New Product Opportunity for Al Ghurair in American Market - Case Study Example

Table of Contents New Product opportunity for Al Ghurair in American market (Jena Chocolate bar) 2 1 Introduction 2 2 Grief description of the company 2 2.1 Al Ghurair consumer goods 4 3 General characteristics of the U.A.E consumer goods market Al Ghurair is operating in 4 3.1 Economy 4 3.2 Demographics 5 3.3 Competitors in the market and growth prospects 5 3.4 Health and environmental trends in the market 7 4 Current competitive and marketing strategy by Al Ghurair 8 4.1 Cost leadership 9 4.2 Differentiation strategy 10 5 Marketing strategy 11 6 Description of the launch strategy 12 6.1 Differentiation strategies 14 6.2 Product strategies 14 6.3 Promotion strategies 15 6.4 Pricing strategies 15 6.5 Distribution strategy 16 7 Conclusion 16 Works Cited 17 New Product opportunity for Al Ghurair in American market (Jena Chocolate bar) 1 Introduction This presentation is intended to give a full description of new product (Jena chocolate bar) opportunity for Al Ghurair company consumer foods section in the American market. The company is currently operating in U.A.E but has operations in 20 countries world over. Jenan is the flagship brand of the company. The products are sold in Africa, Asia and middles east. The study is based on secondary sources of information. This presentation gives a grief description of the company, general characteristics of its U.A.E market and its current competition and marketing strategy. Finally the presentation describes the launch strategy in the American market. 2 Grief description of the company Al Ghurair is one of the largest diversified industrial enterprises in the Middle East. The company has been in operation for half a century now, a period in which it has been able to widen its reach to global markets. The company name is largely a U.A.E brand a fact which the company is proud to be associated with. The company is committed to enhancing life in the communities its serves. The core focus of the company is on foods, construction, resources and properties, printing, retail and education. The company is based on its native Dubai from where the management directs operations in over 20 countries in four continents. Some of the food related operations include flour mills in Lebanon, Sudan, Algeria and Srilanka. The company produces one million packs of noodles every year which can be found in supermarket shelves in North Africa and Asia. Al Ghurair reputation and success are based on strong values and unwavering commitment to whatever the company undertakes. Perhaps this explains why the company is a respectable brand in Asia and world over. The company’s values statement reiterate they commitment to upholding quality, focus, commitment and unity which have defined the company in the past five decades and will sure guide its growth in the future (Al Ghurair). The company has interests diversified into various sectors and industries which are not necessarily related. As a result the Al Ghurair boasts of a much diversified range of products and brands which are available in the U.A.E market and other markets mostly in Asia. The company has interest in (Al Ghurair): Construction Properties Education Energy Retail Printing and publishing food For the purposes of this research we shall concentrate on proposing a new product opportunity for Al Ghurairair foods which is the choice of this research work as a range of consumer products by Al Ghurair . Al Ghurair foods has been in operation since 1976 after the creation of National Flour Mills in Dubai. Since then, the company has been able to diversify its portfolio of food products and ensure presence in over 20 countries around the world. The food section of Al Ghurair comprises of four main functions; consumer goods, food services, industrial, and animal nutrition. 2.1 Al Ghurair consumer goods Al Ghurair consumer goods are made in U.A.E and offer the best natural nourishment available according to the company. The range of consumer goods includes; flour, pasta, noodles, eggs, oats and edible oils. Jenan is the company’s flagship brand but other brands associated with the company include Rawan, Rodha and Pastadoro. Pasta, noodles and other consumer foods are distributed under the four brands across major markets in Asia, middle east and Africa to clients who include; retailers, HORECA, Wholesalers and private label. Jenan happens to be the main brand in all the products by Al Ghurairair (Al Ghurair). 3 General characteristics of the U.A.E consumer goods market Al Ghurair is operating in 3.1 Economy The U.A.E is an important oil and gas producer and ranks seventh in the world as of 2010. Revenue realized from oil trade has seen significant social and economic change in finance, education, and other growth sectors of economy such as construction. Other measures take by the U.A.E rulers has ensured the economy of the Emirates has grown exponentially. As of 2010, U.A.E enjoyed a per capita GDP of US$ 38,900. This is higher than in other first world countries such as Canada whose per capita GDP stands at US$ 38,200 meaning the consumers in U.A.E have a considerably higher buying power than several others in big economies (Agriculture and agri-food Canada - International Markets Bureau). 3.2 Demographics The population of U.A.E is slightly above 8 million people including expatriate workers in the region. This is the target market of Al Ghurair since the product is a general consumer product with no specific market segmentation in terms of say gender or demographics. Households in U.A.E can be classified into three man segments: Nationals, expatriates and singles. The nationals live as extended families in villas and homes outside the city. The trend is changing as young people become more educated and rich due to the high standards of living. The result is many singles in the emirates. The expatriates live with families but some are sending their families back home due to strained budgets. A majority of these singles are eating out in restaurants as they go for movies and night outs. This is the lifestyle replacing the traditional way of life as incomes improve and globalization penetrates the U.A.E population (Agriculture and food agri-food Canada - International Markets Bureau). 3.3 Competitors in the market and growth prospects By the end of 2010, 8 companies accounted for 29 new products introduced in the U.A.E market grain based market. YFL Manufacturing Sdn. Bhd, Nabisco ArabiaCo. Ltd happens to be the main industry players. Americana group and Kraft foods are some of the others playing in the U.A.E consumer foods market. The noodles market is a highly competitive market with many players in the industry. Towards the close of 2009, Al Ghurair had only 6.1 % of market share behind three players in the market with Barilla holding Societa per Azioni topping the market share with 16.1 %. This means a lot of resources have to be dedicated to promotion and advertising as well as product improvement and development to beat competition (Agriculture and agri-food Canada - International Markets Bureau). United Arab Emirates Dried pasta/noodles brand share, by value, 2003-2009 (%) Company Brand 2003 2004 2005 2006 2007 2008 2009 Barilla Holding Società per Azioni Barilla 15.4 15.5 15.6 15.8 15.9 16.0 16.1 Conga Foods Pty Ltd Spigadoro 6.3 6.4 6.5 6.7 6.8 6.9 7.0 Private Label Private Label 6.2 6.3 6.4 6.6 6.7 6.8 6.9 Al Ghurair Group Jenan 5.4 5.6 5.7 5.8 5.9 6.0 6.1 IFFCO Group Others 4.4 4.6 4.6 4.7 4.9 5.0 5.1 Food Manufacturing Group Co. Al Alali 4.2 4.2 4.2 4.2 4.2 4.2 4.2 Nestle S.A. Maggi 3.4 3.6 3.7 3.8 3.9 4.0 4.1 H.J. Heinz Company Honig 3.2 3.3 3.4 3.6 3.7 3.8 3.9 Emirates Macaroni Factory Others 3.1 3.1 3.1 3.1 3.1 3.1 3.2 Ebro Puleva S.A Panzani 0.0 0.0 2.7 2.8 2.9 3.0 3.1 Riso Gallo S.p.A Gallo 2.1 2.2 2.3 2.4 2.6 2.7 2.8 Pasta ZARA SpA Pastazara 1.3 1.4 1.6 1.6 1.8 1.9 2.0 Nestle S.A. Butoni 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Riso Scotti S.p.A. Scotti 1.1 1.1 1.1 1.1 1.1 1.1 1.1 Gruppo Colussi Panzani 2.4 2.6 0.0 0.0 0.0 0.0 0.0 Others Others 40.1 38.9 37.8 36.7 35.5 34.3 33.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: (Agriculture and food agri-food Canada - International Markets Bureau) Food and beverage consumption trend and expenditure U.A.E. Market Value Forecast ($US millions) Category 2008 (US millions) 2013 Projections (US milllions) CAGR (%) Baby Food 7.7 10.4 6.1 Bakery/Cereal 1027.6 1544 8.5 Canned 13.6 16 3.2 Chilled 111.5 171.4 9 Dairy 546.9 709.6 5.3 Dried 143.6 180.7 4.7 Frozen 183.5 237.8 5.3 Hot Drinks 225.6 259.3 2.8 Ice Cream 48.4 61 4.7 Meat, Fish and Poultry 251.1 351.4 6.9 Oils and Fats 39.9 45.3 2.5 Pasta/Noodles 59.6 83.8 7 Savoury Snacks 85.4 124.4 7.8 Source: (Agriculture and food agri-food Canada - International Markets Bureau) From this table the pasta/noodles, oils/fats, and bakery/cereal segment are poised to grow by large margins in 2013 presenting good prospects for Al Ghurair 3.4 Health and environmental trends in the market Social and economic advancements in U.A.E related to rapid development have dramatically changed the lifestyles of the population in U.A.E towards less physical activity and poor diet choices. One third of the U.A.E population is obese presenting a great risk of chronic lifestyle diseases such as type 3 diabetes. At 20% the U.A.E has the highest level of diabetes in the world. The government is responding to this situation by promotion and prevention initiatives such as a comprehensive nutrition strategy based around WHO guidelines (Agriculture and food agri-food Canada - International Markets Bureau). The food market is therefore a sensitive market to operate in since people are becoming more aware of the problems that might arise due to poor diets. To take advantage of this growing trend in U.A.E, products in the food segment have to take into consideration the packaging portions to reduce the level of calories. Small premium portions are preferred by a majority who don’t want to indulge. Single men working in the federation also prefer portion-controlled offering. Labeling is important too, consumers in U.A.E are beginning to look out for ingredient listing in their products and also the “free from” message in the product (Agriculture and agri-food Canada - International Markets Bureau). 4 Current competitive and marketing strategy by Al Ghurair A competitive advantage as proposed by Michael porters occurs when a business is able to develop measures, attributes and policies that make it outperform its competitors. These measures should result into the business either offering lower prices of it as products or greater benefits that justify higher prices of a company’s products as compared to those of competitors. It is highly important that a firm’s management takes into consideration key resources and technology applications in a firm as they are the sources of competitive advantage. The system must be value creating through manipulation of available resources and information. Porters proposed four strategies to gain a competitive advantage over rivals in an industry: Cost leadership Differentiation Cost focus Differentiation focus Cost leadership and Differentiation are the evident strategies in Al Ghurair since it’s a large company which has to rely on broad industry strategies to remain competitive. 4.1 Cost leadership Cost leadership strategy aims at positioning a company as the lowest cost producer in the industry. From this the company will be able to enjoy larger margins and can even offer discounts or react to price based competition effectively. Al Ghurair has been able to achieve cost leadership in the industry through: Vertical integration whereby the company does not only manufacture noodles, produce flour and pasta, it also specializes in production of edible oils and biofuel for export. The company is also a grain handler with bulk grain silos of 300,000 metric tones. The grain elevator is located at Jebel Ali with a discharge capacity of 25, 000 MT per day. This vertical integration and expertise means the company is able to offer products at competitive prices and realize a larger margin from its operation (Al Ghurair). The products are also mass produced with pasta being produced at 72,000 metric tones per annum and noodles at 15, 000 metric tones per annum. This production level ensures the process is able to achieve economies of scale which will translate to reduced cost (Al Ghurair). Al Ghurair has over the years been able to invest in the best production technology in line with the company’s vision. As a result the company has one of the most advanced noodle and pasta manufacturing plants in the Middle East. The production process is automated from start to finish with no manual intervention at any stage. This reduces costs significantly (Al Ghurair). 4.2 Differentiation strategy This strategy involves meeting customers’ criteria as much as the business can and then charging a premium price for the product that has superior criteria than what is available in the market. Al Ghurair has been able o achieve this through: Al Ghurair produces superior product quality ensured by the company’s extensive expertise in the grain industry. The company sources its grains from regions where the soil is very rich in necessary grain production nutrients. This ensures consistency of the products. The production process for noodles, flour and pasta are entirely automated from start to the end meaning there is adherence to the best production methods and standardization of the end product. From this the company is able to satisfy the market criteria for high quality products and gain a competitive edge over others (Al Ghurair). The company has also invested massive resources towards responding to consumer concerns in the U.A.E market. Recently the company has diversified its portfolio to include a range of specialty flour and Omega 3 eggs to help address the diabetes and obesity problems facing the U.A.E population and other global markets. This focus on a particular segment of its consumers ensures that the company differentiates itself from the rest of the players in the market and can therefore comfortably sustain its prices in the market and it doesn’t have to engage in price based competition strategies that are likely to impact negatively on the profitability of the company (Al Ghurair). The company has a current offering of more than 45 product variants across all categories its serves. Plans are underway to diversify into newer consumer food categories to maintain and consolidate market share through keen quality focus to gain consumer trust (Al Ghurair). 5 Marketing strategy A marketing strategy can be defined as an organizations strategy that combines all the marketing goals into a comprehensive plan of action. A good marketing strategy is as a result of extensive a marketing research and focus on product mix in order to achieve growth and sustainability of the business. Marketing strategies differ depending on individual situation acing a business. A general contention though is that a business overall strategy has to be linked with the marketing strategy. Marketing efforts should therefore be guided by the marketing strategy prepared in accordance with the business strategy. Al Ghurair business strategy is to grow and increase profitability. The company is a large industry player which seeks to dominate the industry and become an industry leader. Al Ghurair has adopted a marketing strategy keenly tailored to achieve the market leader position. To do this the company has in its consumer foods portfolio 45 variants all spread in its five categories under brands such as Jenan. Jenan is a global brand with presence in Asia, Africa and Middle East. The company produces more than 85,000 metric tones of pasta and noodles only for over seas markets. This strategy is an obvious statement by the company that it seeks to become a global force in food industry. The company’s clients help it distribute its products to its market all over the world. The company relies on retailers, wholesalers, HORECA and private labels to distribute its products. The company is continuously looking for more distributors to market its products the world over. The strategy is to grow customer base as much as possible to beat competitors domestically and also in the international arena. Al Ghurair is introducing a new range of healthy conscious products such as specialty flours and omega 3 eggs. This is in its long term strategy to address growing consumer concerns on dietary attributes of foods both in U.A.E and world over. This strategy will ensure that Al Ghurair does not lose this particular market to competitors who may acquire its market if it does not address the health issues by a section of its consumers (Al Ghurair). 6 Description of the launch strategy The new product opportunity that we have identified for Al Ghurair in the US market is the market for Jena chocolate bars, a chocolate brand to be produced by Al Ghurair for the American market. Al Ghurair as a company has extensive experience in food and other sectors of consumer goods and services. This means the company is in a position financially and also in terms of expertise and market connections to engage in confectionary and especially in production of chocolate bars meant for the US market. The United State has a good market for Chocolate bars with companies such as krafts food, Mars and Nestle. Al Ghurair is in a better position to compete in this sector simply because the company already has developed efficient strategies to compete in high competition consumer market and also due to its competitive strategy which involves vertical integration to cut costs, increase profit margin and ensure highest quality of their products. Segmentation, targeting, positioning Age Chocolate is bars are taken by all age groups in the US. However children above the age of five, teenagers and young adults between 18 and 30 make up the greatest percentage of chocolate consumers in the US market and thus this should be the group the company will concentrate on. Gender Chocolate is taken by all genders in the identified age segments. From teenage hood to around thirty years, females take the most of chocolate and confectionary products as compared to men’s consumption. In as much as the company will seek to market the chocolate bar to all genders, special effort should be taken to market the brand to the females who are currently very sensitive to high calorie products and sugary products. Psychological The behavioral aspect that may influence target marketing is the customer expectation of value derived from the products. The consumers expect to get preferred flavors and tastes from the Jena chocolate bar brand. The customers also expect the product to be healthy and nutritious to them. 6.1 Differentiation strategies Jena chocolate bar will differentiate itself in the market as high quality brand from a manufacturer with considerable experience and expertise in production of consumer food products. The US market is also very sensitive to health issues as such the brand will position itself as a healthy alternative that will have 60% less. Most of the chocolate brands have 45% fat content. This will attract the health conscious population of the US market especially the female consumer segment who are very particular with their choice of diet. 6.2 Product strategies Chocolate bars are common in the US market with manufacturers in the US exploring various ways to differentiate the products from the plenty in the market. This means the market is very competitive. As such Al Ghurair will have to come up with a product that meets the expectations of the consumer in terms of quality, price and additional features. The company will have to employ the modern confectionery technology to process cocoa and come up with a product that is of high quality and healthy to the target market. The product will also be produced in sizes approved by the industry regulator but it should also produce small quantities since some consumer just have a craving for chocolate bars and don’t need to eat a lot to derive satisfaction from the product. The company will therefore be at a better position by producing small size as well as medium size chocolate bars for the US market. The company might as well produce low sugar alternative Jena chocolate for the purposes of attracting the market segment concerned about the amount of sugar they consume due to health factors or diet considerations. This will give the company competitive edge in a country where the reality of obesity and other lifestyle diseases is so real. 6.3 Promotion strategies Al Ghurair will rely on print, TV and online advertising channels such as social media and YouTube to market the new chocolate brand in the US market. The print such as dailies and popular magazines will provide a perfect opportunity for the brand to communicate its benefits as compared to the available brands in the market. the channels is very good at getting the attention of the target consumer since they already are concentrating on the contents of the material they are reading. The TV adverts will leave a lasting impression on the minds of the consumers regarding Jena chocolate bar. The TV adverts have an immediate impact on sales as they reach a wider audience quickly. The online platform is becoming very popular with products that are targeting young population in developed countries such as US. The company will therefore need to set up a Face book page and a Twitter account to get as many followers in order to increase the brand visibility in the US market. Short YouTube videos meant to attract attention through funny content incorporating brand advertisement will also be instrumental in increasing brand visibility and prompting consumers to buy the chocolate brand. 6.4 Pricing strategies Chocolate bars are not expensive commodities since they don’t belong in the category of essential consumer goods. However they are indulgence products which have a fairly inelastic demand curve. This means the company can introduce the products at the prevailing market prices. For the first quarter the chocolate bars will have to be priced at lower than the price of the popular brands such as mars’ three musketeers and Almond joy. This is a penetrative price model that will boost sales for the first quarter and achieve a consumer base for the new brand. The penetrative price will also be to complement promotion efforts of the brand as it seeks to gain a footing in the US market. 6.5 Distribution strategy Jena chocolate bars will be distributed through the existing supermarket chains and small convenience stores. This distribution strategy will reduce the cost the company might incur if it seeks to develop its own distribution channel such as market research and assets like distribution vehicles and warehouses all over the US. The strategy will therefore mean that the product will have a competitive price at the shelves enabling it to compete with existing brands. The strategy is also a chance to develop strategic partnerships with major retailers that can offer support and knowledge required to penetrate the market. 7 Conclusion From the secondary research we conducted. Al Ghurair as a company can be able to profit by taking advantage of the new product opportunity for chocolate bars in the American market. The company is already competing effectively in its U.A.E market with a wide range of consumer products such as noodles, pasta and flour. The company has however not ventured into the confectionary industry which has a very high growth potential in the US market. Al Ghurair has high quality products and strong brand that can do well win the American market if the launch strategy we described can be followed. Works Cited Agriculture and agri-food Canada - International Markets Bureau. "The United Arab Emirates Consumer." MARKET ANALYSIS REPORT. 2010. Agriculture and food agri-food Canada - International Markets Bureau. "saudi Arabia,Egypt and the United Arab Emirates: consumers, markets, and demand for grain-based products." Market analysis report. 2011. Al Ghurair. Consumer foods UAE. 2013. 27 May 2013 . Al Ghurair. The Group. 2013. 27 May 2013 . Read More