International Marketing Strategy

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




      Smucker’s Uncrustables in Germany
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
 Assessment of Potential
        Market
       Eating 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
Assessment of Potential
       Market
  Frozen 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.
Assessment of Potential
       Market
 Frozen 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 market’s 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 Germany’s
  position as the largest in Europe.

 This is good news for Uncrustables in Germany.
Assessment of Potential
       Market
Frozen 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
Assessment of Potential
       Market
Frozen 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, Germany’s
 frozen food market holds a slight advantage in market
                        share
 Assessment of Potential
        Market
     Future 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 Smucker’s was to enter this market it would
  be most beneficial to do it quickly.
Assessment of Potential
       Market
        Ready 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
Assessment of Potential
       Market
          Ready 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
Assessment of Potential
       Market
 Germany’s 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.

 Germany’s western part of the country is more affluent
  than the former communist, eastern area.
Assessment of Potential
       Market
 Germany’s 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 Smucker’s to invest their product in Germany
  Assessment of Potential
         Market
                  Competition
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 Smucker’s upon entering Germany.
Assessment of Potential
       Market
                  Competition

 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
Assessment of Potential
       Market
               Competition

 Findus has come out
  with a product called
  Crispy Pancakes
 Flavors include:
   3 cheese
   Beef
   Sweet corn, bacon,
    and chicken
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
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
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
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.
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).
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 railway’s 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).
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
  Smucker’s for Uncrustables, it
  would be important to consider
  the implications of locating
  Uncrustables facilities by one of
  these major cities.
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.
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)
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)
Distribution
 Geography
  Germany shares             This is important to consider
   boundaries with nine        when choosing where to put
   other countries:            production and distribution
       Denmark                facilities. Putting a facility in
       Poland                 a neighboring country could
       The Czech Republic     be the most cost-efficient.
       Austria
       Switzerland
       France
       Luxembourg
       Belgium
       The Netherlands
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 nation’s total population is in
      North Rhine-Westphalia (the state
      who’s cities include Berlin, Bremen,
      and Hamburg.
Distribution
 Current Sales in Germany

  There are currently no sales
   offices or production facilities
   in Germany.

  Also, there are no Smucker’s
   products on store shelves in
   Germany.

  Smucker’s products can be
   bought from online groceries.
Distribution
 Current Distributors and Suppliers in
 Germany

               Smucker’s 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.
Distribution
 Production in Germany
  Smucker’s 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.
 Distribution
   Production in Germany
 Many factors were at play
  in Smucker’s decision to
  close some plants. A        When considering
  strike affected the         where to have a
  Woodburn facility last      production facility in
  year, though local          Germany, it will be
  sources say the             important to look at
  workforce included many     factors such as the
  second-generation           worker’s
  employees who were          demographics and
  willing to work with the    attitudes in addition
  company to improve          to factors such as
  efficiencies.               cost.
Distribution
 Foreign Direct Investments

  Germans and Americans regularly make investments in
   each other’s countries.

  Germany is the United State’s largest European trading
   partner and fifth largest partner in the world.

  France, the Netherlands, and the United States led the
   list of Germany’s foreign investors during 2003.
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.
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…
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.
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
      Segmentation and
         Targeting
 Demographics: targeted towards moms across the
  United States—most 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 States—
  not the international market.

 Smucker’s may consider entering Uncrustables in the
  wealthier, western half of the country for easier
  penetration of the market
         Segmentation and
            Targeting

 The Average Family

   “Our research shows that the average family
    doesn’t know what they’re 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,” Smucker’s says.
      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.”
     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.
       Segmentation and
          Targeting
 In the United States retail market the Company’s
  products are sold through brokers to food retailers
    food wholesalers
    club stores
    mass merchandisers
    military commissaries.
      Segmentation and
         Targeting
 Psychographics: for people with interests that keep
  them on the go

 Behavior: this product is most likely for the loyal
  buyer. Smucker’s is hoping to convince mothers
  that this product is convenient enough to keep
  handy around the house.

 Also, Smucker’s 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
        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%
      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 Smucker’s can tap into this vast population in
  their target market, Uncrustables could be very
  profitable
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
           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.
           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.
           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.
          Marketing Mix
                 Packaging


 The packages are produced in English and
  Smucker’s 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.
          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.
                 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.
             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.

 Smucker’s realized this when they decided to
  close optimize their supply chain and consolidate
  manufacturing facilities. Smucker’s closed plants
  in Watsonville, California, Woodburn, Oregon,
  and West Fargo, North Dakota allowing for more
  efficient product production and distribution.
       Marketing Mix
        Promotion/Message


“Our first priority was to serve our loyal
 existing customers. We’ve continued to
pursue new customers, but (we’re) really
  targeting the fall, back to school time
    period for implementing that new
                  business.”
           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
  PB&J and the Grilled Cheese. Something that children
  will associate with
               Marketing Mix
                Promotion/Message

 With capacity shortcomings, Smucker’s 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 we’ll
              have a better feel for growth”
            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.
                  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
           Marketing Mix
              Promotion/Media

 The Uncrustables brand name has not been the
  sponsor of any major event, but Smucker’s 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 Smucker’s 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.
           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.
           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 company’s German branch would be charged
  both corporation tax and trade tax.
            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.
          Marketing Mix
Positioning 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.
         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.
               Marketing Mix
      Positioning Against Competition
                      Crispy Pancakes
 Crispy pancakes were developed “for kids by kids.”

 Unlike Crispy pancakes, Smucker’s does not directly
  target children in Uncrustables promotion.

 Crispy pancakes are served in many schools in Germany.

 Smucker’s has recently been promoting Uncrustables the
  same way by putting them within the school foodservice
  market.

 Smucker’s needs to consider this direct competition for the
  grilled cheese flavor in schools.
Uncrustables in Germany?
       Main Factors to Consider

 Assessment of
  potential market

 Distribution

 Segmentation and
  Targeting

 Marketing mix
Questions?