Today on Wale’s musings, we would be reflecting on another business case in our Analysis of Business Problem (ABP) class at the Lagos Business School (LBS).
INTRODUCTION: The case study is about United Cereal (UC), a breakfast company that specializes in and serves breakfast food products based on roasted grains to its customers through its chains and outlets throughout Europe. Since Jed Thomas laid the groundwork for the company in the early 1900s, it has grown and prospered. The company began as a grocery store, but its services and products have evolved over time as the company has grown and expanded.
It now sells a wide range of products to its customers, including snacks, dairy products, and baked goods, in addition to breakfast.
The market trends in which the company operates have changed over time, and old, historical, and cultural foods and products are no longer a priority for customers and populations throughout Europe.
The market’s societies and population are very conscious, and it is now shifting to health-based products, which is a significant shift because the company’s traditional products contain large amounts of sugar. This is a significant development, and the company’s management must adapt to maintain profits and market demand.
The company’s business structure is well-established throughout Europe. The organization’s business structure is highly segregated and distributed. The market trends in which the company operates have changed over time, and old, historical, and cultural foods and products are no longer a priority for customers and populations throughout Europe. As these managers pursue the tastes of the markets in which they operate, the company’s product base and variety vary from country to country.
The market has become very health conscious and prefers products that meet these criteria. Also, because of the recession and increased competition in the market, the company is struggling to cope and maintain its traditional policies and strategies. The business structure on which it currently operates is highly segregated and decentralized. It is more akin to separate divisions that operate largely independently in each country because they are solely responsible for their costs, revenues, profits, and marketing and advertising campaigns.
The market’s changing trend has now evolved to health-based products, and the company’s management is at odds over what new products the company will offer. The Health Berry Crunch has the potential to attract new customers in France and a few other countries. Still, the company is at a crossroads as to whether to launch the product under its new Euro Brand strategy or pursue another product with this approach.
The organization’s business structure is highly segregated and distributed, as country managers are appointed by the company for each market in which they operate. These managers have a lot of power and oversee product offerings, market research, advertising, and marketing campaigns.
As these managers pursue the tastes of the markets in which they operate, the company’s product base and variety vary from country to country. Although this strategy was effective in the past because the population preferred traditional foods and products and the company’s profits were higher, this has changed over time as the market has become more health conscious and prefers products with these characteristics. Also, as a result of the recession and increased competition in the market, the company is struggling to cope and maintain its traditional policies and strategies.
As a result, the company’s new leader is eager to revisit the business strategy in order to accommodate this new shift and revise the company’s financial performance. The market’s gap and taste are rapidly eroding, and an increasing population in Europe is based on health-conscious products. The new initiative she is proposing will allow the company to centralize its business in some ways while also allowing the company to respond to changing customer tastes.
THE ISSUE
The company must decide whether to launch a product called Healthy Berry Crunch in France or throughout Europe.
OBJECTIVES
- To reduce operational costs throughout Europe.
- To expand their market share throughout Europe, particularly in the healthy Market segment.
ALTERNATIVES
A. Launch Healthy Berry crunch exclusively in France.
Consequences on the company:
• The tests and market research conducted thus far have only covered the French market and do not meet the UC testing procedures.
• France accounts for 21% of total European sales, making it an important market for UC Europe. • Kellogg’s has a first-mover competitive advantage in France and a large production, which lowers costs due to economies of scale. United Cereals France will have to play catch-up.
B. Roll out Healthy Berry throughout Europe Consequences
Consequences on the company:
• Launching across Europe will be far more expensive, costing 15% more than launching in France alone. However, it will be less expensive in terms of SG&A.
• A Europe-wide launch will result in cost savings due to a reduction in the number of brand managers required across Europe.
| CRITERIA | Launch Healthy Berry in France | Launch Healthy Berry across Europe |
| Cost Savings | The launch cost is high at $20 million. | Initial costs to achieve Eurobrand are high. SG&A could be reduced by 10%–15% over three years |
| Competitive Advantage | They would be the second to launch healthy fruit cereal in France. Cereal partners are also planning to launch Berry Burst Cheerios. | They can leverage a unified launch to penetrate European countries without a healthy fruit cereal product. |
| Market Share | Kellogg is the existing competitor with better economies of scale. Going head-to-head will be costly. Markets may be saturated if they decide on a country-to-country launch, considering that it takes 2-4 years for product development and launch. | Higher economies of scale across Europe with standardized products Markets may be saturated by the time they are ready for a European rollout. |
| Market reception and acceptability | Market research and testing have been done for this market even though the final report didn’t meet UC’s cut-off of 60% for intention to purchase. But another market test (not on a full scale) scored 64% for intention to buy. Cereal isn’t the first choice for breakfast in France but is more popular than in most European countries. | Consumer panels on Healthy Berry Crunch have also been conducted by CM in Germany and Benelux. The samples were small, but the feedback was like the French findings. Each country’s local market is unique. Disregarding local markets and behaviors may turn out to be costly. |
| Stakeholders’ (Country Managers’) acceptance of the new product marketing system | The country manager’s knowledge of culture and distribution channels will help make the product launch successful. | Country managers may not be receptive to the change and may sabotage the success of another Eurobrand launch. One of the VPs thought the plan would create confusion, while the VP of Northern Europe thought a coordinated rollout was a good strategy. |
Recommendation and Plan of Action
UC should begin selling the Healthy Berry Cereal in France. Entering the healthy cereal market early after Kellogg’s will improve their chances of capturing market share. As the recession fades, the product has the potential to provide significant benefits.
While France provides feedback on the launch, other European countries should begin consumer testing and market sensitization.
The VPs should pay attention to the opinions and concerns of country managers and other stakeholders. The country managers understand their markets and can provide valuable insight into which aspects of the Eurobrand plan may or may not work for their respective countries. This would aid in the future development of a fail-safe Eurobrand launch.
Until next time when we will be considering another reflection on my learnings at LBS, have a great week ahead.
OLAWALE
