Formulating an International Marketing Strategy

Introduction

The country I have chosen to analyse and formulate a strategy for is the Czech Republic. I intend to use recent market data to show that there is the potential for the marketing of a range of organic fruit juices, both fresh and pasteurized. I shall then analyse the market using a "5C" framework, and give an outline of a marketing strategy for these juices, based upon the "5P" approach.

Data

The Czech Republic is a net importer of food, and its food processing industry is in the hands of a large number of private players and is highly competitive. Imports come mainly from Germany, the Ivory Coast, and Brazil. Consumption of fresh fruits and vegetables was falling until recently, but has grown over the last few years, as people become more health conscious: with almost one-third of the population overweight or obese, the market for diet and health foods is expected to grow. Total volume sales of soft drinks were estimated at 1.56 billion litres in 2003. Mineral water is the most popular beverage among soft drinks, followed by carbonated drinks, and fruit and vegetable juices. (Economist Intelligence Unit, 2005)

Year

1998

1999

2000

2001

2002

2003

Fruit consumption (kg per head)

74

73

69

67

75

76

Vegetable consumption (kg per head)

78

82

76

74

67

68

Soft drinks, sales volume (million litres)

1,117

1,217

1,284

1,379

1,493

1,558

Source: Economist Intelligence Unit, 2005

Czech consumers have shown a preference domestically made products, which are cheaper than imports; however the agricultural sector's contribution to GDP was an estimated 2.7% in 2004, down from 4% in 2001. Around 41% of the land is arable; with the main crops being grains, potatoes, sugar beets, hops, fruits, pigs, cattle and poultry. Government subsidies are lower than in EU and OECD countries, with most of the formerly state-owned land having been privatized: by end-1999 the state held only 2% of the agricultural land. The sector faces a lot of challenges, including low investment, slow mechanisation, high costs and inadequate government subsidy. The food-processing industry accounted for 12.8% of total industrial output in 2004, with meat and dairy processing units accounted for the highest share. The industry is highly competitive and is controlled by private producers: there were 10,000 registered food-processing units in 2001, of which at least 70% were small companies; however some of the key players in the processed food industry are Nestlé (Switzerland), Danone (France) and Hame (Czech Republic). (Economist Intelligence Unit, 2005)

International food-retail chains are eroding the position of small retailers: there were 105 hypermarkets in 2001, and retail sales of food amounted to US$7bn in that year. A quarter of food products sold are imported, mainly from the EU, through small import companies. Locally owned co-operatives, however, have begun merging over the past couple years to counteract the competition from foreign-owned hypermarkets and supermarkets and appear to be holding their own. Independent food retailers have largely been driven out of business. (Economist Intelligence Unit, 2005)

Analysis

The context of the global market for organic fruit juices is that of growing world wide food consumption, with obesity becoming a major concern in many countries, both developed and emerging. (Binns, 2003) This is as relevant in the Czech Republic as anywhere else: the market data shows that consumers in the Czech Republic are becoming more health conscious, with fruit and vegetable juices the third most popular soft drink, but are still very price sensitive: the main reason domestic goods are preferred over imported goods that may well be of higher quality. When coupled with the competitive nature of the food market, it is clear that being price competitive should be an extremely important part of any marketing strategy. No information is provided on the inner workings of the UK FMCG company, but for the purposes of this strategy, I am assuming that it is capable of producing and marketing an inexpensive, reasonable quality range of organic fruit juices. Collaboration could potentially be very important to any strategy, with the small import companies being vital to any attempt to crack the market, and with most of the arable land being privately owned, an agreement would be needed in the event of an attempt to grow the produce within the country.

Strategy

The product should be a healthy, low calorie, range of organic juices, with good quality control levels, although the quality control is not as important as it would be in a more developed nation: the majority of Czech consumers appear to buy on price, rather than luxury status. The price itself should be as low as possible: as a minimum it should be comparable to carbonated drink prices: this will allow the product to use its health benefits to compete with carbonated drinks for the number two spot in the soft drinks market. Promotions should equally focus on the price and health benefits of the organic juices versus soft drinks, ideally showing a lower calorie, fat and added sugar content, and more vitamins and nutrients, for a similar price. The placement of goods in stores should ideally reflect this: displays should be mounted as near as possible to carbonated drinks and should emphasise the health benefits as much as possible. The people factor will require resourceful negotiators to negotiate the importing or production contracts, and also to liaise with the hypermarkets to ensure the desired product placement and displays.

Conclusion

Although the market for healthy food and drink in the Czech Republic has been falling it recent years, health concerns are now leading to its re-emergence. As such, there is a definite opportunity for the successful importing and marketing of organic fruit juices, provided their health benefits can be maintained and emphasized, and they can be made price competitive, in the eyes of the Czech consumers, with the currently more dominant carbonated drinks. If this is achieved, these juices could potentially gain control of a large and profitable market share.

References

  1. Binns, S. (2003) Buyers urged to back obesity fight. Supply Management; Vol. 8 Issue 25, p. 8.
  2. Economist Intelligence Unit - Executive Briefing (8 February 2005) Czech Republic: Food, beverages and tobacco background.