Change the rule of competition! Good Taste Milk, GT

1. Change the rule of competition!Good Taste Milk, GT

2. Contents • 0) About the competitive domain • 1) Good Taste Milk, GT • 2) GT Technology • The Effect of GT • Future • Conclusion

3. White milk : a fresh milk that is not added any ingredients or taste. • Functional milk : a milk that is strengthened or removed specific ingredients. • Processed milk : a milk that is processed to add some taste or fragrance. 0) About The competitive domain, Milk Industry • Divided into White milk, Functional milk, Processed Milk

4. 0) About the competitive domain • Michael Porter’s 5 force model • The degree of existing rivalry : “Seoul Milk” as s traditional market dominator (market leader) “Maeil milk” as a competitor that competes with Namyang to get 2nd market position. (ESL) Many other competitors, like Yunsei, Denmark. • The degree of potential entrants : The high entrance barrier. Agriculture departments of Universities as a potential entrants. • Bargaining power of suppliers. : Supplier’s demand for 20% increase of raw milk price. => 13% increase since Sep. 2004

5. 0) About the competitive domain • Michael Porter’s 5 force model • Bargaining power of buyer : 21.7% rise in the consumer price index (107 -> 130.2) => increase the price => 10 % reduction in consumption The change of Customer’s needs/wants to processed or functional milk because of “Well-being movement” The industry changing to Customer-driven industries from Capacity-driven industries. • Threat of Substitutes : The growth of functional milk and processed milk markets. White milk’s loosing its market.

6. 0) About the competitive domain • Trends of milk market before GT • The State of white milk market : Decrease in White milk’s growth ratio. White milk market on the matured stage of the S-Curve • Rule of competition : Brand image as Rule of competition in White milk market. ex) Brand power of Seoul : Processed milk in whole milk market ex) Banana milk, Strawberry milk, Chocolate milk, Green tea milk, peanut milk

7. 0) About the competitive domain • Namyang’s Decision • Pros. And Cons. • White milk Pros : Stable market. (school,..) Low Cost. Cons : Strong competitors. Customer’s needs/wants. • Functional & Processed milk Pros : High quality. High price. Well-being trend. Cons : Unstable. (depending on trend.) High Cost. High Sugar content • All the main competitors focused on Functional & Processed milk Change the Rule of Competition to White Milk !!!

8. 1) Good Taste Milk, GT • Market research Target 20~ 30s !! Target white milk !! Focus on better Taste !!

9. 1) Good Taste Milk, GT • About Gook Taste Milk, GT • High Price • Success : 100 million milks (200ml) sold 100 days after launching. Why? Good Taste !!!

10. Good Taste Milk, GT A white milk with true taste and freshness of raw milk and no crude taste without any artificially adjusting components. 1) GT Technology • About Gook Taste Milk, GT • What is “Good Taste” ? : From Research, ‘true taste of raw milk’, ‘sweet taste’, ‘flavory taste’ ‘smooth taste’, ‘freshness’, ‘end taste’ Bad tastes are from bad smell True taste and freshness of raw milk !! How? GT Technology !!!

11. 2) GT Technology • What is GT Technology? • Key technology of “Namyang”. The result of Product Innovation • Technology Integration & Market-Pull Innovation • A technology that makes the white milk with better taste than processed milk : Removing crude and unpleasant taste and smell, & Maintaining good taste of raw milk for long. • Compatibility with existing values, but having Relative advantage in “taste” • 3 Steps of GT Technology • GT1- Good Taste process • GT2- Nitrogen filling process • GT3- New milk process

12. 2) GT Technology • Overall Process

13. 2) GT Technology • GT1, GT2, GT3 ? • GT1- Good taste Process : Eliminating oxygen dissolved in raw milk. Eliminating bad taste and smell components from Pasture and Feed smell. Using GC/MS and detectors. • GT2- Nitrogen filling Process : With filling Nitrogen, Eliminating dissolved and free oxygen, bad taste, bad smell perfectly. Maintaining the taste until drinking A Patent application • GT3- New milk Process : Finding the secret of milk taste, and Improve the taste without artificially adjusting components.

14. 2) GT Technology • Namyang’s Technology Management (Problem recognition -> Technology Selection) • Scanning & Forecasting : To Catch the market needs. Using questions and customer’s feedback. Convincing that white milk can be competitive again. • Catching the technological opportunity and Decision to technology appropriation : Technological opportunity not derived by technical feasibility but also by marketplace needs. The market need is “TASTE”. “Taste”is the technological opportunity !!

15. Satisfying Resources and Collateral Assets : Investment in Plant & Equipment, and R&D (more than 100 billion won.) A good R&D Center. – approved as KOLAS. 2) GT Technology • Namyang’s Technology Management (Solution development) • Developing Technology Strategy : Choosing Technology Leadership Strategy. - Get out of competition functional & Processed milk market. alter the rule of the competition (->taste) Decision to In-house Development Adopting Differentiation Strategy - Good taste but higher price. White milk can be tasty !!

16. 2) GT Technology • Namyang’s Technology Management (Commercialization/Implementation) • Diffusion : Developing new products, Good Taste Milk, GT Adopting this technology to other products. Whole Products to be Good taste. Removing other white milk products : Marketing with Emphasis on its competitive advantage, Good Taste. Ex) Naming the product as “Good taste milk, GT” Emphasis on the good taste in CF. Free Sampling party. (80% answered delicious)

17. Seoul Milk • Namyang • Maeil Milk 1st Grade Raw Milk No technology development Depending on Brand image Market research Technology development GT Technology Leadership Strategy Focusing on “Taste” Adopting to other products Technology development ESL Focusing on Health & expiration date Depending on Brand image 2) GT Technology • Three major milk company’s Decision

18. 3) The Effect of GT • Success in the Competitive Domain • 100 million packs sold in 100 days after Launching • The most sold milk in a day. (1million packs a day)

19. Star Question Mark 높음 17茶 GT Milk Market Growth Cash Cow Dog 3.4 Milk 낮음 I,O Bulgaris Einstein Milk 10X 1X 0.1X Market Share 3) The Effect of GT • Success in the Competitive Domain • BCG Matrix

20. 3) The Effect of GT • Change the Rule of Competition => Induced Change • Breaking the fixed idea that “White milk is not delicious”. : 80 % of participants in the sample party answered “delicious” • Change the rule of competition to “taste of white milk” from processed milk. • Disruptive technology to Processed Milk, • But, Sustaining technology to Functional Milk. : 40% increase in sales of Calcium and vitamin Milk (2005~2006)

21. 3) The Effect of GT • Expanding • Adopting GT technology to other Products : Improve the taste of other milk Increase the competitive power of whole products • Globalization : Pass PMO (Pasteurized Milk Ordinance) Supply Good taste milk, GT to US army

22. 3) Future • Challenges • Protection From Imitation : Protect the key technology and Differentiation from imitators. • Developing new technology : To make Product life longer (ESL of Maeil) To make Products more nutrious • Offensive Marketing for differentiation • Globaliztion

23. 3) Conclusion • Success factor of Namyang • Market research and get the Market needs/wants • Developing new technology, GT • Investment, and having its own R&D Center. • Diffusion Strategy