Healthy Eating and the UKs Major Food Retailers - Assignment Example

 Healthy Eating and the UK’s Major Food Retailers Kefir, a fermented milk product, used for promotion and maintenance of good health historically in Russia, is now marketed globally. Kefir possesses a wide array of health benefits and depending upon the source, everything from cancer to a hangover can be improved upon its consumption. Despite its numerous benefits, Kefir’s acceptance in global markets differed due to socio-cultural background and economic conditions. It was assumed in early 1960s that due to globalization, as economic development took place, tastes and needs of consumers would converge which would lead to standardized marketing and advertising (Mooij, 2000) but according to Duncum (2001) global culture arouses feelings of disgust. This paper will discuss how the cultural differences between UK and Indonesia can influences the decisions on marketing communication for the launch of kefir. Culture has a significant impact on perception, problem-solving and cognition and often leads to differences in satisfaction levels on the same product between global customers. Expectations differ. Levels of literacy differ and so do performance evaluation standards (Pizam & Eliss, 1999).According to Hofstede (1984), different cultures imply different mental programming, which governs activities, motivation and values (cited by Gilbert & Tsao). Socio-cultural and economic details The UK retail market for milk and dairy products was worth £7.43bn in 2003. In 2005, the total UK milk and dairy products market was worth £8.16bn at retail selling prices (rsp), a rise of £3.8% on 2004 (Mindbranch, 2006). This market has been relatively mature and hence there has been marginal growth. To keep the market buoyant, new product development has been taking place. Milk is considered a basic commodity and hence people do not give importance to branding (CMS, 2004) and since kefir is based on milk which contains saturated fats and ‘bad’ cholesterol, people in UK may not be attracted to it (Spiritualpath, n.d.). Economic growth started in Indonesia after macro-economy stabilized in 2004. Investment rates were higher, business environment improved, and future economic growth in Indonesia is assured. About 73% of the total distribution takes through the traditional markets in Indonesia but there is a 16% growth in the modern retail sector (GAIN, 2004). These modern retail stores of supermarkets are generally located in shopping centers and cater to the food and beverage products. These markets are frequented by the higher and upper income groups. Liquid milk has registered an annual growth of 40% in annual sales and most of the products that these modern retailers stock are imported. Milk and dairy products enjoy a high level of consumer penetration and most households buy major product categories in UK. Liquid milks have the largest market share and people are interested in flavored, organic and regional products. Since yoghurts have managed to target various aspects of food market demand, kefir also could gain popularity. People in UK are health conscious and health remains the major drive for growth across the market. Within the UK diet related health problems have increasingly become a significant area of Government concern (Jones, Comfort & Hillier, 2006). The underlying driver is the link between nutrition and health. The UK population is aware of the impact of what they eat and the need for a balanced diet, but it does not reflect in their eating habits. In Indonesia on the other hand, the consumer purchase patterns have changed and continue to evolve. They prefer staple food and avoid impulse buying or buying luxury items. They are price conscious and not concerned about brand loyalty. They prefer discount venues in the modern retail segment. They do not place much value on the quality and appearance of packaging. They are not nutrition conscious and prefer local produce rather than imported costly items (GAIN). Here culture has a vital role to play as according to Hofstede (1997, p4) culture is “the collective programming of the mind which distinguishes the members of one group or category of people from another” (cited by Hope & Mühlemann, 2001). Societies have developed common set of beliefs and developed a set pattern of behavior which allows them to live harmoniously. These are handed from one generation to another. Hofstede further believes that the culture in which an individual is immersed since birth is likely to have a much stronger effect on him than the organizational culture. The market in UK is homogenous and health conscious as cholesterol-lowering and probiotic-containing products are already established. Kefir being probiotic may gain market penetration immediately but the ‘bad’ cholesterol aspect may be a hindrance to some extent. Reduced fat brands are well established in UK. People are interested in products with low cholesterol and which can boost the immune system. Research suggests that kefir inhibits the allergen specific antibody Immunoglobulin E (IgE). IgE is involved in immune responses to inactivate organisms that might cause disease but despite these, experts in UK warn that much more testing needs to be done of the product. The NHS Primary care Trust in UK also warned that supportive evidence is needed before human trial could be carried out (BBC News, 2006). Thus UK society has a common set of belief and they would rely on tests and evidences before trying a new food product. Education level too makes a difference according to Hofstede in making choices and decisions. This sector is highly legislated and already has lot of international processors. There is stringent legislation from hygiene to product labeling (Mindbranch, 2006). Studies suggest that up to 2010 the outlook for this market is very positive. Suppliers are keen to adept new products based on consumer needs and wants and there since there is scope to add value, kefir should be a success in UK. Besides, suppliers are investing in brands and developments. In Indonesia, Mini-markets target the residential and housing complex and they are preferred because of ease in shopping and comfort. The prices are reasonable as the margins by the retailers are low. The supermarkets have been serving the needs of the consumers. The aggressive entry of foreign retailers started after the economic crisis in 1998. In the hypermarket business 66.2% capital comes from the foreign investors. Some mini markets are franchised by foreign retailers. Modern retail market is taking over the traditional market @2% per year. If this trend continues, by 2020 modern market will have 60% share of the market (Natawidjaja, 2005). Cultural differences in UK and Indonesia within the theoretical framework All societies are unequal but some are more unequal than others. Accordingly, the Indonesian society indicates high power distance as there exists high level of inequality of power and wealth within the society (ITIM, 1967) while in UK, even though inequality exists, it is endorsed by the followers as well as the leaders, which means there is low power distance (ITIM, 2003). Both UK and Indonesia have a high level of Uncertainty Avoidance, which means low level of tolerance for uncertainty. This indicates the society prefers to be bound by strict rules, laws and legislation, safety and security measures. This is true in both countries where government regulations cannot be evaded. The Indonesian society is collectivist while the UK society is individualistic. Loyalty in Indonesia is paramount and overrides most other societal rules and regulations. Strong relationships are maintained where everyone shares family and extended family responsibilities. In UK there are no family ties and everyone is concerned about himself and the society also does not expect beyond that. The UK society is masculine in nature where roles are distributed equally between the genders. Indonesia has a modest, caring society and hence feminine in nature. In UK the women are equally assertive and competitive as men and also have decision making powers. The Indonesian society has a long-term orientation against UK with a short-term orientation. Perseverance prevails in Indonesia while in UK the society is concerned with fulfilling social obligations. These characteristics of the culture and society influence the buying decisions, the food habits and the growth of the economy in general. Marketing communications – UK and Indonesia When Danone launched its Danone Activ water with calcium, even though the calcium-fortified waters were not new to the UK, they spent $15.25 million for the launch (Hilliam, 2003). The advertising featured a family of skeletons, emphasizing the bone-health positioning and within a year they gained the overall fourth position. This demonstrates that communication has to target health awareness, benefits and consciousness. Lifeway Food, the leading kefir company, has a range of sweetened low fat kefir line and recently they have sweetened it with organic cane juice. This has been done due to demand from the current and potential customers. This addition is expected to aid the immune and digestive systems, provide a good source of both calcium and protein and may even promote weight loss during a reduced calorie diet (DNM, 2005). The UK population is very health conscious and according to Padel and Foster (2006), Mintel report of 2000 states that term ‘organic’ and organic labels have strong emotional appeal with consumers as it relates to health and well being but the average UK consumer is not familiar with the various organic labels. The size of the organic food market in UK accounts for only 1.2 percent of the entire food retail market. Hence, kefir’s marketing communication should focus not so much on organic juice as on the health benefits like weight loss and reduced calorie diet. In Indonesia, to attract the consumers, the packaging size should be reduced to prices, and the promotional campaigns should be more aggressive with store fliers, seasonal discounts and in-store advertising. Consumers impressionable and hence promotions play a vital role. They are looking for variety but value for money is important to them. Interest in nutritional value is growing and brand names are becoming important. Indonesia has a large population base and the distribution system has improved a great deal. The people prefer image associated with American products and since kefir is very popular in America, it can be expected that it would capture a good market in Indonesia as well. Another strong reason for its potential success is because no local alternative is available. Mini-markets and convenience stores are growing in popularity. Besides, a lot of expatriates reside in Indonesia which also adds to the market for kefir (GAIN). Conclusion Opportunities exist for all milk and yoghurt products. The local industry in Indonesia lacks in expertise in dairy farming, processing and packaging and hence any foreign product in this category would be welcome (DOIR, 2004). This is a good time to enter the Indonesian market as the retail segment is growing rapidly. Investment in promotions is essential part from thorough training to the distributor. Prices should be affordable and packaging small, wider choice is essential for the consumers, which means kefir should not launch just one product but variety of products should be offered during the launch. Since there is a tendency to accept whatever Americans eat and rink, it is highly likely that kefir would be easily able to make a share in the dairy market. The distribution should be through hypermarkets as that is where most of the capital is from foreign investors and it would also ensure the target middle and upper income group. The British culture is relatively open to taking risks and dealing with change. On a macro level this translates into repeated revisions of laws and regulations. Marketing in UK would require very intensive promotions as competition is high, people are price conscious and do not really follow the healthy diet schedules despite being aware of it. They would also not be attracted by the organic label but since they are open to risks, they would certainly try out the product. The promotional campaigns must highlight and connect it to health and well-being to attract the first-time consumers. In UK this drink should be sold through small retail local shops but unless the NHS clears the product, it is highly unlikely that the government would allow market entry. Thus, market potential exists in both these countries, difference lies in the approach and market segmentation. References: BBC News (2006), Fermented milk 'cuts allergies', 10 Dec 2006 DNM (2005), Lifeway dumps HFCS for organic cane juice, 10 Dec 2006 DOIR (2004), Business Opportunities In Indonesia, 10 Dec 2006 Duncam, P. (2001), Theoretical Foundations for an Art Education of Global Culture and Principles for Classroom Practice, 10 Dec 2006 GAIN (2004), Indonesia Retail Food Sector Report 2004, 10 Dec 2004 Gilbert, D. & Tsao, J. (2000), Exploring Chinese cultural influences and hospitality marketing relationships, International Journal of Contemporary Hospitality Management 12/1 [2000] 45-53 Hillam, M. (2003), Functional Drinks Diversify In Europe, 10 Dec 2006 Hope, C. A. & Mühlemann, A. O. (2001), The impact of culture on best practice production/operations maangement, International Journal of management Reviews, Vol. 3 No. 3 pp. 199-217 ITIM (1967), Geert Hofstede™ Cultural Dimensions, 10 Dec 2006 ITIM (2003), Geert Hofstede™ Cultural Dimensions, 10 Dec 2006 Jones, P., Comfort, D., & Hillier, D., (2006), Healthy eating and the UK’s major food retailers: a case study in corporate social responsibility, British Food Journal Vol. 108 No. 10, 2006 pp. 838-848 Mindbranch (2006), Milk & Dairy Products Market Report 2006, 10 Dec 2006 Mooij, M., (2000), The future is predictable for international marketers, International Marketing Review, Vol. 17 No. 2. 2000 pp. 103-113 Natawidjaja, R. S., (2005), MODERN MARKET GROWTH AND THE CHANGING MAP OF THE RETAIL FOOD SECTOR IN INDONESIA, 10 Dec 2006 Padel, S., & Foster, C., (2006), Exploring the gap between attitudes and behaviour, British Food Journal Vol. 107 No. 8, 2005 pp. 606-625 Pizam, A. & Eliss, T. (1999), Customer satisfaction and its measurement in hospitality enterprises, International Journal of Contemporary Hospitality Management, 11/7 [1999] 326-339 Spiritualpath (n.d.), Milk Kefir, 10 Dec 2006 Read More