Petra Szabolcsi Individual assignment

IB-BA, 3rd year International corporate strategies

Corvinus University of Budapest Global Economy specialization

THE SIÓ-ECKES KFT.

Strategy analysis
 Table of content
Table of content..........................................................................................................................2
THE SIÓ-ECKES Kft.................................................................................................................3
The history of SIÓ-ECKES.....................................................................................................3
The main brands and products of SIÓ-ECKES:.....................................................................4
Present market position...........................................................................................................4
THE CORPORATE STRATEGY OF SIÓ-ECKES...................................................................5
General mission and vision.....................................................................................................5
Goals.......................................................................................................................................6
High and trustable quality...................................................................................................6
Unique brand-building strategy..........................................................................................7
Widening distribution.........................................................................................................7
Cost-efficiency....................................................................................................................8
Innovation...........................................................................................................................8
Being part of Eckes-Granini Group....................................................................................8
CSR.....................................................................................................................................8
THE STRATEGIC ENVIRONMENT OF SIÓ-ECKES............................................................9
FMCGs....................................................................................................................................9
Threat of entry, rivalry on the market...................................................................................10
Threat of substitutes..............................................................................................................11
Bargaining power of consumers...........................................................................................12
Bargaining power of suppliers..............................................................................................12
Broader environmental factors (according to PESTEL analysis).........................................13
SUMMARY..............................................................................................................................13
Bibliography.............................................................................................................................16
 THE SIÓ-ECKES Kft.

The history of SIÓ-ECKES

SIÓ-ECKES kft. is Hungary’s market leader juice and fruit drink producer. It’s a limited
liability company and is part of the market leading European group, Eckes-Granini, which
operates through Europe, in 14 countries.
It’s located in the South-West region of Hungary, in Balatonszéplak-felső. Here is the
headquarter of the company and the fruit-processor, as well as hundreds of hectares of fruit-
tree plantations.
The story of SIÓ in Hungary started in 1977 when the company entered the market with its
0,2 l product in two flavors: peach and apricot. Since the first time there was significant
demand for the product: its annual sales were 2 million packages and increased continuously
as the product range widened : new tastes and new packaging modes were introduced.
In 1991, after its privatization, SIÓ-Nektár Kft Limited Liability Company was established.
The change in ownership happened in 1993 when Europe-leader ECKES AG bought up the
SIÓ-Nektár Kft. However, this wasn’t a hostile buy-up. Granini didn’t want to kill the local
competition for its own brand through an acquisition. This fusion only ensured the Hungarian
market access for the ECKES AG. SIÓ still remained appreciated, focus product, a ‘local
hero’ which is now considered as a core product. (From the point of strategy this is important
because SIÓ has its own, tailor-made strategy and doesn’t only follow the parent company’s
way.)
The new owners meant a pulse for the company and persuade the Hungarian brand-
managers to want more than simply satisfy the existing demand and perform good, positive
sales and profit numbers. Success came soon: SIÓ gained market leader position in the
Hungarian market in 1994 and in 1996 SIÓ 100% orange beverage was the ‘most successful
new drink of the year’.
The last decade of the company was very fruitful: they have strengthened and stably
maintained the market leading position. They expanded the product range with several new
products, tastes. They’ve got into partnership with Szentkirályi mineral water producer and
they cooperate with the energy drink producer Bomba! to further diversify their product
portfolio.
 The crisis and the negative economic trends hit the juice and fruit beverage market, as well.
Therefore the last 2 years meant significant threat for the company. But SIO-ECKES
managed to respond to the new trends and consumer habits and remain market leader and still
grows in sales volume and EBIT number. The company also introduced new products to
widen the circle of its consumers.

The main brands and products of SIÓ-ECKES:

• SIÓ drinks: 9 flavours, ‘traditional’, TETRA-PAK products
• SIÓ premium: 11 flavors, 100% fruit content, top-quality fruit beverages
• SIÓ fresh and fruit: new, low-carbon product, extraordinary flavors, PET package
(0,5 and 1,5 l)
• SIÓ light and delicious: Update 1 diet drinks, 4 tastes
• SIÓ Vitatigris: positioned for children, 3 flavours (red, yellow and green)
• SIÓ Vitatigris Friut snack: ‘children’ brand, healthy, all-fruit puree in 2 flavors,
in practical packaging
• Hohes C and Mild: 11 different products, premium brand; the German parent
company’s core product
• YO: new, Austrian brand, fruit syrup in 11 flavors
• Szentkirályi products: mineral water, flavored water, ice tea, drinks for babies

Present market position

The General Assembly of the company held its annual meeting on 10 th of November, 2009.
Data released then claim that the company has kept its leading position. Despite the crisis its
sales numbers and profit has increased in comparison with data from previous year. In 2008,
the company made sales revenue of more than 21 billion HUF and sold app. 70 million litres
of drink. Its market share accounts for 25% of the market. (Although this figure looks low
because doesn’t mean major share, but in reality there are many actors on the Hungarian
market with only 1-5% shares and only 2 other companies have more than 10 % share, but
they are still far behind SIÓ – therefore this 25% share can be considered as a big market
power.)
These numbers are even more significant in the light of the present global crisis. This recent
crisis has landed the company in difficulty. Consumers had to rethink their consumption
patterns and moderate their spendings. The company’s products fell pray to these saving
desires. Juices, mineral water and energy drink are not vital consumption goods, people in
hard situation simply cannot afford them or – because of the high price-elasticity – they
sacrifice quality and turn toward lower category but cheaper brands.
(Information source: 11 Nov 2009 article found in Trade Magazin online, www.trademagazin.hu)

So, from where comes this market power, this high competitiveness? What is the strategy
behind this brand which differentiates it so well?

THE CORPORATE STRATEGY OF SIÓ-ECKES

General mission and vision

The SIÓ-ECKES Kft. sees as basic value the human health and the healthy growth of our
children. The company feels its responsibility to serve these values by its premium quality
products. Also, SIÓ wants to contribute to the growth and development of the Hungarian food
industry and act as one of the main processor of Hungarian fruit.
We cannot ignore the fact that SIÓ-ECKES is part of the ECKES AG Group. The two
visions are harmonized, they should fit each other as the company must head in one direction.
See what ECKES says:
“Leading European fruit juice and fruit beverage company, based on strong Number 1 /
Number 2 brands, with an excellent reputation for successful innovations.
Profitable and sustainable growth, via organic growth and acquisitions, mainly in Europe.
With a motivated and competent team in a very attractive company characterized by an open
and entrepreneurial culture.”1
If we compare it to SIÓ’s vision we see that they see themselves as market leaders, their
main focus point is quality, the factor by which they want to differentiate themselves. It
determines the main line of strategy: supplying better quality than our competitors and

1
Source: Eckes Granini Annual Report 2008
persuade the consumers to choose quality. Also, SIÓ uses the nationalist feelings of
Hungarians.

Goals
In the ultimate years the company has appointed as its main target to remain the market
leader of the Hungarian nectar/juice market and to build a strong brand. This medium-term
goal gained even more importance in the light of EU-accession as the common market
increased potential competition with the appearance of several new, even lower-price brands
and the possibility of cheap import.
Among its new goals they mentioned that the company wants to be 100% prepared for the
after-crisis market trends. They expect more dynamic market movements, increasing demand.
They want to benefit from these new trends as much as it’s possible and return to the growth
path again. The adaptation to the new trend reflects dynamic corporate thinking.
To achieve its goals the company direction sees 5 key success factors, strategic capabilities:
•innovation,
•cost-efficiency,
•high and trustable quality,
•unique brand-building strategy,
•widening distribution

High and trustable quality

The company sees itself as premium and high quality producer and this image is very
important for the company. Over 30 years the company gained enough experience, know-how
and organizational knowledge to be able to produce at such quality level. They also focus on
the quality of their ingredients as well as the packaging materials. The well-known brand
name, SIÓ means one with premium category therefore the company cannot allow itself to
lower the standards or requirements. Even its lower category, ‘general’ products (Sió drinks)
represent the top quality.
SIÓ has the advantage of being present in the market for more than 3 decades. Hungarians
know the product very well and appreciate it a lot. They mean stable consumer base. But, as a
result of it, the critical success factors for the company are more challenging as well as rumors
and legal procedures against the company can destroy its reputation.
Unique brand-building strategy
SIÓ-ECKES marketing strategy is excellent. As a basis they differentiate between regional
and international brands. International brand is the parent company’s leading product, Hohes
C for which they apply the very same strategy than abroad. Also internationals are the
children brands, the Vitatigris products.
For the regional brand’s marketing the company can apply its own strategy. The SIÓ has
several product but they are very well positioned which is important to avoid ‘cannibalization’
between the brands: the phenomenon when the company’s own brands compete with each
other and destroy the sales. First, there is the general SIÓ drinks product, which is the
traditional one. It is the lowest category, for it mass marketing is applied. SIÓ premium is the
top-category drink, here quality is emphasized.
In the last years health, wellness became so important for people. SIÓ extraordinarily
benefited from this new trend realizing the niche market: it introduced the Fresh and fruit and
Light and delicious brands.
Also SIÓ started producing 0,2 bottle products which are very good solutions for
conferences, parties, etc. This was a niche market SIÓ found in the latest years and which
further broadened its scale of products.
Although basically these products are the very same – fruit drinks, SIÓ used a perfect
marketing and created categories, segments on the market to be able to increase its sales and
power.
Also, to extend the brand, it has made partnership with a mineral water producer,
Szentkirályi and has got into cooperation with energy drink producer Bomba! Because
realized that the substitution products can decrease its sales.

Widening distribution
SIÓ as consumer goods producer has the advantage of being able to use nearly any kind of
distribution channel. Although in case of top quality products it can be advantageous to use
top quality distributors, for a drink it doesn’t create or destroys value where it is sold.
Moreover, easy access is much more important. SIÓ focus on being on the selves in every
shop: let it be a hypermarket or the corner shop in a town.
But in connection with distribution SIÓ’s foreign presence is surprisingly low. The main
reason is the fact the parent company doesn’t want to create competition for other own
brands, they want to keep SIÓ and the other foreign brands like Finnish Marli or French Joker
to be “local heroes” and don’t go international.
Cost-efficiency
Cost efficiency is a result of 4 basic factors: economies of scale, experience, supply costs
and product design. As SIÓ is a mass producer its production costs are low (economies of
scale). SIÓ has the right know-how, up-to-date technology and experience to produce in the
most cost-saving manner. The ingredients are in general low-cost products. Packaging can be
considered as a cost driver but as SIÓ purchases them in huge quantity and continuously their
price is lower. Product design is also a cost driver as its vital part of the marketing strategy
and the company cannot make savings on it. But in the long run investments pay off.
However, we have to state that in cost-efficiency the company lacks wide range of
possibilities.

Innovation
SIÓ is a very innovative company. In packaging, the company always creates something
new, and these innovations earn prices for the company. For example its Go-Pack won first
place in 2005 in Hungary, and 2nd place in 2006 in Paris. Such achievements are important
from the aspect of good reputation, as well.
Innovativeness is shown in the variety of products: SIÓ always tries something new, a new
product, new taste combination, etc. And as innovation moves a company further, this is a
great competitive advantage of the company.

Beside these 5 strategic capabilities for competitive advantage I would like to add 2 others,
which I think are also important.

Being part of Eckes-Granini Group

Being part of a big, very professional and successful company is a great advantage for SIÓ-
ECKES. The parent company is a strong background, shows direction for its affiliates, serve
as a pool of know-how, modern technology is more available for the small Hungarian
company. It also means strong financial background for SIÓ. International reputation and
acknowledgment come with it. The parent company may bail out SIÓ in hard times. In case of
a niche segment in Hungary, SIÓ must not create its own product only sell another affiliate’s
(like in case of YO syrup).

CSR
Reputation is always important to create a strong brand, and to gain it corporate social
programs are very important. SIÓ put big emphasize on it: it has the “Thank you, SIÓ”
program to help children in need, they have charity programs and they regularly sponsor
events in line with their vision: healthy lifestyle or children.

Some capabilities like the reputation, the long presence on the market are inimitable by
competitors. Its marketing strategy is very complex, a similar product offer cannot be
designed in the short run. Being part of a company group, a holding is not matter of strategic
decision, managers don’t have direct power over it. From these it’s clear that the company
possesses all the necessary threshold resources and capabilities (not question in case of a
market-leader company) and beside them it can build on numerous unique resources and core
competences to increase its competitive advantage.
But for future success their sustainability is also important. Examining the capabilities from
this point of view we can emphasize the importance of innovativeness. Quality, reputation and
the product mix can be maintained if managers plan strategy carefully and realize them
properly. The holding’s role in this question is huge, but SIÓ-ECKES can trust in the
professional and high-quality operation of its parent company. Cost-efficiency, sales volume
determines the company’s success and unfavorable economic circumstances (like the crisis)
can destroy its position, but these circumstances effect the whole industry, as well, not only
SIÓ-ECKES. All in all, if SIÓ-ECKES remains of the right path and doesn’t make mistake, it
will probably be able to maintain its comparative advantage.

THE STRATEGIC ENVIRONMENT OF SIÓ-ECKES

It’s important to analyze a company’s close and broader environment as success is

determined in function of the environment, and the changes in circumstances affect the
company, it cannot be independent from it and cannot be analyzed independently.

FMCGs
Fruit juices and beverages are fast moving consumer goods (FMCGs) which mean that they
are frequently sold products and their price level is relatively low (in Hungary it varies
between 100 and 500 HUF/liter depending on fruit content, flavor and brand). For such
product it is typical that consumers have their preferences, they get used to a brand, a product
and they purchase it without reconsideration. Therefore if SIÓ would like to attract more
consumers it had to change their habits by using a special, effective marketing strategy.
However, in Hungary SIÓ has the strategic advantage of being a well-known and appreciated,
quality product with a properly intensive marketing strategy and most Hungarians buy or
would buy this brand by habit – if they can afford it.
This is another important characteristic of FMCGs: price-elasticity and price-sensitivity.
Price is a basic determining factor. Consumers, in worse times, are tending to choose cheaper
products and get used to poorer quality. In such case, after gaining back their financial
stability they still remain at the poorer brand because of habit – then comes the importance of
marketing strategy to gain back the consumers. But according to the data about SIÓ this
strategy can be considered successful.
Strategic capabilities of SIÓ: traditional, well-known product
brand name is associated with quality
proper marketing strategy

Threat of entry, rivalry on the market

In general, we can tell about the Hungarian fruit juice and beverage market that the market
is saturated. It has reached its maturity: growth rate, growth possibility is low, the products
are standardized or very similar. According to the Hungarian Competition Agency 2, the 10
biggest company give the 75 % of output in the country. (The other 25% includes the big
chains’ brands like Tesco or Interspar.) Within it 3 big producers can be distinguished whose
share reaches 10%: SIÓ, Rauch and Olympos-Top. But from these three SIÓ is far the best
with its 25% share.
On the other hand, within the market segments can be differentiated according to the quality
and in the different segments the market shares are different. For example in the premium
category (100% juices) SIÓ’s Hohes C is unbeatable, only one competitor means threat from
the 6 significant players: Rauch’s Happy Day.
On the market of beverages (25-40%) and drinks (12%) the situation is a little bit more
complex. The lower the quality category the more the competitors, but SIÓ still leads the
segments.
So, competition is really fierce. There are enough or even too many players on the market.
There are no or no significant niche markets (players in every quality segment; product
categories as drinks/purees/syrups). Even it is easy to access suppliers and retailers and there
is no legal barrier; entering the Hungarian market in lower categories is now nearly

2
Source: http://www.gvh.hu/gvh/alpha?do=2&pg=11&st=1&m5_doc=2756
impossible: too costly, requires too complex strategy, too intensive marketing and success is
even then unpredictable. It is hard to properly differentiate the product on a saturated market.
In higher categories maybe there are possibilities, but quality should be excellent as well as
the whole introduction strategy, and the new entrant should be competitive in price, as well.
But still, SIÓ is the traditional, Hungarian brand Hungarians trust.
Strategic capabilities: no real threat of new entrant, despite the fierce competition,
SIÓ –as far as doesn’t make a big mistake – doesn’t have dangerous

competitors threatening its leading position

Threat of substitutes
In case of any FMCG it is a real threat: consumers are flexible to substitute these products
with any similar product category, if necessary. For fruit juices and beverages there are
several possibilities for substitution. Mineral and flavored water, tea and ice tea, milk and
flavored milk, soft drinks – all kind of non-alcoholic drinks. Within it the closest substitutes
are the waters, ice teas and soft drinks.
About the Hungarian fruit juice and beverage market we can tell that the market is
important segment of the non-alcoholic drinks’ market but the yearly consumption of such
products fall behind the consumption of soft drinks, and is much less than the consumption of
mineral water.

Table 1: The yearly per capita consumption of non-alcoholic drinks in liters 1999 - 2008 3
3
Source: Hungarian Accosiation of Soft drinks, Fruit drinks and Mineral water Producers’ webpage
 (red: juice, beverage, drink, tea; green: soft drinks; blue: mineral water)

However, the segment’s increasing tendency is seems to be stable, there is continuous

demand for these kind of products. Also, these products gained share against soft drinks –
maybe the reason behind it is the more health-concerned lifestyle.
However this is the reason behind the huge market share of mineral waters, as well.
Therefore it is hard to compete with waters. Requires lot of care and proper strategies. But
within mineral water category the leader products are the natural waters which are not close
substitutes of fruit drinks while the close substitutes fruit-flavor waters are less significant and
strong.
Strategic capabilities: partnership with Szentkirályi mineral water producer
company fulfills its mission by beating unhealthy soft drinks

Bargaining power of consumers

The bargaining power of consumers – in general – is very big. For one hand, this comes
from the nature of FMCGs. On the other hand, fierce competition also gives power to the
consumers and the lack of backward integration. They are offered by a wide range of very
similar products and – based on price, quality, design and marketing, and many other factors –
they can decide according to their taste. Technically there is no switching cost.
One easy tool for winning competition can be the lower price but in case of SIÓ it could
destroy the positioning, the image of ‘quality – brand’ which worth more for the company.
Good solution can be the quickest respond to new consumer needs. Therefore SIÓ must
dedicate enough time to know their consumers, gather data over them and fit its products and
strategies to their taste.
Strategic capabilities: SIÓ is the oldest player on the market – it has the most information
and also is the most well-known; strong company, it can devote
money to market analysis and strategic planning

Bargaining power of suppliers

Among suppliers Hungarians have more bargaining power as they are the primer suppliers
of Hungarian producers, because of geographical and cost-saving considerations. Hungary’s
capabilities are excellent for fruit cultivation: peach, apricot, pear, apple, grape, berries are all
grown in the country and these cultures serve as bases for the Hungarian drink producers, they
are their main suppliers. They nearly don’t have to compete with foreigners as the drink
producers prefer the Hungarian ingredients.
 Foreign suppliers come into view for the tropical fruits like orange, lime, pineapple and the
others.
In general, if the crop is good, there is even oversupply, therefore suppliers don’t have too
much power. Their power increases in ‘bad years’ when the producers compete for the
Hungarian fruit and prices rise. On the other hand, in these circumstances foreign supply
appears and may distort the Hungarian suppliers bargaining power.
Strategic capabilities: SIÓ is located in the very neighborhood of its main supplier – they
cooperate, which means security for SIÓ
if there is need for foreign suppliers SIÓ can rely on its parent
company’s suppliers

Broader environmental factors (according to PESTEL

analysis)
For SIÓ-ECKES and for the industry several outer factors have influence. When creating
strategy managers must take them into consideration. For example, the industry is heavily
regulated by technical and environmental standards which must be met: fruit content,
packaging, etc. But SIÓ can tell that it uses the most modern, 100% EU-standard methods.
The social aspect is also very important: in the recent years and decades being healthy,
leading a healthy lifestyle became more important, developed societies spend more on such
products. This creates more demand for SIÓ’s products and the company’s mission makes
more sense.
Economic circumstances also affect the industry. As these drinks and beverages are not
unavoidable products, the demand for them is higher in bullish economic times and decreases
in time of recession. Therefore the present crisis also affected the industry because households
had and have to revise their spendings.

SUMMARY

In general, I found that SIÓ-ECKES Kft. uses a clear, proper strategy and it determines
achievable goals but these goals are challenging enough to keep the company in move. So far
they are able to fulfill their goals, they are effective as well as flexible and dynamic.
The company can build on a wide range of important resources and capabilities, from which
several has strategic importance or they ensure the competitive advantage of the company.
About the industry we can tell that the operation has difficulties (saturated market, fierce
competition, high bargaining power of stakeholders) but SIÓ even among these hard
circumstances is able to perform extraordinarily. This well shows its strategic and market
power.
The following SWOT table summarizes the strategic position and capabilities of SIÓ-
ECKES Kft. .

Strengths (40) Weaknesses (-25)

• national product (3)
• high, trustable quality (3)
• market leader position (4)
• no dangerous competitors (3)
• possible but challenging goals (3)
• excellent marketing strategy, perfect
positioning, strong brand (3)
• diversification of profile: mineral water,
energy drink (3)
• intensive distribution (3)
• cost-efficiency (2)
• innovativeness (4)
• parent company means a strong
background (3)
• coop.with, proximity to suppliers (3)
• CSR activity (3)
Opportunities (6,5)
• more middle-category product as far as
the vision of the company is not hurt (1)
• new tastes (0,5)
• new products in the sense of
wellness/healthy lifestyle (2)
• introduction of bio products (0,5)
• looking for niche markets (0,5)
• targeting new segments intensively (1)
• open up for foreign markets outside the
scope of Eckes-Granini Group (1)
• low international presence (-4)
• price-sensitive market (-2)
• no presence in the ice tea segment (-3)
• fierce competition (-2)
• special features of FMCGs (-2)
• high bargaining power of customers (-2)
• highly relies on its suppliers (-3)
• few opportunities to reduce costs (-3)
• strict EU regulations and standards (-2)
• only 25% of market share (-2)
Threats (-10)
• activity in too many categories can be too
much for the company (-1)
• rumors, legal procedures (-0,5)
• after-crisis situation: unable to gain back
consumers (-1)
• many actors (-2)
• a powerful new entrant (-1)
• many substitutes (-1)
• limited potential in the market (-1)
• high bargaining power of consumers (-1)
• steal of ideas (-0,5)
• too complex strategy: one mistake may
have horrible effects (-1)

The numbers in the brackets indicate the weight of each characteristic according to my
judgement. I gave score from 2 to 4 for strength and weaknesses according to that how
unique/general they are and how much benefit/loss they mean. For the other two I gave scores
of 0.5, 1 and 2: how possible they are, what is the cost/benefit ratio or how much it hurts SIÓ.
After summarizing we arrive to 11.5: a quite high, positive ratio which testifies the strong
position of SIÓ-ECKES.
All in all we can state that the company is highly competitive, strong leader of its target
market because it possesses special capabilities, adapts well to its environment and do its best
to fulfill its goals and reach that level it created for itself in its vision.
 Bibliography

• Johnson, Gerry; Sholes, Kevan: Exploring corporate strategy

Financial Times/Prentice Hall
2002
• www.sioeckes.hu
• Eckes Granini Annual Report 2008
http://www.eckes-granini.com/
• Balázs Zoltán: A gyümölcslégyártók piaci stratégiája Magyarországon
( ~ Balázs, Zoltán: The market strategy of fruit drink producer in Hungary )
Thesis work at BGF
downloaded from the electronic library of BGF
• www.gvh.hu
• www.trademagazin.hu
• www.progressziv.hu
• www.vendon.hu
• www.agrotrend.hu
Articles by title:
• Kinn vagyunk a vízből?
( ~ Are we out of water?)
5 June 2009, www.vendon.hu
• Stabilan a gyümölcslépiac élén
( ~ Stably on the top of fruit drink market)
4 April 2008; www.agrotrend.hu
• Szomjoltás válság ellen
( ~ Thirst – killing against crisis)
4th publish, 2009; www.progressziv.hu
• Az Eckes-Granini Group igazgatótanácsa Magyarországon járt
( ~ The Boad of Directors of Eckes-Granini Group came to Hungary)
10 Nov 2009;
http://www.trademagazin.hu/index.php?oldal=6&mod=article_detail&id_art=5921
 Date: 15 November 2009
Length: 15 pages (12 work pages + cover page + table of content + bibliography)