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Delissa In Japan. HEG. Hung Duy. Elwin Kusumaningtyas. Goran Adam Gasparac. Agenda. Japan yogurt market History Competitors Franchisee - NIKKO Japan Strategy 1990: DELISSA AFTER THREE YEARS IN JAPAN LEADING UP TO 1997 Problems Solutions Conclusion What Agria should do?.
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HEG Hung Duy Elwin Kusumaningtyas Goran Adam Gasparac
Agenda • Japan yogurt market • History • Competitors • Franchisee - NIKKO Japan • Strategy • 1990: DELISSA AFTER THREE YEARS IN JAPAN • LEADING UP TO 1997 • Problems • Solutions • Conclusion • What Agria should do?
Japan yogurt market • Japan is not a dairy product consumer. • Urban density naturally affects lifestyle, tastes, and habits. • Disposable income is high. The Japanese spend over 30 percent o their income on food. • Westernization (goat milk vs cow milk) • Japanese market has still potential for growth.
Japan yogurt market • Per capita consumption of yogurt in Japan is estimated at around 5.3 cups per person per year in Japan, versus 110 in Sweden and 120 in Finland. • Seasonal sale is in Japan through March to July. • The highest sales have been recorded in June so ideal launch date would be at the end of February. • 80 percent of yogurt is sold through supermarkets.
Japan yogurt market • Plain yogurt: 39 percent of the market in volume. • Flavored yogurt: 45 percent of the market in volume. • Fruit yogurt: 16 percent of the market in volume.
History • Agria is a leading dairy products cooperative in Sweden. (Yogurts, Desserts, Fresh cheese and Fresh cream) • Sweden’s leading dairy products cooperative, Agria, Delissa line was launched in 1980, encountered difficulties in Japan market. • By 1997, more than 1.1 billion Delissa yogurts and desserts were being consumed per year worldwide. • In fiscal year 1996, Delissa had sales of $2.1 billion and employed 4,400 people in and outside Sweden.
History • The total yogurt market in Japan for 1986 is approximately 600 million cups. • Next five years’ expected market grow is at least 8%. • Company’s launch strategy would be based on expected growth rate of 10% or 15% for the total market. • First year, target of market share is 5 percent and 10 percent share of market within three years of launch. • Company’s plan to cover the three main metropolitan areas, Tokyo, Osaka, and Nagoya, within two years period and the rest of the country within the next three years. • Delissa’s share of the total yogurt market had fallen to 2 percent in 1997.
Competitors The Japanese also consume a yogurt drink called ‘Yakult Honsha’ which is often included in statistics on total yogurt consumption as it competes with normal yogurt.
Franchisee - NIKKO Japan Distribution • Using of existing channels of distribution with daily schedules and enjoy lower • Distribution costs for new products. The Japanese retail system : • Three major metropolitan areas in Japan are; Tokyo 11 million, Osaka 3 million, Nogaya 2 million inhabitants. • Nikko is dominant in these areas. • Initial strategy would be to accepts Nikko’s current milk distribution system as the basic system and at the same time, adopt shifting distribution routes. • Japanese complicated street identification system makes great demand for distribution and drivers.
Franchisee - NIKKOJapan • Nikko is the price leader for various food products in Japan. • Nikko is a significant political force in Japan. • Nikko is divided into two parts. ( process and distribution) • Nikko is the big and its credentials seem perfect for Agria in JAPAN.
Entry Strategy • The concept is natural dairy food is good to taste is proposed as the basic message. • The core target is families with babies. However the product will be consumed by a wider age bracket from young children to high school students. • Advertising and point of sale message will address housewives, particularly younger ones. • It is essential that ads be attractive and stand out strikingly from the others, because • Nikko is newcomer in this competitive market. • Delissa should be positioned as a luxurious mass communication product.
SRT proposal • SRT proposed that Japanese housewives were becoming more diet conscious, it might be advisable to mention the dietary value of Delissa in the launch rationale. • The text was ‘refreshing nature of Delissa Swedish yogurt: it’s so fresh when it’s made at the farm.’
Launch, product line • Product line was presented to distributors in 1987 January. • Three different types of yogurt were selected for launch; • Plain; packs of 2 or 4 • Plain with sugar; packs 2 or 4 • Flavored with vanilla, strawberry and pineapple (packs of 2) March 1 1987 Tokyo and May 1 1987 Osaka and Nagoya • All three types were to be sold in 120 ml, cups. • A major pre-launch promotional campaign was scheduled for the month before launch with strong TV, newspaper and magazine support, as well as street shows, in store promotions, and test trials in and outside retail stores.
1990: DELISSA AFTER THREE YEARS IN JAPAN • Distribution system: It is not satisfied and should be improved. The ordering system is slow and complicated. The delivery process is long for dairy products, it takes almost three days after production of yogurt. This period should be one day. Distribution costs were at 27% of sales versus competition at only 19%. • Advertising: In an advertising awareness test, half of the respondents claimed not seeing any yogurtbrand advertisement. Furthermore, 55% of Delissa advertisement viewers responded that they did not know what the message was
LEADING UP TO 1997 • Delissa had only 3 percent of total yogurt market in Japan in 1997. • 1994; the Japanese market is still tough and competition is very strong. Consumers brand loyalty seems low. But market is large with high potential. Lack of a real marketing function in nikko is a great handicap in market as competitive as Japan. • Distribution cost is high. • Distribution level is low. • 1995; Delissa’s strategy in Japan is being redefined. Ads will now show happy blonde children eating yogurt. Over time, the product line has grown significantly and a line of puddings has recently been added. • 1997; plain yogurt should represent almost half of Dellisa’s Japanese sales and account for about 43 percent of the total Japanese market. The plain segment has grown by almost 50% in the past three years. Delissa’s fruit yogurt segment has been disappointing. New segment, yogurt with jelly, has been selling well, 1.2 million cups in three months. • Mid-Year results: Sales as of mid- year 1996 are below forecast. Target is to reach over 42 million cups by year ed.
Problems • The core problem for Agria in Japan is that fact that even after 10 years since the launch of the Delissa brand yogurt in Tokyo, Osaka and Nagoya, Delissa only holds less than3% of the overall yogurt market share in Japan. Furthermore, by 1991, its market share dropped further to only 2%.
Solutions Media Planning • Delissa’s primary target should be young people between thirteen and twent-four and its secondary target is children. • Ads showing time should be arranged according to these segments. Positioning • First largest segment is plain yogurt, second is flavored yogurt, third is fruit yogurt. • Ads of plain yogurt should be traditional one and ads of fruit yogurt should be based on fashionable.
Conclusion (1) • In January 1987, Delissa’s product line was presented to distributors prior to launch in Tokyo. Their main goal was having the %15 of market share on dairy products. After three year they only had the 2 percent of the Japanese yogurt market. Results were really disappointed for the company. In 1997, results were almost same, they had the 3 percent of total yogurt market. • At the beginning SRT helped to developed Delessa’s entry in to milk related products market in Japan. Company chooses the Nikko, as a franchisee company who is the country’s second largest association of agricultural cooperatives. Also Nikko was the price leader for various food products in Japan.
Conclusion (2) • Agria’s executives thought that it was going to be easy to establish a brand name in Japan like they did in Thailand and Taiwan. Consumer behaviors were so different and Japanese consumers don’t consume that much milk like Scandinavians do. And Also company was having a lot of problem on their distribution channels. There are so many retailers inTokyo and they are small retailers. Routes for their tracks were so complicated . Consumers in Japan shop daily and traditionally use the small shops so they had to negotiate with the small retailers. At the beginning Nikko’s ordering system was so slow. It takes 4 day to buy Delissa’s products which means loosing the freshness.
What Agria should do? • Almost ten years after launching delissa with nikko, should agria cancel it’s contract and find another distributor? • should the company renew the arrangement with nikko and continue to try to gain market share? • should agria admit defect and withdraw from japan completely?
Language problem between Delissa and Nikko was one of the main problem. Dellisa couldn’t establish their company mentality to Nikko’s workers. There are many misunderstandings. For example TV ads, Dellisa were intended for young people in the ads, however Nikko were running TV spots at late night times. Plain yogurt makes up the largest segment inJapan . It was therefore recommended that regular advertising should concentrate on plain yogurt. However, according to Nikko, the company makes only a marginal profit on plain yogurt, thus they feel it would be preferable to advertise fruit yogurt. • In sum, Agria never controls the business. Their distribution system is a perfect example. They could never know what was going on out there because language problems forced Agria to count on Nikko. Agria’s executives think that the Japanese will kill Delissa once they’ve mastered the Swedish technology and they will develop their own brand. According to us, they have to get out of the venture agreement with Nikko and they have to get out of the Japan altogether.
