Strategy Management: Wimm Bill Dann - Case Study Example

Wimm Bill Dann Wimm Bill Dann Wimm Bill Dann - An Introduction In the year 2003, WBD, (a public listed company) became the largest producer of dairyproducts and fruit juices in Russia. This was the result of effective market assessment and which helped the company to provide the market with products that were innovative products and at the same time available at affordable prices. Each new product launch was marketed using excellent advertising campaigns to capture consumer attention. When Russia's economy opened up after the break down of the Soviet Union, it brought with it a whole new ball game for the Russian entrepreneur. Looking at the market for fruit juices, the Russian public, were for the first time tasting orange, pineapple and grapefruit juices in the year 1991. During the period from 1980 to 1990, the average consumption of juices in the market was pretty low. The period beginning with 1991 till the financial crisis faced by the Russian economy in 1998, saw an increase in the consumption of fruit juices. This increase was the result of the strategic production and marketing plans of key entrepreneurs in this market segment, with WBD being the primary source of affordable and relishing fruit juices during this period. Wimm Bill Dan's strategy to catch the Russian food market Wimm Bill Dann was created in 1992. WBD strategic plan was to make WBD, Russia's leading and nationwide food producer, by implementing the best ideas in all aspects of food production such as product development, distribution, quality, packaging and marketing. Their core strategy was to use brand imaging and quality control, whereby they attracted consumers with attractive packaging of quality fruit juice products available at very affordable prices. Studies conducted a decade after the company's inception show that it acquiring 33 percent of the market in traditional milk products, 41 percent in enriched products, 46 percent in yoghurt and dessert dairy products and 53 percent of the milk market. In 2003, they had captured 32 percent of the market in fruit juices. This was attributed to their brilliant marketing strategies. The company implemented specific strategies in the fruit juice segment, diary product segment, milk and cheese segment, mineral water and beer segment. In some areas they were hugely successful, while others area proved to be a learning experience for the company. The following article takes a look at the strategies adopted by Wimm Bill Dann from 1998 till 2004, how successful these strategies were and the changes they introduced into their business at it evolved over time, A look at Wimm Bill Dann's strategy in the fruit juice market segment Earlier, the fruit juices available in the existing food market in Russia, were made from traditional fruits and the packaging was difficult to handle. Juices were usually packed in three liters glass jars or metal cans, which were cumbersome to open. WBD strategy changed all this by providing their customer with exotic fruit juice flavors. The product they gave was the 'J7', which essentially consisted of seven varieties of fruit juices nectars. These products hit off with the consumer and provided Wimm Bill Dann, a good share of the market. Here a list at how Wimm Bill Dann strategy worked with the consumers in the fruit juice market segment: Will Bill Dann's products were of premium quality and offered new tastes, which the consumer had hitherto never experienced. The company imported their raw materials from a supplier named Cargill, who is the largest supplier of juice concentrate. They used tetra-pack technology to package their products and they gave the products bright, attractive labels with foreign sounding names, to draw the attention from consumers. These core-strategies made Wimm Bill Dann's fruit juice product a hit with the Russian public. 'J7', was seen as the benchmark for the domestically produced fruit juice in the region. By the year 1997, WBD increased it sales from a mere 6 million liters to about 100 million liters and by the millennium, their fruit juice production further increased to about 164.5 million liters. The juice market showed an annual growth of 25 to 40 percent in the years between 2000 and 2003 and WMD had a major share in this growth, thereby retaining its position as the absolute leader of this market, with an estimated market share of 32 percent in 2003. Bill Dann decided to iversify into other products and their diversification strategy proved to be very successful in certain areas, while in other areas, they had to persist in their efforts.. The strategies used to catch the market in dairy products When WBD was just two years into making fruit juices, it expanded its portfolio by its decision to target the milk and the dairy products market as well. The chief action, which enabled the company to pull of this idea was its acquisition of Lianozovo diary, which is one of the biggest dairies in Europe. In the year 1997, the company's production at the plant increased by 500 percent and sales from their dairy products gave them a huge boost, by not only carving a niche for the company this market segment, but also by providing funds for its future expansion plans. In the same year, WBD got stakes in a baby food plant and in two more dairies in Moscow and this further aided its plans in diversifying into the dairy products and milk market segment. The company first flooded the shops in Moscow with its diary products, and here its products proved to be successful. Following this, it decided to bring out its products in other parts of Russia, by setting up production bases in every economically developed region in Russia. Not only did the company do this well in this decision, it was also able to gain control over ten companies in the region and this gave it entry into the markets of the Far East, Siberia, Central and Southern Russia. The strategies which helped WMD to establish exclusive attention from consumers in milk and diary products were its technical prowess, product specialization of diaries, access to local markets and acquisition of rich resource bases. When it went into modernization of its dairy plants, it was able to carry out the plans successfully, because it made good use of the distribution systems of prominent regional diaries. Furthermore, it established its distribution network much earlier than it competitors by either opening or acquiring trade branches. This was done in about 26 cities, located in regions where it did not have production facilities and also by acquiring distribution companies in more than 40 Russian cities. Expansion into the dairy market was carried beyond the border of Russia, by the acquisition of high stakes in dairies located in Ukraine and Kyrgyzstan. This venture was successful strategy because: The Ukraine yoghurt market grew by 25 - 30 percent every year, giving a good opportunity for WBD's product presence here. Kyrgyzstan is a state full of natural resources such as fruits, which can be processed into juice concentrates. It was also a member of the WTO, as a result it was easy to export juice from this country to countries in Central Asia. This meant more growth and profit opportunities for WBD After the millennium, new players entered into the market and WBD's competition increased, which led it to take decision to further diversify and expand it product portfolio. Bill Dann's strategy to capture the market in Yoghurts and Dairy Desserts WBD's entry into the Yoghurts and Dairy Desserts market segment was successful because it enjoyed the benefits of local production. This meant that it was able to provide consumers with top-quality products at affordable rates and had an edge over it western competitors and domestic producers in the market. Following are the reasons, why its strategies proved to win in this market segment: It's packaging technology enabled it to provide products with a long shelf life. This coupled with the benefits of low transportation costs sand production cost resulted in the booming sales for the company, from this segment. When the ruble was devalued, Russian consumer turned to local products. WBD was one of the very few companies, which was able to achieve a high sale figures during this period of the economy's financial crisis. In the year 2000, WBD was the leader in Yoghurts and Dairy Desserts market segment and occupied about 50 percent of the share in the market. Up to this point WBD was largely successful in its venture. From the year 2000 onwards, rivals or competitors sought to get their share of the Russian open economy market. Increase in competition and change in consumer taste As Bill Dann's competitors also started to establish production facilities in Russia, the year 2002, saw a drop in sale figure in WBD's yoghurt products. The main reason attributed to this was WBD, concentration in increasing it production of fruit juices and milk. On the other hand, it western competitors were only concentration on yoghurt. Consequently the sales figures for yoghurt of rival company 'Ehrmann' doubled in the year 2001. In 2002 they were the leading company in the region for Yoghurt sales, gaining a 36 percent of the market share. Another aspect that was changing during this time was consumer tastes. Initially consumer wanted yoghurt which was creamy, with lots of fruits and high in fat content. Now, they were health conscious and wanted this product to contain biologically active ingredients, vitamins and be low in fat content. Consumers spending power had increased with the rise of the middle class, wherein there were families with two income heads. This means that the average consumer was looking for less traditional, low cost products, more of juices and specialized diet yoghurts and desserts. Wimm Bill Dann strategy to face competition and change in consumer taste Looking into this scenario, WBD increased its production of fruit juice products. The seven varieties of fruit products were now increased to about 22 varieties and they occupied about 22 percent of the market. In the year 2001, it launched its product 'Ginger Up', which was mainly aimed at the children's section of the population. This product came with its own magazines, games and comics. The product used the same packaging technology as the 'J7' product, only it was priced 10 percent higher. It was enriched with vitamins, and this feature was promoted in its advertising campaigns. Further plans included licensing the brand to producers of chocolate bars and board games. WBD also added products with higher added value such as kefir, milk, puddings, cottage cheese and so on to its extensive portfolio of dairy products. They also brought out a new line of health oriented products to cater to the rising health conscious consumers and these included drinks, milk cocktails full of vitamins and live bacteria. These products was priced 25 more than the average retail price and went meant to cater to the high income segment of the population. Strategies of further product diversification to beat off competitors In order to meet with rival foreign competitor, Wimm Bill Dann decided to take on the production of more types of food products such as mineral water and cheese and Beer. Here a look into each product and the strategy used by Bill Dan to become successful in these market segments. Mineral water and cheese: WBD also decided to get into the mineral water and cheese markets. They wanted to cater to the water segment because they wanted to level off the reduction in sales of dairy products in the summer. The mineral water market was increasing by 23 percent annually. Furthermore, consumers were becoming more health conscious and moved away from drinking tap water to bottle water. With rising incomes and the wanting of a sports lifestyle, this market was prime target for this company. In 2003, it launched its mineral product 'Sanctuary Valdai', its mineral water product. This was possible with the acquisition and modernization of plants the Novogorod region of the Valdai national preserve. This plant had the largest capacity to produce bottled water. Critics, however, were skeptical about how much of this market WBD could gain because it was already taken, by the mineral water products put forth by Coco Cola (Bon aqua), Pepsi (Aqua Minerale)and Nestle (Saint Spring). In spite of such criticisms, WBD persisted in this segment, and it acquired Healing Springs Ltd, a producer of the Essentuki brand of mineral water. This was however a saturated market. Though the company did not have to spend much in promoting the brand as it was already famous, it was not very successful area of WMD's diversification. Cheese: WBD entered into the cheese market by putting forth high quality cheese products at very affordable prices. It was their acquisition of the dairy Bishkeksut, which produced hard cheese that enabled WMD to do this successfully. Up to this point 60% of the cheese market was occupied by high priced imported cheese and 40 percent by low priced domestically produced cheese. WBD's strategy of giving their cheese brand 'Lamber' offered one kg cheese, in an attractively packed way, at a very reasonable price for consumers was hugely successful with the consumer and they succeeded in gaining presence in this market. Beer: WBD's entry into the beer market, was receive with skepticism because, it was like the mineral water market - already saturated!. There were already well known brands here, which were promoted by good advertising campaigns. WBD however, continued into this market segment with optimism. In 2001, it handed over the breweries that it acquired to the Central European Brewery Company. In June 2003, CEBC had acquired four breweries and accounted for 2.6 percent of the beer market in Russia. On the whole, gaining foothold into the Beer market segment was not very profitable for Bill Dann because it had too much competition from existing and well-known brands. A look at how sustainable was Bill Dann's marketing strategy Wimm-Bill-Dann was a company which has used the opportunity put forth by Russia's open market economy by putting forth a diversified product portfolio. This portfolio was made up of more than 1,000 types of dairy products and 150 types of juice and juice-based drinks. This company has the leading position in the Russian dairy market and as of the year 2005, it had 34% share in this market. What can be understood from the product diversification plans of WMD is that they assessed the markets well for fruit juices, yoghurts, dairy product, and cheese. They put forth quality products at affordable prices for their consumers. On the other hand, they took a risk in the mineral water market segment and the beer market segment. However in a marginally way their investment in these market segment paid off, largely due to their prime strategy of using a brand image and they established presence in the market. The product diversification and acquisitions programs induced WMD changed their corporate structure. This was part of their strategy to sustain their company in a market of growing competitors and changing consumer tastes. Up to the year 2004, WMD's corporate structure was vague and complicated. Its ownership was unclear to the public because it wanted to avoid taxes. WMB was a group that consisted of separate companies and enterprises. It shareholders were made up of private people, banks, food companies and local governments. Clearly, this structure was not enough to handle the changing economic scenario and the coming in of new businesses into the market. A step was taken to change this structure by transforming it into a public listed and such a change made Bill Dann the first Russian to disclose it ownership structure to the public. It also brought in Independent experts with who had an international reputation into the board of directors. The management structure also underwent a serious transformation. When the company was formed in 1992, it consisted of seven directors, and this was based on the idea that each gave his best knowledge to the company. With the market becoming very competitive, they realized that this structure was not enough to cater to the evolving nature of their business. They were coming up with new products, changing their products according to consumer tastes and were also facing stiff competition from western world companies. If they wanted to gain an international presence, their goals and objectives would have to change and this meant new demands on the management. Realizing that the role of management had to change to meet the new demands of business, the management structure was formalized and people on the board focused on strategic decisions and control, leaving the work of carrying operation to managers. This change in corporate structure enhanced their growth as is seen in the following successful business decision which took place, after the corporate structure change: The year 2006, saw this company continuing to expand its operations in its homeland and seeking to exploit the growing markets of Siberia and the wider Commonwealth of Independent States region. In November 2006 Wimm-Bill-Dann completed the acquisition of the Moscow-based dairy producer Ochakovo. This was done as part of their strategy of expanding their business through the selective acquisition of successful companies, which had leading market positions in their respective regions and possess strong brand portfolios. As of 2006, this dairy and juice giant Wimm-Bill-Dann showed strong quarterly results for a second successive year, despite a decline in margins from its beverage sector. Will Bill Dann is a company which has implemented successful marketing and business strategies. They have see growth since the time of their inception and have successfully called off a takeover by rival competitor 'Danone'. In the process of evolving their business they change their corporate structure. All these aspects put together proves that Wimm Bill Dans's strategy is a sustainable and successful one. References: Company Profile. Available. http://www.wbd.com/page_pid_455.aspx Wimm-Bill-Dann Dairy, Kiev Wimm-Bill-Dann, dairy and juice packaging company, Ukrainehttp.Available://www.foodprocessing-technology.com/projects/wimm/ Wimm-Bill-Dann warms to Siberian dairy. Available http://www.dairyreporter.com/news/ng.aspn=71783-wbd-siberia Wimm-Bill-Dann Foods Cheese Production Plant, Rubtsovsk, Russia Available http://www.foodprocessing-technology.com/projects/wbd/ Wimm Bill Dann. Available.http://en.wikipedia.org/wiki/Wimm_Bill_Dann Wimm-Bill-Dann Foods Issues Ruble Bonds. Availablehttp://www.findarticles.com/p/articles/mi_m0EIN/is_2005_Dec_21/ai_n15956682 Wimm-Bill-Dann acquires Ochakovo Dairy Plant. Available http://media-newswire.com/printer_friendly_1039482.html Wimm-Bill-Dann profits soar despite increased costs. Available http://www.cee-foodindustry.com/news/ng.aspn=70575-wimm-bill-damm-coca-cola-dairy-russian-beverage Read More