Smucker

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Smuckers Uncrustables in Germany

• by Steve Guy
• Nate Jones
• Allyson Kappers
• Lindsey Quinn
• Kristin Tschantz

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Assessment of Potential Market Competition

• 2 Categories Frozen Food and Ready Made Meals
• Frozen Food

Major Competitors 2003 Market Share
Private label  21.2
Langnese-Iglo GmbH   13.8
Aldi GmbH Co KG   12.5
Conditorei Coppenrath Wiese GmbH Co KG   9.4
Dr August Oetker Nahrungsmittel KG   7.4
Wagner Tiefkühlprodukte GmbH   6.1
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Competition Cont

• Ready Made Meals
• 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

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Assessment of Potential Market German Consumer
Demand

• German Frozen Food Market
• 6.84 billion and growing at 13.8 since 1999
• Ready Made Meals was largest sector
• German Ready Meals Market
• 2.59 billion in 2003 and growing at 6.7 since
  1999
• Ranked 3rd overall behind France and UK
• Frozen Ready Made Meals accounted for 81.7 in
  2003 (2.1 billion)

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DISTRIBUTION

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

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1. Smuckers Production Facility in Scotland

• Part of the United Kingdom, and therefore follows
  rules of imports, exports, tariffs, and taxation
  applicable to the UK
• 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.

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German location relative to Scotland
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2. Producing and Shipping from United States

• There is the option to produce within the United
  States and ship overseas to Germany
• 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
• Smuckers currently outources logistics to a
  worldwide company that has operations in the U.S.
  and overseas

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3. Create a Production Facility within Germany

• Would reduce costs of transportation, and would
  open up future business options for Smuckers
  within Germany
• 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 Smuckers
• VAT Rate 16
• Highway Systems permit timely distribution
• Labor Force
• Help with currently increasing unemployment rate
  of 10.5
• Would help the slow down of US imports, while
  boosting German economy

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Current Distribution Agent

• Smuckers uses the supply chain management
  company Tibbett and Britten to handle their
  distribution of Smuckers 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.
• Have ability to keep frozen and pre-packaged
  foods fresh, as well as an extremely efficient
  delivery service
• They have a new facility Deutschland (western
  part of Germany) , but is not a food and beverage
  distributor
• Possible Locations
• Austria, Czech Republic, France, Ireland,
  Netherlands, Poland, Portugal, Spain and UK

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Consumer Related Issues

• Segmentation and Targeting
• Demographics
• Geographic
• Benefits
• Psychographics
• Behavior

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United States Target Demographics

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

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German Target Demographics

• Families in Germany
• Total Population 85,424,609
• 81 live in families
• Priority on childrenfeel children complete a
  family
• Middle Class to Upper Middle Class Families
• Personal Income per Capita 27,600
• Income Tax Rate 30.3
• Older Population and single-person households for
  packaged foods
• Decline of traditional family meals
• Need for single portion products
• Higher disposable income

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United States Target Geographics

• Families in busy suburban settings
• Target areas with access to large grocery chains
  that carry Smuckers products
• Not typical for areas that are super rural
• Includes under developed areas with low
  disposable income

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German Target Geographics

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

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Targeted United States Benefits

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

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Targeted German Benefits

• Can be used as a quick, hassle free meal or snack
  food
• Clean and easy product for childrens lunches or
  snacks
• Provides valuable daily nutrients for growing and
  developing children

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Targeted United States Psychographics

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

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Targeted German Psychographics

• Target Family Life
• 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
• Much of personal disposable income spent on
  healthy food and products
• Interested in Health and Fitness services
  (exercise and dieting)

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United States Behavior

• Not targeted towards children, but will reward
  children that participate
• Online games and activities within the Smuckers
  website
• Product available at schools
• 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

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German Behavior

• Tendency to buy products that are healthier
• 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 (3rd ranking spread
  market in the world)
• Germans and Europeans tend to purchase frozen
  bakery products rather than frozen spread
  products

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Marketing Mix

• Positioning
• Distribution
• Product
• Promotion
• Price

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Uncrustables distribution in the US

• Available in many school cafeterias
• Frozen foods section of grocery stores
• Can be found in WalMart stores and other similar
  multipurpose retailers

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Channels of Distribution in Germany

• No Smuckers 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

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Retail Distribution in Germany

• The Great Atlantic and Pacific Tea Company
• Worldwide retail organization with local
  headquarters in Germany
• Stores include Kaisers and Tenglemann
  Sumpermarkets
• Discount supermarkets
• Aldi, Lidl, Plus
• MiniMalls
• New line of grocery stores, similar to WalMart
  supercenter

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Product (US vs. Germany)

• Made with white bread
• PBJ and grilled cheese
• Stored in freezers
• Boxes of 4 single servings
• Under widely recognizable Smuckers label
• Main feature is absence of crust (not a concern
  in Germany)

• White bread not popular
• 3rd ranking spread market in world
• Recent increase in jam consumption
• Personal fridge/freezer ownership not as common
• Limited freezer space
• Dont place large value on brands and labels

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Packaging in US

• Cardboard box
• Color matches color of spread
• Graphic similar to picnic table cloth
• Picture of glass of milk
• English label Uncrustables

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Packaging in Germany

• 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)
• translation Ohne Kruste
• Translation may not hold same meaning for Germans
  due to their lack of concern for the crust on
  bread

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Promotion of Uncrustables in US

• 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 Smuckers website

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Mass Media outlets and promotion in Germany

• Television reaches 92.6 of population
• Newspapers reach 95 of pop.
• Magazines reach 88 of pop.
• Radio reaches 88
• Sponsorship of Sporting Events
• Germany plays host to Soccer/Footballs World Cup
  in 2006

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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
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Price

• 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
• 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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Auf Wiedersehen