1

ABC FOODS : GLOBAL

MARKETING AND INTERNATION EXSPANSION STRATEGY REPORT
By

Abdulalim Bachani
07079419 Word Count: 3190 Tutor: David P Evans

Rationale:
ABC Foods are UK market leaders of food intolerance products specialized in developing and producing diabetic friendly food such as gluten free bread, cakes, biscuits, chocolate, bagels, muffins, white and brown rice and diabetic friendly drinks range. They have well recognised brands in the UK such as G-F Essentials, G-F Delights and D-F Juices occupying majority shares in the home market and are known for developing nutrient rich and good quality products. ABC Foods have a high level of quality controls and all products are approved by the Department of Health. Since establishment in 2005 ABC foods have shown strong profitability over the years and now show competence to expand abroad into foreign markets. According to the International Diabetes Foundation There are 285 million people worldwide with diabetes and these figures are likely to increase 54% by 2030 in major regions of the world.
Global Estimates of the prevalence of diabetes for 2010 and 2030 - J.E. Shaw *, R.A. Sicree, P.Z. Zimmet

According to World wide outlook for Food speciality products, The World wide market potential for food speciality retailers is 54.4 billion.
INSEAD, 2005-10 www.icongrouponline.com

The statistic clearly outlines the expected major increase in diabetes over the next two decades and the market potential defining a need for products by ABC Foods and a potential global market for ABC foods and its range of products. According to Euromonitor Global competition in the overall health and wellness global market is occupied by 6 major corporations, Weight Watchers, PepsiCo, Nestle, Coca-Cola, Danone and Unilever who are all yet to develop major equity in the global market for food intolerance products. However the need for more research into potential markets is needed and

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a carefully evaluated global marketing strategy needs to be defined. This report intends to research potential countries and markets and provide a critical evaluation and recommendations on strategic options available to ABC foods based on their current competencies. Research into food intolerance sectors in China, Canada and Sudan will outline any gaps or opportunities in markets which are relevant to the organisations product range.

Sections Overview

1. M a r k e t S e g m e n t a t i o n :

2. P o s i t i o n i n g S t r a t e g y 5

3. R e l a t i o n s h i p S t r a t e g i e s 6

4. D e c i s i o n M a k i n g P r o c e s s 9

5. M a r k e t S t r a t e g y 11

6. R e c o m m e n d a t i o n s 12

7. A p p e n d i x 15

1. Market Segmentation China

Primary consumers of food intolerance products in China will tend to be part of the affluent middle class or wealthy segment of the consumer base between the ages of 20 and 40 and over, single or married with families.

Canada
Primary consumers of food intolerance products are likely to be middle class to upper class consumers ages 20 to 70, highly developed market means more niche segments to exploit. Consumers high levels of tastes require ABC to enter into niches that fit firms strengths.

Sudan
Due to the lack of market and consumer information available in Sudan, it is difficult to locate a segment except for the statistics from IDF state that 675,300 of people have diabetes. (www.internationdiabetesfederation.com) (See Appendix 1 for Reworked Swot Analysis)

2. Positioning Strategy China

China requires high status quality foreign products, country of origin more than likely to affect here in ABCs favour as Chinese consumers are developing a taste for high quality foreign products. Upper end skimming pricing policy to back up status and quality of product, advertising may be mainly print media, option is available for digital and TV advertising but too expensive on entry.

Canada
Canadas requires high brand image with status and quality, country of origin effect may have implications. Higher levels of customization and will require adopting upper end skimming pricing policy that competes with competition prices. Advertising options may be limited as promotional mix will need high levels of investment and creativity to generate awareness and compete in similar strategic groups with other companies.

Sudan
Sudan requires simplistic product positioning, basic needs few alternatives drives basic positioning by introducing products with limited features. Advertising methods also need to be basic, low literacy levels means consumers require visuals to learn about new product. In addition under developed infrastructure and media broadcasting technology reduces marketing to print media. (See Appendix 1 for Reworked Swot Analysis)

3. Relationship Evaluation

Strategies:

Critical

Relationships in life are there for the advantage and progression to humanity; similarly, organisations have strong motives to progress with their goals and ambitions through different relationships to succeed in international business. Whether these are joint ventures and collaborations with similar companies, agreements with distributors or schemes to develop relations with customers, they can all potentially be prone to disaster. Core factors that make relationships with customers or suppliers great can easily funnel into disagreements, exploitation, infidelity, abuse, suspicion or eventually dissolution. While relationships can provide many benefits, for example collaborations such as strategic alliances and joint ventures help businesses to spread and reduce costs, specialise in competencies and gain knowledge or technology transfer, they also present opportunities for covert activities designed to systematically cheat partners. Other major collaborative arrangements such as franchising, licensing or FDI also have their own pitfalls when working together with other international businesses, organisations, customers, employees, governments, distributors and suppliers. The point is they all transport different advantages and problems for the management to deal with, one of these problems is the level of control the management has especially in non-equity relations like sales contracts, licences and turnkey arrangements where control over decision making is out of the franchisors hands. The close relationships that a business develops all start with intentions to benefit profitability for all party members. Nonetheless these collaborative arrangements can open doors to failure; exploitation can occur depending on the short-term and long term orientation of the companies (Das and Teng: 2005), tensions are expected in any relationships but if companies are more short-term they are more attracted to exploiting each other before the relationship is over. Long term orientated companies may lack substantial gains from these long term relationships so it can be

8 very difficult to stay dedicated and supportive. Building strong interpersonal links and high levels of trust with suppliers is another way to succeed; this keeps both companies flexible and responsive to each other (Anderson & Jap: 2005). However this can also set up relationships to fail as one can easily dominate another to secure resources or component products at cheaper price, less bargaining power for a smaller company means they can be played off with other suppliers making it harder to opt out of painfully high performance relationships at the risk of losing their contract. These types of relationships can make or break a company. Furthermore the strong trust and links that are built up in these relationships give some managers the opportunity to use it and cheat a partner on a regular basis. Unfaithfulness and infidelity can lead to scandals that may ruin the reputation of an organisation and impact on potential relationships in the future. An additional method of expanding the benefits of successful relationships is the unique processes and adaptations businesses apply to collaborative arrangements (Anderson & Jap: 2005). Anything from product enhancements, supply specifications that help businesses to become more efficient and productive, this way both partners are likely see gains in profitability. However the same adaptations that increase productivity in the short term can have a disastrous effect in the long run, arrangements like these tend to forget about innovation and improvement to keep productivity up. Whether firms involved in these relationships can stay relatively flexible is the key feature to the life of the collaboration. If the alliances are too rigid then associates can be subdued from achieving potential benefits. (Das and Teng: 2005) In the business world it is considered that the customer is king, so logically a business should strive to have strong profitable life long relationships with its customers. Sometimes however, relationships may not always turn out to be profitable, customers who purchase products and services at high prices may perhaps exploit companies into giving them premium services and discounts. These customers are smart enough to know their significance to the firm therefore are a position to make demands; consequently the loyalty clubs and schemes that were originally created to develop strong relationships

9 and capitalize on the faithfulness of customers can prospectively fail in the long term. (Anderson & Jap: 2005) Collaborative arrangements of any kind are open to many calamities; many factors can influence impending disasters on relationships between partners in the long run. For instance companies can have differing objectives, control issues, contribution problems and differences in culture context in international business. Nevertheless its not all doom and gloom for relationship strategies, there are many protocols businesses should regularly carry out in order to manage diverse relationships and collaborative arrangements. The first step is to identify and understand these issues in order to be capable of suppressing the dark side of relationships. Whether companies are in long term or short term arrangements it is necessary for them to constantly evaluate the relationships, regular assessments helps to strengthen links and foresee any crisis in the future. Adopting a rotational system for personnel will also help to freshen up relations with new faces. Establishing common goals and keeping profitability in mind will also help firms to keep relationships strong; however the main aspect to building a strong successful relationship is to avoid suspicion, falling into a spiral of suspicion can have disastrous affects if managers start questioning minor behaviours of their partners. Once companies arrive at crisis situations, it should be looked at as an opportunity to reinforce relations and improve on what they started. A lot of the time however it isnt possible for companies to kiss and make up, they make carry on psychological scars that suppress performance and as a result previous conflicts could arise again, consequently for this reason a dissolution may be necessary for the benefit of both parties. The nature of business relations is such that they do not tend to carry on indefinitely but it is better for a business to enter and exit networks a number over a period of time, while constantly maintaining and investing into these relationships (Anderson & Jap: 2005)

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3. Decision Making Process for Country Expansion

The decision making processes used to determine the first country expansion was the interactive multi-criteria to identifying potential foreign markets (Kumar et al: 1993) and Michael Porters extended porters analysis for the overall global industry for food intolerance products. The multi-criteria approach was used to more bring together secondary research from the first two stages and then apply that information with Porters 5 forces analysis to determine the attractiveness of the industry. The aim of this was to gain a better overall view of the global environment from analysis, in addition using Harrell and Kiefer (1993) Business portfolio matrix to plot each countrys attractiveness to the companies compatibility with the countries, which gives a better view of which country is more attractive. This matrix was drawn up from the secondary research conducted. (See appendix 3 and 4 for Business portfolio matrix and porters 5 forces analysis). Both processes used have their own advantages and disadvantages on the implications for the overall decision making process, according to Kumar et al the benefit of using this approach is that it takes into account multi criteria objectives of the firm, reduces sets of optimal solutions, cost affective, easy to adopt and flexible enough to be applied to a wide variety of firms. Taking into account qualitative and quantitative data the model also helps to aid managerial decision making process, however the downfall to the methodology is that it requires data on a particular variables across all countries, the problem here is that data needs to be available most importantly, this proves difficult when researching under developed regions like Sudan since consumer markets and infrastructure has not developed fully. Moreover data needs to be reliable to make clear judgements and decisions while also being comparable so to compare one market with another. For certain information this can be difficult to attain (Kumar et al: 1993). The model requires secondary information for the first two stages of screening and identification; however in the third stage primary data is vital to gain a better insight into the market as secondary data is not enough to make sound judgement and decisions, at this

11 stage managers would need to use local marketing expert to carry out the necessary research and deploy the information back to HQ. This part of the process can be lengthy and costly if dealing with a high culture context market as collecting primary data in those regions could be slowed down by language, literacy, access to technology or other professional services. Calculating a desired entry strategy and market depends on a repeated process of a cycle of operations, in other words an iterative process. This method helps to filter information in an add and drop function to arrive at an appropriate method on entry and market. Porters 5 forces was used to aid the decision making process however the model has been heavily criticized over the last 30 years, some of the main criticisms are as follows. The model assumes static market structures as it does not take into account the environment that affects complex industries and technological forces that are capable of shifting structures, changing business models and entry barriers (Lynch: 2009) Porter sees all forces as threats and the need for competitive advantage over customers, suppliers and markets, however it does not consider strategic alliances, closer relationship with suppliers and higher level of customer engagement with companies. According to Downes states that porter should include 3 more forces to the model; these are Deregulation, Digitalization and Globalization, macro-economic forces drive changes in industries every day Porter does not recognise this either. (Larry Downes: 1997)

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5. Market Entry Strategy: Direct Exporting employing independent agents and distributors
Direct exporting has the long term benefit for companies who want to oversee their operations in international markets; this helps to influence costs, develop market and marketing channels in the long term and control over marketing mix decisions in local markets. (Johansson: 2009) However there are also many obstacles in the way to achieving the fruits of exporting, according to (Rundh: 2001) one of the main problems to international export is the economic distance to the market; SMEs limited resources can affect production capacity and cause other financial problems. Market structure and environment of markets also has a huge influence on the international interest of SMEs, underdeveloped environments and market structures can hinder product distribution to meet demand. On the other hand other markets which have intense local and global competition may also hold back exporting interests, high levels of consumer tastes and preferences would require SMEs to invest more resources into achieving high levels of product customization and function in order to meet demand well. The middle men who carry out activities in international markets also need to be competent with local culture, lifestyles and languages as these can prove to be obstacles for SMEs. Other factors increasing complexity of exporting is though individual country import regulations, tariff and non tariff barriers to entry, governmental, political and technology. According to (Hollensen: 2003) mentions that direct exporting through agent or distributors impacts control over market prices because of tariffs and lack of distribution control, problems in communication may be influenced by cultural differences in relaying information back to HQ.

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6. Recommendations: Direct Exporting to China

A justified recommendation for your choice of one country, and one initial course of action

International expansion is a long term process and certainly a long term commitment, companies do not expand into overseas trade for overnight returns but the original thought is for the long term advantage a company gains from entering into this process. This is why I have chosen China as the first country choice for expansion, my justification is as follows; China recently became free from governmental control in 1978 and since then the number of private companies has shot up from a few hundred thousand to over 6 million (Tse: April 2010) indicating the potential companies see in China. Its clear that the country still has political and governmental concerns that are causing unrest but China has made clear efforts in improving its international relationships and ties with western countries such as UK and agreements with Association of South East Asian Nations (ASEAN) has opened up markets into china. The China-Britain Business Council has also been set up to increase and facilitate business relationships from UK into China; these strong relationship links would aid ABC foods expansion plans into China and also make exporting easier. The required China Compulsory Certificate (CCC) for quality and safety for foreign manufactured goods can be acquired for exporting through the CBBC. The legal landscape into China has improved, statistics from doing businesses survey suggests efficient and hassle free business environment (Datamonitor: China Country Factfile: 2010). This will help in overcoming any legal problems when entering or during the stay of the process. China also offers resources to ABCs advantage, low labour costs and much agricultural potential offers the chance to cultivate raw ingredients for manufacturing of products. This type of investment would help reduce overseas logistics costs and at the same time build distribution channels in China.

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A newly industrialised country like China is still in the growth stages of development, this presents many opportunities for a company like ABC because the food intolerance market has not fully developed. Product variety of food intolerance products in China are less compared to the Canadian food intolerance market (See appendix Category data 5 and 6) it indicates that the consumers have not developed preferences and tastes like the Canadians therefore leaves the market open for a variety of niches that ABC can utilize. In addition to this, 2009-2014 sales forecasts for food intolerance sector in China is at 572 million compared to 198.7 million in Canada (See appendix 9 and 10 for Sales forecasts) Forecasts are based across all intolerance products in the market which China only has a third of compared to Canada yet annual growth for China is predicted three times as much compared to Canada in the same time span. This shows the level of growth and potential expected in China in the future. In addition to these statistics: the competition facing ABC in both countries vary, in Canada the market is populated by many companies including global players such as Heinz, Nestle and Unilever compared to only a few local companies in China (See appendix 7 and 8) According to Euromonitor the competitive landscape in Canada has been influenced by the economic downturn thus companies are increasing investment in marketing and advertising as well as product innovation due to rising competition (Euromonitor: Food Intolerance Canada: 2010) it suggest the levels of investment ABC would need to sustain in order to compete in such a competitive environment, a strategic option that carries a lot of financial risk. In contrast with the competitive landscape in China where all three major players in the industry are domestic manufacturers with no significant multinational presence to date (Euromonitor: Food Intolerance China: 2010). By all means not suggesting that the market in China is secure haven seeing that the threat of new entrants is still high and entry barriers are low to global players so eventual entry is possible, however to ABC the market in China is

15 more attractive and achievable compared to Canada and less costly to enter and to compete with competition, consequently the low entry barriers make direct exporting easier for ABC as there will be plenty of room for new product introductions, consumers will be less biased towards purchasing high quality foreign brands as tastes and preferences are still developing. Academic research points out that for SMEs like ABC exporting is a appropriate way of starting the internationalisation process, (Rundh: 2000) research states that companies to a great extent have been starting and developing their process of internationalisation by direct or indirect export. The reason direct exporting is an appropriate method of entry for ABC is because the company can slowly learn and gain knowledge about the internationalisation process to consequently transitionally increase its activities in overseas trade through this incremental learning process. The point is ABC are new to international trading and with out taking on too much risk and commitment in the early stages, direct exporting acts as a learning bridge to the international market with out over stretching their competencies. Using overseas agent also helps because they normally have an established set of contacts in the market, something that ABC would need to do on their own if entering alone. Research by (Crespi et al: 2008) backs up the learning process firms go through when using exporting an entry mode strategy, suggesting firms improve by learning from exporting when interacting with different buyers, suppliers and other firms innovating (Crespi et al: 2008). The initial course of action to be taken is to conduct primary research in the chosen market to further validate all the statements that have been made in this report, further analysis of research will help to clearly define strategic options available to ABC to help facilitate the expansion into China.

Yes, its a tough market. And yes, your competitors may have gotten there first. But the biggest mistake would be choosing not to invest in China.

16 By Edward Tse

Is it Too late to enter China? April 2010

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Appendix
1. Reworked Swot Analysis
Strengths A can-do attitude Quickly established a brand that is highly regarded by stakeholders in Profit slowed in 2010 the home market Good profits in the first 3 years Marketing focused Able employees Opportunities Threats Weaknesses Very limited knowledge outside the home market

Some, but limited, in the home The usual! Competition...... market for the foreseeable future Tianjin Alpha Health Production Co What overseas opportunities? Ltd leader in food intolerance products with 30% share in China: China; Sales in lactose and gluten no multinational presence intolerance products expected to grow, increase in demand for food Likely entrant of other competition, intolerance products due to the Low barriers to entry diabetes epidemic. Levels of political and social unrest Rapidly expanding affluent middle in China from corruption, inequality class along side Chinas economic and poverty may lead to problems growth, substantial middle class has in economic reform. increased the number of products and brands available in china, IPR cases increase identifies Chinese consumers like foreign food copyright infringement, ABC would products see bibliography for news need IPR protection when exporting

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artilcles Grows Imported Food Market

and imported foods gain Canada: Agropur Cooperative share 54% and

favour of Chinese buyers Gap in Chinese markets for special Saputo milk formulations, gluten bakery products, baby food and pastas. Chinese health care not Kinnikinnick share, Foods with for 25% of recognised sandwich 26% within lactose-free

free dairy products market,

doing bread, Bagel, donuts and cookie

enough to accommodate diabetic products. illness and gluten free food needs, possible opportunity of alliance. Britain and China business Canadian market lead companies to invest more into marketing and No recent acquisitions or mergers in food intolerance opportunity for ABC foods to form alliances and networks. High marginal effective tax rates high political instability, innovation of products. High market, Barriers to entry Heinz Canada own majority share in gluten-free baby food of 91% association and trade agreements Increased levels of competition in make easier imports into China.

Guan Xi networks useful in china to Sudan; develop relationships

rising security threats

Caf bar report from GMID shows Weak economic performance huge increase in coffee culture and forecasted huge growth, ABC can High unemployment rates target companies Starbucks and Costa Coffee to stock their gluten 69% of population live in rural areas free product for Chinese consumers. under poor living condition See Starbucks to sell gluten free pastry Canada; Growing demand for food intolerance products, sales expected to reach $199million by No country match for Sudan

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2014, growing demand for gluten free bakery products as sales reach $10million portfolios and shows supermarkets gap for more increasing natural health and food gluten free pasta Growing elderly population and

immigrants from other parts of the world with food intolerance needs fuel demand and growth expected to increase over coming years. Market substantially covered in all areas by current companies Low business taxes in Canada Government effective and stable, government preferential to small businesses than large corporations in terms of R&D Sudan: available very unlikely very to limited information any

determine

opportunities: Expansion to Sudan

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2. Culture Context Matrix Geert Hofstede Cultural Dimensions Countr y High or low context culture ? Low Individualis t or collectivist ? High or low power distanc e? Masculin e or feminine ? Uncertain ty avoidanc e: weak or strong?

Canada

High Low Masculin Medium Individualis stable e tic cultura l enviro nment High Collectivist society from communist rule High Masculin Strong power e distanc e countr y high levels of inequal ity High More Strong masculi ne than feminine

China

High

Sudan

High

Collectivist

Hofstede, Geert. "Geert Hofstede Cultural Dimensions Resources." Geert Hofstede Cultural Dimensions. Web. 25 Oct. 2010. <http://www.geerthofstede.com/geert_hofstede_contrarian_position. shtml>

21 Culture will play a major role in the international expansion of ABC, also taking into account E.T Halls Silent language in overseas business there are lot of culture related business practices that ABC would need to adapt to, from relationships with suppliers, distributors, customers, employees and even right down to how they market their products. Cultural context can not be ignored if ABC is aiming to develop a sustainable competitive advantage on foreign soil.

22 3. Business Portfolio Matrix Country Attractiveness

Harrell G D and Kiefer R O (1993) Multinational market portfolios in global strategy development, International Marketing Review, Vol 1- No 1

The Business portfolio matrix was put together from the secondary research conducted, plotting each countries attractiveness with the compatibility. We can see that China is highest plotted, Canada is in the middle and Sudan at the bottom. Sudan is a country that is still very under developed and there are not many comparative advantages between ABC and the country in order to develop a sustainable competitive advantage, rather entry into this LDC would be to help develop the nation further. Canada has many benefits that are compatible with ABC, however the level and type of competition would make it very difficult for entry and to develop awareness among a very high developed consumer base therefore I have plotted China at the top for the sheer opportunity, market size and potential it offers to ABC. High quality products are what the consumers want and thats exactly what ABC has, the fact that ABC have product ranges that are not even available in that market shows the potential growth and niche markets, add that to the 57

23 different ethnic groups, over 20 provinces and population of 1.3billion its hard to say that the country has no future prospect. The main issue for ABC is to adapt to the hugely diverse environment in China, it is an opportunity that can not be missed.

24 4. Porters (1980) 5 forces analysis for Global Food Intolerance market

Threat of buyers Low concentration, high numbers, low bargaining power Threat of Substitutes High number of substitutes in mature market Canada, low levels of substitutes in emerging markets and new growth markets Sudan and China respectively Threat of Suppliers Raw materials expensive but suppliers have relatively low power, low concentration and higher number means lower bargaining power Global Competitive Rivalry Global market dominated by Unilever, Danone, Nestle and Heinz but competition is low in the food intolerance market Domestic competition: domestic competition high in mature market Canada as there are many global players operating in the market, low levels of competition in new growth market china, only 2 major domestic players. Sudan low competition, emerging market has developed enough for companies to compete Foreign competition All markets open to foreign competition, China has more risk of being entered by foreign competition because of potential market and dominant players like Unilever, Nestle and Danone and Heinz have potential to enter market with ease and barriers to entry are low Strategic Groups No strategic groups seem to show yet, global market still in growth stage of industry life cycle and more growth through the years will eventually reveal global competitors and strategic groups Threat of New Entrants Barriers to entry into market are low for existing global players such as Danone and Unilever, R&D and marketing related costs affordable to diversify product portfolio to match country environments. Higher barriers to entry for initial starter in terms of costs however not a major issue. Summary: Threat of New Entrants Global Competitive Rivalry Threat of Suppliers Threat of Substitutes Medium Low Low Low-to-Medium depending on sub

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markets Threat of buyers

Low

Michael Porters 5 Forces analysis favours the global food intolerance industry; threats across all levels are low showing an attractive global industry

26 5. Category Data: China

Table 1 Sales of Food Intolerance Products by Subsector: Value 2004-2009

RMB million 2004 2009 2005 2006 2007 2008

Diabetic Food

83.2 236.2

118.5

142.3

170.0

205.4

- Diabetic Bakery

82.8 234.3

118.0

141.6

168.9

203.8

Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food - Gluten-Free Bakery Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food Lactose-Free Food - Lactose-Free Dairy Products - Lactose-Free Ice Cream - Lactose-Free Milk Formula Other Special Milk Formula Food Intolerance 83.2 236.2
Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates

0.4 0.2

0.5 0.2

0.8 0.3

1.1 0.4

1.5 1.9 0.5 0.6

0.2

0.3

0.5

0.7

1.0 1.4

118.5

142.3

170.0

205.4

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Table 2

Sales of Food Intolerance Products by Subsector: % Value Growth 2004-2009

% current value growth 2008/09 TOTAL 2004-09 CAGR 2004/09

Diabetic Food - Diabetic Bakery Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food - Gluten-Free Bakery Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food Lactose-Free Food - Lactose-Free Dairy Products - Lactose-Free Ice Cream - Lactose-Free Milk Formula Other Special Milk Formula Food Intolerance
Source:

15.0 14.9 26.1 15.9 30.8 15.0

23.2 23.1 36.9 29.7 40.6 23.2

183.8 182.8 381.1 267.2 449.9 183.8

Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates

28 6. Category Data: Canada

Table 1 Sales of Food Intolerance Products by Subsector: Value 2004-2009

C$ million 2004 2009 2005 2006 2007 2008

Diabetic Food

8.6 10.1

8.9

9.2

9.6

9.9

- Diabetic Bakery Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food

2.6

2.7

2.8

2.9

3.0 3.1

3.8 3.6

3.9 3.8

4.1 4.0

4.3 4.1

4.4 4.5 4.2 4.4

0.1

0.2

0.2

0.2

0.2 0.2

2.2 14.3 24.4

2.3 15.3

2.3 17.6

2.4 20.0

2.4 2.4 22.3

- Gluten-Free Bakery

4.8 10.4

5.3

6.4

7.9

9.1

Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food 0.5 1.2 7.8 11.8 Lactose-Free Food 67.5 90.3 - Lactose-Free Dairy 42.0 56.8 Products - Lactose-Free Ice Cream 19.9 23.1 - Lactose-Free Milk 5.6 10.3 Formula Other Special Milk 35.1 33.5 31.7 33.1 32.7 6.4 7.2 8.1 9.2 20.7 21.5 22.2 22.7 44.7 47.7 51.3 53.9 71.7 76.4 81.7 85.7 0.6 1.2 8.3 0.6 1.3 9.3 0.7 1.4 10.1 0.7 0.8 1.4 1.5 11.0

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32.0 Formula Food Intolerance 125.4 156.8
Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates

129.5

134.9

144.4

150.6

Table 2

Sales of Food Intolerance Products by Subsector: % Value Growth 2004-2009

% current value growth 2008/09 TOTAL 2004-09 CAGR 2004/09

Diabetic Food - Diabetic Bakery Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food - Gluten-Free Bakery Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food Lactose-Free Food - Lactose-Free Dairy Products - Lactose-Free Ice Cream - Lactose-Free Milk Formula Other Special Milk Formula Food Intolerance
Source:

2.3 2.8 2.7 2.6 5.0 0.8 9.4 13.4 4.1 3.2 7.2 5.3 5.5 1.7 12.9 -2.0 4.1

3.4 3.9 3.8 3.7 6.5 2.2 11.3 16.7 7.9 5.0 8.6 6.0 6.2 3.1 12.9 -1.8 4.6

18.2 20.8 20.3 19.7 36.7 11.6 71.0 116.2 46.2 27.5 51.4 33.7 35.3 16.3 83.8 -8.7 25.1

Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates: EUROMONITOR

30 7. Market Share Analysis: China

Table 3 Food Intolerance Products Company Shares 2005-2009

% retail value rsp Company 2005 2009 2006 2007 2008

Tianjin Alpha Health Production Co Ltd Beijing Lvde Food Co Ltd Shanghai Meijing Food Co Ltd Others Total

26.5

27.9

28.4

28.9 29.6

35.2 0.1

37.1 0.1

37.8 0.2

38.2 19.2 0.2 0.2

38.2 100.0 100.0

34.8 100.0

33.6 100.0

32.7 51.0 118.3

Source:

Trade associations, Trade press, Company research, Trade interviews, Euromonitor International estimates: EUROMONITOR

31 8. Market Share Analysis: Canada

Table 4 Food Intolerance Products Company Shares 2005-2009

% retail value rsp Company 2005 2009 2006 2007 2008

Agropur Cooperative Ltd David Chapman's Ice Cream Ltd Saputo Inc Mead Johnson Nutritionals Abbott Laboratories Inc Gay Lea Foods CoOperative Ltd Kinnikinnick Foods Inc Parmalat Canada Ltd Glutino USA Ross Chocolates Distribution Co Nestl Canada Inc Gourmet Distributors Ltd Unilever Canada Inc Heinz Co of Canada Ltd, HJ Boulangerie St-Methode, La El Peto Products Ltd Neilson Dairy Ltd Artisanal Private Label Others Total

20.3 11.6

20.9 12.1

21.0 12.1

19.3 19.4 12.5 12.9

2.8 5.5 3.3 3.0

2.8 5.1 3.2 3.1

2.8 8.4 3.1 3.1

9.1 9.3 7.9 7.7 3.1 3.3 2.7 2.7

0.9 0.8 1.1

1.1 1.1 1.2

1.4 1.4 1.2

1.3 1.6 1.5 1.5 1.4 1.4 1.2 1.2

1.0 0.9 0.5 0.4

1.2 0.9 0.5 0.4

1.2 0.8 0.5 0.4

1.2 1.0 0.9 0.9 0.5 0.5 0.4 0.4

0.3

0.3

0.3

0.3 0.3

0.2 5.2 1.4 0.2 40.7 100.0 100.0

0.2 5.3 1.4 0.2 38.9 100.0

0.3 5.4 1.4 0.2 35.1 100.0

0.3 0.3 -

1.4 1.3 0.2 0.2 34.9 34.0 99.1

Source: Trade associations, Trade press, Company research, Trade interviews, Euromonitor International estimates.

32 9. Sales Forecast for Food intolerance Sector China

Table 5 Forecast Sales of Food Intolerance Products by Subsector: Value 2009-2014

RMB million 2009 2014 2010 2011 2012 2013

Diabetic Food

236.2 572.0

285.5

348.0

414.2

485.1

- Diabetic Bakery

234.3 564.0

282.9

344.4

409.4

478.8

Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food - Gluten-Free Bakery Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food Lactose-Free Food - Lactose-Free Dairy Products - Lactose-Free Ice Cream - Lactose-Free Milk Formula Other Special Milk Formula Food Intolerance 236.2 572.0
Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimatesEUROMONITOR

1.9 0.6

2.6 0.7

3.6 0.8

4.9 0.9

6.3 8.0 1.1 1.3

1.4

1.9

2.8

3.9

5.2 6.8

285.5

348.0

414.2

485.1

33 10. Sales forecasts for Food Intolerance products for Canada

Table 6 Forecast Sales of Food Intolerance Products by Subsector: Value 2009-2014

C$ million 2009 2014 2010 2011 2012 2013

Diabetic Food - Diabetic Bakery Products - Diabetic Confectionery -- Diabetic Chocolate Confectionery -- Diabetic Sugar Confectionery - Diabetic Spreads Gluten-Free Food - Gluten-Free Bakery Products - Gluten-Free Baby Food - Gluten-Free Pasta - Other Gluten-Free Food Lactose-Free Food

10.1 3.1

10.3 3.2

10.5 3.3

10.9 3.4

11.3 11.7 3.6 3.7

4.5 4.4

4.6 4.4

4.7 4.5

4.9 4.7

5.1 5.3 4.8 5.0

0.2

0.2

0.2

0.2

0.2 0.2

2.4 24.4 10.4

2.5 26.6 11.7

2.5 29.4 13.3

2.6 32.8 15.2

2.6 2.7 36.8 41.5 17.5 20.3

0.8 1.5 11.8 90.3 120.3

0.8 1.5 12.6 95.5

0.8 1.6 13.7 100.7

0.8 1.7 15.1 106.5

0.9 1.0 1.7 1.8 16.6 18.4 113.1

- Lactose-Free Dairy Products - Lactose-Free Ice Cream - Lactose-Free Milk Formula Other Special Milk Formula Food Intolerance

56.8

59.9

62.8

66.2

70.0 74.3

23.1 10.3

23.6 12.0

24.2 13.7

24.8 15.5

25.6 26.4 17.6 19.7

32.0

31.0

29.8

28.4

26.8 25.1

156.8 198.7

163.4

170.4

178.6

188.0

Source:

Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimatesEUROMONITOR

34 11. Diabetes suffers statistics Sudan Percent with diabetes (20-79 years), 2010 (national) 3.3 Percent with diabetes (20-79 years), 2010 (comparative) 4.2 Percent with diabetes (20-79 years), 2030 (comparative) 5.2 Number of people with diabetes, 2010 675,300 Canada Percent with diabetes (20-79 years), 2010 (national) 11.6 Percent with diabetes (20-79 years), 2010 (comparative) 9.2 Percent with diabetes (20-79 years), 2030 (comparative) 10.9 Number of people with diabetes, 2010 2,866,100 China Percent with diabetes (20-79 years), 2010 (national) 4.5 Percent with diabetes (20-79 years), 2010 (comparative) 4.2 Percent with diabetes (20-79 years), 2030 (comparative) 5.0 Number of people with diabetes, 2010 43,157,200 http://www.diabetesatlas.org/map These statistics show the numbers of food intolerance suffers in the chosen countries, as we can see China has a more than both Sudan and Canada put together, this give us an insight into how big the markets are across all countries. While reading this report it is essential to remember than demand for diabetic friendly products are driven by medical conditions. This makes segmenting targets

35 slightly difficult as anyone at any age can have diabetes, rather than segmenting by traditional methods we would need further breakdown of statistics to determine who the segment is and how many of them they are. For example if there was a high number of diabetes in children in a region of China, then ABC would need to develop products that are related to children and then market them to parents. Further research into these statistics would be needed to develop a clearer view of segments and target markets.

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39 Magazine Articles 26. Downes, Larry. "Beyond Porter." Context Magazine 1997. Web. 9 Dec. 2010 Online News articles 27. "IPR Cases Jump as Awareness Increases." People's Daily Online. 24 Dec. 2010. Web. 24 Dec. 2010. <http://english.peopledaily.com.cn/90001/90776/90882/7242 165.html>. 28. "Starbucks to Start Selling Gluten-free Pastry." Newswire. Datamonitor, 21 Apr. 2009. Web. 28 Dec. 2010 29. "Imported Food Market Grows." China Daily. QQ International, 10 Nov. 2010. Web. 20 Nov. 2010. <http://www.chinadaily.com.cn/imqq/bizchina/201011/10/content_11529355.htm>. 30. "China's Import Growth Outpaces Export in Oct." China Daily. 11 Nov. 2010. Web. 1 Jan. 2011. <http://www.chinadaily.com.cn/china/201011/10/content_11527818.htm>. 31. Moody, Andrew. "Convertible Currency on the Cards by 2020." China Daily European Weekly. 31 Dec. 2010. Web. 1 Jan. 2011. <http://europe.chinadaily.com.cn/china/201012/31/content_11781636.htm>. 32. Jing, Meng. "Imported Foods Gain Favor with Chinese Buyers." China Daily Europe Weekly. 23 Dec. 2010. Web. 21 Dec. 2010. <http://europe.chinadaily.com.cn/china/201012/23/content_11743334.htm>. Websites Used 33. "International Trade | Business Link." Business Support,

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35. Hofstede, Geert. "Geert Hofstede Cultural Dimensions Resources." Geert Hofstede Cultural Dimensions. Web. 25 Oct. 2010. <http://www.geerthofstede.com/geert_hofstede_contrarian_position.shtml>. Culture information collected from respective country profiles and applied to Culture Context Matrix (See Appendix 2) 36. "Certification & Standards." China-Britain Business Council. Web. 17 Dec. 2010. <http://www.cbbc.org/guide/exporting_to_china/certification_s tandards>. 37. "Agents & Distributors." China-Britain Business Council. Web. 17 Dec. 2010. <http://www.cbbc.org/guide/setting_up/agents_distributors>. 38. "The China Opportunity." China-Britain Business Council. Web. 17 Dec. 2010. <http://www.cbbc.org/who_we_are/china_context/china_oppor tunity>. 39. "Guanxi." China-Britain Business Council. Web. 17 Dec. 2010. <http://www.cbbc.org/guide/business_culture/relationship_buil ding/guanxi>. 40. "UK Trade and Investment Homepage." Web. 25 Oct. 2010. <http://www.ukti.gov.uk/home.html>. o Doing Business Guides for Sudan, China and Canada: [Date Accessed 25th Oct 2010] o New to Exporting? Heres How We Can Help

41 http://www.ukti.gov.uk/export/aboutexporting/newtoexp orting.html [Date accessed 25th October 2010]

41. "Using an Overseas Agent | Business Link." Business Support, Information and Advice | Business Link. Web. 18 Nov. 2010. <http://www.businesslink.gov.uk/bdotg/action/detail? itemId=1077658464&type=RESOURCES>. 42. International Diabetes Federation | IDF. Web. 15 Oct. 2010. <http://www.idf.org/>. 43. "Using an Overseas Distributor | Business Link." Business Support, Information and Advice | Business Link. Web. 18 Nov. 2010. <http://www.businesslink.gov.uk/bdotg/action/detail? itemId=1077658576&lang=en&r.i=1077658464&r.l1=107386 1169&r.l2=1073858854&r.l3=1077657575&r.s=m&r.t=RESO URCES&type=RESOURCES>. Database Reports Used 44. Euromonitor: Global Marketing Information Database: www.portal.euromonitor.com [accessed through University of Lincoln Portal] o Canada Food Intolerance Report: 2010 o China Food Intolerance Report: 2010 o China Company and Brand share Report in Food intolerance market: 2010 o Canada Company and Brand shares Report in food intolerance market : 2010 o Sudan Country Fact File o Year on Year growth statistics for Middle east African o o o o region on Food intolerance products: 2010 China Gluten-free food Market Size Statistics: 2010 Canada Diabetic Food Market Size Statistics: 2010 Canada Gluten-free Food Market Size statistics: 2010 China Caf bar Report: 2010

(Date accessed 25th October 2010)

42

45. Market line. http://www.datamonitor.com/ [Accessed through University of Lincoln Portal] o Country Profiles for China and Canada: 2010 o Country Overview for Sudan: 2010 [Data Accessed 25th October 2010]

43 Reference List 1.
There are 285 million people worldwide with diabetes and

these figures are likely to increase 54% by 2030 in major regions of the world - Shaw, J.E, R.A Sicree, and P.Z Zimmet. "Global Estimates

of the Prevalence of Diabetes for 2010 to 2030." Diabetes Research and Clincal Practice: International Diatetes Federation 87 (2010): 4-14. Print. 2. According to World wide outlook for Food speciality products, The
World wide market potential for food speciality retailers is 54.4 billion - Parker, Phillip M. "The 2005-2010 World Outlook for

Food." INSEAD: Www.icongrouponline.com (2005-2010). Print. 3. Due to the lack of market and consumer information available in Sudan, it is difficult to locate a segment except for the statistics from IDF state that 675,300 of people have diabetes - International Diabetes Federation | IDF. Web. 15 Oct. 2010. http://www.idf.org/ 4. Exploitation can occur depending on the short-term and long term orientation of the companies - Das, T.K, and Bing-Sheng Teng. "Instabilities of Strategic Alliances: An Intemal Tensions Perspective." Organization Science 11.1 (JanuaryFebruary 2000): 77-101. Print 5. Building strong interpersonal links and high levels of trust with suppliers is another way to succeed; this keeps both companies flexible and responsive to each other - Anderson, Erin, and Sandy D. Jap. "The Dark Side of Close Relationships." MIT Sloan Managment Review 46.3 (Spring2005). Print 6. loyalty clubs and schemes that were originally created to develop strong relationships and capitalize on the faithfulness of customers can prospectively fail in the long term Anderson, Erin, and Sandy D. Jap. "The Dark Side of Close Relationships." MIT Sloan Managment Review 46.3 (Spring2005). Print

44

7. business to enter and exit networks a number over a period of time, while constantly maintaining and investing into these relationships - Anderson, Erin, and Sandy D. Jap. "The Dark Side of Close Relationships." MIT Sloan Managment Review 46.3 (Spring2005). Print 8. Direct exporting has the long term benefit for companies who want to oversee their operations in international markets; this helps to influence costs, develop market and marketing channels in the long term and control over marketing mix decisions in local markets - Johansson, Johny K. "Chapters 2, 3, 4 5, 6, 7, 8, 9, 10." Global Marketing: Foreign Entry, Local Marketing, & Global Management. Boston [etc.: McGraw-Hill Irwin, 2009. 31+. Print 9. The model assumes static market structures as it does not take into account the environment that affects complex industries and technological forces that are capable of shifting structures, changing business models and entry barriers Lynch, Richard L. "Chapter 3 Analysing the Strategic Environment." Strategic Management. Harlow, England: Prentice Hall/Financial Times, 2009. 99. Print. 10. Deregulation, Digitalization and Globalization, macroeconomic forces drive changes in industries every day Porter does not recognise this either.- Downes, Larry. "Beyond Porter." Context Magazine 1997. Web. 9 Dec. 2010 11. China recently became free from governmental control in 1978 and since then the number of private companies has shot up from a few hundred thousand to over 6 million - Tse, Edward. "Is It Too Late to Enter China." Harvard Business Review (April 2010): 96-101. Print 12. Suggesting firms improve by learning from exporting when interacted with different buyers, suppliers and other firms innovating - Crespi, Gustavo, Chiara Criscuolo, and Jonathon

45 Haskel. "Productivity, Exporting, and the Learning-byexporting Hypothesis: Direct Evidence from UK Firms." Canadian Journal of Economics 42.2 (2008): 619-38. Print 13. Yes, its a tough market. And yes, your competitors may have gotten there first. But the biggest mistake would be choosing not to invest in China - Tse, Edward. "Is It Too Late to Enter China." Harvard Business Review (April 2010): 96-101. Print