Namyang Dairy and French Cafe Coffee Mix

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Strategic suggestions for Namyang Dairy and its French Cafe Coffee Mix

Strategic suggestions for Namyang Dairy and its French Cafe Coffee Mix

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  • I was searching for the information about Namyang company and this presentation would be really helpful! Do you mind if i ask you where those information came from? I couldn't find information that came from reliable sources... I'll be waiting for your reply!
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  • @banerjeeamlan Thank you for the comment. The coffee power - in Korea it's called coffee mix - is produced by the company in their factories. Namyang was already producing several coffee products other than coffee mix, and they also recently developed a new factory just to produce their coffee mix products.
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  • excellent and short presentation. One question - the ingredients for the coffee mix that is like instant coffee powder etc. are they produced by the company or are they bought outs
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  • 1. Namyang Dairyand French Café Coffee MixGroup 3
  • 2. Table of ContentsAnalysis of Current StrategyProblem IdentificationSuggestions
  • 3. Dairy BusinessSales Breakdown BCG Matrix Dairy Others Star Question Mark 218 211 199 220 235 221 234 260 283 538 562 595 599 578 663 774 768 921 Cash Cow Dog 03 04 05 06 07 08 09 10 11
  • 4. Trend Declining Birthrate Increasing Milk Price Decreasing Milk Consumption Price received by farms kg per capita 4.53 Production Cost 9.43 855.36 770.13 2.83 722.39 7.9 662.23 621.04 633.47 640 585 7.03 6.89 7.17 1.6 1.47 1.17 1.16 1.121.19 495 493 6.35 458 436 5.655.75 70 80 90 00 02 04 06 08 00 02 04 06 08 10 04 05 06 07 08 09 10 11 Need to Diversify Its Business Portfolio
  • 5. Why Coffee Mix? External Internal 1 Market Size 1 Integration with existing (in trillion won) businesses 1.2 X2 0.6 05 11 2 Strong R&D Capability 2 Less Competitors 3 Solid Distribution Channels 3 High Margin 2-3% Average F&B 10% Coffee Mix
  • 6. Current StrategyQuality Differentiation Aggressive Marketing Market Share IncreaseFound the strategic Raise concern about Salessweet spot through Sodium caseinate (in bil won, 2011)extensive market 43.1research 30.6 22.4 untapped 9 1Q 2Q 3Q 4Q Star Marketing Market ShareNon-composite Dongsuh Namyang Nestlécreamer using 86.6 80.2fat-free milk 9.3 11.8 4.8 1 Jan 11 Dec 11
  • 7. Problem IdentificationLow Attractiveness of PotentialDomestic Coffee Mix Market EntrantsPorter’s 5-Forces Model Med Suppliers Competition Buyers Low High High Substitutes HighLow Market Growth Low Market GrowthConsumption of Mix Coffee Growth Rate(in mil cups) (in %) 14740 14940 9.2 14112 8.68 13179 12126 11104 7.08 4.45 1.36 06 07 08 09 10 11 07 08 09 10 11
  • 8. Problem IdentificationEasily Imitable Strategy and CompetencyMe-too products of competitors Namyang French Café Coffee Mix Research Found out customers dissatisfaction with creamer of existing coffee mix products R&D Developed technique to use pure milk instead of sodium caseinate for creamer Promotion Extensively advertise their product as health-friendly Maxim White Gold Taster’s Choice Mocha Harmony Lotte Chilsung Cantata Stick Coffee
  • 9. Portfolio AnalysisBCG Matrix Star Question Mark Business Growth Rate Cash Cow Fermented Dog Milk Baby Formula Plain Milk Coffee Mix Relative Competitive Position
  • 10. Portfolio AnalysisBCG Matrix Star Caseinate-free Question Mark Coffee Mix Business Growth Rate Cash Cow Fermented Dog Milk Baby Formula Plain Milk Coffee Mix Relative Competitive Position
  • 11. Hierarchy of Strategy Mission “To Be an All-around F&B Company” Goal/Objective “To Achieve 1 Trillion won Sales in the Coffee Market” Strategy Formulation In the Coffee Market
  • 12. SWOT Strength Weakness Financial firepower Late-mover Technology patent and expertise Lower brand loyalty than Maxim Established distribution channel Favorable well-being perception Opportunity Threat Growth in the coffee market Fierce competition among rivals Increased concern for well-being and Possible new entrants healthy diet Substitutes such as coffeehouses and canned coffee
  • 13. TOWS Matrix Strength Weakness Opportunity S-O W-O Differentiation Diversification Threat S-T T-O Export
  • 14. DifferentiationFull Line-up of Diverse Coffee Mix Products19 No. of Dongsuh’s mix products ˃8 No. of Namyang’s mix productsPositioning as a healthy quality brand Fierce competition in coffee beans quality already ↓ Positioning as a ‘healthy’ brand with natural ingredients and low calorie sugar
  • 15. DifferentiationFunctional Healthy Additives e.g. Coffee Bean and Tea Leaf – Ginseng e.g. Jardin – Red Ginseng, Collagen, DHA, vitamin and etc. e.g. CNI & Indocafe in Indonesia – herbs, ginseng and ginger 20% sales growth in 5 years
  • 16. TOWS Matrix Strength Weakness Opportunity S-O W-O Differentiation Diversification Threat S-T T-O Export
  • 17. DiversificationCapsule Coffee Invented in 1970s by Nespresso • Capsule filled with ground coffee beans to make espresso with capsule coffee machine • Accounts for 30% of European coffee market
  • 18. Diversification Capsule Coffee Market in South Korea 2007 2010. 12 2012. 3 Nespresso Nescafe Dongsuh First in Korea Dolce Gusto Ally with Bosch Market Share Rapid Growth (%, 2011) (in bil won) 200 Others 130 Nespre 100 sso Dolce Gusto 10 11 12
  • 19. Diversification Growth Potential Market Share by Segment Sales Growth Rate % in 2011 % in 2011 41.50% 42.6 37.4 Brewed 27.29% Brewed 80.2 Instant Instant RTD RTD U.S. Japan Korea 2008 2009 2010 2011 Increasing demand for brewed coffee
  • 20. Diversification Growth Potential I want brewed coffee at home Yes, 59.20 % Coffeehouse, 31% Mix, 16% Home, 29% Brewed, 7% I’d buy an espresso machine at home Office, 40% Soluble, 4% Yes, 45.40 % Consumers Needs Identified*Trend Monitor
  • 21. TOWS Matrix Strength Weakness Opportunity S-O W-O Differentiation Diversification Threat S-T T-O Export
  • 22. Export Coffee Market in China Coffee Consumption Commodity Usage (kg per capita) % change in intensity – 11-15 Forecast Finland 11.9 Coffee 130 Germany 6.5 Italy 5.8 Soyabeans -13 Brazil 5.7 -20 Pork U.S. 4.1 Japan 3.4 -23 Beef China 0.1 -27 Rice India 0.1 10-15% Instant Rising market coffee Attractive middle growth sales Instant Market class per year Coffee increase 80% 13%*Reuters/Economist
  • 23. Export Competitive Advantages Differentiated Export Base Advantageous Products in Dairy Position Products among Korean Competitors A variety of MOU with a Dongsuh’s French Café Chinese limitation in products company in exporting 2011 due to the for exporting agreement w/ baby formula General Foods
  • 24. Export How-To’s Increase Production Capacity Now barely manages to supply the demand in the Korean market A new coffee factory in Naju → Enhance to meet overseas demand as well Marketing Raise issue of healthy diet and quality Korean movie stars Nestlé’s 3-in-1 Emphasis on quality simple & standard and use of milk type of coffee mix
  • 25. Thank you!