Fruit Yogurt In Uae Marketing Essay

Fruit Yogurt In Uae Marketing Essay This study is an analysis of UAEs market and Nestle. This study is analyzing the suitability of Nestlà ©s plan of entering UAE with its product Fruit Yogurt. Abstract In the world of growing and emerging food companies, the name Nestle stands out. It is one of the most dominant firms when it comes to dairy products. Nestle is spread out all over the worlds with its many famous sub-brands in its portfolio like Maggi. Its dairy product Fruit Yogurt is one of the most famous brands in countries like India and Pakistan. This product finds its uses in many ways. UAE is a country where Nestle doesnt have this product in its portfolio. Though many firms are there with the Fruit Yogurt product but enthusiasm towards this product is still not there. Therefore Nestle wants to enter this UAE market as it sees it as a strategic market. We in this study are analyzing Nestlà ©s hypothesis that this market is good for Nestle if it launches it Fruit Yogurt products in UAE. Table of Contents Executive summary The following audit report on Nestlà ©s gives a vivid eloquence of the marketing related issues of the company. One can see from the time the company formed, it has not looked back. It produces three times the quantity of products as compared to any other competitor in the global market. The report contains the introduction of the company and the country United Arab Emirates. This is followed by the market analysis and SWOT analysis on the basis of which financial and environmental recommendations have been made in the latter part of the report. The companys marketing strategies are also highlighted. There is strong emphasis given to the Marketing Mix of the company. Most of the attributes of customer satisfaction are developed from the proper functioning of the 4ps of marketing mix. The report also contains an analysis based on the Five Generic Forces of Porter. This is the base for making the marketing recommendations of the company. Introduction Nestle Nestle is one of the most dominant brand when we discuss about the nutritious food industry. With over 500 factories in 76 countries, it sends its products to close to 196 nations. Only 3% employees and 1% of sales come from its home country, Switzerland. After establishing its name in most of the western markets, Nestle started focusing efforts on emerging economies in Eastern Europe, Asia, and Latin America. Most of these countries have a consumer base to support the investments nestle is making in these countries. In fact due to rising economies of these countries people are capable of buying many Nestle products and the market will sustain this demand for few decades to come. Nestle makes it a point to enter a market ahead of competition. This risk appetite for niche markets has stood them in good stead so far. It adopts the strategy of developing goods for local market. Preference is given to localization of all activities like marketing and distribution. It isnt afraid of acquiring local firms also, when opportunities are good  [1]  . Nestle prefers decentralization, given its strategy to adopt localization. Operating decisions are taken by local units. Above this is an SBU organization on food groups and still above in hierarchy is a regional organization that rationalizes marketing efforts across the region. all brandz Nestle has its products in following verticals Baby foods Bottled water Coffee Cereals Chocolate confectionery Culinary, chilled frozen food Dairy Drinks Food service Healthcare nutrition Ice cream Pet care Sports nutrition Weight management Fruit yogurt Yoghurt, yogurt or yogourt (Turkish: yoÄÅ ¸urt) is a milk product made from fermentation of milk by bacteria. The bacteria act on milk to form what is known as yogurt cultures. Fermentation in yogurt cultures converts lactose sugar of milk to lactic acid which gives the yogurt its characteristic tang  [2]  . Yoghurt is a rich source of protein, calcium, riboflavin, vitamin B6 and vitamin B12. [20] The best thing about yogurt is that people with lactose intolerance can easily consume yogurt. It is also lower in fat. As an add on, yogurt is available in different flavors like Strawberry, Mango, Berry Mix Medley, Fruit Basket, , Melon-Nata, Apple-Cinnamon and Raspberry-Apple. All images are taken from http://www.nestle.com The yogurt product range is very crucial for Nestle, as the milk and milk products contribute 48 percent to the companys turnover. Tough Nestle prices its yogurt at a little premium in many countries compared with local players, but still it is very competitive. Cultural analysis UAE History The  United Arab Emirates  (UAE) also known as the Emirates. The Emirates  are ruled by  emirs, Abu Dhabi,    Fujairah,   Ajman,   Dubai, Ras al-Khaimah,  Sharjah  and  Umm al-Quwain. The capital is  Abu Dhabi, which is also the countrys center for political and industrial activities. (Reiser) Before gaining independence in 1971, the UAE was known as the Trucial States because of a truce between the United Kingdom and several Arab Sheikhs. (UAE History) Geographical Setting Location The Emirates  is a  federation  situated in the Southeast Asia. It shares its borders with Oman  and  Saudi Arabia  and sea borders with  Iraq,  Kuwait,  Bahrain,  Qatar  and  Iran. The border with Saudi Arabia is 530-kilometer long and the border with Oman is 450-kilometer long. The total covered area of UAE is nearly 77,700 square kilometers. (Reiser) Climate UAE is hot and dry round the year, July and August, being the hottest months. During these months average maximum temperatures may reach above 48  °C on the coastal plain. The average annual rainfall is low. It is a little better in mountainous areas than the coastal region. Rain in coastal region is tough typical in its style of short bursts and torrential rains. It may sometimes lead to flood. Social Institution Family Families are usually big and have high literacy. The relationship are every strong in the Arabs and they used to follow traditions strictly. Political System UAE constitution was formed in 1971 comprising of various governing bodies.  It is a federation of 7 monarchies, where within each monarchy, a ruler has absolute powers. Arabic  is the  official language in the Emirates .Islam is the official language for the country. Even in spite of being a federation of monarchies, UAE has a president and a constitution. The constitution does not interfere in internal matters of any emirate but just looks over the relations and tie ups between the federations. (Oxford Business Group, 2010) Legal System Law in the constitution of the United Arab Emirates provides special emphasis to human rights with equality, liberty, rule of law, freedom of opinion and speech, freedom of movement, freedom of communication, freedom of religion, freedom of occupation, freedom of council and association, freedom to be elected to office is provided to all citizens by law Sharia that defines several ideas of marketing. It is Islamic religious reference that is applied to the real world by the Islamic banks.. Living Conditions The living condition has a very huge gap in UAE. Some people are very reach and the city area is very much developed, and rural is still very behind in education and living styles. Diet and Nutrition Before the imported foods came into UAE, food mainly consisted of fish, rice, bread, dates, yogurt, vegetables, and meat from sheep, camels and goats With the advent of imported foods, the quality and nutrition levels of the food has gone up. It usually consists of fish, rice, meat, and a vegetable dish. There are some strict Muslim rules about eating pork and alcohol, which are closely followed, like the meat should be slaughtered in the traditional halal method. Emiratis are famous for their hospitality. They put in great efforts to welcome guests and also have a good time with guests. Traditionally guests are welcomed with dates. With a large inflow of immigrants, restaurant industry has picked up with offers of various ethnic foods Economic Analysis Demographics Population The population is estimated to be at 4.4 million people by US state department with just 15-20% of these being citizens. Since the growth of industry in late 1960s and impetus in trade, population of expats from Arab countries, Indian Subcontinent , Europe have increased. (Oxford Business Group, 2010) Growth rate The population is growing at 4% per year. Age Structure The Age breakup of UAE is as follows    0à ¢Ã‹â€ Ã¢â‚¬â„¢19 years: 27.4% (female 40,328,895, male 42,667,761) 20à ¢Ã‹â€ Ã¢â‚¬â„¢64 years: 60.1% (female 90,813,578, male 89,881,041) 65 years and over: 12.6% (female 21,991,195, male 15,858,477) (Oxford Business Group, 2010) Literacy There are many programs run by the government to enhance the level of education in all levels ranging from primary education, secondary education to masters level education. With recent opening of many institutes of international bodies there has been a recent growth in the level of education and its quality. Literacy rate in emirati citizens is 90 % in the age of 6-12 years. (United Arab Emirates, Education) Since education in very important in all the sectors of the society there are many steps taken by the government in the recent time to lay focus in this domain Ethnic Groups A large proportion are South Asian, of the order of 84 percent comprising of Pakistani, Bangladeshi, Chinese, Indian, Filipino, Thai, Westerners and rest 16 percent are Arabs Religions Islam is predominant religion with, approximately 85 percent Sunni and the remaining 15 percent are Shia. If official ministry documents are to believed, 76 percent of the total population is Muslim, 15 percent is other, and 9% is Christian. Economic Statistics and Activities GDP and GNP Nominal per capita, GDP = USD 47,407, as per the  International Monetary Fund  (IMF). GDP (PPP): US $ 182.8 billion GDP (nominal) US $ 252.2 billion (Economic Statistcis ) Inflation Inflation is a becoming a major roadblock in UAE for last couple of years. Currency valuation is also a point at the top of minds of the consumers. The main problem is UAEs pegged currency against the US dollar. Dirham, its national currency is pegged against dollar. So as dollar loses value, dirham also follows suit. BMI estimates real GDP in 2009 at 5.4.0%, with another very good performance in 2010. Projected values are at rate of 5.4%, as a result of a small contraction in the oil sector (-2.6%), offset by continued out performance in the non-oil sector (10.5%). Thereafter, we see a cyclical slowdown to 4.5% in 2011 and 3.9% in 2012. (Economic Statistcis ) Channels of Distribution (Macro Analysis) Retailers The way retailers work in UAE is a little different than in other countries .There is not VAT or service tax and the more good news is that retailers are not required to report their quarterly earnings. The retailers thus have a bright future in this country shown by the recent success. UAEs retail market is growing relatively at a faster pace when compared to other developing economies of the world Mall culture has come as an advantage to the retailers who have been able to attract the local customers and tourists alike. (Oxford Business Group, 2010) Market Audit and Competitive Market Analysis Market Analysis The market for dairy products has been growing over the years globally with a special focus on Nestlà ©s products. Dairy products like yogurt have now started to be recognized as everyday snack. They are the most readily available food item in the eatables shop in almost all of the countries that Nestle exists in. (Weaver) The major factor that can influence a person to invest in the dairy product market is that it has been growing every year on an annual basis of 10%. The reason is inevitable. Nestlà ©s targets all forms of the society. Be it children or the youth or the aged, Nestle has products for all of them. This gives it an advantage over its competitors. Even though its recognition is not as high as the other products in the Middle East market, people had started considering Dairy product as nutritious edibles as a traditional mark in the food industry in the medieval periods. One can be worried of the fact that the history of the dairy product has not been on the expansion side. This is due to the rise in inflation. But at the same time there is a good deal of boom in the financial sector that accounts for the better future prospects of the products. The history of Dairy products in the market is that it has been a part of the local custom. Meals are considered to be the important routine of the day. It is certainly a custom to have a nutritious diet. This trend has been continuing ever since civilization began. As Nestlà ©s product like sweet curt or Fruit Yogurt has brought nutritious food is easily available readymade packs, it is highly recognized in most part of the world. One must also understand that other dairy products of Nestle include chocolates that add flavor to the rich vitamin and calcium content. As a result, it has been preferable from the time businessmen have taken it to higher standards. This is more beneficial for targeting the children. (Yogen Fruz (Canada) Signs UAE Franchise, 2010) It has been often said that the world has been progressing largely of late. Lets have a look at it from the Nestlà ©s products industrys perspective. There has been a greater progress in the nutritious food industry over the last decade then in the last quarter of a century. The percentage of people favoring Nestlà ©s product is more preferred than any other edible commodity, has gone up. It has gone up to 27% as against the mere 2.5% only some 15 years ago. This rise is due to the fact that Nestlà ©s food products have been gaining fame on account of the diversity of the products manufactured. If one gives a thought over the condition of nutritious food industry; he/she will put in a developing stage. But the development is not small. It has been developing at a rate no lesser than the other recognized industries. Lets consider Abu Dhabi for an example. The capital city of UAE has a good deal of cereal consumers. The recent surveys reveal that more than 17% of the population takes dairy products as a favorite snack (this includes the other products that Nestlà ©s manufactures). This is also a boon for the industry. Other than just the simple junk snacks, there is such a lot of variety in Nestlà ©s products that it has taken its food industry to the peak. The most preferred flavor in UAE is anything that which has a blend of chocolate in it. The company can certainly take advantage of this fact. (Our Brands) Keeping all these factors in mind, there was a survey of the number of people who have increased their consumption of nutritious food in the world. More than 70% of the population said that they have increased their nutritious food consumption (especially dairy products) over the last few years. This can boost up investment in the product. SWOT Analysis Strengths Company Name: The very name of Nestle brings with it the confidence of quality as it has reliability and trust associated with it. Usually, the consumers mind they prefer Nestle products over other brands time and again whether it is their Dairy product or something else. Quality: Nestlà © is the one of the biggest manufacturer of diary food products all over in the world. The Nestle name is synonym of quality. They have a tradition of providing food products of supreme quality. Most of their products belong to category of assured and certified quality confirmed by tests done by quality assurance companies. Its production facility is certified with ISO certifications and also, FDA approval certificates. But, the quality differs from country to country for example Nestle juices sold in UAE are all artificial and with preservatives whereas usually in other parts of the world such as United States they are preserved naturally with citrus. But this difference doesnt mean that products are of low quality anywhere in United Arab Emirates. Manufacturing processes: Nestle boast of having state of the art technology machines, Certified and proven process and techniques which facilitate them to produce best in the category. Trustworthy company: Nestle symbolizes trust. Consumers have faith that the product will be anything but harmful. No one should be surprised if Nestle yogurt will occupy the highest market share in the market of United Arab Emirates. Consumption in immigrants Culture: As discussed, many foreign nationals are living together in UAE. Outsiders constitute a big population in UAE. They are kind of used to most of the Nestle product including yogurt in their home countries therefore this population doesnt need education regarding Yogurt consumption benefits. Yogurt is usually used for various purposes including for cooking. Usually while cooking, yogurt can play an important role same as many local dishes that are cooked in Yogurt. Weaknesses Lack of awareness: One big drawback associated with the launch of Fruit yogurt in UAE or any Middle East countries is low awareness among the citizens. A lot of people dont know that any such type of product is there in the market. The product is already present in the market the acceptability among the UAE citizens is very low. Price: The other major weakness that the company possesses is that the selling price of Nestlà ©s products is comparatively higher than the competitors in ost of the countries it is present. The company accounts this fact to the intensive use of natural resources. But the end-users are the customers who are certainly not going to entertain such excuses. Big accounts: Company Nestle doesnt carry with it any fixed allotted funds for advertising high. Its budget for advertising is fixed as a percentage of its sales. This type of strategy usually backfires when product is losing market when compared to its competitors. If the sales are not getting high so will be advertising therefore the products sales suffers a lot. Availability: Availability of normal Nestle product is also a problem for Nestle. It also contributes to the low sale Nestle product as of now in UAE. Retailers dont want to keep product which has low acceptability in the market but takes a lot of space in freezer space. But Nestle do give their retailers a freezer which increase its products visibility therefore sales. Therefore the retailers who dont have space constraint usually accept the Nestle product wholeheartedly. But the problem comes when its given freezer is utilized to put other FMCG product of higher demand in market or competitors product. Lack of Distributors interests: Distributors usually dont accept Nestlà ©s product because of its need to be transported in chilling environment. Nestle fruit yogurt need to be transported in chilling environment of nearly 2- 3 degree Celsius. Therefore whichever distributor who is willing to accept the distributor relationship will have to fulfill the requirement of having a capability to transport on this demanding condition of maintaining chilling condition in transportation and distribution. It is kind of costly affair for distributor under until and unless Nestle occupy a large market within a very short span of time so that even distributors can get economy of scale. Chilling need: The basic requirement of Nestle fruit yogurt to keep it a chilling temperature all the time makes it difficult for even retailers to accept the product. They have a fear of the case that in case if they are not able to sell its proper quantity they will have a huge carrying cost of the product. Therefore they dont want to accept the product in very in initial phase of the product launch. This is a risk factor which company will have to wave off offering higher margin on its yogurt product as co pared to any other product. Low Expiry date: Nestle fruit Yogurt product has low expiry date. Whatever the keeping condition it has maximum expiry time of 10-15 days. This makes retailers to sell the product as soon as possible. Therefore Nestle product are kind of tension of tension to retailers when it comes to their dairy product section. This is also another hindering factor which will affect the yogurt sales in its initial days. After every 10-15 days every stockiest have to refresh its product line. Even if te retailers start putting the yogurt because of Nestlà ©s brand name, the sales in initially sales consistency cant be guaranteed therefore there will not be any limit on amount of their stock that will go waste because of the expiry. Opportunities Potential market for fruit yogurt: Nestle fruit Yogurt is nutritious food product mainly ad from milk and has very low fat as compared with the milk. Fruit flavor ends its sourness associated with it. Therefore nutritious food with good taste has a great potential market in UAE. There is kind of big market for Nestle to explore. Presence of other nationalities and hot climate works as a topping on the already existing potential market for Nestle to cherish. Most of the sil=milar product has huge acceptability and good thing is that Emirates have high per capita Income which will work as a advantage for the Nestle to putting their product in premium segment and gaining huge profit from this segment. Climate of UAE: United Arab Emirates climate is an extra advantage for Nestle to Ancash. It hot climate prompt residents to have some cold nutritious products daily. Usually in summers, ice-cream sales increase a lot but still there is a need to find a substitute having similar frosted class as well as some health benefits associated with it. Here Fruit yogurt comes to fill the gap. The consumption of yogurt in the summers in most of the south east countries is as follows: plain form Lassi meal component such as raita culinary The high use of yogurt in its fruity flavor form gives Nestle one big opportunity to sell frosted fruit yogurt in summer-time. Tax exemption: Absence of any Value added tax VAT or sales tax in UAE prompts lower price of most of the products and therefore higher amount of sales in UAE. Many companies have entered the market seeing this facility only. This also give companies to make more and more profit on their product as the VAT or sales tax part of the price usually is shared by either the customers or by companies. The amount saved by companies here as part of no Vat can be utilized for better advertisement and educating consumers. Threats Competitors: Competitors are already there in this market in UAE market. Out of these competitors some are really very serious and have a reach on international scale. Some major firms who have presence in UAE market are : Pinkberry frozen yogurt Marmum fruit yogurt Al ain dairy yogurt Yogen fruz Al rawabi fruit yogurt   Yogurberry frozen yogurt So it will be bit difficult for Nestle to compete with these players. It has spend heavily in the market for advertisement and brining awareness about its new product. Competitors Analysis Competitors are already there in the market with their yogurt related product in the market. Some of the famous brands which already have their yogurt product in the market are as below: Pinkberry frozen yogurt Marmum fruit yogurt Al ain dairy yogurt Yogen fruz Al rawabi fruit yogurt   YogurBerry UAE frozen yogurt Yogen Fruz is an international brand which has specialty in this section of frozen flavored yogurt. It is a master franchise venture with Arcology Investments, which is based in Dubai, UAE. Arcology is very proud to declare that they are opening their first Yogen Fruz outlet in Dubai very shortly. Their recently confirmed that their aim is to open 30 similar outlets in very recent future in the Gulf region. They are also aiming neighboring countries including Qatar, Oman, Kuwait Bahrain. Yogen Fruz has presence in more than 25 countries and spread over around 1200 locations. Their specialty is to provide more and more flavors of frozen yogurt. The YogurBerry UAE LLC is famous master franchise of YogurBerry group present in the United Arab Emirates. YogurBerry is one of the first premier and all-natural, non-fat frozen special yogurt brand which brings unique flavor and frozen style first time in the country. YogurBerry claims to be classy, healthy and different. YogurBerrys has opened its first outlet in Dubai, in late June 2009 to make Dubai get exposed to totally different culture of taste. Similarly, other players are also geared up to cover UAE market as soon as possible and they are playing every tactics to attract consumers towards them to reap a first movers advantage as soon as possible. Porters five forces  [3]   The threat of substitute products Nestlà © products entry in the market is a bit late. Fruit yogurt nestle is subject to face crisis as too many players want a piece of this market. Actually product fruit yogurt will face competition from local unflavored Dahi which is available at much cheaper rate than Nestlà ©s fruit yogurt. This fact will be intensified by the fact that local most of the time prefers local items over foreign items. We can also say that it will face competition from ice-cream. Here the only advantage it has is it contains low fat as compared to ice-cream but age-old ice-cream concept is difficult to be substituted with relatively new yogurt concept. The threat of entry of new competitors Many entrepreneurs are willing to invest in this field of dairy product diversity on account of the health conscious trend that has been continuing in the recent past, as it comes under the booming sector. So, the only option left for Nestle to prevail is to maintain a constant switching of costs and make proper use of its brand name. This has been seen in many other companies like HP. It is therefore recommended that with constant switching, Nestle will be able to provide its users with the products in the time span they want. The threat of competitive rivalry Food Snacks is a field where competition doesnt just come from price dimensions but also from innovation and advertisement. Nestle should realize the number of competitors it has and the diversities in which they exist. Sometimes, the reason for the late delivery of products is also competition. Different rival companies can make negotiations with the producers for the delay. Nestle has to be careful of this fact. The bargaining power of customers  [4]   Nestle dealers will be forced to keep higher prices of products to compensate for some bargain. This generally happens at villages or types. At the same time they should also keep price sensitivity in mind. So, Nestle dealers have to make a proper balance between price sensitivity and high market price for bargain compensation because there can be decent customers as well on visits to such places who might have to pay high once, but then never return or buy the commodities at their respective places. This is because one wrong step leaves a mark on the entire supply chain and finally has an impact on the company as well. Such are the customers who finally realize the companys conditions and deliberately make orders that the company cant fulfill. Nestle should not give a chance to any customer with such views. The bargain power of suppliers Nestle is more or less a Food product company, so it owes much of its pricing to its suppliers. The raw materials that it uses, determine the costs of its products. So, it is highly beneficial to have a team which is good at bargaining to keep the cost of production low. This requires a good deal of ground level work. Marketing Strategies 4Ps Product Nestle fruit yogurt which is currently offered in 3 major different flavors in most of the countries. The main flavors which are offered are peach strawberry mango in 100g cup. Strawberry can be said to be most popular of all the 3 flavors and it is usually consumed more than other two. Nestle usually keeps on adding the flavor in the country in which is already present using the flavors that are famous in those very countries. The yogurt is already there in the market in UAE but the problem is that not a large part of UAE crowd is in fan of this yogurt thing. Say it a lack in promotion by other marketers or their targeting on elite class, this product really needs to be market through educating customers. The rate of consumption among Emirates needs to be increased to increase the overall sale of the product. The quality of product is not questionable; as it is part of trustable nestle group. Price The price set by Nestle of the fruit yogurt is minimal in most of the countries like India and Pakistan. It is around 15 rupees/cup. Seeing the flavors which are being offered at this price, it is considered very reasonable. The main fact that Nestle has to refresh its stock after every 10 15 days is a problem. Therefore selling only at Nestle special stores will make Nestle to manage inventory well. Selling this awesome project at this affordable is the main thing which makes Nestle popular in all the markets. We can say that seeing the per capita income of emirate people that the product will be great hit in the market and Nestle can charge premium price for the product at later stage. Place Like all the other countries, Nestle should launch its product only in the major cities in United Arab Emirates. The main reason is that the urban people due to large per capita income are ready to use new product which they think is of good quality and have value for money. People in small cities are used to of their own brand and their tendency tgo use their favorite brands all the time make them a bad customer for Nestle. Targeting only big city will make its product to sell in bit low volume but it will be good for Nestle in maintain its goodwill and help Nestle to charge a premium price from its urban consumers. Company can target anything between 5000 to 10000 retailer in 2 years of time span. Promotion Last P which symbolizes promotion related with marketing interface. It is suggested the promotion plan of Nestle should be through following mediums. TV program Billboards Advertisement in newspaper, Magazines and television Banner Kiosks TV Program 5 minute of daily TV show @ 8:30 pm Nestle should broadcast a re