Delissa in Japan

Agria, A Swedish firm Delissa, A product line

Yogurts, Desserts, Fresh cheese and Fresh cream

GROUP MEMBERS MISS. SANAM MR. IFTIKHAR MISS: GHAZAL MR. ADIL MR. HAMAD MR. FAIQ MISS. AMNA MR. RAHIB MR. ADNAN

Q.1

Analyze the current situation in the Japanes yogurt industry: its consumers, the

competition, & the distribution system. And how these different from the Pakistani market?

History Agria was found in 1973, when a group of Swedish dairy cooperatives decided to create a united organization that would develop & sell a line of fresh dairy products. Delissa was launched in 1980. This was one of the few national lines of dairy products in Sweden, including yogurt, desserts, fresh cheese, & Fresh Ice Cream. Agrias share rose from 3% to 25% of the Swedish fresh milk products market. By the year of 2001 more than $ 1.1 billion Delissa yogurt & dessert were being consumed per year worldwide. In fiscal year 2000, delissa had sales of $ 2.9 billion & employed 4400 people in & outside Sweden. In contrast Delissas biggest competitor worldwide Danone- one of the largest multinational French company, it is ranked 3rd number in Europe & 7th number worldwide. It has three core business, Dairy products, Beverages & Cookies. Yogurt Industry The total yogurt market in Japan for 1990 is estimated at approximately 600 million cups. The market for yogurt is expected to grow at an average of at least 8% per annum for the next five years. The company launch strategy would be based on a expected growth rate of 10% or 15% for the total market. The company set the goal of developing a high range of yogurt in Japan. The aim of company is to reach 5% market share in the 1st year & 10% share of market within three years. The company plans to cover the three main metropolitan areas, Tokyo, Osaka & Nagoya. In the year of 2001 delissas share of the total yogurt market had fallen to 2% without reaching 3%. Consumers The core target group has been defined as families with babies. However, the products are consumed by a wider age bracket from young children to high school students. The concept freshness will capture the consumers interest as well as clearly differentiate Delissa from other brands and the message healthy products direct from the farm and sophisticated taste from Sweden attract housewives in Japan. & per capita consumption of yogurt in Japan estimated at around 5.3 cups per person per year. Sales of yogurt in Japan are seasonal, with a peak period

from March to July. The highest sales have been recorded in June, so the most ideal launch date would be at the end of February.

Competition Three major competitors Japans manufacture account for about half of the total real yogurt market. 1: snow brand milk products, its products such as drinking milk, cheese, frozen food, biochemicals & pharmaceuticals. 2: Meiji milk products, its products such as dried milk for babies, ice cream & cheese. 3: Moranaga milk products, its products such as drinking milk, ice cream & instant coffee. Distribution system Delivery process is too long for fresh product. Day 1 a.m Day 1 pm Day 2 a.m Day 2 p.m Day 3 Day 4 each salesman sent an order to his depot each depot order went to the Yokohama depot The Yokohama depot transmits the order to the factory Yogurt was produced at Nikko Milk Processing De Delivery to stores livery to each depot Delivery to stores

BY: SANAM

How these different from the Pakistani market After analyzing Delissa in japan case study. And acquiring information from different sources I have concluded that on the basis of some external and internal factors these two markets can be differentiated. Some external factors of Consumer buying Behavior, that can really vary the demand for dairy products Pakistan Japan Place Huge market size, number of companies Small market size, number of companies operating operating in pakistan; TWENTY in Japna; FIVE COMPANIES. COMPANIES. Promotion Right promotional campaign. Wrong promotional campaign Demographics (Population, Education) Population: 145.5 Million Population: 127 million Urban Population: 46 Million Urban Population: 80 million Education Ration: 57% Education Ration: 99% Description: the reason for mentioning difference in urban population is; that the people those live in metropolitan cities make more demand for packaged dairy products as we compared to rural population. And the reason for mentioning education rate; because educated people refers packaged dairy products as compared to uneducated people. Economic (Income) Per capita income: $ 14 $ 33 Description: percapita income helps to elucidate purchasing power. Situational Number of Festivals: MORE Number of Festivals: LESS Description: consumption of dairy products gets increase, on these festivals, especially in Pakistan. Social Social Interaction: MORE Social Interaction: LESS Description: consumption of dairy products increased due to more social interaction. Cultural Use of dairy products are in Pakistani Even before 90z, there was no concept of using culture dairy products in Japanese culture. Climate Hot climate, so people love to take drinks Normal Climate. made of milk or yogurt (Lassi)

Some Inter Factors Values Pakistani believes without milk made, dessert No such beliefs could be found. their festivals could not be celebrated. Life Style House are not congested, people like to store Congested houses, people dont like to store goods, so potential can be found for goods. packaged goods.

BY: IFTIKHAR

Q2.

Had Delissa been successful or unsuccessful in Japan? Reasons? Analyze the

current Position of Dellisa in Japan? A: By the time Delissa decided to enter into the Japan, it was enjoying great foreign businesses in USA, Taiwan, Germany, UK and France. The pre- launch data that included mass of information like media costs, distribution data, socio-economic breakdowns, competitive analysis, positioning statements, advertising, pricing, entry strategy etc everything looked so fascinating and promising. Agria prepared its launch campaign to ensure that the Agria/Nikko venture would mean a successful entry into Japan for Delissa, but contrary to this Delissa just got failed in Japan and had just 2% sales in ten years. Though, the market seemed to be very lucrative, yet the product could not survive in the market. There were multiple reasons behind the failure of Delissa in Japan that are listed below: y Japan is not a vast Dairy Products market y Low per capita consumption of yogurt y Seasonal Sales (Peak Period: March to July) y Strong Competitors like Danone and Yoplait y Language (Communication) barriers & Cultural gap y Nikko was not an appropriate distributer y Poor ordering and delivery system y High product returns y Ambiguous target market y Advertising failure y Ambiguous Positioning Generally, it is believed that Japanese do not have enzymes to digest the milk. It was only a generation ago that Japanese have started taking milk and now when they are consuming milk and dairy products, the dairy companies have got potential to find the innovative opportunities in Japanese market. But as the Japanese market still has not fully grown up for dairy products therefore for Agria, Japan was a very tough market. The per capita consumption was very low as compared to other countries in which Agria was operating.

Also, there were seasonal sales of yogurt in Japan. The peak period was March-July. So, Delissa had very particular time for having the sales as the sales were very low in other months. Delissa was not the only yogurt to get the sales; the strong competitors like Danone and Yoplait were also available to snatch the lion share of sales. These competitors were enjoying the better position and brand image than Delissa since they were operating in Japan before Delissa so to enter into the pre-occupied market was also a big challenge for Delissa; and this hindered Delissa success in Japan. The language barrier and cultural gap also played vital role in failure of Delissa. The Agria team didnt know Japanese; therefore they had to rely on their partners in Japan. This communication gap caused Agrians to be totally dependent on Nikko people and also being Japanese so polite, restricted Agrians to argue over the things with Japanese. So, this Agria/ Nikko joint venture did not compare favorably with those achieved in foreign countries. For the market like Japan, Nikko was not an appropriate distributer. There was a poor integration between Delissa/ Nikko operations. Nikko was doing the things on its own without any integration with Delissa. Nikkos limited distribution network outside the metropolitan cities posed great hindrances to Delissa to get access to the small towns and make this brand available there. Nikko was not able to make its salesmen devote their time to promote Delissa. The salesmen hardly devoted 5% of their time and rest of the time was contributed to personal operations of Nikko. Hence; Nikko was not committed to development of Delissa in Japan. Apart from these, another problem was poor ordering and delivery system. Daily purchase habit of Japanese people needed fast and efficient delivery system. But, it was too complicated and slow as it involved multiple steps taking 4 days for delivery that was too long for fresh dairy products. Where as the date on yogurt cup is of huge importance to Japanese consumers. Though the shelf life of Agrians products was 14 days but as the Japanese consumers are of the perception that a product is too old to buy after 5 or 6 days so they did not prefer Delissa as the date on yogurt cup got old enough till it went through the delivery process and got available at shelf. That is why there were huge product returns to Agria. Agria could also not target the proper market for Delissa. Initially it targeted mothers and children but later on it targeted young people between the age of 13 to 24 and the secondary target market was children and the mothers were over looked. This switching of target market caused Delissa not to get proper and required position. The advertisement failure added more

ambiguity to Delissa positioning. Nikko was running TV spots intended for young people and children from 11:15 to 12:15 at night. Nikko was probably trying to get reach at both the consumers and distributers with these late night spots. Whereas it was not at all proper timing to run the TV spots for Delissa as the children could not capture these spots at night. One more reason for advertisement failure was cluttered ads and point of sale messages. When a survey was conducted for Delissa, 55% of the respondents did not know what Delissa TVCs were trying to convey. Delissa switched from its advertisement messages repeatedly. At first, it concentrated over the freshness and natural dairy attributes of Delissa and came up with this tag line: Natural dairy food is good to taste. But then it was linked to the image of Sweden healthy food and sophisticated taste and the tag line became: Sophisticated taste from Sweden. After that Agria tried to promote Delissa as absolutely fresh yogurt so the message was conveyed as: Healthy products direct from the farm. Later on, the fanciful taste and a fashionable image was tried to build by positioning this text: Refreshing nature of Delissa Swedish yogurt; it is so fresh when it is made at the farm. All these blunders put a question mark to the actual positioning and brand image of Delissa. Consumers and even Agria itself was not sure what actually it was trying to promote, whether Delissa should be positioned as a fresh and a natural dairy brand, a healthy brand, a fanciful and sophisticated taste brand or as a fashionable brand. Due to all these reasons Delissa had been unsuccessful in Japan. And currently the brand had just 2% sales in ten years where as the objective was to get 5% sales in first year and 10% in next three years. The brand sale is very low and the consumer brand loyalty is also poor. The ambiguous positioning of brand has leaded it to either revise the business plan or to get pull out of the market.

BY: GHAZAL

Q.3

what were the entry options available for Agria into the Japanese market? Analyze

Delissas chosen strategy for entry into Japan. Was the choice of Nikko as Agrias partner in Japan appropriate? Why or Why not?

Available entry option for Agria in Japan

1. Selecting Franchise 2. Licensing 3. Joint Venture

Entry Strategy

Agria decided to get help from SRT International Advertising Agency regarding the Delissas entry into the Japanese market, than Agria and Nikko had approved a substantial advertising and sales promotion budget.

The SRT international Advertising Agency suggested to Agria for Selecting Nikko, because Nikko already was big in the drinking milk and it was a good idea to move into the processed milk or eating milk.

The core target group has been defined as families with babies, and housewives had been recognized as the primary purchasers for the dairy products and it was suggested by SRT Advertising Agency that housewives were diet conscious hence they prefer to buy fresh dairy products, and Delissa was perceived as coming directly from the manufacturer.

SRT Advertising Agency feel that the freshness concept which has been the main selling point of the whole Nikko line, which capture the consumer interest as well as clearly differentiate Delissa from other brands.

Agria was decided to launch Delissa brand and establish is as distinct from its competitors product by prominence over natural dairy taste. So for that Agria decided its slogan line as natural dairy food is good to taste

Advertising Advertising strategies were also included in the proposal of SRT International Advertising Agency. Campaign should be run intensively over shorter period of time rather than successively throughout the year. TV ads will be used as they have an immediate impact and make a strong impression through frequent repetition.

Pricing Pricing should be following the top brands so as to reflect a high class image, yet the price should be affordable for the housewives. As Nikko is price leader for various food products in the Japan. Finally Agria decided to sell its products 15% more than its competitors products.

Launching SRT Advertising Agency suggested three different type of yogurt which was selected for simultaneous launch.

Plain (Packs of two and four) Plain with Sugar (Packs of two and four) Flavored with Vanilla, Strawberry and Pineapple. (Pack of two)

Agrias choice of Nikko was appropriate or not?

Not appropriate Choice of Agria for selecting Nikko as its partner in Japan was initially satisfactory because in several other candidates Nikko was the first one that seems prepared to join Agria and Agria believed that Nikko was the most appropriate distributor for Agria in Japan as Nikko was big and its credentials seems to be perfect for Agria, particularly since its strong supermarket distribution system for milk in the three main metropolitan areas is also ideally suited to yogurt. (80% of yogurt was sold through supermarkets) But after some time that partnership of Nikko was below the expectations of Agria because Agria cant reached to its sales target ever and it was due to many reasons like communication barriers, less consumer behavior towards yogurt in Japan, ineffective distribution arrangement, socio economic breakdowns, media cost, positioning statement and detailed assessment of the competitive situation. When you enter in the market like Japan, you are on your own. If you dont speak the language, you cant find your way around. After signed the agreement we were never sure that what they really thought about us or what they really expected from the deal.

BY: HAMAD & FAIQ

Q.4:

How did Agria manage its partner over time?

Ans: Agria has a partner in Japan Nikko; they signed industrial franchise agreement in 1989. In agreement; they have mentioned that Manufacturing of yogurt and marketing will be done by the Nikko, but machinery would be provided by Agria. They had certain problems in their partnership among those one is communication and other is cultural difference found in both companies. As Agria is Swadish Company and Nikko is Japanese company, while at the e time of signing agreement they had less communication because of not being well award from their partners language. As Japanese are more humble and polite in nature and they take a lot time to make decisions. Agrias choose Nikko as a partner because Nikko has good distribution system in Japanese metropolitan cities and Nikko signed agreement because it wanted be recognize internationally. Agria was trying to manage its partner by conducting lots of meetings and Japanese people was giving polite and humble response, but after that communication and cultural barriers was there. Gustafson a person who was from Agria who spend one month in Nikko for survey and supervise the Nikko, At that time he felt that Nikko is just Getting benefit and using Agria name to make their Image internationally. As Agria passed ten years in Japan with Nikko but still they have a problem their market share was just 2% that was not good enough. Main part is that while managing the partner remove communication barrier and understand their culture. Agria had problem that they was familiar from Japanese language. So thats why Agria would not provide enough support to their partner Nikko. Agria was not successful to manage its partner Nikko in Japan.

BY: AMNA

Q.5 should agria pull out of Japan? If yes, explain why, if not what should Agria do? in other words if agria should stay in japan what should their new marketing strategy be? 1. One-on-One Approach for Managers 2. Repositioning of Brand Image 3. Change in Marketing Strategies 1. One-one-One approach, in such means that management of both Agria and Nikko should sit together as of equal status with their peer managers, whether they are from marketing, sales, advertisement or distribution department. Both sides managers should let to know their organizational goals to each other in order to prevent the mishaps which ultimately cause failures in their specific department. 2. Repositioning of brand image, because Dellisas brand image was not clearly positioned in the mind of its targeted customers, like; when Dellisa tried to position its Yogart as it is delivered from Swiden farms, so, that means; it is very tasty and healthy but at the other hand Japanese people are very health conscious, so they thought that how Yogart can be very fresh if it is delivered to them from another continent, and a product which is not fresh then how it can be healthy? So there should be a sound strategy of positioning the brand image of Yogart brand, so that Japanese people dont think such like that, and Yogart can be easily accepted by the Japanese people. 3. Change in marketing strategies, makes a sense of making such a marketing strategy so that in practice it give something to Agira and Nikko in return. In Japan house wives are actual purchasers for their family members specially for food stuff for their children, here in this case Yogart is supposed to be offered to young children, and the advertisement timings of Yogart found at 11:15 pm to 12:15 am in the busy cities like, Tokyo, Nagyo and Osaka, so how can young children or house wives be targeted for Yogart? Though, young children and house wives mostly watch T.V at evening. Nikko choose that time for T.V spots because of scare budget of advertisements, and T.V spots are very expensive which range from 1.2 million yen to 2 million yen for 15 to 20 seconds, so Nikko tried to target both the end users of Yogart and distributors of it as well, but in return the marketing strategy got failed and found ineffective. Concluding words: So, Agria and Nikko should sit together and apply these three suggested approaches; One-on-One, Repositioning of brand image, and Change in marketing strategies. BY: RAHIB

Q.6

What is the key lesson that one should learn from this case?

In January 1987, Delessas product line was presented to distributors prior to launch in Tokyo. Their main goal was having the %15 of market share on dairy products. After three year they only had the 2 percent of the Japanese yogurt market. Results were really disappointed for the company. In 1997, results were almost same; they had the 3 percent of total yogurt market.

At the beginning SRT helped to developed Delessas entry in to milk related products market in Japan. Company chooses the Nikko, as a franchisee company who is the countrys second largest association of agricultural cooperatives. Also Nikko was the price leader for various food products in Japan.

Agrias executives thought that it was going to be easy to establish a brand name in Japan like they did in Thailand and Taiwan. Consumer behaviors were so different and Japanese consumers dont consume that much milk like Scandinavians do. And also company was having a lot of problem on their distribution channels. There are so many retailers in Tokyo and they are small retailers. Routes for their tracks were so complicated. Consumers in Japan shop daily and traditionally use the small shops so they had to negotiate with the small retailers. At the beginning Nikkos ordering system was so slow. It takes 4 day to buy Delissas products which means losing the freshness.

Language problem between Delissa and Nikko was one of the main problems. Dellisa couldnt establish their company mentality to Nikkos workers. There are many misunderstandings. For example TV ads, Dellisa were intended for young people in the ads; however Nikko were running TV spots at late night times. Plain yogurt makes up the largest segment in Japan. It was therefore recommended that regular advertising should concentrate on plain yogurt. However, according to Nikko, the company makes only a marginal profit on plain yogurt, thus they feel it would be preferable to advertise fruit yogurt.

In sum, Agria never controls the business. Their distribution system is a perfect example. They could never know what was going on out there because language problems forced Agria to count on Nikko. Agrias executives think that the Japanese will kill Delissa once theyve mastered the Swedish technology and they will develop their own brand. According to us, they have to get out of the venture agreement with Nikko and they have to get out of the Japan altogether BY: ADNAN