Food and beverage has been one of the fastest growing categories in China, driven in part by changing consumer taste preferences in favor of foreign brands. Mars Inc., parent company of sweet treats such as Snickers, M&M's, and Dove, decided to capitalize on this trend in order to expand its business. The company formed a strategic partnership with Alibaba, the world's largest online retailer. Under the agreement, Mars will sell 17 brands on Tmall.com, Alibaba's business-to-consumer (B2C) platform, as well as Ruraltaobao.com, Alibaba's new platform targeting China's 600 million rural citizens. The partnership benefits Mars by helping improve the brand's reach and distribution, particularly to the China's more geographically dispersed, harder-to-serve rural population. It also enables Mars to leverage Alibaba's local marketing expertise, extensive media properties, and big data insights. For example, in a Snickers test campaign earlier in the year, the brand partnered with a Chinese pop group and used Alibaba's targeting and big data analysis capabilities to maximize the campaign's ROI. In only three days, the campaign generated almost a year's worth of sales! For strategic partnerships to endure though, they need to benefit both parties. A major advantage for Alibaba is that the deal includes an “e-commerce food safety initiative” that will be managed by Mars' Global Food Safety Center in China. The Center has built a reputation for world-class scientific research and effective global food safety education. This knowledge and skill will be important for Alibaba as they continue to grow their B2C consumer goods business, as food safety is a top concern for Chinese consumers. Mars' financial gains from the partnership are yet to be determined, but look promising given the size of the market and other foreign brands' performance in China to date. China's e-commerce market is made up of 550 million consumers who made $589 billion in purchases last year alone. Should these buying patterns continue among Chinese consumers, Mars will likely be well positioned to grow its footprint in the region.
Questions:
1. Strategic partners often seek exclusive deals—in this case, Alibaba would only sell Mars products and/or Mars will only sell its product on Alibaba e-commerce sites (other brick and mortar stores would not be included in the deal). Why would these partners strike such a deal? What other alternate agreements could have been put in place? What are the advantages and disadvantages of each alternative?
2. Chocolate consumption decreased in China during the recent recessionary period in a country that is starting to opt for healthier treats and with lower chocolate consumption compared to Western Europe, United States, and Brazil to begin with. Develop one other strategy for improving adoption in the Chinese market? Explain fully.