International Marketing Strategy

1
International Marketing Strategy
Rachel Bauer, Pat Lynch, Sarah vonFischer, Erik
Wright

• Smuckers Uncrustables in Germany

2
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

3
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

4
Assessment of Potential MarketEating Habits of
Germans

• Lunch is the primary meal of the day in Germany.
  It is typically a warm meal served around noon.
• Recently consumers have begun to shift away from
  large main meals towards snacks and smaller
  dishes this could lead to increased interest in
  a product like Uncrustables.
• Large family meals are still common at noontime
  on Saturdays and Sundays

5
Assessment of Potential MarketFrozen Food Market
in Germany

• In 2003 the German Frozen food market reached a
  value of 6.84 billion
• This was an increase of 13.8 since 1999
• The frozen food market includes frozen ready
  meals, frozen deserts, frozen bakery products,
  frozen fruit and vegetables, and frozen meats.

6
Assessment of Potential MarketFrozen Food Market
in Germany

• Frozen ready meals was the leading segment of the
  market that contributed 3.3 billion of the total
  revenue, 48.6 of the of the markets value.
• The German frozen food market is the largest in
  the European Union and Eastern Europe.
• Even though the market is mature, analysts expect
  the growth rate to be moderate and confirm
  Germanys position as the largest in Europe.
• This is good news for Uncrustables in Germany.

7
Assessment of Potential MarketFrozen Food Market
in Germany
Year million million Growth 1999
6,008.2 5,319.7 2000 6,240.0 5,524.9
3.90 2001 6,495.5 5,751.1 4.10 2002
6,714.8 5,945.2 3.40 2003 6,837.2
6,053.7 1.80 Source Datamonitor D A T A M
O N I T O R
This data shows the recent growth in the German
frozen food market and the increasing
net value of the market
8
Assessment of Potential MarketFrozen Food Market
in Germany
Geography Share Rest of Europe
54.80 Germany 16.10 UK 15.00 France
14.10 Total 100.0 Source Datamonitor D
A T A M O N I T O R
Compared to other European countries, Germanys
frozen food market holds a slight advantage in
market share
9
Assessment of Potential MarketFuture Market
Expectations

• 2005 is predicted to have the highest future
  growth
• By 2008 analysts expect the frozen food market to
  reach a value of 7.9 billion, which is a
  stronger growth prediction than for the UK and
  Italian markets, and significantly higher than
  the growth of the French market.
• If Smuckers was to enter this market it would be
  most beneficial to do it quickly.

10
Assessment of Potential MarketReady Meal Market

• The German ready meal market has reached a net
  worth of 2.6 billion
• The market had a growth rate of 6.7 between
  1999-2003
• Germany is currently third in ready meal market
  size behind France and the United Kingdom

11
Assessment of Potential MarketReady Meal Market

• The leading segment of the ready meal market is
  the frozen ready meal segment accounting for
  81.7 of the market value.
• The expected growth rates for this market is
  expected to experience decline slightly
• By 2008 the ready meal market is predicted to
  reach a net value of 3.3 billion, which
  indicates growth of 5.1 in the 2003-2008 periods
  

12
Assessment of Potential MarketGermanys Economic
Prospects

• The GNP is around 1.864 billion. More
  relevantly, they have a per capita GNP of
  22,740, making them one of the most affluent
  nations in Europe.
• GNP is 22,740 per capita, and the GDP is 27,600
  per capita, once again proving that the average
  population should be able to afford our product.
• Germanys western part of the country is more
  affluent than the former communist, eastern area.

13
Assessment of Potential MarketGermanys Economic
Prospects

• The total population of Germany is 82 million
  (more specifically, 82,531,700 at the end of
  2003)
• Population growth has been slow since the 1960s,
  so no future change is expected
• There is sufficient income and population in
  Germany for Smuckers to invest their product in
  Germany

14
Assessment of Potential MarketCompetition

• Company market share
• Private label  21.2
• Langnese-Iglo GmbH   13.8
• Aldi GmbH Co KG   12.5
• Conditorei Coppenrath Wiese GmbH Co KG  
  9.4
• Dr August Oetker Nahrungsmittel KG   7.4
• Wagner Tiefkühlprodukte GmbH   6.1

Companies well established in the German frozen
food industry are listed above. These are the
main competitors for Smuckers upon entering
Germany.
15
Assessment of Potential MarketCompetition

• Langnese-Iglo has products such as frozen pizzas,
  hamburgers, chicken sandwiches, fish sticks,
  pasta, and baguettes.
• Coppenrath Wiese specializes mostly in
  breakfast rolls and desserts
• Dr Oetker is mostly in the business of frozen
  pizza.
• Wagner Tiefkühlprodukte GmbH offers a variety of
  pizzas, bruchettas and wraps

16
Assessment of Potential MarketCompetition

• Findus has come out with a product called Crispy
  Pancakes
• Flavors include
• 3 cheese
• Beef
• Sweet corn, bacon, and chicken

17
Assessment of potential market
Direct Competition

• Dr. Oetker has come out with frozen sandwiches
• They microwave in 2 minutes
• Flavors include
• Chicken BBQ
• Hot Peppers
• Pizza Style
• Tomato Feta
• Hawaii

18
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

19
Distribution

• The distribution of Uncrustables in Germany
  depends on many different variables including the
  following
• Surface Transportation
• Geography (large cities and surrounding
  countries)
• Current sales and production facilities in
  Germany
• Current suppliers and distributors in Germany
• German legislation pertaining to foreign direct
  investments, tariffs, and taxes

20
Distribution Surface Transportation

• The western states of Germany have a more
  advanced transportation infrastructure, but
  government spending is closing the gap.
• Ease of travel in different parts of the country
  is something to consider when deciding on the
  placement of different facilities in Germany.
• In 2005, a new system is supposed to be
  implemented to charge lorries (trucks) 12.4 euro
  cents per kilometer.
• This makes truck travel a more expensive option.

21
Distribution Surface Transportation

• The railway system for passenger travel has
  recently become more expensive and has lost a lot
  of customers due to an economic downturn in 2003.
• Railways are still commonly used for freight
  services, with annual goods totaling 285 tons.
• A problem with this source of transportation
  could be problems with monopolistic pricing for
  the DB (the federally sponsored company).

22
Distribution Surface Transportation

• The use of sea-going merchant vessels for
  transportation of goods is on the downturn,
  totaling 246 tons in 2003 (less than the
  railways 285 tons).
• The most important port for Germany is Rotterdam
  in the Netherlands, and the most used domestic
  port is in Hamburg (accounting for 35 of all
  freight shipped to German ports).

23
Distribution Surface Transportation

• Other main ports in Germany are Wilhelmshave,
  Bremerhave, Bremen, Rostock, and Lubeck.
• If transportation using sea-going merchant
  vessels was chosen to be used by Smuckers for
  Uncrustables, it would be important to consider
  the implications of locating Uncrustables
  facilities by one of these major cities.

24
Distribution Surface Transportation

• The most used airport for freight and passenger
  travel is Rhein-Main Airport near Frankfort.
• Cologne-Bonn is the second most used for freight
  traffic.
• Again, if using airport for freight
  transportation, it would be important to consider
  a distribution facility near one of these two
  cities.

25
Distribution Surface Transportation

• Roads 226,000 km in 1992 (11,000 km of these
  roads are at least four lanes)
• Railroads 40,000 km in 1994 (16,000 km of which
  are electrified)
• Airports 660 total (12 civilian airports provide
  passenger and cargo service within the country
  and to the rest of the world)

26
Distribution Surface Transportation

• Ports several dozen large, well-equipped ocean
  and inland ports
• Inland Waterways 6,900 km of navigable inland
  waterways, including extensive canal systems
  (inland waterways account for about 20 of
  freight shipping)

27
Distribution Geography

• Germany shares boundaries with nine other
  countries
• Denmark
• Poland
• The Czech Republic
• Austria
• Switzerland
• France
• Luxembourg
• Belgium
• The Netherlands

• This is important to consider when choosing where
  to put production and distribution facilities.
  Putting a facility in a neighboring country could
  be the most cost-efficient.

28
Distribution Geography

• The three largest cities are Berlin (3.4
  million), Hamburg (1.7 million), and Munich (1.2
  million).
• Concentration of population
• The most densely populated cities are Berlin
  (3,898 persons per sq. km), Hamburg (2,236
  persons per sq. km), and Bremen (1,697 persons
  per sq. km).
• 1/5 of the nations total population is in North
  Rhine-Westphalia (the state whos cities include
  Berlin, Bremen, and Hamburg.

29
Distribution Current Sales in Germany

• There are currently no sales offices or
  production facilities in Germany.
• Also, there are no Smuckers products on store
  shelves in Germany.
• Smuckers products can be bought from online
  groceries.

30
Distribution Current Distributors and Suppliers
in Germany

• Smuckers does not own its suppliers or
  distributors. It does not grow its own fruit,
  nor does it manufacture its own labels or storage
  containers.
• When going into Germany, one would need to decide
  what suppliers and distributors are available and
  the best to use.

31
Distribution Production in Germany

• Smuckers Uncrustables are currently produced in
  a manufacturing facility in Scottsville, KY.
• It would be important to decide whether to
  produce Uncrustables in Germany or to import them
  from Kentucky.

32
Distribution Production in Germany

• Many factors were at play in Smuckers decision
  to close some plants. A strike affected the
  Woodburn facility last year, though local sources
  say the workforce included many second-generation
  employees who were willing to work with the
  company to improve efficiencies.

• When considering where to have a production
  facility in Germany, it will be important to look
  at factors such as the workers demographics and
  attitudes in addition to factors such as cost.

33
Distribution Foreign Direct Investments

• Germans and Americans regularly make investments
  in each others countries.
• Germany is the United States largest European
  trading partner and fifth largest partner in the
  world.
• France, the Netherlands, and the United States
  led the list of Germanys foreign investors
  during 2003.

34
Distribution Foreign Direct Investments

• The profit rate of US direct investment in
  Germany was 5.1 in 2003, compared with 3.7 a
  year earlier.
• This is showing that US investments in Germany
  are becoming more and more profitable.

35
Distribution Foreign Direct Investments

• German government officials, and the population
  in general welcome foreign investment that
  provide new jobs. There are no serious
  limitations on new projects.
• Foreign investors encounter the same conditions
  as their German counterparts in obtaining
  licenses, securing building permits, and gaining
  approval for investment incentives.
• However, the German government often opposes
  hostile takeovers.
• The next slide shows an example

36
Distribution Squeeze-out example

• A provision of the take-over law concerning
  squeeze-outs has been used frequently. According
  to the law, an investor who holds at least 95 of
  equity can force the remaining shareholders to
  sell their shares in the company.
• Since the first quarter of 2003, however, when
  Procter Gamble of the US unsuccessfully tried
  to use the squeeze-out provision to take over all
  of Walla, a German hair-care company, investors
  have rarely been able to reach the necessary 95
  threshold.
• Minority shareholders will deliberately increase
  their stakes to force the investor to make a
  higher offer.

37
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

38
Segmentation and Targeting

• Demographics targeted towards moms across the
  United Statesmost likely people of middle- or
  upper-range incomes (because it is definitely
  cheaper for a mom to make her own peanut-butter
  and jelly sandwiches). This is also mostly
  targeted toward working mothers.
• Geographic not necessarily specific
  geographically, although the main focus now is in
  the United Statesnot the international market.
• Smuckers may consider entering Uncrustables in
  the wealthier, western half of the country for
  easier penetration of the market

39
Segmentation and Targeting

• The Average Family
• Our research shows that the average family
  doesnt know what theyre going to have for
  dinner until 4 p.m., and probably the most
  popular category of food is handheld products you
  can take in the car, Smuckers says.

40
Segmentation and Targeting

• Children and Schools (although children are not
  directly targeted)
• We continue to focus on Uncrustables, our line
  of crustless, thaw-and-serve peanut butter and
  jelly sandwiches. Within the school foodservice
  market, sales of Uncrustables have increased
  substantially over last year, yet to date we are
  in fewer than 20 percent of school districts
  nationally.
• Reaching a later percentage of children with a
  branded food item, served as a meal or nutritious
  snack, is a most exciting prospect for our
  Company.

41
Segmentation and Targeting

• Amusement Parks and Ball Parks
• The Uncrustables line was also successful this
  year in traditional foodservice outlets,
  especially in the recreation category where
  initial placements have included Walt Disney
  World and several major league baseball parks.

42
Segmentation and Targeting

• In the United States retail market the Companys
  products are sold through brokers to food
  retailers
• food wholesalers
• club stores
• mass merchandisers
• military commissaries.

43
Segmentation and Targeting

• Psychographics for people with interests that
  keep them on the go
• Behavior this product is most likely for the
  loyal buyer. Smuckers is hoping to convince
  mothers that this product is convenient enough to
  keep handy around the house.
• Also, Smuckers is most likely hoping that once a
  mother buys the Uncrustables the first time, the
  kids will be hooked and create a demand for the
  mother to continue buying the product.
• Benefits convenience

44
Segmentation and Targeting
Age Distribution in Germany
Age Male Female Male () Female ()
0-4 1,924 1,825 51.3 48.7
5-9 2,061 1,953 51.3 48.7
10-14 2,328 2,210 51.3 48.7
15-19 2,403 2,277 51.3 48.7
20-24 2,418 2,298 51.3 48.7
25-29 2,353 2,227 51.4 48.6
30-34 3,023 2,851 51.5 48.5
35-39 3,743 3,504 51.6 48.4
40-44 3,542 3,360 51.3 48.7
45
Segmentation and Targeting

• The previous graph displays the Target Market for
  Uncrustables, which consists of 14,697 million
  males and 13,878 million females, which includes
  parents and children
• If Smuckers can tap into this vast population in
  their target market, Uncrustables could be very
  profitable

46
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

47
Marketing Mix Product

• Uncrustables are a sandwich made up of white
  bread, and with no crust
• It come in three flavors, Grape, Strawberry and
  Grilled Cheese
• The idea of new flavors and even seasonal ones is
  something that has been successful in the German
  market
• Germans do eat peanut butter but not necessarily
  peanut butter and jelly sandwiches. This may be
  something to consider pertaining to flavor.

48
Marketing Mix Product

• Most get their food from both supermarkets and
  specialty shops (like bakeries, butcher shops,
  etc.)
• Germans tend to shop more frequently than
  Americans, usually 2-4 times per week
• The typical German household has a significantly
  smaller refrigerators than Americans and have a
  separate larger freezer in the basement
• This all indicates that Germans may not be as
  interested in the larger packages of Uncrustables
  (such as the 10 and 18 pack). A pack of 4 may be
  more appealing to Germans.

49
Marketing Mix Packaging

• Uncrustables are packaged in a cardboard box with
  each sandwich individually wrapped.
• The individually wrapped sandwiches would also be
  easy to store in the freezer outside of the box.
• The design has a picnic feel to it and the colors
  of the box vary with the different flavors.
• The package looks All-American which is not
  necessarily a good thing.

50
Marketing Mix Packaging

• The packages are produced in English and
  Smuckers name is prominently displayed on the
  front of the box along with the Uncrustables
  name.
• The nutritional facts and ingredients are listed
  on the sides of the box, and an explanation of
  what Uncrustables are (including pictures) is on
  the back.

51
Marketing Mix Packaging

• The Germans have recently installed new laws
  regarding waste disposal. In responses, companies
  are making more environment friendly packaging.
• Green dots are starting to appear on packages
  that are recyclable, and while it is not
  required, it makes packages more acceptable.

52
Marketing Mix Place

• The Industrial Investment Council offers
  consulting free of charge for investors in
  eastern Germany. This includes
• Market research
• Identification of partners
• Permit applications
• Advice on financial incentives
• The investment allowance law provides for
  additional incentives for the acquisition of
  buildings, plants, and equipment in eastern
  Germany.
• Regular incentives are 12.5 of investment cost
  for small and medium-sized companies, the rate is
  25, and it is increased by 2.5 in regions close
  to the Polish and Czech borders.

53
Marketing Mix Place

• One thing to remember when analyzing the best
  location for a production facility is not
  necessarily the place that costs the least.
• Smuckers realized this when they decided to
  close optimize their supply chain and consolidate
  manufacturing facilities. Smuckers closed
  plants in Watsonville, California, Woodburn,
  Oregon, and West Fargo, North Dakota allowing for
  more efficient product production and
  distribution.

54
Marketing Mix Promotion/Message

• Our first priority was to serve our loyal
  existing customers. Weve continued to pursue new
  customers, but (were) really targeting the fall,
  back to school time period for implementing that
  new business.

55
Marketing Mix Promotion/Message

• Uncrustables are a great time saving product for
  those parents on the go. With more and more two
  parent working families, the idea of a easy to
  serve, ready to go product is always a good one.
• The idea of a convenient, low cost and also good
  tasting product can be seen with Uncrustables
• Lastly, the flavors of the product are what some
  would call trademark American products a good
  old fashion PBJ and the Grilled Cheese.
  Something that children will associate with

56
Marketing Mix Promotion/Message

• With capacity shortcomings, Smuckers pulled most
  of its advertising and promotion for the
  Uncrustables line.
• Richard Smucker, co-CEO and CFO had this to say,
• As a result, growth and sales projections
• for the brand have been difficult to ascertain.
  We
• have pulled quite a bit of support for the brand,
  
• but once we get back up to full support, then
  well
• have a better feel for growth

57
Marketing Mix Promotion/Media

• In Germany print media holds a 48 share of
  advertising and is the leading medium for
  advertisement
• Television is the most popular medium of
  communication and entertainment. Today some 30
  stations compete fiercely for audience ratings.
• Each of the 16 Landers (states) are solely
  responsible for their television broadcast
  activities.

58
Marketing Mix Promotion/Message

• Uncrustables received free advertising when Liz
  Crenshaw of NBC4 did a segment on the product.
• Currently, Uncrustable ads can be seen regularly
  on television and coupons are available in local
  newspapers.
• However, the most buzz about Uncrustables can be
  found on the internet.
• Individual store promotion samples and displays

59
Marketing Mix Promotion/Media

• The Uncrustables brand name has not been the
  sponsor of any major event, but Smuckers on the
  other hand has been the main contributor to an
  ice-skating event and a special episode of Family
  Feud has featured some the Smuckers Ice-Skating
  stars.
• In Germany over 27 million people belong to
  sports club and the most popular sport in Germany
  is Fussball (Soccer). Event and team sponsorship
  is a major player in advertising in Germany as
  well as player endorsement.

60
Marketing Mix Price

• As we said before, pricing would not be a major
  issue in Germany because the per capita GNP is
  relatively high (22,740).
• The price would depend on the extra expense of
  either importing the goods from the United States
  or producing them in Germany.
• There are high tariffs on goods imported to the
  EU from the United States, particularly on
  processed foods containing added sugar, flour,
  starch, and milk.

61
Marketing Mix Price/Tax

• The effective rate for trade tax varies by
  location from just under 12-20. It is around
  18 for most larger cities.
• This tax is deductible as an expense for
  corporation tax.
• German business profits are subject to 2 taxes
  corporation tax which is levied at 25 and
  subject to a surcharge of 5.5. The surcharge
  does not apply to companies with headquarter and
  management outside of Germany.
• A foreign companys German branch would be
  charged both corporation tax and trade tax.

62
Marketing Mix Price/Tax

• There is a 7 sales tax on food. This is charged
  to the manufacturer, not the consumer.
• All these factors could ad to the price of
  selling Uncrustables in Germany.

63
Marketing MixPositioning Against Competition
Intermezzo

• Intermezzo are sold at a cost of .99 euro. With
  the current exchange rate of 1/1.32 Euro, the
  cost of one Intermezzo is about 1.31 (this
  includes tax).
• In the U.S. Uncrustables cost about .75 per
  sandwich and usually come in packages of 4, 10,
  or 18.

64
Marketing Mix Positioning Against Competition

• Uncrustables needs to consider the price of their
  competitors to decide if they want to position
  themselves based on price.
• A leader in the German frozen food industry,
  Frosta, decided to position themselves on quality
  rather than low cost.
• They suffered a large drop in sales.

65
Marketing Mix Positioning Against Competition
Crispy Pancakes

• Crispy pancakes were developed for kids by
  kids.
• Unlike Crispy pancakes, Smuckers does not
  directly target children in Uncrustables
  promotion.
• Crispy pancakes are served in many schools in
  Germany.
• Smuckers has recently been promoting
  Uncrustables the same way by putting them within
  the school foodservice market.
• Smuckers needs to consider this direct
  competition for the grilled cheese flavor in
  schools.

66
Uncrustables in Germany? Main Factors to
Consider

• Assessment of potential market
• Distribution
• Segmentation and Targeting
• Marketing mix

67

• Questions?