Country Market Analysis

1. Country Market Analysis MEXICO Lipton Iced Tea

2. LIPTON ICED TEA IN U.S. • Positioning: • Healthy alternative • On-the-go refreshment • Variety of flavors • sweet, un-sweet, lemon, raspberry, peach, green tea • Target Market: • Adults who seek a healthy lifestyle • Distribution: • Pepsi-Lipton tea partnership is the leading ready-to-drink tea producer in U.S. & Canada

3. TRANSITIONING INTO MEXICO • Issues to Consider: • How much will consumers be willing to pay in Mexico? • Will the current product line in the U.S work in Mexico? • Where do consumers in Mexico purchase iced tea, and how do we make it available to them? • Is the consumer base large enough for Lipton Iced Tea to enter the Mexican market? • How will the population become aware of our product?

4. AGENDA • Price: • Factors that affect price • Product: • Cultural differences and how competition influences product decisions • Place: • Distribution options and advantages • Promotion: • Ways to reach consumers

5. PRICE Considerations for a pricing strategy: • Disposable Income: • Mexico is a relatively poor country • Per capita: $9,000* • *This is about ¼ of the U.S. average • 40% live below poverty line • Competitive Pricing: • McKormick, Nestea, and domestic brands • Consumers in Mexico are willing to pay a lower price for domestic brands

6. PRICE • Distribution Costs’ Effects on Pricing: • Partnership with Pepsi – reduces distribution and production costs • Economies of scale • Advertising Effects on Pricing: • TV and radio are the most effective forms of media, but are most expensive • Increased advertising may fluctuate prices

7. PRODUCT • Languages and Dialects: • 95% of people speak Spanish • Different interpretation for marketing strategies with the different dialects in the Mexican culture • According to Mexican laws, you must translate your marketing literature, product manuals, labels, and warranties into Spanish • High literacy rate of 92% • Consumers will be better educated about product • Less likely to misinterpret labeling or packaging

8. PRODUCT • Religion: • Catholicism plays a major role in society and Government • Mexicans value the meanings of symbols in a religious sense • Research logos to be used by Lipton for product

9. PRODUCT • Mexico’s unsafe drinking water • Water source? Purified? • Competition – other successful iced tea brands • Closely observe their strengths and weaknesses • Flavors • Colors • Ingredients • Obtain consumer feedback on already established brands of iced tea

10. PLACE • Free market economy, very similar to U.S. • Retail outlets in Mexico for new age beverages: • Standard Grocers - 51.6% (of the market’s value) • Traditional grocers - 32.2% • Convenience stores - 5.2% • Kiosks - 3.7% • Discount grocers - 3.4% • Petrol Station stores - .5% • Vending - .2%

11. PLACE • Additional Availability: • Movie Theaters • Cinemex - Mexico’s largest cinema chain • Pepsi is the supplier of cinemex’s drinks • Street Vending • Distribution Options: • Unilever Plant • Currently present in Mexico • Needs to be adapted to produce tea • Local Mexican Distributor • Finding well respected Mexican distributors is difficult • 50-50 joint-venture with Pepsico

12. PLACE • Existing Presence in Mexico: • Unilever • Several successful brands and production plants within Mexico • Pepsi • The Pepsi Bottling Group Mexico reaches 65% of the Mexican market place • A well established, strong brand in the Mexican market • Existing business relationships • Strong brand loyalty

13. PLACE • Pepsi-Lipton International: • A 50-50 joint venture between Pepsi and Unilever • Uses Pepsico’s extensive bottling and distribution network • Pepsi-Lipton International joint venture has proven to be extremely successful among other international markets

14. PLACE • Pepsi Bottling Group Mexico • 5 different territories • 22 production facilities with water purification • 180 distribution centers • 5,200 trucks on the road making deliveries each day • 26,000 employees • 4 other Pepsi franchise bottlers serve the remaining regions

15. PLACE • Surface Transportation • Railways: 12,120 miles • Highways: Total: 204,800 miles • 137,600 miles unpaved • Problems: • Getting product to retail outlets • Consumers getting to retail outlets and getting product home

16. PROMOTION • Population - 104,959,594 • Growing 3 times as fast as U.S. • Ever-expanding group of potential customers • Segmented market due to social classes • Mexicans are very status conscious • To be considered when positioning product • Television • Reaches 19,284,881 of 22,268,916 households in Mexico, or 84% of households have television

17. PROMOTION Commercial Television • Basic channels reach large number of people • Strong opportunity to market to the masses • Peak times are between 7pm-midnight

18. PROMOTION • Unilever – 8th highest spending on Mexican TV advertising • Established presence and relationships with advertisers and TV companies • Know how to reach customers • Sensitive and aware of Mexican customs • Business and personal

19. PROMOTION • Other Media Outlets: • Radio • Newspapers • Magazines • Cinema • Internet • Radio is 2nd strongest, while internet is only able to reach a small fraction of consumers

20. PROMOTION • Competition • “New Age Beverages” • iced teas, sports drinks and bottled waters • Iced Tea Products • Particularly are popular in Northern Mexico • Consumers are more influenced by consumption trends of the United States • McKormick – leading brand of iced tea • Coca-Cola – Nestea brand of iced tea

21. PROMOTION • Iced Tea Targets: • Towards 25-40 year old age group • Those concerned with living a healthy lifestyle • Nestea’s motto: “Cuando te sientes bien, se nota” (one can tell when you’re feeling good) • Other Competition: • Gatorade • Dominant force in sports drinks market. • Powdered drinks • Low price creates high demand • Liquid concentrates • Ease of handling and generally lower prices. • Carbonated beverages

22. PROMOTION • Lipton must decide how to position itself in the existing market • Similarities with competition • Differences between competition • Coupons, Sales Promotions, Sampling • Standard groceries enable us to consider these types of promotion as an option

23. KEY CONSIDERATIONS • Pepsi-Lipton Joint Venture • Production • Distribution • Unilever’s Existing Presence in Mexico • Mexico = Free Market Economy • High Television Penetration • Existing Iced Tea Brands • 40% of People Live Below Poverty Line

24. GRACIAS! ANY QUESTIONS?