Entry Strategy into UAE for Sonnamera

Applied Research Project (ARP)

Presenters –Sarthy Vadnerkar & Shriti Chhajed

Internal Mentors - Dr.Balakrishna Grandhi & Ms. Jyothsna Singh

Corporate Mentor – Mr. Abhay Sharma

Executive SummaryAsian food factory, a leading trading and distribution hub based out of Singapore is

looking to expand their flagship brand , Sonnamera by entering the UAE market.

Some of the factors that go into building a good entry strategy would be selecting

the best Emirate to start with, choice of distributors and retailers, Market

positioning and the product portfolio to start with.

Recommendations The best emirate to start operations would be Dubai. Target two major hypermarkets like Lulu, Carrefour and one supermarket Spinneys. A big distributor with a large product portfolio and catering to the above

mentioned retailers. Product portfolio to have pineapples, corn , mushrooms and green peas. Market positioning as a premium brand.

Based in Singapore

A major trading and distribution hub

The Asian Food Factory is within easy access to the food processing and production facilities in Asia

Leading supplier of canned fruits and vegetables, under the Brand Sonnamera

Private label solutions company to both Retail and wholesale trade

Product Portfolio -Tomatoes and Gherkins from India, Pineapples and Sweet corn from Thailand, mushrooms from France and Olives from Spain.

To perform an analysis of all the emirates with the end goal of suggesting the best emirate to start operations, with respect to setting up a marketing facility

To identify entry barriers for the canned food segment in the UAE market

To analyze market research findings in order to develop entry strategy

To find approximate cost involved across the supply chain to help estimating the total cost of the product

UAE as a market

for Canned

Food

Estimated annual value of the canned food market is $2.5

billion.

Estimated average annual growth in canned food market is 5-10

percent.

Percent of imported consumer-ready products is 75-80

Percent of locally processed foods is 20-25

In UAE - Abu Dhabi, Dubai and Sharjah are home for nearly 75

percent of the population and retail development

All major chains except Carrefour import most

products stocked.

Porter’s 5 Forces

Top 3 Entry Barriers

Factors important For A New brand

Evaluation of Options

Take a license from a smaller emirate and operate from Dubai

Setting up a facility in Dubai

Pros: Biggest consumer market for

canned food Majority of the corporate offices of

distributors and retailers are based out of Dubai

Reduces the replenishment time Avoids inter emirate tax

Cons: High cost of renting High cost of living for employees License cost would be high

Pros:• License fee of smaller emirate is

less• Cost of operating also reduces

Cons:• Transportation cost increases• More coordination needed

between the 2 emirates

Emirate to Start With

Small DistributorBig Distributor

Distributor

Pros: Higher bargaining power with

retailers Faster penetration into the

market Get better visibility in shelves Strong Distribution network

Cons: High Cost Demand its terms and

conditions in the contract

Pros: Smaller distribution network Less Cost May have a good hold in the

market for canned food products

Cons: Slower penetration in the

market Buying power to retailers

Convenience StoresBig Retailer

Retailer

Pros: Large Customer base Better market penetration

Cons: High listing fee Upfront marketing cost Buying power of retailers

Pros: Lower listing fee No upfront marketing and

advertising cost

Cons: Small customer base Too many to enter together

All products existing in UAEProducts having the highest

market share

Pros: Top 20% of the products

would be responsible for 80 % of the sales

Less cost of listingCons: Unavailability of brand for

certain products

Pros: Availability for all products Build brand loyalty

Cons: High initial cost Large inventory

Product Portfolio

Super Premium Segment

Pros: Continue with previous brand

image Higher margins

Cons: Difficult to get innovators for the

product Narrows the customer base

Premium Segment

Pros: Wide customer base More sales Faster penetration in market

Cons: Difficult to move to super

premium later Lower margins

Market Positioning

Distributor or Retailer Big Small

Distributor margin (includes

warehouse cost and transportation) 13-15% 10-13%

Listing Fee (AED/month) 1500 600

Wholesaler margin NA 5-10%

Retailer margin 15-20% 15-20%

Shelf Space Cost (AED/ month) 200-700 Nil

Upfront Marketing and Advertising

Cost 2000-3000 Nil

Costs Involved

Best

Recommendations

The Way

Ahead

Sarthy VadnerkarShriti Chhajed