Lipton in South Korea

Will their ice tea succeed?

OverviewOverview

• Categories:– Product– Price– Place– Promotion

• Subcategories for each section further analyze the Korean market

ProductProduct

• The following will affect Lipton’s entrance into the S. Korean market:– Legal Issues– Consumer Behavior– Cultural Issues

Legal Issues

• Unilever is currently established in S. Korea– They sell mostly personal care products– This is crucial in S. Korea where a communication channel with

the government is key

• Legal standard of requiring Korean labels on all products– Would require Unilever to change their labels– Could possibly lead to misinterpretation of “ice tea”

Consumer Behavior

• Very brand loyal– Consumers are more likely to buy a product if it states

that it was produced in S. Korea– They are more likely to buy a product which has a known

label on it• Lipton would therefore sell under the Lipton brand

name

• Quality Concerns– Emphasis on health benefits of product

• Shy away from additives and preservatives• The added preservatives in Lipton’s ice tea may cause

hesitation among S. Korean consumers

Consumer Behavior• Koreans consider themselves a “tea culture”

– Tea is seen as being a stimulating and healthy beverage– Tea is seen as a tradition in Korea– Might be hesitant to try a “new age” version-ice tea

• The word tea connotates a feeling of respect – Using the word “tea” on packaging could lead to consumer

skepticism

• Also, Korean “new age” beverage market is expected to decrease 30.1% by 2008– Might be considered risky to venture into this market right

now

• Lipton would probably want to bottle their ice tea in smaller cans– Cans tend to be more popular in S. Korea than bottles– Consumer preference leads can sizes to be taller and skinnier

than an American can

Cultural• Refrigerators sizes tend to be the same as standard

American versions– Would influence the size and quantity of product being

bought– Buy packages of beverages in 250ml-330ml units

• A Lipton ice tea out of a vending machine is 591 ml– Buy large units at their supermarkets which are 1.5

liter

PricingPricing• The following will

affect Lipton’s entrance into the S. Korean market:– Competition– Economic

Competition• Lipton’s price should be

based off of similar selling products– According to the

website, ikoreaplaza.com, similar selling new age beverages sell for $.99

– Lipton would need to sell their ice tea at a similar price in order to gain competitive market share

Economic

• The purchasing power parity of Korea is $17,111 as opposed to a purchasing power parity of $39,000 in the U.S.– Less likely to try new

products– Lipton’s price will have

to be sensitive to their relatively low purchasing power

PlacePlace• The following will

affect Lipton’s entrance into the S. Korean market:– Consumer Behavior– Economic– Infrastructure

Economic

• Population distribution– Seoul: 10,331,000– Busan: 3,786,000– Incheon: 2,582,000

• Increase distribution in these areas because of population concentration

Consumer Behavior

• In big cities there is a trend to buy at larger, discount stores– Has been best method for marketing foreign products

• Hypermarkets and supermarkets sell the same amount in total food sales– They are more likely to take or showcase foreign

products

• Traditionally, consumers prefer to shop at a supermarket within their apartment complex, or near their home, rather than travel far distances to a hypermarket– However, there the new trend is to visit a hypermarket

once a week, rather than go to a smaller retail location multiple times a week

Infrastructure• Unilever currently has a production facility in S.

Korea – Daejeon – est. in 1993

– Currently produces:• Personal care items (shampoo, lotion,

toothpaste)– Possible to set up production for ice tea– Would save on costs regarding imports

• Alternate option of production:– Unilever has an existing partnership with PepsiCo – Because PepsiCo is already established in S.

Korea, partnering with them could reduce manufacturing costs

Infrastructure (2)• Transporting Lipton:

– Established distribution methods (roadways, air, etc.)

• CJ-GLS is a distribution service provider– Uses mostly trucking throughout the country– Has means to use air and ocean freight– Also takes part in distribution consultations

• Unilever could partner with CJ-GLS in order to move Lipton throughout Korea efficiently

– CJ-GLS has logistical expertise in Korea– They focus on lowering costs for their

customers– Work individually with customers to

formulate a customized plan

Infrastructure (3)• Retail locations

– Hypermarkets• They are being placed in larger suburban cities because

there is more space• Their daily visitor counts range from 10,000- 300,000• Sold more food than any other retailer in 2001

($13,988,000)– Supermarkets

• They typically carry a wider variety of products than smaller, family owned stores

• Often carry new food and beverage products– Kiosks/Vending Machines

• Convenient for consumers on the run• Ideally located in high-traffic areas

PromotionPromotion• The following will

affect Lipton’s entrance into the S. Korean market:– Technological– Legal– Competition

Technological• Unilever currently uses the following established

advertising agencies in S. Korea:– J. Walter Thompson Adventure– Lintas– McCann Erickson – Ogilvy & Mather

• Unilever uses these four firms no matter the country– Consistent message across countries for one brand

image

Technological (2)• Key media vehicles

– TV is most popular medium• 100% of households own a television• Average adult watches 106 minutes of TV per day• Aligns with current promotional strategy

– Newspapers• They are second most popular form of advertising• Newspaper ads account for 31% of all advertising

expenditures• Would require Lipton to slightly change current strategy

– “Outdoor”• Lipton could be promoted on vending machines • Efficient because product is promoted at the point of

purchase– Sponsorships

Legal• The pre-established advertising firms operating in S. Korea would

help guarantee that Lipton promotions followed the rules and regulations of Korea– Some examples of these restrictions include:

• Advertising should not contain exaggerated statements and visual presentations

• Different or exaggerated presentations of ingredients and content

• Indications or presentations of health improvement, longevity, and youth maintenance capabilities

• Portrayal of product as natural food rather than artificial food• Presentations of food being consumed in an unrefined

manner of being handled

Competition• The following would be direct ice tea competitors:

– Lotte Chilsung Beverage Co, Ltd.• Largest beverage company in S. Korea• Lotte produces carbonates, juices, and health drinks

– Nestle– Other beverage competitors in S. Korea:

• Iced coffee (44.3% market share)• Other (31.10%)• Herb-based (13.20%)• Malt-based (6.0%)

• Knowledge of competition is crucial for product positioning

Brought to you by:• Allison Bennett• Nicole Curtner• Ryan Hoban• Jennifer Jacobs• Jennifer Sorin