International Marketing Strategy Project: Country Market Analysis

India

Skippy in the U.S.

• Positioning:– Family oriented– Nutritious alternative– Fun for kids

• new packaging and snack bars

• Target market: Families with young children• Distribution: sold to grocery chains, convenient

stores, and mass retailers from one central manufacturer

Implications for Skippy in India

• Will consumers like the taste or will it have to be altered?

• Will consumers be able to afford the product and what price must it sell at to be successful?

• Where will consumers buy the product and how will the product get to the selling locations?

• How will consumers find out about Skippy and how will ads have to be changed?

Agenda

• Would it work in India?• 4Ps

– Price: Retail Price– Place: Production, Distribution,

Warehousing, Retailers– Product: Ingredients, Packaging– Promotion: Types, Message

Price: Retail Price

• In U.S., avg. price of 18 oz. jar: $2.50– In India, that would be about 114 rupees

• But in 2002, a bottle of soda cost 10 rupees, about $0.22.

• Economic factors– Top 20% of households have income of $2800 /

year or greater• About 128,000 rupees

– Top 2% (20 million) have income of $13,000 / year • About 594,000 rupees

Price: Retail Price

• Legal Factors– Tariffs can reach up to 25%

• Cultural Factors– Bartering / Negotiating can lower prices

• Overall, price must be lower in India than in U.S.

Place: Production

• Currently, Skippy only produces its products out of Little Rock, Arkansas– For both domestic and international sales– Product must be held for 24 hrs. to settle before being

sent to one of Unilever’s 7 distribution centers in the U.S. and 19 countries as well

Place: Production

• Legal Factors for shipping from U.S.– Very few quantitative regulations– Tariffs up to 25% on imports (but India

continuing to decrease tariffs to meet WTO guidelines)

– Avg. tariffs on U.S. companies: 15%– U.S. and India not part of any multinational

trade agreement– No licensing fee for food items

Place: Production

• Cultural Factors– Indians favor use of local labor and joint

ventures

• Technology Factors– Unilever already has the facilities to produce

in India if they so choose

Place: Production

• Infrastructure Factors– Hindustan Lever Ltd., Indian subsidiary of

Unilever already has 100 factories and research facilities in India (Also one of the largest and most respected companies in India)

– Unilever already produces products like Lipton Iced tea there

Place: Production

• Economic Factors– State to state tariffs if produced in India– Cheaper labor in India

Note: These folks are not making peanut butter

Place: Distribution

• Transportation– Infrastructure Factors

• Developing new national 4-lane highway system• Only 58,000km (36,039 miles) of road usable for

high speed traffic– 3,000,000km of road with only half paved

• 232 paved airports but only 10 are profitable• Rail very expensive to move product because of

high tariffs– 63,000km of rail with new system in development

• Outdated sea ports

Place: Distribution

• Transportation Examples

Place: Warehousing

• Technology Factors• Hindustan Lever, Ltd. Uses JIT system called RSNet,

internet-based network to connect warehouses and manufacturers

• Infrastructure Factors– Mother Depots: warehouses that stock manufactured

goods to be sold in given region• Stocked weekly or bi-weekly

– Single channel distribution plants for rural areas• Villagers come to plants to pick up goods

Place: Retailers

• Currently in the U.S., Skippy is available in most groceries stores, convenient stores, and mass retailers

• Infrastructure Factors– 12,000,000 retailers, very few national chains– Mostly mom and pop stores

• Retail outlets almost always locally owned– Large groceries targeted to ex-patriots and upper-

class Indians– Most cities have well-known market districts– Although many villages have satellite TV, getting

product to rural markets can be huge challenge

Place: Retailers

Place: Retailers

• Competition Factors– Planters peanut butter and an Australian

brand sold in India– Chutney, used as a spread, may be a

possible competition• Skippy could possibly copy positioning in retail

markets

vs.

Product: Ingredients

• Currently in U.S.… – Skippy has 6 flavors of peanut butter as well as

snack bars and squeeze sticks– In U.S., peanut butter must have 90% peanuts

• India second largest exporter of peanuts in the world (Skippy gets most of its peanuts in the U.S.)– 24.5% of world production

• Legal Factors– Imported and domestic food products must be

subjected to provisions of India’s Food Adulteration Acts

– Copies of act can be obtained for $25 or 1175 rupees at your local Indian bookstore

Product: Ingredients

• Cultural Factors– Indians prefer savory vs. sweet foods– Many Indian foods have numerous spices– Indians prefer fresh and nutritious, healthy

foods and many foods consumed are homemade

– There exists a large focus on vegetarian diets (as emphasized through religious teachings and practices)

– Peanuts used in a lot of Indian cooking

Product: Packaging

• Recently, Skippy has updated its packaging with a new vibrant and upbeat design– Maintained the color schemes

and big red Skippy logo

– Incorporated new,

family-friendly cartoon

character, Skip.

• Legal Factors– Packaging must have Hindi along with English on

the label

Product: Packaging

• Cultural Factors– Literacy rate of 65% in 2001– Numerous religious symbols and colors– Ganesha: Elephant God…maybe avoid “The

Nutshells,” the Skippy elephant band

Product: Packaging

• Consumer Behavior Factors– Due to limited storage space and frequency

of shopping habits the jars of peanut better are currently too large for the market

Too big!!

Promotion: Types

• Currently in all main categories (Unilever spent $9.3 million on Skippy last year)– Also promotions like….

• Endorsement by Derek Jeter• Product placement in Nickelodeon productions• The Skippy “Nutshells” elephant band• Several charity promotions• “America’s Nuttiest Family” contest

Promotion: Types

• America’s Nuttiest Family: The Hurds

Promotion: Types

• India’s Nuttiest Family: The Patels?

Promotion: Types

• In India… – Media availability has increased

exponentially – Competition is unlimited– Budgets are large– Expectations of advertising are high

Promotion: Types

• Hindustan Lever– Largest advertiser (6,966 mill Rs in 2001)

• Largest in every category but print media

– Most admired company– Top marketer

• Indian Advertising Expenditure by Medium (US$ million)

TV Print Radio Cinema Outdoor

777.3 894.5 46.6 7.2 134.9

Promotion: Types (TV)

• 75% household penetration– Color TV: 35.7%– Cable: 49.0%

• Legal Factors– No wholly political or religious ads– For children: “Ads must not suggest that,

unless children buy (or encourage others to buy) the advertised product or service, they will be failing in their duty or lacking in loyalty to any person or organization.”

Promotion: Types (TV)

• Cultural Factors– All media available in English, Hindi, and variety of

regional languages– May be criticized on grounds of deception,

manipulation, bad taste– For rural areas (70% of pop.) creating brand

awareness most important

• Technology Factors– Same media outlets available in India as in U.S.– Increase in satellite and cable TV

• Economic Factors– Peak rate for 30sec

• 18,000 to 1,200,000 Rs ($400 to $26,000)

Promotion: Types (Print)

• Print media reaches 70% urban adults

• Infrastructure Factors– Nearly all controlled by private sector– Ads available in daily newspapers, weekly

and monthly business magazines, news magazines and industry-specific magazines

– Total circulation of newspapers (‘000): 39,676

Promotion: Types (Print)

• Economic Factors– Full page color ad (Newspaper):

• Min: 76,960 Rs• Max: 22,340,000 Rs

– Full page color ad (Magazine):• Min:7,000 Rs• Max: 530,000 Rs

Promotion: Types (Radio)

• Gov’t owned All India Radio reaches 90% of pop.

• Hindustan Lever: top radio advertiser• Infrastructure Factors

– Private radio, limited to FM music channels, only available in a few cities

• Economic Factors– Peak rate for 30sec

• 15,000 to 21,000 Rs ($330 to $460)

Promotion: Types (Internet)

• Homes with internet (2002): 600,000 (0.3%)

• Adults with internet access (2002): 6,500,000 (1.0%)

• Economic Factors– Most cost efficient

• Rates from $227 per month to $2,272 per month

Promotion: Message

• Currently…– Targeted towards children and moms with

cartoon imagery and “food as fun”– Use of Skip– “If you’re going to sell to children, you have

to target them because today’s moms ask their kids what they want” -- Youth-marketing advertising consultant

Promotion: Message

• Legal Factors– Must be careful with ads directed at children

• Cultural Factors– Skip: blond haired white kid who surfs– Is food fun in India???

Considerations

• Low income affects pricing but population is a key asset

• Presence of Hindustan Lever Limited and available facilities

• Limited competition

• Poor infrastructure

• Large reach of TV and print advertising

India, Now...

India, Post Skippy invasion…

Questions?

• James Corbello

• Lindsay Johnson

• David Lindvall

• Brent Wakley