1. D ELISSA IN J APAN

2. G ROUP M EMBERS 馬立歐 陳奕光伊詩卉 MA1N0225 M9970112 MA1N0246

3. I NTRODUCTION - A GRIA 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

4. I NTRODUCTION ( 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.

5. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - O BJECTIVES 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%

6. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - C ONSUMPTION 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 PlainFlavouredFruit 39% market volume, white color. 45% market volume, strawberry, etc. 16% market volume, with more pulp that real fruit.

7. Three major Japanese manufacturers: Yogurts drink called Yakult, on a total market base for yogurts and yogurts drink, Yakult is 31% A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - C OMPETITION Snow Brand MilkMeiji MilkMorinaga 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

8. S ELECTING A FRANCHISES - N IKKO 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)

9. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - J APANESE 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.

10. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - D ISTRIBUTION 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

11. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - J APANESE 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.

12. 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. A NALYSIS OF THE J APANESE M ARKET BEFORE D ELISSA ’ S E NTRY - J APANESE RETAIL MARKET

13. T HE F RANCHISE C ONTRACT – W HAT IS A F RANCHISE C ONTRACT ? 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

14. T HE F RANCHISE C ONTRACT BETWEEN A GRIA & N IKKO 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

15. T HE F RANCHISE C ONTRACT BETWEEN A GRIA & N IKKO 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.

16. G ENERAL P OINTS C ORORATIONS HAVE TO CONSIDER WHEN ENTERING A FOREIGN M ARKET 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 scanning Strategy formulation (strategic or long-range planning) Strategy implementation Evaluation and control (in order to adopt the strategy to the changing needs of the consumers)

18. I NTERNAL AND EXTERNAL ENVIRONMENTAL SCANNING & S TRATEGY 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

19. S TRATEGY IMPLEMENTATION & E VALUATION 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

20. D ELISSA ‘ S ENTRY STRATEGY INTO THE J APANESE M ARKET 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

21. D ELISSA ‘ S ENTRY STRATEGY INTO THE J APANESE M ARKET - T HE 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

22. D ELISSA ‘ S ENTRY STRATEGY INTO THE J APANESE M ARKET - T HE 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

23. T HE L AUNCH OF D ELISSA IN J APAN 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 1 st Delissa was launch in Tokyo, and May 1 st in Osaka and Nagoya

24. S ITUATION OF D ELISSA THREE YEARS AFTER L AUNCH 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

25. S ITUATION L EADING 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)

26. P RODUCT S ALES 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.

27. P RODUCT S ALES 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.

28. H OW IS THE P ERFORMANCE OF THE MAJOR E UROPEAN C OMPETITORS IN J APAN ? 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.

29. D ELISSA - M EDIA P LANNING 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?

30. D ELISSA - P RODUCT 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

31. Largest segment in Japan : 1.Plain yogurt 2.Flavored 3.Fruit Brand Awareness : Unaided Brand awareness : Meiji Bulgaria 2. Morinaga Bifidus 3. Yoplait 4. Danone 5. Delissa

32. People Focus on house-wives in Japan Package Packs of 2 and 4 for Plain Yogurt Packs of 2 and 4 for Plain with sugar Packs of 2 for Flavored with vanilla, strawberry and pineapple

33. 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.

34. Respondent had consumed plain yogurt ( past month ) : 1. 28 % Bulgaria 2. 15 % Bifidus 3. 5 % Yoplait 4. 4 % DANONE 5. 3 % Delissa The number who ever tried : Delissa 22% Bulgaria 66 % Brand mainly consumed by respondent: 1.Bulgaria 2.Bifidus 3.Delissa In fruit segment : Yoplait ( 10 % ) Bulgaria ( 8 % ) Delissa ( 5 % ) DANONE ( 4% ) CONSUMPTIO N

35. C ONCLUSION 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.

36. C ONCLUSION 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.

37. C ONCLUSION 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.