Delissa in Japan Case study of an internationalization of a Swedish company into the Japanese market

TEAM R.A.M. Rita.Anja.Michel Rita Chen MA1N0103 Anja Išek MA1N0206 Michel Sung MA1N0245

AGENDA INTRODUCTION CASE DESCRIPTION AND ANALYSIS History Abstract CASE DESCRIPTION AND ANALYSIS Proposal for entry into Japanese market SWOT analysis based on pre- launch data Entry strategy Situation after 3 years and leading up to 2001 RECOMMENDATION AND ANALYSIS Mangers point of views Questions and recommendations Conclusion

INTRODUCTION Abstract HISTORY OF AGRIA

ABSTRACT AGRIA, a Swedish milk products cooperative launches its Delissa yogurt in Japan through a joint venture/franchise agreement At launch in 1991, AGRIA expected to reach between 10% and 15% of the total Japanese yogurt market. Despite repeated surveys and visits from AGRIA market specialists, Delissa fails to reach 3% of the market in Japan after 10 years of operation. Disappointed by Delissa's poor results, the Swedish management begins to wonder whether they should continue in Japan, change franchisee or pull out.

HISTORY OF AGRIA 1973 : founded by Swedish dairy cooperatives 1980 : Delissa line was launched 1981 : USA launch 12,5 % (MS in 2001) 1984 : Germany launch 14% 1986 : UK launch 13,8% 1987 : France launch 9,5% 1991 : Japanese launch 2%~3% 2000 : 2,9 billion sales / 4,400 employees

CASE DESCRIPTION AND ANALYSIS PROPOSAL for entry into Japanese market SWOT ANALYSIS base on pre- launch DATA ENTRY STRATEGY SITUATION after 3 years and LEADING UP TO 2001

PROPOSAL FOR ENTRY INTO THE JAPANESE MARKET OBJECTIVES Expected growth rate : 10% or 15% total market 5 % first year 10% in 3 years Positioning : high quality range of yogurts Target areas : TOKYO, OSAKA , NAGOYA in 2 years Rest of the country within 3 years

SWOT ANALYSIS based on pre-launch data STRENGTHS Worldwide presence : 13 foreign countries Worldwide known brand Partnership : Nikko 2nd largest association agriculture cooperative Leader various/food product Strong supermarket distribution system

SWOT ANALYSIS based on pre-launch data WEAKNESSES Dependency on local partner : since the franchisee doesn't master very well other languages but their own one (Japanese), Franchiser have to trust and count on locals. Communication between both companies Language barrier Cultural barrier

SWOT ANALYSIS based on pre-launch data OPPORTUNITIES 30% household budget allocated to food In 1990, total yogurt market : 600 million cups Westernization of society : interest to western products Income is high Culture and distribution of wealth is homogeneous

SWOT ANALYSIS based on pre-launch data TREATS Low consumption of dairy products Substitute : Yakult Honsha / local desserts Urban lifestyle => shop daily => expect freshness Distribution system is complex and expensive Competition Japanese manufacturers : Snow Brand Milk Products : Largest manufacturer of dairy product : 25% MS Meiji Milk products : Alliance with Bulgaria government : 2nd largest : 19 %MS Morinaga Milk Industry : third largest, JV with Kraft US for cheeses : 10% MS European brands : DANONE /Yoplait

THE ENTRY STRATEGY Segmentation Targeting Positioning Drinking milk Eating milk product Targeting housewives => purchasers Core target : families with babies Young children to high school students Positioning Luxurious mass communication product « Refreshing nature of Delissa Swedish yogurt; it’s fresh when it’s made at the farm »

THE ENTRY STRATEGY Advertising Pricing Launch Intensive / short period of time High budget, almost equal to launch in U.S. Channels : TV ads / Newspaper/magazine Pricing 15% above competitive products Launch March 1, 1991 => Tokyo May 1, 1991 => Osaka and Nagoya 3 types of products Plain / Plain with sugar / Flavored

1994 DELISSA AFTER 3 YEARS Positive Negative Strong « fashionable » Image 2% of the Japanese yogurt market Distribution should be improved Ordering system is overcomplicated and slow and is cause of delivery bottlenecks Delivery procedure is too long Observed that small streets and identification system affect deliveries Small outlets => small storage => more visit from wholesalers Weak support of sales force : 5% of their time Advertising is not successful : messages are too cluttered => low brand awareness Delissa has not so much differentiation in terms of taste

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 Positive Negative Market is large High potential among young population Nikko has the size and manpower to increase penetration by 2000 2001 : Segment of plain yogurt grown by almost 50% in the past 3 years Yogurt with jelly and Plain yogurt drink segment are selling well Less than 3% MS after 10 years Low coverage in small cities 1998 : Consumer’s brand loyalty is low Lack of real marketing function in Nikko Distribution : cost are high and excessive compare to competition Low distribution levels 1999 : Positioning mistake : “Freshness” concept is wrong Low results in Fruit segment, custard and chocolate pudding Unreliable information from Nikko Product return is high

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 MARKETING SITUATION Media planning Wrong media planning : target doesn’t match with the broadcasting hours Advertising rates are more expensive compared with Europe Positioning : 3 segments Plain yogurt : marginal profits on this segment. Advertising concentration with existing brand image would differentiate the product and increase sales, reduce costs and increase profit Flavored : periodic spot Fruit : periodic spot, new commercial to stress the fashion concept.

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 Brand awareness Photo aided Fruit yogourt : Bulgaria > Yoplait > Delissa 71% > Danone Yogourt drink : Delissa – 44 % close to Bulgaria Brand Image : Delissa is less desirable than Meiji Bulgaria except fashionability Yoplait Danone Delissa Bulgaria Unaided 4% 3% 27% Recall 14% 16% 47%

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 Advertising awareness 65% could recall something about current ads 9% could recalled previous ads 55% didn’t know what the company was trying to say Brand Bifidus Bulgaria Delissa Danone Yoplait % 43% 41% 36% 28% 26% Channel TV In-store promotion newspaper magazines % 94% 6% 4%

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 Consumption follow-up 77% had consumed plain yogurt within the past month

DELISSA IN JAPAN SITUATION IN AND LEADING UP TO 2001 Consumption follow-up 22 % had at least tried Delissa - 66 % for Bulgaria Plain category, mainly consumed : First : Bulgaria, second : Bifidus, third : Delissa Fruit segment Rank Brand % Consumed 1th Yoplait 10% 2nd Bulgaria 8% 3rd Delissa 5% 4th Danone 3%

CONCLUSION and RECOMMENDATIONS Mangers point of views Questions and recommendations CONCLUSION

POINTS OF VIEWS BORG GUSTAFFSON KARLSSON Language problem create frustration NIKKO was not committed to the development of the Delissa brand in Japan Joint-Venture misrepresented the situation to AGRIA Confusion in positioning and advertising Leaving Japanese market Lack of knowledge about eating milk and yogurt business Autonomy issue Accept and trust NIKKO Keep the JV and give more time Poor communication led to mass conflict data Frequent turnover of managers responsible Paradoxes : Westernization but local taste predominate Taste adaptation : European flavors don’t succeed

RECOMMENDATIONS Almost ten years after launching Delissa with Nikko, should Agria cancel its contract and find another distributor ? Considering all the huge previous investments in terms of capital, time, partnership, training, distribution and the existing relationship, Delissa shouldn’t cancel it’s contract. Indeed, the cost of changing distributor would be very high. Rebuilding a partnership with a distributor takes time and considerable amount of money. Training the new team is expensive and take time. It will be mortal, weakened the brand and competition will take advantage of the situation In addition, considering the weight of the actual partner, it would be hard to find another partnership with the same size. Finally, the problem of language and cultural barriers would remain the same.

RECOMMENDATIONS Should Agria renew the arrangement with Nikko and continue to try to gain market share ? Agria should renew the arrangement with Nikko. However internal issues must be handle with negotiations and communication because the market potential is there to be taken. The autonomy of the franchisee must be controlled. Strategies must be applied with cooperation. Data conflicts has affect on the effectiveness of action. Terms of arrangement should be redefine and must be clear.

RECOMMENDATIONS Should Agria admit defeat and withdraw from Japan completely ? Or…was it, in fact, defeat at all ? Agria shouldn’t withdraw from Japan. The opportunities and prospects of the market are promising. The reasons of their “defeat” are organizational and internal issues but also a lack of understanding and adaptation to the Japanese market which led to unfit marketing actions. Indeed, the targeting and positiong were confusing, not clear and not suitable. Many wrong marketing moves were done. However, Agria must learn from experience and corrections can be taken. Finally, the benchmark with the competition shows that Agria is not doing so bad compare to Yoplait and Danone.

CONCLUSION AGRIA enter Japanese market in 1991. They thought that they would succeed as they did in other foreign countries. They might have underestimate the complexity of the market and didn’t take enough time to prepare their entry. Despite the fact that AGRIA haven’t reach their objectives, they should keep trying to gain market share in Japan with the NIKKO partnership. If their advertisements (advertisement awareness) were somehow effective, there were a important gap between what they wanted to communicate and what Japanese really perceived (brand awareness). The message and their positioning was confusing. With their “fashionable” image they would rather target Young adult rather than housewives or children. Finally, flavors must be adapt to local taste. The internal issues between the both companies created frustration in both sides. In order to solve the problem, they must be courageous and face the issues trough clear negotiations. Effective Information system must be rethink to improve data sharing.

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