Link Natural (Pvt) International Audit

EXECUTIVE SUMMARY

Link Natural (Pvt) Ltd’s decision to advance their business to France was apart of the economical and socio-cultural analysis carried out to identify the market potential for the product (Link Samahan) to be sustainable in the French herbal market. The company is already conducting their businesses in many locations around the world, and France was a further step taken to expand their global presence.

The following report is the market audit conducted in order to identify some of the key factors that should be taken into consideration when expanding a business across borders. A brief description of the product ‘Link Samahan’ is presented initially in the report followed by an analysis of the product acceptance as well as possibilities of product resistance by the French consumers. This was identified through considering factors such as trialability, complexity, relative advantage, observability and compatibility of the product in the French herbal beverage market.

The report further analyses the market in which the product will be sold and the geographical regions in France that were chosen for the initial business operations, namely Paris, Nice and Marseille. The basic transportation systems and modes in the selected areas are also discussed followed by the main communication methods used by them. Furthermore the report provides a description on consumer buying habits, distribution of the products, pricing strategies and the advertising and media usually used to reach the target market.

A comparison and contrast between Link Samahan and its competitors in the French market is also carried out in the report. The comparison includes the prices, product features, packaging differences along with the promotional methods and distribution channels utilized by Link Samahan and the other competitors. Moreover, the report extends to discuss the market size indicating the trend of the industry sales and the expected sales for Link Samahan in the coming year.

Finally, the agencies that will benefit the company and the important government regulations that should be followed by the company are discussed at the latter part of the market audit.

INTRODUCTION

Link Natural Products (Pvt) Ltd. is a leading business entity in Sri Lanka that provides herbal, Ayurvedic pharmaceuticals as well as safe and effective herbal healthcare products. Some of the main products of Link Natural include, ‘Link Kesha’ hair oil, ‘Link Sudantha’ toothpaste, ‘Gotukola Tea’ and Spa/Aroma products. As a result of extensive research carried out for years, Link Natural introduced ‘Link Samahan’, a 100% natural herbal product to the market for curing common colds and similar ailments. Currently Link Natural is exporting their products to countries such as Malaysia, USA, UK, Germany, Thailand, India etc. (“Company Profile”, 2009)

France being a European Union country owns the largest land among the EU countries. As an expansion in the maturity level of the product (Link Samahan), Link Natural has decided to distribute the product to three different locations situated in France. According to (Bell, 1997), French people consider herbal beverages to be healthy and they are most commonly used in every day life in the French culture. The demand for herbal products in the European market has risen over the years and this can be considered as a great opportunity for Link Natural to expand their business to France.

In order to identify the target market and their potential it is vital to carry out a detailed market analysis with regard to the product. Thus the main focus of the following report will be to evaluate a market plan and audit for the purpose of marketing Link Samahan in the French herbal beverages market. The market audit will comprise of a detailed description on the target market, geographical distribution, diffusion of innovation of the consumers as well as advertising, pricing and promotions in terms of the herbal beverages market in France.

THE PRODUCT: LINK SAMAHAN

Link Samahan is an authentic herbal product made in Sri Lanka and it is made of 14 natural plants which are generally used in ‘Peyave’ formulations. As stated in (“Product Data Sheet”, n.d.), in ancient Sri Lanka ‘Peyave’ was considered to be one of the most popular cures for viral fevers and influenza, and it consists of a mixture of herbs in boiling water. This instant herbal beverage is used for common colds as other similar ailments such as sneezing, itching eyes, running noses etc.

Currently Link Samahan plays the leading role in the Sri Lankan herbal products market for colds and other related ailments, and Link Samahan is being distributed to 32 destinations in eight different countries around the world, (“About Samahan”, 2009). (Refer Appendix 1).

Link Samahan will be expanding into the herbal beverage market in France for the first time. “An innovation is any product or a service that consumers perceive to be new’, as stated by (Solomon, 2004, pg.567). Therefore, the following section will focus on how the proposed target market will perceive Link Samahan and their levels of acceptance and resistance will be determined.

LINK SAMAHAN AS AN INNOVATION (As perceived by the intended target market)

“Diffusion of innovation refers to the process whereby a new product, service, or idea spreads through a population”, (Solomon, 2004, pg.567). The rate of adoption may differ from person to person even within the same culture. According to (Solomon, 2004, pg.567) a study of 11 European countries found that consumers in individualistic cultures are more innovative than consumers in collective cultures. Therefore to identify the acceptance rate of Link Samahan in France a few important factors will be analyzed apart from the consumer behavioural changes among the target market. These factors are as follows:

Relative advantage

It is important that the consumers believe that the product is important and more beneficial for them than the alternative brands in the market, as the new product adaption rate is directly proportional to the relative advantage of the new product.

The main characteristic of Link Samahan is that it is an herbal drink, which can be prepared instantly by just dissolving in hot water. Furthermore it has the relative advantage of being a complete natural product that can not only be used to prevent colds and similar ailments, but also can be used as a hot beverage. Therefore, it can be said that Link Samahan has a 2-in-1 relative advantage compared to other herbal beverages.

Compatibility

According to (Solomon, 2004, pg.570), the innovation should be compatible with the lifestyle of the consumers. No matter how convenient the product is, sometimes the consumers may not accept the product due to ethical or cultural issues.

But as mentioned before according to (Bell, 1997), the French have a popular demand for herbal beverages, and have over a 70% of herbal products in large grocery stores and hypermarkets. This is one of the core reasons that Link Natural has decided to distribute Link Samahan to France. It can be stated that Link Samahan is strongly compatible with the French market and will potentially have a high usage rate.

Complexity

Link Samahan is a moisture-proof, triple laminated sachet with a net weight of 4 gram per packet and contains a soluble powder that can be instantly made, which makes it very low in complexity. For the convenience of the French people the directions and other details will be indicated in French, as well as English as opposed to the Sinhala, Tamil and English product details used in Sri Lanka. Therefore the product will be easier to understand and use over the other competitor brands available in the market.

Trialability

Link Samahan is considered to be a fast moving consumer good (FMCG). Therefore with regard to trialability, promotions will be carried out at the initial stage at the supermarkets and retail stores for the consumers to taste the product through free samples. Since consumers have the ability to try out the product and evaluate it through the free samples, Link Samahan has a very high trialability factor.

Observability

An innovation should be high in observability for an adopter to be aware of its existence. Having promotions as mentioned above can be of use to a certain extent (i.e. taste) but the exact outcome of Link Samahan cannot be observed immediately after the consumption.

MAJOR PROBLEMS & RESISTANCES TO THE ACCEPTANCE OF LINK SAMAHAN, BASED ON THE PROCEEDING EVALUATION

Any company when entering to a new market or introducing a new product is faced with a potential risk of failure no matter how favourable the circumstances are. Therefore it is essential to analyze the consumer acceptance for the product in order to survive in the market.

Based on the proceeding evaluation, Link Samahan has a high potential of the consumers acceptance as there are high levels of relative advantage, compatibility, trialability and it is also low in complexity.

THE MARKET

MARKETS IN WHICH LINK SAMAHAN WILL BE SOLD

Through the sociocultural and an economical analysis conducted previously, it was identified that there is a favourable market for Link Samahan to be introduced in France. According to (Bell,1997), approximately 2500 metric tons are sold annually in the herbal beverages market in which 60% is in sachet format, 36% in instant products and about 2% in bulk.

One of the main reasons to penetrate the French market is their acceptance of herbal beverages. It is most commonly used in many households and is enjoyed by most French people. Thus there is a demand for herbal products, and in addition to this, Link Samahan can also be used as a cheap & effective way to cure common colds as oppose to using Saunas which is also highly popular in France.

Link Samahan is an FMCG which can be afforded by anyone ranging from lower-middle level to upper level income earners. France has an estimated population of 64,057,792 as mentioned in, (“France – Demography”, n.d)

Geographical regions

France is a Western European country which borders countries such as Belgium, Spain and Italy in the Europe region. 77% of the total population has been urbanized as of 2008 and 65% of the total population falls in the 15-64 years age category, (“Central Intelligence Agency”, n.d.) (Refer Appendix 2).

The population is one of the main factors that have to be taken into consideration in deciding the main geographical regions for Link Samahan to be distributed and marketed to. According to research carried out by (Butler, 2009), the main cities in France with the highest populations are Paris (11,293,200 people), Marseille (1,532,400 people), Lyon (1,665,700 people), Toulouse (975,000 people), Nice (943,000 people) and Nantes (718,700 people).

Furthermore, France is generally known to be a cold city and it is a country with typical seasonal changes through out the year. Also, according to (“Central Intelligence Agency”, n.d.), France is faced with floods, midwinter windstorms etc. at certain times of the year. Hence, the probability of people being faced with the common cold is high in terms of climate changes.

The company has selected Paris, Marseilles and Nice to distribute and market Link Samahan due to the above mentioned reasons. Another primary reason for selecting Marseilles and Nice is the easy access due to being situated in the coast of France bordering the Mediterranean sea. Hence geographically there is easy access to these cities and the products can be shipped conveniently from Sri Lanka.

Forms of transportation available in these regions

Paris

There are many forms of transportation used in Paris. It consists of four airports, Roissy-Charles de Gaulle and Orly being the main two commercial airports and, Le Bourget, and Beauvais Tille being two smaller airports for budget airlines and private jets, (“Paris Airports”, n.d.)

Gare de Lyon train station in Paris provides rail services to the south and east of where Marseilles and Nice are situates. Therefore, Link Samahan can easily be transported to and fro from Paris to the other 2 selected locations, (“Gare de Lyon”, n.d).

Apart from this the Metropolitan underground train network and the two tramlines are also commonly used for transportation in the city of Paris. The bus network in Paris covers the Ile-de-France region and also it extends in the central Paris. However, traffic has to be taken into consideration when travelling by bus as Paris a busy city, (“How to use Parisian transport networks”, 2003).

Marseille

Marseille has one airport. Similar to Paris it consists of a bus network and two metro lines which are commonly used among passengers. It is convenient to travel using the Metro Line over the bus network due to the heavy traffic situation in the city. The main train station in Marseille is called Gare Saint Charles and it connects to Paris, which takes approximately 3 hours, (“Marseille Transport”, 2007).

The Marseille Port, being the largest port in France, plays a major role in transporting of Link Samahan from Sri Lanka to France, as the company will be using Vieux Port in Marseilles as the main port to distribute the products to Marseille and Paris and Nice respectively, (“Marseille Cruise Port”, 2009). From Marseilles, Link Samahan will be transported via train from Gare Saint Charles Station to Paris.

Nice

The main concern of the company is transporting the product from Marseille to Nice. Therefore the Link Natural (Pvt) Ltd. will be using the railway system for the means of transporting the product to Nice.

Communication available in these regions

The most common methods in communicating in Paris are through telephone, Internet, and television. Some of the main telecommunication companies situated in Paris are Coriolis Télécom, France Telecom, Orange (France Telecom), Bouygues Télécom and SFR in which most provide the consumers with telephone as well as internet broadband facilities. (“France Telecommunication Companies”, 2009)

According to (“Internet World Stats”, 2008) the main dominator of all telecommunication methods such mobile, fixed, Internet and broadband in France is France Telecom. Similar to Paris, Nice and Marseille also use Internet, Telephone and television as main methods of communication.

58.1 % of the population uses the Internet in France (“Internet World Stats”, 2008). Therefore, Link Natural can use Internet advertising to promote Link Samahan in France for wider reach of the target market.

According to (“Television Viewing by Country”, n.d.), the average viewing rate of television in France is 23 hours per person per week, which indicates that accessibility for television is high among the consumers and therefore television media can be used as an effective means of communicating the product to the customers.

Consumer buying habits

Consumers’ buying habits may vary according to the type of products purchased by them. For instance, people may compare and contrast when purchasing a ‘shopping’ good with the alternative products available in the market.

Since Link Samahan is a consumer good, which needs little effort of the consumer in purchasing the product the consumers in the intended target market are not expected spend a lot of time in deciding on purchasing the product. However, since the herbal beverages market is considerably large in France it is vital to pay attention to the leading competitor’s brands purchased most frequently by the consumers.

Product use patterns

The herbal beverages market in the Europe has grown over the years due to health concerns of most consumers. People are more careful with their health as a result of their busy scheduled lifestyles. The French generally tend to consume herbal infusions daily in the night after dinner time. Therefore the usage of herbal beverages in France is regular and consistent in the current market.

Product feature preferences

Most people look for convenience when purchasing products and are more health conscious considering the health issues that they are exposed in the society as previously mentioned.

Link Samahan is marketed as a two in one product, which is an herbal cure of colds, as well as a normal hot beverage to the consumers. Therefore the taste of the product is given special consideration so that the consumers will show a favourable response towards the product. It also an instant drink which can be prepared easily.

Shopping habits

According to the research carried out it was identified that the average consumer purchases herbal beverages approximately once in every three weeks. With the rise in health concerns among the people and herbal beverages being conveniently available in the local retail and supermarket outlets customers are bound to purchase them on a regular basis.

Distribution of the product

Most of the herbal beverage products are available all over France. They are mainly distributed in local grocery stores, retail outlets and many international supermarket and hypermarket chains located in the country. According to (“Shopping in France”, n.d.) some of the main supermarket chains are Champion, Carrefour, Auchan, Casino, Leclerc and Intermarché.

Advertising and Promotion

Advertising media usually used to reach the target market

The usual methods of advertising FMCG products are through television, radio, and newspaper/magazine advertisements, as they are targeted towards a mass market of all levels of income earners.

Having the fourth highest television-viewing rate in the world, 99% of the households in France have access to televisions especially in the urban areas. According to (“Press Reference France”, n.d.), there are 584 television networks currently operating in France and marketers of FMCG’s frequently use television advertisements.

Another popular method of advertising is through Radio networks, as most people have access to radios. Considering the busy lifestyles of the people most companies have adopted this method as people in urban as well as rural areas are known to listen to the radio even when doing other work.

Other methods used include newspapers and magazines. French are said to have a high literacy rate of 99% and newspapers and magazines are commonly used around the country. Apart from these methods, Internet is also widely used for advertising consumer products as most people purchase goods online, especially the younger generation.

Sales promotions customarily used

For most FMCG products, most commonly used sales promotions methods are buy one get one free promotions, in store promotions and free sampling promotions held at retail stores and supermarkets.

Pricing Strategy

Initially Link Natural will be using the price penetration strategy at a set price of €10.50 intending to attract more customers and capture a larger market share. However, the price maybe varied accordingly in the future depending on the purchasing trend of the consumers and discounts will be given during different seasons.

COMPARISON & CONTRAST OF LINK SAMAHAN WITH THE COMPETITOR’S PRODUCTS

Link Samahan

Brand Name: The name Link Samahan is a ‘family brand name’, which is derived from the company name Link Natural. This gives Samahan a special recognition for the consumers, as Link Natural is a well-reputed company in many countries in the EU.

Features: Link Samahan is made using 14 natural Ayurvedic herbs, which were chosen through a comprehensive study done by Ayurvedic scientists for years. The main feature of the product is that it is a beverage, which can be made instantly by dissolving in hot water. The basic flavors of Samahan are Lime and Lemon, and will extend to include Mint and Linden (which is a common taste preference of the French people).

Package: The 100g pack consists of 25 moisture-proof, triple laminated sachets with a net weight of 4 grams per packet. The details on the sachet will be indicated in both French and English for the convenience of the consumers. The sachet will be yellow and green in color to give a natural look and the colors will be differed accordingly when new flavors are introduced.

The competitor’s products

Link Samahan is mainly marketed as a medicine for curing common colds as well as a regular herbal beverage. Therefore there is no direct competitor for the product although there is a large market for herbal beverages in France.

There are many herbal tea products available in the French market. The market leader is Lipton with more that 46% of the herbal sachet tea market. The Lipton Company brands Elephant and Saveurs du Soir, dominate the French herbal beverage market by providing various types of herbal tea flavors.

The bulk herbal tea market is dominated by La Tisanerie brand, which is also a popular brand available in France. However, they also sell sachet packages in a variety of flavors. Apart from these competitors, Solinest’s Ricola brand of instant herbal infusions dominates 90% of its product area while 10% of the market represents other Store brands, (Bell, 1997) (Refer Appendix 3)

Lipton

Brand name: Lipton Elephant Brand & Lipton Saveurs Du Soir

Features: Both brands mentioned above are herbal teas and have different types of flavors ranging from mint to a wide range of fruit flavors. The price ranges from £6.00 to £7.00.

Package: Each pack contains 25 sachets and is presented in their own unique color depending on each flavor.

Foods International

Brand name: La Tisanière

Features: La Tisanière is also an herbal tea with various flavors such as “Les Fruisanes” range, which has a variety of fruit flavors, “Trésors de Nature” range, which has a variety of flavors combining flowers and herbs and the “Wellness” range. (“What about La Tisanière”, n.d)

Package: Different flavors are presented in different colors and packed in 25 sachet boxes.

Ricola

Brand name: Ricola

Features: Ricola herbal tea is a popular hot beverage especially during the winter season and is commonly used as a remedy for colds and coughs, (“Instant Teas”, n.d.) Similar to other competitors, Ricola also offers a wide variety of flavors in their herbal tea range.

Package: Ricola teas are generally packed in a plastic container ranging from 200g onwards and in presented in different colors according to the flavors.

Comparison

All competitors of Link Samahan fall under the herbal tea category. Therefore there is a relative advantage for Samahan as it will be marketed as an herbal beverage as well as a medical concoction used for common colds and similar ailments.

Most competitor brands seem similar in appearance which makes it hard for the consumers to distinguish between them at a glance. However, Link Samahan will be presented in its own unique packaging so that it will be visible among rest of the products. The most significant difference between Link Samahan and other competitors is that the price of Link Samahan will be slightly higher due to the fact that it is more of a remedy to cure colds as well as a regular herbal beverage.

The competitor’s price

The following is a list of prices of the competitors available in the herbal beverages market. There is no significant difference between the prices of each brand.

Competitor’s promotion and advertising methods

The primary method of advertising used by Lipton is through newspaper advertisements. Lipton range consists of a wide range of brands. Thus, they advertise each brand separately rather than as a whole. Since most people have access to reading newspapers daily, they believe that it is the best way to capture the target market.

La Tisanière on the other hand is mainly advertised through radio advertisements along with the Twininngs and Ovaltine, which are the other hot beverage products of their mother company Foods International.

Ricola’s main focus is on health magazines as they stress on health benefits of consuming Ricola herbal tea such as a cure for coughs and colds. However, Ricola products are also advertised through radio advertisements as well as newspapers through feature articles etc.

Other main promotion methods used by these competitors are discounted prizes, special draws and competitions, sponsoring various events and coupon systems.

Competitor’s distribution channels

Lipton: Hypermarkets and supermarket chains

Foods International: Supermarket chains and retail stores

Ricola: Hypermarkets, supermarkets and retails stores

MARKET SIZE

Estimated industry sales for the planning year

According to the research carried out in France, a rise in the industry sales is expected in 2010/2011 due to the regular consumption of herbal products among the consumers. The income level of the consumers may not affect them since herbal beverages are considered as an FMCG.

Estimated sales for Link Samahan for the planning year

The graph indicates the forecasted sales for Link Samahan for the year 2010 per city. According to the figures shown, approximately about 45,350 packets per city will to be sold and roughly about 3250 packets will be sold per month in average in the year 2010. Furthermore, Link Samahan is expected to detain the market share rapidly in the French market according to the number of estimated sales. All these details are further discussed in the preliminary marketing plan.

GOVERNMENT PARTICIPATION IN THE MARKET PLACE

Agencies that can help Link Natural

The herbal beverages industry especially herbal tea industry is a rapidly growing market in France. Apart from being sold mainly in hypermarkets and supermarkets, herbal beverages are commonly used in health care centers, hospitals, holiday spas as well as hotels around the country. The usage of herbal beverages can be highly encouraged among the consumers through most of these agencies which will benefit the sellers in the trade.

For instance, Link Samahan can be made available in popular health spas and hotels such as George V-Buddha Bar Spa, Ban Thai Spa, Bleu comme Bleu and Spa Anne Fontaine in Paris, (“Spas What’s New”,n.d.), and SPA de l’hotel Boscolo Exedra – Doctor, sauna le cercle – Nice Saint Maurice and Nyrvana – Madeleine Nice, in Nice (“Saunas and Spas in Nice”, 2009).

It will also enable brand recognition through making the products available in recognized organizations to grab the attention of the target market.

Regulations that must be followed

It is vital that all companies follow the rules and regulations of the country to avoid complications. France belongs to the European Union and according to (Gauthier, 2005, pg.7), the European Commission has decided to draft a legislation on herbal medicinal products, dietetic foods, nutritional and functional claims, and fortified foods.

Also according to (Gauthier, 2005, pg.7), the French Research Center on Nutrition and Food has a recommended allowance of a percentage of ingredients in the products to be consumed daily, and if the product doesn’t meet those requirements, a special authorization from the French Public Superior Council for Hygiene (CSHPF) should be obtained by the manufacturer to market the product.

Also according to French regulations it is important that all information such as product definition, list of ingredients, shelf life, weight and volume etc. are labeled in French on the packaging of the product. (Gauthier, 2005, pg.7) Apart from these, according to (“France Trade Regulations and Standards”, n.d.), quality and ecological labels, bar code price labeling, and usage instructions should also be mentioned.

In general it is important that the product does not portray any offensive material that is not accepted socially, religiously, ethically etc. in France as it will not be accepted under the government regulations.

MARKETING PLAN

EXECUTIVE SUMMARY

The following preliminary marketing plan was prepared by Link Natural (Pvt) Ltd to present a comprehensible idea on their business expansion of Link Samahan to France after conducting an ample research on the feasibility of the product in the French market. The main objective of this report is to guarantee that the product will be successful in the French market when competing among the alternatives available.

The report portrays a detailed description mainly on the intended target market focusing on geographical, sociological, demographical etc. aspects, which are relevant to B2B and B2C markets. It gives an insight to the expected sales and the profit expectations for the year 2010. Furthermore, it explains the penetration strategies used by the company to gain market share of the consumers of herbal beverages in the market.

It is imperative to analyze the product adaptation and modification by using factors such as core components, packaging, and support services etc. to grasp a clear interpretation of the product, which is described with sufficient details in the analysis.

The report also focuses on to one of the major components in the marketing the mix, the promotions of the product carried out in France. The overall promotion objectives are explained followed by advertising, sales promotions, personal selling and other promotional tools used by the company to promote Link Samahan among the French consumers.

Moreover, it explains the distribution components from origin to destination, which includes port selection, mode selection, packing, important documentations, insurance claims etc. as well as channel of distribution and more importantly the price determination of the product.

Finally the terms of sales and method payment used by the company are explained followed by the budget and the financial statement of the entire business plan. Therefore as mentioned above, the crucial factors are highlighted in this report to ensure the success of Link Samahan’s establishment in the French market.

THE MARKETING PLAN

MARKET OBJECTIVES

Target Market

France has been ranked the 19th most populated country in the world, with a population estimate of 64,057,792, as stated in (“France – Demography”, n.d.). It is therefore impractical to target the entire population of the country. The company has taken into consideration factors such as demography and geography when selecting the target market for Link Samahan.

Demographically, the variables that were taken into consideration when selecting the target market were age, sex and income status. 65% of France’s population falls within the age group 15-64 years (“Central Intelligence Agency”, n.d.). Both males and females having a lower-middle to upper level income will be targeted since Link Samahan is an FMCG and is generally affordable to all the income groups mentioned above.

Geographically, Paris, Marseilles and Nice are 3 of the most populated and metropolitan cities in France. Collectively in these 3 cities, the total population amounts to approximately 14.6 million (“France – People”, 2006).

Therefore, the primary business-to-consumer (B2C) target market for Link Samahan in France is: males & females, from lower-middle to upper level income groups, between the ages of 15-64 who are primarily residing in the cities of Paris, Marseilles or Nice.

There will also be a business-to-business (B2B) target market which would consist of the most visited retail stores, supermarket chains, hypermarkets and health & holiday spa’s in the sele