DELISSA IN JAPAN

GROUP MEMBERS

馬立歐 陳奕光 伊詩卉 MA1N0225 M9970112

MA1N0246

INTRODUCTION- AGRIA

Established in 1973 Sweden’s leading dairy products

cooperative In 1980, Delissa line was launched due to

drop their own trademarks Main products of Delissa line: Yogurts,

dessert, fresh cheese and fresh cream Share rose from 3% to 25% of Swedish

fresh milk products market

INTRODUCTION (CONT.)

In order to become a powerful national and international cooperative, Agria concerted with 20,000 dairy famer members

By 2001, Delissa sold over 1.1 billion yogurts and desserts per year worldwide

In fiscal year 2000 Delissa had sales of $2.9 billion and 4,400 employees in and outside Sweden

Delissa is sold in more than 13 foreign markets

Danone is Delissa’s biggest competitor worldwide.

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY -

OBJECTIVES The decision to enter the market was made in

early 1989 At least 8% expected grow of the yogurt

market within the next 5 years Delissa’s expected growth rate of 10%~15%

for total market Goal of developing a high quality range of

yogurts Aim- reach 5% market share in first year and

10% within three years after launch Three main metropolitan area: Tokyo, Osaka,

Nagoya (within 2 years), the rest of the country (within next three years)

In 2001, total market share fallen to 2%, without ever reaching 3%

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY -

CONSUMPTION

Estimated consumption:5.3 cups person/year

Sales of yogurt are seasonal. Peak period from March to July

The highest sales in June Most ideal launch date: end of February

Types of yogurt available in Japan - 1990

Plain Flavoured Fruit

39% market volume, white color.

45% market volume, strawberry, etc.

16% market volume, with more pulp that real fruit.

Three major Japanese manufacturers:

Yogurts drink called Yakult, on a total market base for yogurts and yogurts drink, Yakult is 31%

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY -

COMPETITION

Snow Brand Milk Meiji Milk Morinaga Milk

Milk, cheeses, frozen foods, biochemical, and pharmaceuticals.

￥ 643,332 million

Dried milk for babies, ice cream and cheese.

￥ 610,674 million

Milk, ice cream, and instant coffee (Joint venture with US)

￥ 561,783 million

SELECTING A FRANCHISES - NIKKO Japanese second largest association of

agricultural cooperatives Price leader for various food products in Japan

(milk, fruit juice, and rice) Divided into two parts: manufacturing and

distribution Why choose Nikko?

1. The first one seems prepared to join Delissa 2. Most appropriate distributor for Delissa 3. Strong supermarket distribution system for

milk in three main area. (80% of yogurt sold from supermarket)

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY - JAPANESE

CONSUMER

Japanese are not daily products consumers. 85% of the populations lives in towns

restricted living space & lack of storage area.

Therefore, housewives must shop daily and consequently expect fresh milk products.

Rarely purchase long-life foods or drinks. Japanese spend over 30% of their total

household budget on food. Consumption of yogurts is still low, but is

has high potential for growth.

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY -

DISTRIBUTION

Japanese traditional distribution methods is complex; the chain tends to be many layered, thus the cost is high.

Delissa’s goal - secure mass sales retailer distribution.

At the beginning, Delissa’s products would be sold through Nikko’s existing sales outlets.

Delissa’s objectives would be to 1. make efficient use of existing channels of distribution with daily delivery schedules 2. Enjoy lower distribution costs for new products

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY - JAPANESE

RETAIL MARKET

It is extremely fragmented, with independent outlets accounting for 57% of sales.

Three factors affect the retail system: 1. Economics

2. Government regulations 3. Service demands Japanese and Western-style supermarket

are exactly different, and western-style is costly. So most retailing in Japan is small, independent or family business.

Three main metropolitan areas: Tokyo(11 mil), Osaka(3 mil), and Nogaya (2 mil).

Nikko with a 15% share of total yogurt market

Nikko feels the distribution chain used for their milk would be ideal for yogurt.

So, Delissa accept Nikko’s current milk distribution system as the basic system, and adopt shifting distribution routes.

ANALYSIS OF THE JAPANESE MARKET BEFORE DELISSA’S ENTRY - JAPANESE

RETAIL MARKET

THE FRANCHISE CONTRACT – WHAT IS A FRANCHISE CONTRACT?

A privilege granted or sold, such as to use a name or to sell products or services. In its simplest terms, a franchise is a license from the owner of a trademark or Trade Name permitting another to sell a product or service under that name or mark.

Source:http://legal-dictionary.thefreedictionary.com/Franchise+agreement

THE FRANCHISE CONTRACT BETWEEN AGRIA & NIKKO

Was signed in late 1989 This contract enabled Nikko to manufacture

and distribute Delissa products under license from Agria

Since the contract included technological transfer, Agria had to provide manufacturing and product know-how, as well as marketing, technical, commercial and sales support

As a result of the contract, Agria would receive a royalty for every pot of yogurt sold

In addition, Nikko forms a separate company for distribution, marketing and promotion of Delissa products

THE FRANCHISE CONTRACT BETWEEN AGRIA & NIKKO

Agrias services during the pre-launch phase: Training of the marketing and sales team by a

senior area brand manager Training of the Japanese Technicians by Agira’s

technicians who have know-how 1990 a factory for producing Delissa yogurt,

milk and dairy products was bulit in Mijima with the help of Agria to ensure Nikko is using the right technologies and standards for Delissa products.

GENERAL POINTS CORORATIONS HAVE TO CONSIDER WHEN ENTERING A FOREIGN MARKET

Before a company wants to enter a foreign market it should consider to following points in order to be successful in the long-run: Internal and external environmental

scanningStrategy formulation (strategic or long-

range planning) Strategy implementationEvaluation and control (in order to adopt

the strategy to the changing needs of the consumers)

INTERNAL AND EXTERNAL ENVIRONMENTAL SCANNING &

STRATEGY FORMULATION

Internal and external environmental scanning is the monitoring, evaluating, and disseminating of information from the external & internal environments to key people within the corporation SWOT Analysis & Porter’s 5 forces external environment Opportunities and Threats internal environment Strengths and Weaknesses

Strategy formulation is the development of long-range plans for effective management of environmental opportunities and threats, in light of corporate strengths and weaknesses (SWOT). It includes defining the corporate mission, specifying

achievable objectives, developing strategies, and setting policy guidelines

STRATEGY IMPLEMENTATION & EVALUATION AND CONTROL

Strategy implementation is a process by which strategies and policies are out into action through the development of programs, budgets, and procedure.

Evaluation and Control is a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance use the information to take corrective action and

resolve problems. Although evaluation and control is the finial major

element of strategic management, it can also pinpoint weaknesses

DELISSA‘S ENTRY STRATEGY INTO THE JAPANESE MARKET

The entry of Delissa products into the Japanese market was supported by the SRT International Advertising Agency

The proposal of SRT: Basic message: “Natural dairy food is good to

taste” Nikko has to make sure that there is a difference

between Delissa and former introduced products as well as competitive products

Target group of Delissa: Families with babies (because housewives are the

main purchasers) Families with high school students

DELISSA‘S ENTRY STRATEGY INTO THE JAPANESE MARKET - THE PROPOSAL OF SRT

Differentiation through Delissa‘s “freshness“ concept will capture interest

Attractive and stand out advertisement Delissa should be positioned as a luxurious

mass communication product Food trends are changing Stress dietary

value of Delissa Point out Delissa’s origin strengthens the

association of Sweden and healthy food increases brand awareness

DELISSA‘S ENTRY STRATEGY INTO THE JAPANESE MARKET - THE PROPOSAL OF SRT

Advertisement In order to get the maximum out of the

ads, the campaign should be more intense at the beginning rather than spread equally over the year.

Pricing:Reflect a high class image but still

affordable According to research Delissa’s price can

be 15% higher than the price of the competition

THE LAUNCH OF DELISSA IN JAPAN IN 1991

Three different types were launched at the same time: Plain (packs of two and four in 120ml cups) Plain with sugar (packs of two and four in 120ml

cups) Flavored with vanilla, strawberry and pineapple

(packs of two in 120ml cups) After one or two years: Launch of fruit yogurt Strong promotional campaign one month

prior launch March 1st Delissa was launch in Tokyo, and

May 1st in Osaka and Nagoya

SITUATION OF DELISSA THREE YEARS AFTER LAUNCH

Delissa only gained 2% of the Japanese yogurt market

WHY DID THAT HAPPEN? Distribution channel is not working properly Complicated ordering system delivery

bottlenecks it takes too much time to deliver the

products to the retail stores Advertisement has not been successful Message of the campaign was not

understood

SITUATION LEADING UP TO 2001

Had less than 3 % in total market 2001 , the result has been far below expectation

Discovered limited distribution network outside major metropolitan area ( small cities, town and rural area )

Japanese market brand loyalty is low with respect to the strong competition

However, the market has high potential due to its size

Lack of marketing and distribution is one of the main problems Delissa faces. (Distribution costs are very high)

More money has to be spend on the distibution channel (40% are still to low)

PRODUCT SALES

In 2001 plain yogurt 43 % in the total Japanese market. And grown 50% in this past 3 years.

1998 fruit yogurt segment growth 25%, should be 23% next year.

Yogurt with jelly: 1.2 million cup 3 month after launch

Custard and chocolate pudding sales disappointed. Plain yogurt is very good.

Mid Year result : Forecast of expected sales: 55 million 120 ml

( 2002 ) Expected sales: only around 42 million.

PRODUCT SALES

Stores covered In Nikko’s store Delissa sell about 71 %. 7000 store cover in Great Tokyo. However, Nikko has been found unreliable on

retailer information

Product Return April 2000 to March 2001 :

5.06% vs. almost 0% in Scandinavia and the international standard of 2% to 3%.

The average shelf life of yogurt in Japan is 14 days.

HOW IS THE PERFORMANCE OF THE MAJOR EUROPEAN COMPETITORS IN JAPAN?

Danone and Yoplait are not doing any better in the Japanese market

Although one of the competitors, Danaone, took a different approach (a Joint venture which is run by a French and several Japanese directors) it is not more successful than the Delissa

POSSIBLE REASON OF FAILURE: None of the japanese companies which signed a contract with the foreign companies had any experience in selling these kinds of products.

DELISSA - MEDIA PLANNING

Primary target: Young people between 13 -24 years

Secondary target: Children Nikko and agency running TV spots for young

people and children – from 11.15 to 12.15 at night.

With this late night spot Nikko try to reach customer and distributor.

The price of 15 second spot in Tokyo are between Yen 1.25 million and Yen 2.3 million in 2000.

Problem: is it worth it to invest in media advertising to reach the consumers with respect to the costs and the limited budget?

DELISSA - PRODUCT POSITIONING

Plain yogurts makes up the largest segment, second is with flavored, third position is fruit.

However, only a marginal profit on plain yogurt.

Therefore, they considered that: Plain yogurt use the existing commerical as brand image, and fruit yogurt as fashion concept.

In order to understand where Delissa may have gone wrong with positioning and promotional activities, Delissa conduct a survey.

There are 394 respondents in the Tokyo. Some of key finding be founded

Largest segment in Japan :

1. Plain yogurt 2. Flavored 3. Fruit

Brand Awareness :

Unaided Brand awareness :

• Meiji Bulgaria2. Morinaga Bifidus 3. Yoplait4. Danone5. Delissa

People

Focus on house-wives in Japan

PackagePacks of 2 and 4 for Plain YogurtPacks of 2 and 4 for Plain with sugar Packs of 2 for Flavored with vanilla, strawberry and pineapple

Advertising Awareness

Top ranking :

1. Bifidus 43% 

2. Bulgaria 41%

3. Delissa 36%

4. Danone 28%

5. Yoplait 26%

Advertising for Delissa : TV 94 % In-store promotion 6 % Newspaper 4 % Magazine 4 %

  65% Delissa ads recall something about the content and current ads 9 % recalled previous adv. 55 % did know what the advertising trying to say.

Respondent had consumed plain yogurt ( past month ) :

1. 28 % Bulgaria

2. 15 % Bifidus

3. 5 % Yoplait

4. 4 % DANONE

5. 3 % DelissaThe number who ever tried :

• Delissa 22%• Bulgaria 66 %

Brand mainly consumed by respondent:

1. Bulgaria2. Bifidus3. Delissa

In fruit segment :

• Yoplait ( 10 % )• Bulgaria ( 8 % )• Delissa ( 5 % )• DANONE ( 4% )

CONSUMPTION

CONCLUSION

Agria has serious problems in its implementation of the Delissa brand and product in Japan. The problems have been identified from basic target market identification to distribution and ordering. Measures have been recommended to be taken in order to alleviate the low market share problem faced by Delissa. The initial step is to implement the 2 year planning to refocus on the intended target segment market.

CONCLUSION

Considering the difficulty faced in venturing into Japan, if the immediate action plan fails to provide satisfactory results, then the alternative plan will have to be implemented. It is a radical plan to move out of the mass retail market and downsize to concentrate on a niche market of supplying to luxury hotels and restaurants. This market provides the avenue of lower production volume but higher profit margin. As the market grows and profits are recouped, Agria and Nikko (or other partner) can then venture into the mass market again.

CONCLUSION

If all the above still does not meet target success, then it is advisable to pull out while still keeping the loss at the minimum.