University of Hamburg & FINEC Master-Program: International Business Administration Course: International Marketing Research and Strategies Lecturer:

Prof. Dr. Julia N. Solovjova

leipjuusto

Porters Five Forces Analysis

Access to and power of financial resources suppliers

Threat of new entrants F2

Competitive rivalry

Availability and power of sales service provider

Bargaining power of suppliers

F4 F1 F3 Threat of substitute products

F5

Bargaining power of buyers

Availability and power of sales intermediaries

Access to and power of human resources

International Marketing Research and Strategies, Prof. Dr. Julia N. Solovjova, Department of Marketing

Force 1: Intensity of competitive rivalry

Industrys growth tempo: (Euromonitor) Before crisis - 22% (2007/2008) After the crisis 9,5% (2009/2010) => competition is quiet high Presence of unloaded facilities: a large number of small producers with limited regional impact. They mostly produce unprepacked cheese selling by weight. They also supply products to a limited number of retail outlets, located in a particular region. Significance of product differentiation: Becomes > important Significance of brands: Becomes > important Degree of competitors diversification: Very high = many brands are represented on the market Barriers to leave the branch: high

Manufacturers mentioned in the market analysis are:

- Pienco Zhvaigzdes - Rokiskio Suris - Valio - Wimm-Bill-Dann - Hochland - Karat - Kaserei Champignon Hofmeister - Unilever - Giaginsky dairy plant - Cherkizovo Dairy Plant - Ostankino Dairy Plant - Belaya Reka - Rostagroexport - Molvest - Nevskie Syry - Starodubsky cheese plant - Kalorya - Unimilk - Lactalis - FrieslandCampina - Uniekaas - Nordmilch - Kraft Foods - Arla - Tine

Force 2: Threat of new entrants

Presence of companies:
having appropriate production facilities and technology, with high brand awareness, having access to raw materials and distribution channels, able to get price advantages.

private label segment - very small share (mainly in fused cheese) => difficulties in supporting of visible presence. BUT! growth can be expected. natural cheeses segment - greater share. Entry barriers low/high The cheese production in Russia is gradually declining => import The main competitors: Ukraine and Belarus: > 40% of total import. The average import price: Ukrainian cheese (DAF price including VAT):16% < Belarusian cheese - in 1,5 times <
2007 Fat cheeses 90,2 2008 87,3 2008. % 2007. 96,8

State policy (support of new competitors in the branch) import duties for milk&dairy products

Force 3: Threat of substitute products

Price / quality ratio for substitutes = 1 Valmiera cheese is already exist on the Russian market The same price and quality Costs of switching to substitutes for consumers easily can switch to a new product Predisposition of customers to substitutes Camembert, Feta cheese and brynza is also in demand

Force 4: Bargaining power of suppliers

Number of suppliers Possibility for suppliers to find customers in other industries Availability of substitutes Significance of volume for suppliers Threat of vertical integration by suppliers Possibility of acquiring control over suppliers

Force 5: Bargaining power of buyers

Concentration level of buyers: high, cheese is an everyday product Average purchase volume: 1-2 types of cheese = 500 gr. once a week Switching costs for buyers: high-income people are less sensitive to a small price change, but in general, switching costs are low. Competency of buyers: high Threat of vertical integration by buyers: low Buyers attitude to substitutes: positive, especially to a new product.

Segmentation
Geographically, cheese producers in Russia are mainly located in Central, Ural, Volga and West Siberian regions. These regions produce > 50% of total cheese volume.
Natural cheeses are the most preferential for Russians, they are more healthful. Processed cheese takes only about 1/4 of retail sales in value terms. People with high incomes focus on expensive imported hard cheeses. Cheeses with a spicy and rich taste: popularity of varieties that are made from goats and buffaloes milk is grown. This group of cheeses is growing mainly due to import.

Success
Cheese retail turnover was grown by 17% in value terms, amounting to about 70 billion rubles in 2007-2011. There are the following problems in Russian cheese market: narrowing of raw material base, which was due to the large reduction in livestock and reduction of raw milk production, and the lack of normal standards of quality of milk, which significantly impairs the quality of cheese. Therefore, import cheeses have an advantage from Russian cheeses in terms of quality.

Success

Trends
gradual growth of branded products share in sales and increase of brand lines in number. promotion of foreign and pro-European brands = some Russians are already aware of our cheese product More concerns about health & wellness (e.g. Arla): lower fat, prebiotic, cottage cheese.

Forecasts
Russia will accelerate the transition from simple commodity markets, where price is the major factor for consumers, to brand markets, where the marketability brand is determined by proposed added value.