International
Marketing Strategy
Rachel Bauer, Pat Lynch, Sarah vonFischer, Erik Wright
Smucker’s Uncrustables in Germany
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Assessment of Potential
Market
Eating Habits of Germans
 Lunch is the primary meal of the day in Germany. It
is typically a warm meal served around noon.
 Recently consumers have begun to shift away from
large main meals towards snacks and smaller
dishes; this could lead to increased interest in a
product like Uncrustables.
 Large family meals are still common at noontime on
Saturdays and Sundays
Assessment of Potential
Market
Frozen Food Market in Germany
 In 2003 the German Frozen food
market reached a value of $6.84
billion
 This was an increase of 13.8%
since 1999
 The frozen food market includes
frozen ready meals, frozen
deserts, frozen bakery products,
frozen fruit and vegetables, and
frozen meats.
Assessment of Potential
Market
Frozen Food Market in Germany
 Frozen ready meals was the leading segment of the
market that contributed $3.3 billion of the total revenue,
48.6% of the of the market’s value.
 The German frozen food market is the largest in the
European Union and Eastern Europe.
 Even though the market is mature, analysts expect the
growth rate to be moderate and confirm Germany’s
position as the largest in Europe.
 This is good news for Uncrustables in Germany.
Assessment of Potential
Market
Frozen Food Market in Germany
Year
1999
2000
2001
2002
2003
$ million
6,008.2
6,240.0
6,495.5
6,714.8
6,837.2
€ million
5,319.7
5,524.9
5,751.1
5,945.2
6,053.7
% Growth
3.90%
4.10%
3.40%
1.80%
Source: Datamonitor D A T A M O N I T O R
This data shows the recent growth in the German
frozen food market and the increasing net value of the
market
Assessment of Potential
Market
Frozen Food Market in Germany
Geography
Rest of Europe
Germany
UK
France
Total
% Share
54.80%
16.10%
15.00%
14.10%
100.0%
Source: Datamonitor D A T A M O N I T O R
Compared to other European countries, Germany’s
frozen food market holds a slight advantage in market
share
Assessment of Potential
Market
Future Market Expectations
 2005 is predicted to have the highest future
growth
 By 2008 analysts expect the frozen food
market to reach a value of $7.9 billion, which
is a stronger growth prediction than for the UK
and Italian markets, and significantly higher
than the growth of the French market.
 If Smucker’s was to enter this market it would
be most beneficial to do it quickly.
Assessment of Potential
Market
Ready Meal Market
 The German ready meal market has
reached a net worth of $2.6 billion
 The market had a growth rate of
6.7% between 1999-2003
 Germany is currently third in ready
meal market size behind France and
the United Kingdom
Assessment of Potential
Market
Ready Meal Market
 The leading segment of the ready meal market
is the frozen ready meal segment accounting
for 81.7% of the market value.
 The expected growth rates for this market is
expected to experience decline slightly
 By 2008 the ready meal market is predicted to
reach a net value of $3.3 billion, which
indicates growth of 5.1% in the 2003-2008
periods
Assessment of Potential
Market
Germany’s Economic Prospects
 The GNP is around $1.864 billion. More relevantly,
they have a per capita GNP of $22,740, making them
one of the most affluent nations in Europe.
 GNP is $22,740 per capita, and the GDP is $27,600
per capita, once again proving that the average
population should be able to afford our product.
 Germany’s western part of the country is more affluent
than the former communist, eastern area.
Assessment of Potential
Market
Germany’s Economic Prospects
 The total population of Germany is 82 million (more
specifically, 82,531,700 at the end of 2003)
 Population growth has been slow since the 1960s, so
no future change is expected
 There is sufficient income and population in Germany
for Smucker’s to invest their product in Germany
Assessment of Potential
Market
Competition
Company
market share
Private label
21.2
Langnese-Iglo GmbH
13.8
Aldi GmbH & Co KG
12.5
Conditorei Coppenrath & Wiese GmbH & Co KG
9.4
Dr August Oetker Nahrungsmittel KG
7.4
Wagner Tiefkühlprodukte GmbH
6.1
Companies well established in the German frozen
food industry are listed above. These are the main
competitors for Smucker’s upon entering Germany.
Assessment of Potential
Market
Competition
 Langnese-Iglo has products such as frozen pizzas,
hamburgers, chicken sandwiches, fish sticks, pasta,
and baguettes.
 Coppenrath & Wiese specializes mostly in breakfast
rolls and desserts
 Dr Oetker is mostly in the business of frozen pizza.
 Wagner Tiefkühlprodukte GmbH offers a variety of
pizzas, bruchettas and wraps
Assessment of Potential
Market
Competition
 Findus has come out
with a product called
Crispy Pancakes
 Flavors include:
 3 cheese
 Beef
 Sweet corn, bacon,
and chicken
Assessment of potential
market
Direct Competition
 Dr. Oetker has come out
with frozen sandwiches
 They microwave in 2
minutes
 Flavors include





Chicken BBQ
Hot Peppers
Pizza Style
Tomato Feta
Hawaii
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Distribution
 The distribution of Uncrustables in Germany depends on
many different variables including the following:
 Surface Transportation
 Geography (large cities and surrounding countries)
 Current sales and production facilities in Germany
 Current suppliers and distributors in Germany
 German legislation pertaining to foreign direct
investments, tariffs, and taxes
Distribution
Surface Transportation
 The western states of Germany have a more advanced
transportation infrastructure, but government spending
is closing the gap.
 Ease of travel in different parts of the country is
something to consider when deciding on the placement
of different facilities in Germany.
 In 2005, a new system is supposed to be implemented
to charge lorries (trucks) 12.4 euro cents per kilometer.
 This makes truck travel a more expensive option.
Distribution
Surface Transportation
 The railway system for passenger travel has
recently become more expensive and has lost
a lot of customers due to an economic
downturn in 2003.
 Railways are still commonly used for freight
services, with annual goods totaling 285 tons.
 A problem with this source of transportation
could be problems with monopolistic pricing for
the DB (the federally sponsored company).
Distribution
Surface Transportation
 The use of sea-going merchant
vessels for transportation of
goods is on the downturn,
totaling 246 tons in 2003 (less
than the railway’s 285 tons).
 The most important port for
Germany is Rotterdam in the
Netherlands, and the most used
domestic port is in Hamburg
(accounting for 35% of all freight
shipped to German ports).
Distribution
Surface Transportation
 Other main ports in Germany
are Wilhelmshave,
Bremerhave, Bremen, Rostock,
and Lubeck.
 If transportation using seagoing merchant vessels was
chosen to be used by
Smucker’s for Uncrustables, it
would be important to consider
the implications of locating
Uncrustables facilities by one of
these major cities.
Distribution
Surface Transportation
 The most used airport for freight and
passenger travel is Rhein-Main Airport near
Frankfort.
 Cologne-Bonn is the second most used for
freight traffic.
 Again, if using airport for freight transportation,
it would be important to consider a distribution
facility near one of these two cities.
Distribution
Surface Transportation
 Roads: 226,000 km in 1992 (11,000 km of
these roads are at least four lanes)
 Railroads: 40,000 km in 1994 (16,000 km of
which are electrified)
 Airports: 660 total (12 civilian airports
provide passenger and cargo service within
the country and to the rest of the world)
Distribution
Surface Transportation
 Ports: several dozen large, well-equipped
ocean and inland ports
 Inland Waterways: 6,900 km of navigable
inland waterways, including extensive
canal systems (inland waterways account
for about 20% of freight shipping)
Distribution
Geography
 Germany shares
boundaries with nine
other countries:









Denmark
Poland
The Czech Republic
Austria
Switzerland
France
Luxembourg
Belgium
The Netherlands
 This is important to consider
when choosing where to put
production and distribution
facilities. Putting a facility in
a neighboring country could
be the most cost-efficient.
Distribution
Geography
 The three largest cities are Berlin
(3.4 million), Hamburg (1.7 million),
and Munich (1.2 million).
 Concentration of population
 The most densely populated cities are
Berlin (3,898 persons per sq. km),
Hamburg (2,236 persons per sq. km),
and Bremen (1,697 persons per sq.
km).
 1/5 of the nation’s total population is in
North Rhine-Westphalia (the state
who’s cities include Berlin, Bremen,
and Hamburg.
Distribution
Current Sales in Germany
 There are currently no sales
offices or production facilities
in Germany.
 Also, there are no Smucker’s
products on store shelves in
Germany.
 Smucker’s products can be
bought from online groceries.
Distribution
Current Distributors and Suppliers in
Germany
 Smucker’s does not own its
suppliers or distributors. It
does not grow its own fruit, nor
does it manufacture its own
labels or storage containers.
 When going into Germany, one
would need to decide what
suppliers and distributors are
available and the best to use.
Distribution
Production in Germany
 Smucker’s Uncrustables are currently
produced in a manufacturing facility in
Scottsville, KY.
 It would be important to decide whether to
produce Uncrustables in Germany or to import
them from Kentucky.
Distribution
Production in Germany
 Many factors were at play
in Smucker’s decision to
close some plants. A
strike affected the
Woodburn facility last
year, though local
sources say the
workforce included many
second-generation
employees who were
willing to work with the
company to improve
efficiencies.
When considering
where to have a
production facility in
Germany, it will be
important to look at
factors such as the
worker’s
demographics and
attitudes in addition
to factors such as
cost.
Distribution
Foreign Direct Investments
 Germans and Americans regularly make investments in
each other’s countries.
 Germany is the United State’s largest European trading
partner and fifth largest partner in the world.
 France, the Netherlands, and the United States led the
list of Germany’s foreign investors during 2003.
Distribution
Foreign Direct Investments
 The profit rate of US direct investment in
Germany was 5.1% in 2003, compared
with 3.7% a year earlier.
 This is showing that US investments in
Germany are becoming more and more
profitable.
Distribution
Foreign Direct Investments
 German government officials, and the population in
general welcome foreign investment that provide new
jobs. There are no serious limitations on new projects.
 Foreign investors encounter the same conditions as their
German counterparts in obtaining licenses, securing
building permits, and gaining approval for investment
incentives.
 However, the German government often opposes hostile
takeovers.
 The next slide shows an example…
Distribution
Squeeze-out example
 A provision of the take-over law concerning squeeze-outs
has been used frequently. According to the law, an investor
who holds at least 95% of equity can force the remaining
shareholders to sell their shares in the company.
 Since the first quarter of 2003, however, when Procter &
Gamble of the US unsuccessfully tried to use the squeezeout provision to take over all of Walla, a German hair-care
company, investors have rarely been able to reach the
necessary 95% threshold.
 Minority shareholders will deliberately increase their stakes
to force the investor to make a higher offer.
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Segmentation and
Targeting
 Demographics: targeted towards moms across the
United States—most likely people of middle- or upperrange incomes (because it is definitely cheaper for a
mom to make her own peanut-butter and jelly
sandwiches). This is also mostly targeted toward
working mothers.
 Geographic: not necessarily specific geographically,
although the main focus now is in the United States—
not the international market.
 Smucker’s may consider entering Uncrustables in the
wealthier, western half of the country for easier
penetration of the market
Segmentation and
Targeting
 The Average Family
 “Our research shows that the average family
doesn’t know what they’re going to have for
dinner until 4 p.m., and probably the most
popular category of food is handheld products
you can take in the car,” Smucker’s says.
Segmentation and
Targeting
 Children and Schools (although children are not
directly targeted)
 “We continue to focus on Uncrustables, our line of
crustless, thaw-and-serve peanut butter and jelly
sandwiches. Within the school foodservice market,
sales of Uncrustables have increased substantially
over last year, yet to date we are in fewer than 20
percent of school districts nationally.”
 “Reaching a later percentage of children with a
branded food item, served as a meal or nutritious
snack, is a most exciting prospect for our Company.”
Segmentation and
Targeting
 Amusement Parks and Ball Parks
 The Uncrustables line was also successful this
year in traditional foodservice outlets,
especially in the recreation category where
initial placements have included Walt Disney
World and several major league baseball
parks.
Segmentation and
Targeting
 In the United States retail market the Company’s
products are sold through brokers to food retailers
 food wholesalers
 club stores
 mass merchandisers
 military commissaries.
Segmentation and
Targeting
 Psychographics: for people with interests that keep
them on the go
 Behavior: this product is most likely for the loyal
buyer. Smucker’s is hoping to convince mothers
that this product is convenient enough to keep
handy around the house.
 Also, Smucker’s is most likely hoping that once a
mother buys the Uncrustables the first time, the kids
will be hooked and create a demand for the mother
to continue buying the product.
 Benefits: convenience
Segmentation and
Targeting
Age Distribution in Germany
Age
Male
Female
Male (%)
Female (%)
0-4
1,924
1,825
51.3%
48.7%
5-9
2,061
1,953
51.3%
48.7%
10-14
2,328
2,210
51.3%
48.7%
15-19
2,403
2,277
51.3%
48.7%
20-24
2,418
2,298
51.3%
48.7%
25-29
2,353
2,227
51.4%
48.6%
30-34
3,023
2,851
51.5%
48.5%
35-39
3,743
3,504
51.6%
48.4%
40-44
3,542
3,360
51.3%
48.7%
Segmentation and
Targeting
 The previous graph displays the Target Market
for Uncrustables, which consists of 14,697
million males and 13,878 million females,
which includes parents and children
 If Smucker’s can tap into this vast population in
their target market, Uncrustables could be very
profitable
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Marketing Mix
Product
 Uncrustables are a sandwich made up of white bread,
and with no crust
 It come in three flavors, Grape, Strawberry and Grilled
Cheese
 The idea of new flavors and even seasonal ones is
something that has been successful in the German
market
 Germans do eat peanut butter but not necessarily
peanut butter and jelly sandwiches. This may be
something to consider pertaining to flavor.
Marketing Mix
Product
 Most get their food from both supermarkets and
specialty shops (like bakeries, butcher shops, etc.)
 Germans tend to shop more frequently than
Americans, usually 2-4 times per week
 The typical German household has a significantly
smaller refrigerators than Americans and have a
separate larger freezer in the basement
 This all indicates that Germans may not be as
interested in the larger packages of Uncrustables
(such as the 10 and 18 pack). A pack of 4 may be
more appealing to Germans.
Marketing Mix
Packaging
 Uncrustables are packaged in a cardboard box with
each sandwich individually wrapped.
 The individually wrapped sandwiches would also be
easy to store in the freezer outside of the box.
 The design has a picnic feel to it and the colors of the
box vary with the different flavors.
 The package looks “All-American” which is not
necessarily a good thing.
Marketing Mix
Packaging
 The packages are produced in English and
Smucker’s name is prominently displayed on
the front of the box along with the Uncrustables
name.
 The nutritional facts and ingredients are listed
on the sides of the box, and an explanation of
what Uncrustables are (including pictures) is
on the back.
Marketing Mix
Packaging
 The Germans have recently installed new laws
regarding waste disposal. In responses,
companies are making more environment
friendly packaging.
 Green dots are starting to appear on packages
that are recyclable, and while it is not required,
it makes packages more acceptable.
Marketing Mix
Place
 The Industrial Investment Council offers consulting
free of charge for investors in eastern Germany.
This includes:




Market research
Identification of partners
Permit applications
Advice on financial incentives
 The investment allowance law provides for additional
incentives for the acquisition of buildings, plants, and
equipment in eastern Germany.
 Regular incentives are 12.5% of investment cost; for small and
medium-sized companies, the rate is 25%, and it is increased
by 2.5% in regions close to the Polish and Czech borders.
Marketing Mix
Place
 One thing to remember when analyzing the best
location for a production facility is not necessarily
the place that costs the least.
 Smucker’s realized this when they decided to
close optimize their supply chain and consolidate
manufacturing facilities. Smucker’s closed plants
in Watsonville, California, Woodburn, Oregon, and
West Fargo, North Dakota allowing for more
efficient product production and distribution.
Marketing Mix
Promotion/Message
“Our first priority was to serve our loyal
existing customers. We’ve continued to
pursue new customers, but (we’re) really
targeting the fall, back to school time
period for implementing that new
business.”
Marketing Mix
Promotion/Message
 Uncrustables are a great time saving product for those
parents on the go. With more and more two parent
working families, the idea of a easy to serve, ready to
go product is always a good one.
 The idea of a convenient, low cost and also good
tasting product can be seen with Uncrustables
 Lastly, the flavors of the product are what some would
call trademark American products; a good old fashion
PB&J and the Grilled Cheese. Something that children
will associate with
Marketing Mix
Promotion/Message
 With capacity shortcomings, Smucker’s pulled most of
its advertising and promotion for the Uncrustables line.
 Richard Smucker, co-CEO and CFO had this to say,
“As a result, growth and sales projections
for the brand have been difficult to ascertain. We
have pulled quite a bit of support for the brand,
but once we get back up to full support, then we’ll
have a better feel for growth”
Marketing Mix
Promotion/Media
 In Germany print media holds a 48% share of
advertising and is the leading medium for
advertisement
 Television is the most popular medium of
communication and entertainment. Today some 30
stations compete fiercely for audience ratings.
 Each of the 16 Landers (states) are solely
responsible for their television broadcast activities.
Marketing Mix
Promotion/Message
 Uncrustables received free advertising
when Liz Crenshaw of NBC4 did a
segment on the product.
 Currently, Uncrustable ads can be seen
regularly on television and coupons are
available in local newspapers.
 However, the most buzz about
Uncrustables can be found on the
internet.
 Individual store promotion: samples and
displays
Marketing Mix
Promotion/Media
 The Uncrustables brand name has not been the
sponsor of any major event, but Smucker’s on the
other hand has been the main contributor to an iceskating event and a special episode of Family Feud
has featured some the Smucker’s Ice-Skating stars.
 In Germany over 27 million people belong to sports
club and the most popular sport in Germany is Fussball
(Soccer). Event and team sponsorship is a major
player in advertising in Germany as well as player
endorsement.
Marketing Mix
Price
 As we said before, pricing would not be a major issue
in Germany because the per capita GNP is relatively
high ($22,740).
 The price would depend on the extra expense of either
importing the goods from the United States or
producing them in Germany.
 There are high tariffs on goods imported to the EU from
the United States, particularly on processed foods
containing added sugar, flour, starch, and milk.
Marketing Mix
Price/Tax
 The effective rate for trade tax varies by location from
just under 12-20%. It is around 18% for most larger
cities.
 This tax is deductible as an expense for corporation
tax.
 German business profits are subject to 2 taxes;
corporation tax which is levied at 25% and subject to a
surcharge of 5.5%. The surcharge does not apply to
companies with headquarter and management outside
of Germany.
 A foreign company’s German branch would be charged
both corporation tax and trade tax.
Marketing Mix
Price/Tax
 There is a 7% sales tax on food. This is charged to the
manufacturer, not the consumer.
 All these factors could ad to the price of selling
Uncrustables in Germany.
Marketing Mix
Positioning Against Competition
Intermezzo
 Intermezzo are sold at a cost of .99 euro. With the
current exchange rate of $1/1.32 Euro, the cost of one
Intermezzo is about $1.31 (this includes tax).
 In the U.S. Uncrustables cost about $.75 per sandwich
and usually come in packages of 4, 10, or 18.
Marketing Mix
Positioning Against Competition
 Uncrustables needs to consider the price of
their competitors to decide if they want to
position themselves based on price.
 A leader in the German frozen food industry,
Frosta, decided to position themselves on
quality rather than low cost.
 They suffered a large drop in sales.
Marketing Mix
Positioning Against Competition
Crispy Pancakes
 Crispy pancakes were developed “for kids by kids.”
 Unlike Crispy pancakes, Smucker’s does not directly
target children in Uncrustables promotion.
 Crispy pancakes are served in many schools in Germany.
 Smucker’s has recently been promoting Uncrustables the
same way by putting them within the school foodservice
market.
 Smucker’s needs to consider this direct competition for the
grilled cheese flavor in schools.
Uncrustables in Germany?
Main Factors to Consider
 Assessment of
potential market
 Distribution
 Segmentation and
Targeting
 Marketing mix
Questions?