Published on August 4, 2009
Calavenna Juices, Incorporated International Marketing Plan International Marketing Management Professor Susan P. Douglas May 3, 2009 Joseph Calavenna Susan Chen Rogelio Plasencia Erica Swallow Nan Zhang
CALAVENNA JUICES COMPANY BACKGROUND The Story In the beginning (Year 2001), Team Calavenna drank orange juice during late night meetings. And Team Calavenna said, “Let there be lychee juice”; and there was lychee juice. And Team Calavenna saw that the lychee juice was good; and they combined the two and concocted a wondrous juice blend and a business idea. The Product Our products are ultra premium 100% juices made with exotic fruits to be sold in 1 Liter and 1.75 Liter bottles, positioned for home use. We will use high-quality, transparent PET plastic for the bottles. Transparency is key as it will enable us to utilize a sleek, trendy design. All of the packages will exhibit a uniform aesthetic language. We will not use fruit imagery, but instead will let the vibrant fruit juice hues speak for themselves behind our transparent bottling. The juices will be flash-pasteurized to preserve quality and taste. We selected these liter amounts since merchants and consumers are already used to handling these sizes. Bottled fruit juice serves a consumer who is on the go, health conscious, or who wishes to make a statement. Though this product type is not a new sight, our exotic fruit ingredients, a competitive advantage, add a special twist to a proven consumer goods product. Additionally, the exotic fruit continues to fulfill the expectations our consumer already has of this product category. The Company Calavenna Juices is an environmentally conscious company focused on selling a premium offering to a discerning consumer. We eschew the typical orange juice product and embrace individuality and experience. Every creation we put out will have a focus on an ingredient not commonly consumed in that market. Customer interaction continues after point-of-purchase by combining official recycling kiosks with deposit incentive programs at neighborhood grocery stores. We are a young, “green” company in tune with consumer tastes and blessed with angel investors. Our financial backing provides us flexibility in exploring ways to provide that “yumm...” moment of bliss to our customer in an environmentally responsible manner. Calavenna 2
INTERNATIONAL MARKETING STRATEGY Having great success in the United States, Calavenna Juices would like to conduct research into international marketing expansion. The following section describes four stages of research conducted in order to discover our next country for entry. These states include: a preliminary screening, an overview of country indicators, a product marketing screening, and a market infrastructure analysis. Stage 1: Preliminary Screening This first stage is a general sifting of countries in order to reduce our consideration set to a manageable few that fit the most basic target criteria. Population > 20million In order to guarantee a large market for our product, we have selected to only consider countries with a population greater than 20million. A large population will offer the opportunity to develop a consumer base large enough for success. PPP per Capita < 10,000 To ensure a wealthier consumer market for our premium juice product, we will only consider countries with a purchasing power parity of $10,000 (international dollars). This measure of standard of living and individual wealth is vital because we need to enter a market that is responsive to up-market products. Urbanization > 60% The success of our product depends on access to a sizeable, highly urban market. Urban markets are characterized by lower price sensitivity and a greater proclivity for premium food products. Additionally, our entry strategy will initially penetrate this market, and aim to achieve a sizable presence and a good reputation before attempting to expand to suburban markets. Conclusion: This initial elimination process has narrowed our focus to 18 countries of sufficient size and development: Argentina, Australia, Canada, France, Germany, Iran, Italy, Japan, Korea, Mexico, Poland, Russian Federation, Saudi Arabia, Spain, Turkey, United Kingdom, United States, Venezuela (See Exhibit A). Calavenna 3
Stage 2: Country Indicators The general condition of a country has a great impact on the success of our product. We paid especially close attention to economic factors, political turmoil, and various other risk assessments that could unnecessarily impede our organization from functioning efficiently. Six-Year Average GDP Per Capita Growth Rate (> 1%) We chose an average growth rate of one per cent as we wanted a country that was not only growing, but growing at a respectable pace. Note that the six-year time frame of the calculation allows for minor fluctuations in economic growth, as our group was largely interested in the greater economic trends within a country. This is crucial, as we are entering the market with a premium-positioned product and expect to do best in a country with a healthy and one could say exuberant economy. Note that all of the countries entering this phase of consideration passed this requirement except for Italy. Inflation Rate (< 5%) Closely related to the rate of GDP growth is inflation, as high GDP growth coupled with high inflation may make it appear on paper that a country is doing well when in reality it is faltering economically. Iran is one of the prime examples of this, and incidentally did not pass this requirement. Russia, Turkey, Venezuela were excluded from further consideration as a result. Moreover, a low inflation rate means greater stability in various finance-related aspects of business. Gini Index (< 50) The Gini Index, or Gini coefficient, is a numerical representation of a country’s income inequality where a lower value means greater income equality. Greater income equality is beneficial to our strategy as we are selling a perishable product that aspires to a significant degree of market penetration. Extremely high income inequality would mean that we would only be able to target a very small portion of the population, perhaps not enough to maintain a viable enterprise. All of the countries in this phase qualified using the above cutoff, although Saudi Arabia did not have a published Gini coefficient and was thus exempted. Macroeconomic and Political Risk Ratings Better than BBB Risk is something we are doing our best to manage, so we took into account the following facets of risk —currency, banking sector, political, economic structure, and country. Combined, they give a view of Calavenna 4
which countries we can expect to have a measure of stability with regards to both its economy and the political forces that ultimately provide the legal framework. Notably, the two counties here that did not qualify based on risk factors both have tricky governments openly hostile to Western interests: Iran and Venezuela. Overall Risk Rating (<40) A more holistic picture of risk than the various factors mentioned above, this is a broader measure of risk that led to a greater number of countries failing to pass. Many of those that had a risk rating above forty would have been considered to be potentially troublesome places to operate via anecdotal and other qualitative measures. Overall Business Environment (> 6) On a ten point scale, this provides an assessment of how friendly the country is to business. Especially important to our venture, as our offering has a limited shelf life and will most likely have to be imported, making it especially sensitive to corruption, bureaucracy, and other issues involved in operating a business in certain countries. Conclusion: Ten countries remain: Australia, France, Germany, Japan, Korea, Mexico, Poland, Saudi Arabia, Spain, and the United Kingdom (See Exhibit B). Stage 3: Product Market Indicators Having narrowed down the list of possible countries for the expansion of Calavenna Juices, it is crucial that an in-depth analysis be carried out to determine which countries present the best fit for our product. Accordingly, ten indicators were strategically chosen based on our product segment and the current market conditions in each country. By gathering indicator data on each foreign market we were able to come up three countries whose market conditions and consumer tastes match our product segment. Average Personal Disposable Income (> $10,000) It is important to know how much disposable income consumers have to better understand how likely they are to buy up-market natural juice drinks. The higher the disposable income, the better chance they will purchase pricier juices instead of settling for cheaper and lower quality substitutes. As a result, we Calavenna 5
chose to pass only countries that have an average disposable income of over $10,000 to better ensure that consumers in the market will be able and willing to buy our juices. Consumer Expenditure on Non-Alcoholic Beverages for 2008 (> $6,000 million) A good impression of how much consumers spend on beverages can help to shape our understanding of both the importance consumers place on beverages and their potential willingness to purchase premium natural juices. It also gives us an impression of consumer budget allocation for beverages; the higher the allocation the more likely they will be to purchase our juices. Accordingly, we set our scale high at $6,000 to weed out countries whose consumers might be less willing to purchase our juices. Annual Per Capita Fruit Consumption (> 60kg) Considering the nature of our product, it is essential that consumers in our foreign expansion market exhibit a taste for fruit. As a result, we have chosen to analyze the annual consumption of fruit per person. We are using this indicator mainly to provide information about consumer interest in fruit, not how attractive heath foods are to local consumers; we understand that fruit can fill different dietary positions in different cultures. Accordingly, we have set our scale high at 60kg. Cola Carbonate Off-Trade Liters per Capita Y-O-Y Growth for 2007-08 (> 3%) The recent growth rates in cola consumption are important because colas tend to be cheap and appeal to a broad consumer base. With this measure we are trying to determine how saturated markets are with colas and how likely consumers might be to start looking to substitutes. Accordingly, we are interested in moving into markets where the cola industry either exhibits low growth or contraction. We have set our scale low, at 3% recent growth, to eliminate countries where the cola consumption is still growing rapidly. 100% Juice Off-Trade Liters Per Capita Consumption in 2008 (> 8 Liters) To get a better idea of how popular premium 100% juices are and how likely markets are to already be saturated we looked at per capita consumption in 2008. It is important that we enter a country that exhibits a mid-ground between saturation and low consumption. To do this we chose to set our scale at more than 8 liters consumption per person to help us settle on a country that exhibits an interest in premium juices and growth opportunity in the segment. Calavenna 6
100% Juice Off-Trade Liters per Capita Y-O-Y Growth for 2007-08 (> 0%) It is important that we get a good idea of likely growth in our product segment and whether or not the local market is already saturated. To do this we set our scale at greater than 0% growth to eliminate any countries that exhibit contractions in the premium juice market and highlight countries where consumption per person is increasing. Per Capita Vitamin Expenditure for 2008 (> $2) Per Capita Vitamin Expenditure helps us identify countries whose consumers are interested in health and wellness. While not many of our countries exhibited high levels of vitamin usage all of them did have vitamin usage to some degree. We decided to set our scale at $2 because it identifies countries where consumers are interested in health and wellness but not overly stimulated to the point where they won’t see the benefit in our natural and healthy juices. Still Bottled Water Off-Trade Liters Per Capita Y-O-Y Growth for 2007-08 (< 3%) The recent growth of per person consumption of bottled water helps us to better understand market conditions. Much like the growth of cola consumption, this indicator illustrates how saturated the market is with bottled water and how likely consumers are to start switching to substitutes, like juice. It also shows an interest in health and wellness; consumers will likely move from low priced colas to mid- priced bottled water. This shift helps us determine how ready consumers might be to take the next step into premium health-centered drinks. As a result, we chose a low growth scale to eliminate countries where the market for bottled water is still growing and identify countries where it is contracting. Fortified/Functional Beverages Y-O-Y Growth for 2006-07 (> 10%) Growth in this market segment illustrates an increased consumer interest in health, wellness and beverages that are similar in nature to our premium natural juices. Knowing that a country is experiencing growth in beverages similar to ours helps us to identify countries whose consumers are interested in the advantages of our juices. We set our scale at 10% to ensure that we pick a country that allows us to better capitalize on this segment growth. Fortified/Functional Beverages Market Size (> $550 million) Just because a market illustrates growth does not mean that it is a good market to enter. To ensure that we are not let astray by the growth in fortified/functional beverages we have included an indicator that eliminates small markets. Accordingly, our $550million scale will weed out all markets that are too Calavenna 7
small and leave only markets that are large enough to risk entering into. Conclusion: After applying our product indicators and scales we narrowed our list of ten possible countries into three that fit our product positioning: France, Spain, and the United Kingdom (See Exhibit C). Stage 4: Market Infrastructure and Final Choice After a preliminary screening and reviewing the country and product marketing indicators for each country that passed through each stage, we conducted further research to determine the market infrastructure. Ease of advertising will be based on media connectivity, which includes internet, television, satellite, and mobile phone subscribers. Distribution considerations will be based on the development of a paved road network. 2008 Internet Connectivity (> 50% of population) As a modern company, Calavenna Juices will make great use of the internet for information dissemination, product promotions, commercial advertising, and social networking. As a result, we have set our internet connectivity rate rather high at 50% of the country population. 2008 TV Connectivity - Color TVs per household (> 2) As our promotional plan will include a decent amount of television advertising, we must make sure that the majority of our chosen country’s population owns a television set. We have cutoff of two television sets per household. This number was based on the fact that the average number of TVs in the U.S. household is 2.24. 2008 Digital satellite Pay-TV subscribers (> 5 million) As we hope to market our product as a premium product for a specific high-end consumer base, we want to target consumers with access to premium channels. Therefore, we have chosen to look at data on digital satellite subscriptions. This will allow us to advertise on very targeted satellite channels. We have set our threshold at 5 million subscriptions. 2008 Mobile Phone Subscribers (> 50 million) As a tech-savvy company, Calavenna Juices has a mobile internet website and wishes to participate in mobile advertising in any country that we enter. As a result, we must enter a country with a relatively Calavenna 8
high mobile phone subscription rate. We have set our threshold at 50 million subscribers. Annual Newspaper Circulation (> 10 million) Newspaper circulation becomes very important for promotional reasons. Therefore, we looked for countries with high newspaper circulation rates. Total newspaper circulation must be no lower than 10 million subscriptions for all combined publications. Density of Road Network (km/km² of land) (> 1.5) For distribution reasons, we have decided to analyze the density of the road network in each country. We chose a density of 1.5, which relative to the world, is much higher than average. Proportion of Paved Roads as Percentage of Total Road Network (> 95%) Although we will enter in urban areas first, in the case of expansion, we want to make sure that the road network within our chosen country can sustain our distribution demands. Thus, we demand that the proportion of paved roads must be over 95%. Language Barrier A language barrier is a minimal deterrent, but we considered this factor for final evaluation. The United Kingdom trumps Spain and France, as English is the national language. Conclusion: Based on our full analysis, the United Kingdom is the best candidate for international expansion. We discovered that the UK has everything we are seeking: our target market (affluent, health-conscious consumers), an ideal business environment, highly-developed mass communication channels, and a developed distribution network (See Exhibit D). Calavenna 9
PRIMARY OBJECTIVES Our primary objective is to enter the United Kingdom market with our ultra premium 100% fruit juices. We represent a health-conscious and passionate point of view that we hope to bring to the UK market. In the short term, Calavenna Juices hopes to achieve high brand awareness and brand knowledge. This will be possible as we are optimizing distribution through large grocery stores. Furthermore, as time progresses, we will make a strong effort to increase availability in order to increase visibility and opportunities for repurchase. We hope that our marketing campaigns will prove fruitful and lead to high penetration in London, our initial entry market. In the case of successful penetration in London, we will enter our secondary markets of Birmingham and Glasgow. With this initial strategy in mind, Calavenna Juices hopes to expand into other developed European nations where the demand for ultra premium 100% fruit juices is greatest. We will utilize the knowledge we gain from entering the UK market to further expand into other international markets. Positioning and Benefits Our positioning strategy is to position Calavenna Juices as ultra premium 100% juices made with exotic fruits. Along with this all-natural, healthy position, we hope to achieve status as a lifestyle brand. Along these lines, we hope to position Calavenna as a juice that you can drink throughout the entire day. Some consumers treat fruit juices as morning beverages or desserts, but we hope to position Calavenna as a multi-purpose juice that is all-natural, refreshing and healthy. We will focus on at-home consumption but will not limit its usage situations. Furthermore, in order to differentiate ourselves from other conservative and seemingly boring juice brands, we will use provocative imagery and suggestive advertising to catch the attention of younger audiences. Our commercials will feature beautiful, healthy people with a true passion for life and Calavenna Juices. Our communications will focus more on the lifestyle benefits of drinking Calavenna while highlighting the natural, healthy products that we offer. We feel that this positioning strategy is unique as most other juices seem to only focus on the health benefit that juices offer. Very few fruit juices have found themselves in the lifestyle brand arena, as they do not position themselves holistically in the lives of their consumers. Calavenna Juices is dedicated to taking a full-circle approach to surrounding our consumers in the Calavenna lifestyle. Calavenna 10
Target Market Our target market is 25-34 year old young professionals who are health-conscious and environmentally- friendly. The 25-34 year old age demographic accounts for 14% of the UK population, at about 8 million people. Based on a study conducted by BBC, 25-34 year olds are more up-market than the rest of the UK population. They are characterized as big spenders who are self-reliant and self-indulgent. As far as relationships and commitment go, 25-34 year olds are not rushing out to get married and have kids. Some are settling down, but others remain single. The average age for marriage is 28 for females and 30 for males. Thus, 25-34 is an age of mixed values, between those of being young and single and those of starting a family. In essence, this age bracket is in a stage of transition. The more affluent consumers in this age bracket watch less television, still listen to the radio (especially during peak listening hours during morning and evening commutes to and from work), shop online, surf the net, and cannot live without cell phones. MODE OF ENTRY Initial Entry Market After running through our screening criteria, we have selected the United Kingdom as our target country. Not only was it an attractive market across all facets of our decision-making process, but it fits our positioning of bringing exciting and exotic juices to a dreary market that has had very little exposure to such a product. The largest market within the United Kingdom by a significant margin is the greater London Metropolitan Area, with a population of nearly 7.2 million. It will be our main entry market for the product and the focus of the majority of our in-store and outdoor promotional efforts. Secondary markets are Birmingham and Glasgow, the two next-largest cities with populations of almost 1 million and over 620,000, respectively. While our television and other broad-reach media advertisements will receive exposure throughout the country, the sheer size and density advantage of London makes it the only viable target for the various innovative promotional activities we have envisioned. Distribution Calavenna 11
As an ultra-premium product designed for at-home consumption, we will be solely reliant on sales through grocery retailers opposed to sales for on-premise consumption at restaurants and bars or sales through convenience stores or small vendors. Our offering was specifically designed to exclude single- serving sizes as would be offered at many of the aforementioned venues. Our product will be distributed through an already-established beverage distributor with an aim of reaching most major supermarket chains and an especial emphasis on the more up-market grocers such as Marks & Spencer and Whole Foods. While we would not object to wider distribution of our product, our in-store promotional efforts will be held at those stores that are most compatible with our image. The advantage of this arrangement is that the already-established distributor has pre-existing relationships with the supermarkets, and we will be able to rely on their expertise and knowledge of market conditions to obtain the best retail placement. Moreover, creating a distribution arm—especially in a foreign country—is an incredibly difficult and time-consuming process and not an aspect of business we are ready or willing to involve ourselves in given the myriad other responsibilities that entail a product launch. International Operations Our United States headquarters are in Half Moon Bay, California. All marketing campaigns and sales promotions are created and distributed from our U.S. headquarters. We have chosen not to set up a headquarters office in the United Kingdom as we are neither producing fruit juices nor managing distribution channels from within the country. However, our business relied strongly on sea shipping. We have two production plants throughout the world (See Exhibit S). • Santos, Brazil Concentration Production Plant: Our Santos, Brazil production plant is conveniently located near the Porto de Santos, the largest shipping port in Latin America. We have strategically located our plant in Santos to take advantage of the port, as well as the abundant supply of exotic fruits grown in Brazil and neighboring countries. All exotic fruits grown in the area will be shipped by land to our Santos factory and concentrated. • Trieste, Italy Reconstitution Product Plant: Our Trieste, Italy production plant is located within the Free Trade Zone at the Port of Trieste. As the Trieste plant will be used as a transshipment plant, we are excited to take advantage of the relaxed transshipment regulations and lack of customs duties in the special economic zone. The concentrated fruit powder will be shipped to the Trieste plant, where it will be reconstituted using locally-procured 100% pure Calavenna 12
white grape juice. Because all of our ingredients are made from 100% fruit juices, and not reconstituted using water, we are still able to label our juices as 100% natural fruit juice. After the juice is reconstituted and packaged, we will ship it via sea to the Port of London Authority, where it will then be distributed (See Exhibit H for Shipping Costs). MARKETING MIX Product Calavenna Juice is an ultra premium 100% juice product made with only the finest of exotic ingredients. Our product is available in six flavors that are both delicious and healthy, playing to the health conscious nature of our target market. Our juices are not only delicious and healthy but they are made with the finest exotic fruits and because of that we are making no changes to our flavors for the United Kingdom market. None of the fruits our juices are based around are native to the United Kingdom and so the introduction of these flavors into the market, while not completely novel, do not need changing (See Exhibit F for Calavenna Juices Product Flavor Assortment). Packaging All Calavenna Juices are housed in sleek and trendy transparent plastic bottles that are easy to hold and pour. The bottle graphics on each bottle are simple and uniform making for an elegant yet approachable aesthetic. Additionally, there will be no fruit imagery on the the bottles allowing the rich and vibrant colors of the juices, visible through the bottle, speak for themselves set off by the plain lettering of the company and juice name. They come in two different sizes: 1 and 1.75 liters because they are designed to be taken home and enjoyed slowly, not as a grab-and-go indulgence. While not ergonomically designed, the circumference of the bottle is designed to make it easy for one to pour out the contents into a glass. We have chosen to use PET plastic specifically because of its excellent performance as a liquid barrier, its varied and long list of recycled uses, as well as its excellent candidacy for thermal disposal. These recyclable qualities of PET are especially important because of the correlation between health conscious and environmentally conscious consumers (See Exhibit E for Product Packaging). Distribution The best placement approach for Calavenna Juices is to most heavily target higher end grocery stores like Marks & Spencer and Whole Foods. We will participate in direct distribution with these two stores Calavenna 13
and provide trade discounts. These relationships will allow us to most efficiently solidify our products as high-end premium quality products. Additionally, they will be placed in the juice section adjacent other off-premise-consumption 100% juices, not with grab-and-go style juices. It is important that we illustrate to the market that we provide a higher quality product that is worth the higher price. Price Our pricing strategy will be very similar to other premium juices, such as Pom, Naked and Odwalla. On shelf prices will be £6 per Liter and £9 per 1.75 Liter. Our direct prices to distributors will be 20% less than shelf prices, placing direct prices at £4.80 per Liter and £7.20 per 1.75 Liter. We will offer trade discounts to premium grocery stores, such as Marks & Spencer and Whole Foods. Promotion As our first excursion outside of the United States and as the initiation of our entry into the UK and the broader European market, our promotional activities are very important. First, we aim to build awareness for our product aimed at stimulating trial and purchase. More importantly, however, we are also very serious about establishing our brand personality in this new market. We face strong competition in our product segment, and we understand that a differentiated brand is essential to our growth and survival. Country Factors Effecting Media Outlets The UK is a very developed national market which was key to our entry decision, but also poses complications in itself. Our target market is well-represented and avenues for mass communication are plentiful. However, we must be conscious of the increasing ineffectiveness of such mass media outlets, including television and newspaper. While our promotion strategy includes such outlets, we are aware of other media options and plan to fully utilize alternative forms of advertising. Keeping this in mind, our promotion strategy will be highly reliant on non-traditional advertising, as we see high potential in social networking, online, and guerilla marketing. Our website will be full of information on our company and products, as well as lifestyle information. We will also attempt to engage our online audience through mediums, such as YouTube, Facebook, Twitter, and related blogs. We will also lend vast resources towards in-store promotions to increase product visibility. And lastly, we will feature some traditional advertising to increase product awareness and knowledge levels, such as magazine, newspaper and television promotions. Calavenna 14
Message Our promotional communication will highlight two main features of Calavenna: Natural and Cool. Our products are 100% juice and every blend includes a different exotic fruit offering. We feel that by developing a direct association between Calavenna and “natural” we will get consumers to focus on the unique beverage blend variety our product line offers. Furthermore, this direct association has the added quality of automatically garnering Calavenna juices the subconscious associations of healthy and fresh that consumers normally make with “natural.” Our message also focuses on transmitting the youthful, trendy, and fun brand personality of Calavenna. In essence we aim to create a “Cool” factor. The individuals in advertising must represent a young and hip consumer, and the presentation of the product must be lively and appealing. Additionally, we remained constantly aware about the immense importance of breaking through the clutter of advertisement for our communication to have any effect. To address this, all our communication is developed with an emphasis on “standing out”. For Calavenna, “standing out” means using a different approach to communicate our message than that which is typical for the juice industry. Our advertisements will consist of edgy humor and racy imagery to deliver our message interestingly and capture the viewer’s attention. By creatively utilizing edgy and racy characteristics we also hope to create buzz around our brand which we can use in viral promotional efforts to speed the spread of awareness in the market. Commercials We have sketched five video commercials. Below you will find the synopses of these commercials. 1) Adam and Eve Synopsis: A very attractive Eve is convinced by the snake to pick from the Tree of Wisdom. She returns to Adam, and offers him what she’s picked. She hand’s Adam a bottle of Calavenna. “Calavenna all natural juice, that will quench all your desires.” (See Exhibit Q). 2) Garden Synopsis: In an English county-side setting, an attractive wife tells her husband she will be picking something fresh and different for him. She goes out to their garden with a basket, exchanging sultry glances with her handsome husband. She reaches into the dirt and with a little struggling, pulls a Calavenna bottle out of the ground placing it in her basket. Calavenna 15
3) School Boy Synopsis: A young boy ponders about what he can get his teacher. Suddenly he leaves his friends, running toward a tree in the opposite direction from his school bus. He Arrives last to his class and is greeted by his very attractive teacher, whose desk is covered in apples. Confidently, he mentions he “picked” her a “different” gift, and hands her a bottle of Calavenna. The teacher is impressed, and smiles. 4) Brazilian Fruit Merchant Synopsis: A handsome young merchant emerges from a fruit jungle with a basket on his head. The proceeding shots show him walking along a road, and finally through a crowded fruit market. An attractive young girl asks him what he has to offer her. The young man replies, “Only the freshest” and reveals he has been carrying Calavenna (See Exhibit R). 5) Indian Market Synopsis: A young Indian woman wonders through a busy fruit market with vendors trying to sell her a variety of “fresh fruits.” She makes eye contact with a handsome young vendor. He whispers to her I have something more exotic, and pulls back a tarp to reveal a Calavenna display. These advertisements play on the suspense of hiding the “fruit” to later reveal that the unique and fresh fruits being picked are actually bottles of Calavenna. The viewer is expected to make the conclusion that the juice is just as “natural” as real fruit. By implying this association and having the viewer make the connection themselves, the viewer is more likely to retain the association. By utilizing Eve and Adam as characters in our first commercial we hope to establish an edginess that should translate to cool. The commercials will be followed with the line, “Try something new, fresh, and exotic. Pick a bottle of Calavenna,” Reemphasizing the natural quality, highlighting exotic in reference to our fruit selection, and reinforcing a trial of the product. The videos will be featured in television spots and on our YouTube channel. We hope that they go viral via YouTube. These video commercial will also be transitioned to print formats that still play with “picking” the product and the brands edgy and racy character. Print Building off the imagery of the commercials, we will place print advertising in local London newspapers, and in targeted women’s interest magazines. We have detailed our print allocations in Calavenna 16
Exhibit M(a). Reach data for print was acquired from ABC Group, and price estimates were found via selected sources quoted averages. The choices were made to maximize our targeted goals for reach. Our newspaper advertisements will be place in The Times (London) and The Daily Telegraph, which didn’t have the highest reach but were more prestigious publications with a closer alignment to our target. We will begin our magazine placements with Vanity Fair, British Vogue, and Cosmopolitain. These magazines were selected for their specific target of wealthier affluent women, and their ability to propel consumer trends. Print advertisement will be a variation of the commercial advertisements mentioned above. They will emphasize natural and cool in the messages, and retain the exotic, seductive, and “juice as fruit” themes of the television commercials. All print advertising must prominently display our logo and feature the actual product (Exhibit R). Web Presence Calavenna’s product launch will be accompanied by a very strong web presence. We strongly support a web promotional campaign as consumers are tending to be less affected by traditional advertising, and because the interactive, opt-in nature of web marketing is much better at capturing consumers. A very thorough and sleek website will present the Calavenna product line and highlight the natural and exotic contents of the product. Upon launching our television commercials, these videos will also be made available on the site, sent to key bloggers and uploaded to social networking sites, such as Facebook, Twitter and YouTube. By spreading the videos virally through these sites, we can drive potential consumers to our website where they can have a more engaged experience through which to learn about the product. The website will include images from promotional events (at which people will be referred to the site), postings about future events, and information for contests in the future. We will also launch a Twitter account in which various company representatives will update fellow Tweeters of company news, product launches, upcoming events and promotions. This will also spur referrals to our website. (See Exhibits N and O for Social Networking Page Examples) Alternative Marketing To forge through the clutter of traditional media outlets, Calavenna will also launch alternative campaigns. While these will include advertising in London’s Tube using CBS Outdoor, we will focus on sample and point-of-purchase ads. As a signature to major public installations, we will have a large artificial tree from which Calavenna bottles will hang in the place of fruit, and from below which Calavenna 17
samples or other promotional material can be distributed. This can be installed at locations like Piccadilly Circus in London, or other high traffic, trendy sites (See Exhibit P). As we had mentioned, these events will be tied back to the website, by collecting photographs of people sampling the product, and directing them to the website for viewing. The same “juice as fruit” concept will be used in point- of-purchase advertising. We will set up similar tree installations in aisle next to our product. Though this may prove more expensive than anticipated, we are strongly support point-of-purchase advertising, as research has shown, that consumers most frequently make their purchase decision in store. Additionally, the increase of point-of-purchase advertising requires an daring and ostentatious in store ad in order to grab a consumers attention. The alternative marketing campaign budget is left open in order to stimulate more ideas over time in response to consumer reactions to initial campaign and to stay current with promotional activities. Money Funding for Calavenna Juices will come from angel investors and venture capital investors. Although a slight more “expensive” form of capital than pure debt, we believe having investors who are knowledgeable about the packaged foods and beverages industry will give us invaluable advice and provide essential connections to suppliers, distributors, and retailers. We do not foresee the availability of financing being a problem, as the company does not have extensive capital requirements. Moreover, our assets in Brazil and Europe are not highly specialized facilities, which means a relatively simple liquidation process if it should come to that. Measurement To measure the effectiveness of our advertising campaigns, Calavenna Juices will aim to measure public opinion and knowledge of Calavenna Juices and our various product offerings. We will administer surveys during our first month of entry and quarterly. Furthermore, we will track sales data and use it to determine necessary changes in promotion strategy. Measurement will be an ongoing endeavor in order to adjust marketing allocations to mediums or sources that will be more effective or reach new segments of our target. Calavenna 18
FINANCIAL PROJECTIONS Sales Revenue To calculate sales revenue, we calculated sales forecasts for our two product sizes. This total was calculated in Pounds Sterling (GBP) and converted to dollars (USD), in order to match the currency in which our business generally operates. The UK juice products and health drinks market is around $4.4 billion USD. Based on our projections, by the year of 2019, Calavenna Juices will hold 2% market share. Our sales will roughly begin at $39.6 million USD with a 0.9% market share and will eventually grow to $88.2 million USD by 2019 (See Exhibits I and J). Expenses In determining our selling, general and administrative expenses (SG&A), we examined the income statements of our closest competitors, Odwalla and Naked Juice and extrapolated Calavenna Juices’ expenses. Based on our observations, we calculated our Cost of Goods Sold (as a percentage of revenue) to be 49% and our SG&A (as a percentage of revenue) to be 47%. These were both averages among our competitors in similar operating conditions to ours. Our Cost of Goods Sold expense includes all production and labor costs related to production, while our SG&A expense includes combined payroll costs and advertising expenses. Analyzing our sales data, we calculated the kilograms sold each year for our two products – the 1 Liter and 1.75 Liter bottles. The combined weight was used to find shipping costs from our Santos, Brazil factory to our Trieste, Italy factory and from Trieste, Italy to London (See Exhibit H). For the first year, our shipping costs totaled $455,000 USD. Based on industry averages, our marketing budget was set at $4.5 million USD. We will base our future marketing expenses on sales successes, but expect a 5-6% increase in marketing expenses each year in order to maintain our premium branding position (See Exhibits L and M). Cash Flows During our first year of operations in the UK in 2010, we have a net loss of just over $2.5 million USD. This loss was anticipated due to the need for us to buy the 30,000 feet2 Trieste, Italy factory at a hefty price of $3 million USD. However, in our second year of income, we begin to slowly recover and break even at just over $647,000 USD. From there, our profits gradually increase each year. By 2019, our net Calavenna 19
income is projected to be over $1.5 million USD. With an assumed interest rate of 5%, Calavenna Juices’ Net Present Value is $4,354,377 (See Exhibits I and J). CONTINGENCY PLAN Because this is our company’s first move into the international market, we are prepared for a less than enthusiastic market. In case this happens, we will conduct careful market research into possible causes, whether it be our marketing approach, distribution channels, ingredients mix, etc. If further attempts to sell our premium beverage in London do not take off, we shall simply move downmarket. We will reposition our product from a premium beverage into a middle market one, simply by adding more water or grape juice as necessary. In accordance, our marketing costs would decrease as this type of consumer does not demand expensive and exciting advertising to believe that our product makes them unique. Our beverage would be positioned as an inexpensive fruit drink with a tinge of exotic ingredients. This reaches the consumer who views our product like an affordable luxury, much in the same way Starbucks coffee is viewed by the majority of its middle class consumers. For the possibility of this modified beverage not selling well, we shall pull out of our European operations completely. We will sell our operations and our factory in Italy to another fruit juice company or interested buyer. Finding a buyer helps ensure we recoup as much of our initial costs as possible. FUTURE As stated in our primary objectives, Calavenna Juices hopes to use London as a jumping off point into expansion into the UK. Beginning our international operations in just one city means we have room to make adjustments to the market as we learn more about our target market. If our business in London proves successful, we shall expand into Birmingham, England and Glasgow, Scotland, since both of these cities have one of the highest populations in the UK. Expansion into these two cities hinges on market research to ensure that we would be operating in a similar business environment. We realize that simply doing well in London does not guarantee success throughout the rest of the UK, so we will limit distribution to these two cities. This small-scale expansion does not call for major costs, as we will be utilizing pre-existing shipping and distribution channels. We will simply need to accost for road delivery from London to the respective cities – a negligible cost. Refrigerated transportation to Glasgow should Calavenna 20
not pose a great hindrance, since an established road infrastructure already exists. Additionally, expanding into two other cities calls for re-allocation of company resources, should one city under performs much more than the other two. If our businesses in these two cities are successful as well, we shall consider the three UK cities a good enough exposure for us to expand tentatively into Western Europe, in select cities. Expansion into the European continent will depend on cities with an adequate interest in our premium product along with the many other indicators we used to reach London during Calavenna’s extensive screening process. Further exhaustive market research will determine the similarities and disparities between consumer preferences and the appropriate marketing approach. Calavenna 21
EXHIBITS Exhibit A: Preliminary Indicators Population (thousands) PPP per capita (int'l Country >20 million dollars) < 10,000 Urbanization > 60% Argentina 39,503 12,990 88 Australia 21,017 33,340 91 Canada 32,976 35,310 79 France 61,707 33,600 76 Germany 82,268 33,530 88 Iran, Islamic Rep. 71,021 10,800 65 Italy 59,375 29,850 67 Japan 121,733 34,600 79 Korea, Rep. 48,530 24,750 83 Mexico 105,281 12,580 75 Poland 38,061 15,330 63 Russian Federation 141,983 14,400 73 Saudi Arabia 24,196 22,910 87 Spain 44,879 30,820 78 Turkey 73,888 12,350 66 United Kingdom 61,034 33,800 90 United States 301,621 45,850 77 Venezula, RB 27,467 11,920 87 Countries Reviewed: 209 Countries Passed: 18 Source: World Development Indicators database, World Bank, revised 17 October 2008 Exhibit B: Country Indicators 6 Year Inflation Banking Economic Average GDP Rate < Gini Index < Sovereign Currency sector risk Political structure Country Overall Risk Overall Business Country Per Capita 5% 50 risk > BBB risk > BBB > BBB risk > BBB risk > BBB risk > BBB Rating < 40 Environment > 6 Argentina 8.45 a a CCC B B B B B 48 6 Australia 3.10 a a BBB BB BBB AA BB BB 36 8 Canada 2.38 a a AA AA AA AAA AA AA 17 9 France 1.78 a a A A BBB AAA A A 19 8 Germany 1.43 a a AA A BBB AA AA A 18 8 Iran, Islamic Rep. 5.78 a B B CCC CCC BB B 55 4 Italy 0.80 a a BBB A BBB A A BBB 32 7 Japan 1.62 a a BBB A A AA BBB A 23 7 Korea, Rep. 3.12 a a BBB BBB BB BBB BBB BBB 34 7 Mexico 5.10 a a BBB BBB BBB BBB BBB BBB 34 7 Poland 7.10 a a BB BB BB BBB BB BB 37 7 Russian Federation 5.17 a BBB BB B B BB BB 43 6 Saudi Arabia 4.08 a NA BBB BBB BBB B BBB BBB 31 6 Spain 3.13 a a AA A BBB A A A 27 8 Turkey 6.18 a BB B BB BB BB B 50 6 United Kingdom 2.37 a a AA A BBB AAA A A 24 8 United States 2.48 a AA A BBB AA A A 24 8 Venezula, RB 7.58 a B CCC CCC CCC B CCC 61 5 Countries Reviewed: 18 Countries Passed: 10 Source: CIA World Fact Book, EIU CountryData, EIU Risk Service Calavenna 22
Exhibit C: Product Market Indicators Consumer 100% Juice Still Bottled Fortified/ Expenditure on Cola Carbonate Off-Trade 100% Juice Off- Water Off- Functional Average Non-Alcoholic Off-Trade Liters Liters Per Trade Liters Per Per Capita Trade Liters Per Beverages Fortified/ Country Personal Beverages for Annual Per Per Capita Y-O- Capita Capita Y-O-Y Vitamin Capita Y-O-Y Y-O-Y Functional Disposable 2008 Capita Fruit Y Growth for Consumption Growth for Expenditure Growth for Growth for Beverage Income (> $6,000 Consumptio 2007-08 in 2008 2007-08 for 2008 2007-08 2006-07 (> Market Size (> $10,000) million) n (> 60kg) (≤ 3%) (> 8L) (> 0%) (> $2) (< 3%) 10%) (> $550million) Australia 26,037 5,944.90 67.1 -4.8 23.4 -5 17.9 2.1 26.5 999.6 France 29,469 16,626.90 87 2.3 13.3 1.6 4.5 -6.1 10.4 573.1 Germany 28,610 28,857.80 65.4 5.1 15.7 -5.8 5.1 9 7 1568.8 Japan 24,256 23,291.50 56.1 7.1 7.4 -5.2 43.4 7.6 -1.1 8137.6 Korea, Rep. 6,769 21,918.80 91.9 -1.1 2 13.6 5 5 10.3 1827.4 Mexico 8,799 5,590.50 39.4 10.3 7 -0.6 4.7 4.2 10.8 1189.7 Poland 5,817 8,352.60 35 3 12.2 4.4 1.8 5.5 40.6 421.2 Saudi Arabia 11,122 3,658.90 63.1 1 2.4 -3.4 11.8 2.8 5.3 505.9 Spain 22,665 7,918.10 102.6 -1.2 8.8 0.1 2.3 -2.4 21.8 827.1 United Kingdom 28,351 18,887.00 65.2 -0.4 20.8 0.7 6.9 1.6 20.2 3636.7 Countries Reviewed: 10 Countries Passed: 3 Source: Euromonitor, Global Market Information Database Exhibit D: Market Infrastructure Indicators 2008 TV 2008 Digital 2008 Mobile Annual Proportion of 2008 Internet Connectivity - Color satellite Pay-TV Phone Newspaper Density of road paved roads - % Country Connectivity (% of TVs per household > subscribers Subscribers Circulation network - km per of total road population) > 50% 2 (millions) (million) > 50 (millions) > 10 sq km of land network > 95% France 49.1% 2.7 5.47 57.13 14.49 1.9 100 Spain 43.9% 1.6 2.15 49.94 2.15 1.3 99 United Kingdom 65.9% 2.7 8.06 76.57 47.42 1.6 100 Countries Reviewed: 3 Countries Passed: 1 Source: World Development Indicators database, Euromonitor International Calavenna 23
Exhibit E: Calavenna Juices Product Packaging Calavenna 24
Exhibit F: Calavenna Juices Product Flavor Assortment Lychee: Our lychee juice is carefully crafted to preserve the delicious and delicate flavor of the fresh lychee. It is made with only the freshest hand-picked fruits to retain its exquisite natural flavors. Passion Fruit: Our passion fruit juice preserves the exotic and delicious flavors of the pulp that surrounds the black seeds of the passion flower. We carefully extract this pulp from around the seed and produce an immensely satisfying exotic experience. Mango: Calavenna Juices use only the freshest Alphonso mangoes, also known as the ‘King of Mangoes’ to produce this tantalizingly sweet and delicious juice. Guava: Our guava juice is marvelously aromatic and sweet, providing a high vitamin c content in addition to other beneficial health properties. This juice is made with both white and pink guavas to provide the most dynamic and distinctive flavor possible. Papaya: A sweet and delicious juice with a velvety consistency and rich orange color. Papaya provides a load of health benefits as a source of antioxidants like Vitamin C and lutein. Calavenna only uses the finest papaya’s, prepared by experts who carefully remove the peppery black seeds and crush the flesh to produce our premium juice. Pomegranate: Calavenna Juice really preserves the mythological history of the pomegranate in this juice by creating a juice so rich and delicious it is suited for the gods. Each pomegranate is carefully selected to ensure that only the finest seeds are used to make the best possible pomegranate juice. Calavenna 25
Exhibit G: Calavenna Juices Logos Calavenna 26
Exhibit H: Shipping Costs Shipping Costs From Trieste, Italy to London 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sold (kg) 5,000,000 8,085,581 8,430,701 9,162,801 9,555,500 10,483,150 10,846,170 11,815,651 12,156,790 13,273,051 Per Box (kg) 50 50 50 50 50 50 50 50 50 50 Boxes Ordered 100,000 161,712 168,614 183,256 191,110 209,663 216,923 236,313 243,136 265,461 Shipping Cost Per Box* $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 $ 4.50 Total Shipping Cost $ 450,000.00 $ 727,702.72 $ 758,763.60 $ 824,652.67 $ 859,995.32 $ 943,483.74 $ 976,155.62 $ 1,063,409.31 $ 1,094,111.18 $ 1,194,575.19 Shipment Notes One shipment contains 50,000kg, which is 1,000 boxes 50kg per box *4.50 quoted by Maersk Line Sea Shipping Shipping Costs From Santos, Brazil to Trieste Italy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sold (kg) 5,000,000 8,085,581 8,430,701 9,162,801 9,555,500 10,483,150 10,846,170 11,815,651 12,156,790 13,273,051 Concentrate (kg) 500,000 808,558 843,070 916,280 955,550 1,048,315 1,084,617 1,181,565 1,215,679 1,327,305 Per Box (kg) 50 50 50 50 50 50 50 50 50 50 Boxes Ordered 10,000 16,171 16,861 18,326 19,111 20,966 21,692 23,631 24,314 26,546 Shipping Cost Per Box* $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 Total Shipping Cost $ 5,000.00 $ 8,085.58 $ 8,430.70 $ 9,162.80 $ 9,555.50 $ 10,483.15 $ 10,846.17 $ 11,815.65 $ 12,156.79 $ 13,273.05 Shipment Notes One shipment contains 10,000kg, which is 1000 boxes 10kg per box *4.50 quoted by Maersk Line Sea Shipping Total Global Shipping Costs 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Trieste to London $ 450,000.00 $ 727,702.72 $ 758,763.60 $ 824,652.67 $ 859,995.32 $ 943,483.74 $ 976,155.62 $ 1,063,409.31 $ 1,094,111.18 $ 1,194,575.19 Santos to Trieste $ 5,000.00 $ 8,085.58 $ 8,430.70 $ 9,162.80 $ 9,555.50 $ 10,483.15 $ 10,846.17 $ 11,815.65 $ 12,156.79 $ 13,273.05 Total Global Shipping Costs $ 455,000.00 $ 735,788.30 $ 767,194.30 $ 833,815.47 $ 869,550.82 $ 953,966.89 $ 987,001.79 $ 1,075,224.97 $ 1,106,267.97 $ 1,207,848.24 Exhibit I: Revenue Forecast 2010-2019 Revenues 2010 2011 2012 2013 2014 $ 39,611,700 $ 43,297,298 $ 47,325,816 $ 51,729,160 $ 56,542,205 2015 2016 2017 2018 2019 $ 61,803,071 $ 67,553,425 $ 73,838,810 $ 80,709,007 $ 88,218,429 Calavenna 27
Exhibit J: Calavenna Juices, Inc. Income Statement Ending Market Share 2% Size of Market $ 4,410,921,441 GBP Rate 1.4671 #Yrs to Ending Market Share 10 First Year Sales $ 39,611,700.00 Growth Rate 9% Cost of Goods Sold % (as % of Revenue) 49% SG&A % (as % of Revenue) 47% Tax Rate 35% Year of Operation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Market Size $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 $ 4,410,921,441 Market Share % Goal
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