91 208 629

55 798 137

50 082 050

9 979 372

115 859 559

Germany

61 440 016

22 150 294

40 833 630

6 062 075

69 045 999

Sweden

25 777 439

12 397 394

19 783 123

274 485

32 455 002

The Netherlands

29 254 787

10 909 502

13 761 085

4 007 222

28 677 809

Angola

16 679 435

2 157 993

18 319 028

6 701

20 483 722

Russia

5 565 560

14 671 405

1 652 102

296 740

16 620 247

Denmark

14 834 497

3 748 398

12 521 993

213 893

16 484 284

USA

13 121 278

9 277 003

4 879 131

170 033

14 326 167

Canada

14 185 778

6 321 932

6 174 830

113 090

12 609 852

Belgium

10 048 656

4 654 318

3 412 361

466 416

8 533 095

France

8 148 930

2 717 674

4 308 384

883 934

7 909 992

New Zealand

10 342 836

3 807 402

4 054 004

23 891

7 885 297

Finland

4 916 103

2 906 475

3 002 496

31 171

5 940 142

Switzerland

5 275 434

2 617 706

1 886 544

562 701

5 066 951

Republic of Ireland

4 922 123

2 368 889

2 244 017

88 615

4 701 521

China

1 467 579

328 656

3 847 191

5 490

4 181 337

Czech Republic

608 933

1 446 813

961 599

17 208

2 425 620

Australia

4 294 944

1 476 419

911 074

15 386

2 402 879

Nigeria

1 368 916

263 833

1 975 674

19 278

2 258 785

Japan

1 436 046

859 861

1 307 561

3 717

2 171 139

Kenya

2 046 063

985 613

976 029

36 946

1 998 588

Norway

1 710 630

308 419

1 501 363

225

1 810 007

United Arab Emirates

1 187 375

675 510

789 837

37 641

1 502 988

Tanzania

1 389 430

582 294

533 426

17 879

1 133 599

Romania

527 966

961 498

32 877

4 869

999 244

Other countries

13 258 281

6 291 171

8 658 325

905 534

15 855 030

Total

345 017 664

170 684 609

208 409 734

24 244 512

403 338 855

Source: SA Wine Industry Information and System (SAWIS).

Exhibit 3. China Wine Distribution: Percentage Share by Volume 2008

Channel

% share

On-trade *

67.0%

Supermarkets/hypermarkets

17.5%

Specialist retailers

14.9%

Other

0.4%

Department stores

0.2%

TOTAL

100.0%

* Consumed on the premises at, for example, a restaurant or bar.

Source: Datamonitor, Wines in China, December 2008.

Exhibit 4a. Martyn the Brave Wine Label

Source: Courtesy of Martyn Mills.

Figure

Exhibit 4b. Back Label of Martyn the Brave Wine Label

Source: Courtesy of Martyn Mills.

Figure

Exhibit 5. MCM Wines China Promotional Activities

Source: Courtesy of Martyn Mills.

Figure Figure Figure

Exhibit 6. The Martyn the Brave Story

Martyn C Mills has always been the adventurous type. From parachuting to hang-gliding and exploring new countries by himself, Martyn always sought new adventures, new experiences and new insights.

From an early age, Martyn travelled all over Europe on his own during his holiday periods. He simply enjoyed travelling and meeting new people, cultures and lifestyles. His travels took him to Australia, North America, South America and Hong Kong.

In 1991, Martyn decided to give Africa a try, and travelled to South Africa. On his first visit, Martyn ended up hitchhiking for six months on his own, from Cape Town, all around the East coast of South Africa, through Swaziland, then into Zimbabwe to the Great Victoria Falls, on into Malawi and the beautiful and friendly Lake Malawi area. Martyn travelled into Zimbabwe to enter Botswana, where he experienced one of the most beautiful and most natural places he had ever seen: the Okavango Delta, a beautiful place untouched by man, and where he nearly lost his life to a huge bull hippopotamus whilst canoeing in a dug-out canoe. The hippo came within two metres of ravaging Martyn and the dug-out canoe. After this near close-encounter experience, he then went on to Namibia and finally returned to Cape Town – the Mother City, as it is known to locals.

It was this very first visit that would ultimately lead to his head following his heart in that he now knew where he wanted to live: Cape Town, South Africa – a beautiful and friendly city.

In 1994, three years after his first visit to South Africa, Martyn decided to start a new life and left Europe for good to live in Cape Town. He had no job, nowhere to stay, no family and only a few pounds in his pocket.

Martyn soon got a job, and it was during this time that one of his employers said he was courageous to have made this journey into the unknown – and he named him “Martyn the Brave”. Martyn eventually started his own business, which he ran for over seven years, and his work took him on new travels yet again, but this time even deeper into Africa. Martyn trained installers of satellite dishes throughout Africa for the largest pay TV broadcaster in Africa. He ended up visiting many African countries, meeting their friendly people and experiencing local traditions and cultures – from West Africa (including Nigeria, the Ivory Coast and Ghana) to East Africa (including Kenya and Tanzania) to southern Africa (including Malawi, Botswana, Zimbabwe, Namibia, Angola and Mozambique). It is now 13 years later, and Martyn still lives in Cape Town. He is now married to a lovely South African woman and has two beautiful baby daughters.

After successfully running his Cape Town business, Martyn looked for new challenges and decided to look to the East. Martyn had been to Hong Kong before, but had never experienced China, and was curious as to what this country was really like. This would prove to be his next destination and new business challenge.

Martyn wondered what natural product was available to him in South Africa that might be enjoyed by the Chinese people, and came up with the perfect answer: wine.

It was not a difficult choice, as South Africa's wines were famous throughout the world and, in a lush Cape Valley, Constantia – where Martyn by coincidence also decided to live – is where wine-making in the Cape truly began, back in 1685.

In fact, South Africa is the oldest winemaking region in the southern hemisphere, and wines from Constantia were sought after by royalty and noblemen in Europe during the 18th and 19th centuries. From France's King Louis XV, England's King George IX and Frederick the Great to literary giants such as Charles Dickens and Jane Austen, they all enjoyed Constantia wines, as did another respected French Commander, Napoleon Bonaparte.

Today wines from the Western Cape equal old world wines and, in some cases, excel against them in international competitions.

Martyn's explorations in China thus started his next adventure and discoveries of new experiences. In September 2002, Martyn arrived in China to start learning about Chinese culture, social etiquettes and wine drinking habits. He travelled extensively throughout China on many occasions, meeting with wine industry people, importers and new customers. This eventually led to Martyn producing his own wine for the Chinese consumer, which he believes is attractive and delicious and will be enjoyed by many.

The name of his wine reflects the nature of his character and his endless determination to explore not only the world, but himself and to learn as much about other cultures as he can. His wine is called MARTYN THE BRAVE.

Martyn invites you to join in the discovery of new places by enjoying his delicious range of red and white wines from a region associated with the Cape of Good Hope.

Martyn would like to wish you good fortune, personal riches and good health on your own adventures of discovery.

Source: Courtesy of Martyn Mills.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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