Smucker s Uncrustables in Germany by Steve Guy Nate

Smucker’s Uncrustables in Germany by Steve Guy Nate Jones Allyson Kappers Lindsey Quinn Kristin Tschantz

Assessment of Potential Market: Competition n n 2 Categories: Frozen Food and Ready Made Meals Frozen Food Major Competitors 2003 Market Share Private label 21. 2% Langnese-Iglo Gmb. H 13. 8% Aldi Gmb. H & Co KG 12. 5% Conditorei Coppenrath & Wiese Gmb. H & Co KG 9. 4% Dr August Oetker Nahrungsmittel KG 7. 4% Wagner Tiefkühlprodukte Gmb. H 6. 1%

Competition Cont… n Ready Made Meals n n n Competitors in Germany: Nestle, the Campbell Soup Company, Danone ( or Dannon), Unilever, Dr. Oetker, Frost, Suedzucker, Iceline, Nordwest, and Grand Metropolitan Danone is the second largest producer in the world of cereal biscuits and snacks. Market forecast for German Ready Made Meals is predicted to reach growth of $3. 32 billion in 2008

Assessment of Potential Market: German Consumer Demand n German Frozen Food Market: n n n $6. 84 billion and growing at 13. 8% since 1999 Ready Made Meals was largest sector German Ready Meals Market: n n n $2. 59 billion in 2003 and growing at 6. 7% since 1999 Ranked 3 rd overall behind France and UK Frozen Ready Made Meals accounted for 81. 7% in 2003 ($2. 1 billion)

DISTRIBUTION Location of Production and Market Entry: n 3 Basic Options for Entry: Scotland United States Germany n Current Distribution Agent

1. Smucker’s Production Facility in Scotland n Part of the United Kingdom, and therefore follows rules of imports, exports, tariffs, and taxation applicable to the UK n n n No Import/Export Tax amongst members of EU VAT Tax: 17. 5% There is also an issue of what means of transportation to move the product from the UK to Germany, as there is a body of water and neighboring countries dividing the two countries.

German location relative to Scotland

2. Producing and Shipping from United States n There is the option to produce within the United States and ship overseas to Germany n n n Drawback to this option is that this would be very expensive, and would tack on a cost to the final product There would be additional costs from export taxes and the VAT of Germany More expensive cost of labor Would require multiple methods of transportation to move from United States to Germany, and would be increasingly expensive Germany and United States are already primary trading partners Smucker’s currently outources logistics to a worldwide company that has operations in the U. S. and overseas

3. Create a Production Facility within Germany n Would reduce costs of transportation, and would open up future business options for Smucker’s within Germany n n n Would be very expensive, and would be starting from scratch to build new facility Could buy out an existing facility within the country Could partner with existing company within Germany to take existing breads and spreads and brand them with Smucker’s VAT Rate: 16% Highway Systems permit timely distribution Labor Force: n n Help with currently increasing unemployment rate of 10. 5% Would help the slow down of US imports, while boosting German economy

Current Distribution Agent n n n Smucker’s uses the supply chain management company Tibbett and Britten to handle their distribution of Smucker’s products throughout North America Tibbett and Britten is a worldwide company with a strong presence in Europe and could be used with the three options for market entry. Tibbett and Britten is in the surrounding countries of Germany, and specializes in food and beverage distribution. n Have ability to keep frozen and pre-packaged foods fresh, as well as an extremely efficient delivery service n They have a new facility Deutschland (western part of Germany) , but is not a food and beverage distributor n Possible Locations n Austria, Czech Republic, France, Ireland, Netherlands, Poland, Portugal, Spain and UK

Consumer Related Issues Segmentation and Targeting n n n Demographics Geographic Benefits Psychographics Behavior

United States Target Demographics n Schools n n Busy Parents n n n Elementary Schools Parents in their 30’s-50’s looking for a convenience good Upper Middle to upper class lifestyle Teenagers n n Convenient after school snacks Snacks between school and other activities

German Target Demographics n Families in Germany n n Middle Class to Upper Middle Class Families n n n Total Population: 85, 424, 609 81% live in families Priority on children—feel children complete a family Personal Income per Capita= $27, 600 Income Tax Rate: 30. 3% Older Population and single-person households for packaged foods n n n Decline of traditional family meals Need for single portion products Higher disposable income

United States Target Geographics n n n Families in busy suburban settings Target areas with access to large grocery chains that carry Smucker’s products Not typical for areas that are super rural n Includes under developed areas with low disposable income

German Target Geographics n Target areas of the country with the highest per capita population n Cities are located close together, and form one of Europe’s larges agglomerations Three largest cities are Berlin, Hamburg, and Munich Target public housing in the large cities n Over 60% of Germans rent homes, furnished with appliances such as refrigerators, freezers, and microwaves

Targeted United States Benefits n Time Efficient n n Goods are Pre-Packaged n n Reduces time to prepare, clean-up, and pack No mess Easily stored and kept fresh by freezing

Targeted German Benefits n n n Can be used as a quick, hassle free meal or snack food Clean and easy product for children’s lunches or snacks Provides valuable daily nutrients for growing and developing children

Targeted United States Psychographics n Targeted for Families with two full time working parents n n Families that do not have time for sit down dinners n n Parents that are working and trying to accommodate the busy schedules of their children Too busy to prepare a family lunch/dinner Personality and Behavior types: n Busy, organized, impatient

Targeted German Psychographics n Target Family Life n n n German tradition is that children complete a family Benefits family life by being clean, easy to use, time saving, small portions German Lifestyle is very concerned for their personal health n n Much of personal disposable income spent on healthy food and products Interested in Health and Fitness services (exercise and dieting)

United States Behavior n Not targeted towards children, but will reward children that participate n n Product available at schools n n n Online games and activities within the Smucker’s website Children are trying the product at schools and convincing parents to buy the product later Shows parents the ease of using the product Gives a recognizable good, with a homemade quality, at a “grab-and-go” convenience

German Behavior n Tendency to buy products that are healthier n n n White bread is not commonly consumed Not a large level of consumption of peanut butter, but an increase in the consumption of jams, jellies and spreads (3 rd ranking spread market in the world) Germans and Europeans tend to purchase frozen bakery products rather than frozen spread products

Marketing Mix n Positioning n n Distribution Product Promotion Price

Uncrustables distribution in the US n n n Available in many school cafeterias Frozen foods section of grocery stores Can be found in Wal. Mart stores and other similar multipurpose retailers

Channels of Distribution in Germany n n No Smucker’s facilities in Germany currently Transportation systems are of more advanced in world Majority of food industry outsources logistics/distribution to other companies Method of logistics/distribution similar to that of US

Retail Distribution in Germany n The Great Atlantic and Pacific Tea Company n n n Discount supermarkets n n Worldwide retail organization with local headquarters in Germany Stores include Kaiser’s and Tenglemann Sumpermarkets Aldi, Lidl, Plus Mini. Malls n New line of grocery stores, similar to Wal. Mart supercenter

Product (US vs. Germany) n n n Made with white bread PB&J and grilled cheese Stored in freezers Boxes of 4 single servings Under widely recognizable Smucker’s label Main feature is absence of crust (not a concern in Germany) n n White bread not popular 3 rd ranking spread market in world n n Recent increase in jam consumption Personal fridge/freezer ownership not as common Limited freezer space Don’t place large value on brands and labels

Packaging in US n n n Cardboard box Color matches color of spread Graphic similar to picnic table cloth Picture of glass of milk English label – “Uncrustables”

Packaging in Germany n n n Box must be recyclable (green dot approval) There are no taboo colors in Germany Europeans like to picnic Milk consumption is similar to that of the U. S. Speak German (with 4 main dialects) n n translation: Ohne Kruste Translation may not hold same meaning for Germans due to their lack of concern for the crust on bread

Promotion of Uncrustables in US n n Television Advertisements feature little girl on a tire swing Coupons Provide fact sheets to schools for consideration on lunch menus (example to the right) Focus on Uncrustables on the Smucker’s website

Mass Media outlets and promotion in Germany n n n Television reaches 92. 6% of population Newspapers reach 95% of pop. Magazines reach 88% of pop. Radio reaches 88% Sponsorship of Sporting Events n Germany plays host to Soccer/Football’s World Cup in 2006

Germany Expenditures on Advertising in 2003 Media Costs in U. S. Currency (in millions) Television $5, 035. 84 (million) Newspapers $8, 604. 93 Magazine $5, 234. 05 Radio $765. 09 Cinema (advertising prior to movies) $212. 74 Average cost of 60 second spot per screen per week in Germany is $101. 42

Price n n $2. 89 per package in US VAT incorporated into price of products in Germany Based solely on current US price, would be approximately 3. 82 euros. Actual cost would include n n n Possible requirement of production facility Costs of media advertising Possible distribution costs VAT Cost of shelf placement in stores Consideration of personal income availability

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