They also wanted to maintain the image of premium and traditional products as well as maximizing profits by mass market coverage.
Richard Wong and Rosemary Brooks had a passion to introduce the "Shanghai style of living" (that prevailed in the Chinese city before the Cultural Revolution) to the Western world and drove Richard Wong to start the Chinablue company in 1999.
This case study written by INSEAD's Rumania Lulova, research associate, and Ha Hoang, associate professor in entrepreneurship, details how the former architect focused the Chinablue brand around his family heritage and used it as the foundation for his new company.
The essence of the Chinablue concept was not only to educate the Western consumer to Asian flavours, but also to sell the long-gone traditional lifestyle of the vibrant Chinese city and to build a preference for premium Eurasian culinary products. The plan was to start with condiments, extending to cookbooks, dinnerware and homeware.
Based on a high-end differentiation strategy, Chinablue targeted high-end channels such as the lifestyle section of Neiman-Marcus and Saks Fifth Avenue. Chinablue's products were soon available at William Sonoma's and in 300 Crate&Barrel stores throughout the country. But this was not enough to make the company profitable.
Richard Wong and Rosemary Brooks were caught in a dilemma. They wanted to avoid any damaging effects that mass-market distribution could have on their upscale brand but at the same time they could not neglect the potential for profit maximisation promised by mass-market coverage.
The team therefore resorted to a widely used alternative method and developed a medium range product-line called the "ShanghaiBASICS". This allowed the company to benefit from both the high margins of their premium offering, and the economies of scale of their mainstream product-line.
With Chinablue, the team chose to invest in differentiating points that indicated high-quality. Packaging was one of them because it is usually the consumer's first contact with the product. The high price point was another, as it's considered as a way to position a brand within the premium food category. Choosing the appropriate distribution strategy and the right brokers was yet another challenge.
Having overcome major difficulties, and after successfully entering a non-US market (Australia), Chinablue had European entry next on their international expansion agenda.
However the team soon realized that expansion on an international scale required serious funding that would stretch every resource of the small company. They also considered the risks related to the multicultural nature of that market.
The easiest way to enter the European market seemed to be to copy the US approach and introduce the brand in high-end distributor stores first, then go down the pyramidal structure of distributor categories.
But would that work in Europe? Did Carrefour and Metro stores have high-end food sections where Chinablue products could fit? Would selling in those mass-distribution outlets tarnish the image of Chinablue? Should they focus on specialty stores like Fauchon or introduce ShanghaiBASICS instead? If they did, how would that help the goal of creating a global upscale Eurasian brand?
These were the major questions that the start-up team needed to answer before making any strategic decisions concerning the European market.