ABC FOODS GMS International Expansion Strategies

ABC FOODS: GLOBAL MARKETING AND INTERNATION EXSPANSION STRATEGY REPORT

By

Abdulalim Bachani 07079419Word Count: 3190

Tutor: David P Evans

1

Rationale:

ABC Foods are UK market leaders of food intolerance products

specialized in developing and producing diabetic friendly food such as

gluten free bread, cakes, biscuits, chocolate, bagels, muffins, white and

brown rice and diabetic friendly drinks range. They have well recognised

brands in the UK such as G-F Essentials, G-F Delights and D-F Juices

occupying majority shares in the home market and are known for

developing nutrient rich and good quality products. ABC Foods have a

high level of quality controls and all products are approved by the

Department of Health. Since establishment in 2005 ABC foods have

shown strong profitability over the years and now show competence to

expand abroad into foreign markets.

According to the International Diabetes Foundation

There are 285 million people worldwide with diabetes and these

figures are likely to increase 54% by 2030 in major regions of the

world.

Global Estimates of the prevalence of diabetes for 2010 and 2030 - J.E. Shaw *,

R.A. Sicree, P.Z. Zimmet

According to World wide outlook for Food speciality products,

The World wide market potential for food speciality retailers is 54.4

billion.

INSEAD, 2005-10 www.icongrouponline.com

The statistic clearly outlines the expected major increase in diabetes over

the next two decades and the market potential defining a need for

products by ABC Foods and a potential global market for ABC foods and

its range of products.

According to Euromonitor Global competition in the overall health and

wellness global market is occupied by 6 major corporations, Weight

Watchers, PepsiCo, Nestle, Coca-Cola, Danone and Unilever who are all

yet to develop major equity in the global market for food intolerance

2

products.

However the need for more research into potential markets is needed and

a carefully evaluated global marketing strategy needs to be defined. This

report intends to research potential countries and markets and provide a

critical evaluation and recommendations on strategic options available to

ABC foods based on their current competencies. Research into food

intolerance sectors in China, Canada and Sudan will outline any gaps or

opportunities in markets which are relevant to the organisations product

range.

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Sect ions Overview

1 . M a r k e t S e g m e n t a t i o n :

4

2 . P o s i t i o n i n g S t r a t e g y

5

3 . R e l a t i o n s h i p S t r a t e g i e s

6

4 . D e c i s i o n M a k i n g P r o c e s s

9

5 . M a r k e t S t r a t e g y

1 1

6 . R e c o m m e n d a t i o n s

1 2

7 . A p p e n d i x

1 5

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1. Market Segmentat ion

China

Primary consumers of food intolerance products in China will tend

to be part of the affluent middle class or wealthy segment of the

consumer base between the ages of 20 and 40 and over, single or

married with families.

Canada

Primary consumers of food intolerance products are likely to be

middle class to upper class consumers ages 20 to 70, highly

developed market means more niche segments to exploit.

Consumer’s high levels of tastes require ABC to enter into niches

that fit firm’s strengths.

Sudan

Due to the lack of market and consumer information available in

Sudan, it is difficult to locate a segment except for the statistics

from IDF state that 675,300 of people have diabetes.

(www.internationdiabetesfederation.com)

(See Appendix 1 for Reworked Swot Analysis)

5

http://www.internationdiabetesfederation.com/

2. Posi t ioning Strategy

China

China requires high status quality foreign products, country of

origin more than likely to affect here in ABC’s favour as Chinese

consumers are developing a taste for high quality foreign products.

Upper end skimming pricing policy to back up status and quality of

product, advertising may be mainly print media, option is available

for digital and TV advertising but too expensive on entry.

Canada

Canada’s requires high brand image with status and quality,

country of origin effect may have implications. Higher levels of

customization and will require adopting upper end skimming

pricing policy that competes with competition prices. Advertising

options may be limited as promotional mix will need high levels of

investment and creativity to generate awareness and compete in

similar strategic groups with other companies.

Sudan

Sudan requires simplistic product positioning, basic needs few

alternatives drives basic positioning by introducing products with

limited features. Advertising methods also need to be basic, low

literacy levels means consumers require visuals to learn about new

product. In addition under developed infrastructure and media

broadcasting technology reduces marketing to print media.

(See Appendix 1 for Reworked Swot Analysis)

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3. Relat ionship Strategies: Cri t ical Evaluat ion

Relationships in life are there for the advantage and progression to

humanity; similarly, organisations have strong motives to progress

with their goals and ambitions through different relationships to

succeed in international business. Whether these are joint ventures

and collaborations with similar companies, agreements with

distributors or schemes to develop relations with customers, they

can all potentially be prone to disaster. Core factors that make

relationships with customers or suppliers great can easily funnel

into disagreements, exploitation, infidelity, abuse, suspicion or

eventually dissolution. While relationships can provide many

benefits, for example collaborations such as strategic alliances and

joint ventures help businesses to spread and reduce costs,

specialise in competencies and gain knowledge or technology

transfer, they also present opportunities for covert activities

designed to systematically cheat partners. Other major

collaborative arrangements such as franchising, licensing or FDI

also have their own pitfalls when working together with other

international businesses, organisations, customers, employees,

governments, distributors and suppliers. The point is they all

transport different advantages and problems for the management

to deal with, one of these problems is the level of control the

management has especially in non-equity relations like sales

contracts, licences and turnkey arrangements where control over

decision making is out of the franchisor’s hands.

The close relationships that a business develops all start with

intentions to benefit profitability for all party members.

Nonetheless these collaborative arrangements can open doors to

failure; exploitation can occur depending on the short-term and

long term orientation of the companies (Das and Teng: 2005),

tensions are expected in any relationships but if companies are

more short-term they are more attracted to exploiting each other

before the relationship is over. Long term orientated companies

may lack substantial gains from these long term relationships so it

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can be very difficult to stay dedicated and supportive. Building

strong interpersonal links and high levels of trust with suppliers is

another way to succeed; this keeps both companies flexible and

responsive to each other (Anderson & Jap: 2005). However this can

also set up relationships to fail as one can easily dominate another

to secure resources or component products at cheaper price, less

bargaining power for a smaller company means they can be played

off with other suppliers making it harder to opt out of painfully high

performance relationships at the risk of losing their contract. These

types of relationships can make or break a company. Furthermore

the strong trust and links that are built up in these relationships

give some managers the opportunity to use it and cheat a partner

on a regular basis. Unfaithfulness and infidelity can lead to

scandals that may ruin the reputation of an organisation and

impact on potential relationships in the future. An additional

method of expanding the benefits of successful relationships is the

unique processes and adaptations businesses apply to collaborative

arrangements (Anderson & Jap: 2005). Anything from product

enhancements, supply specifications that help businesses to

become more efficient and productive, this way both partners are

likely see gains in profitability. However the same adaptations that

increase productivity in the short term can have a disastrous effect

in the long run, arrangements like these tend to forget about

innovation and improvement to keep productivity up. Whether

firms involved in these relationships can stay relatively flexible is

the key feature to the life of the collaboration. If the alliances are

too rigid then associates can be subdued from achieving potential

benefits. (Das and Teng: 2005)

In the business world it is considered that the customer is king, so

logically a business should strive to have strong profitable life long

relationships with its customers. Sometimes however, relationships

may not always turn out to be profitable, customers who purchase

products and services at high prices may perhaps exploit

companies into giving them premium services and discounts. These

customers are smart enough to know their significance to the firm

therefore are a position to make demands; consequently the loyalty

clubs and schemes that were originally created to develop strong

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relationships and capitalize on the faithfulness of customers can

prospectively fail in the long term. (Anderson & Jap: 2005)

Collaborative arrangements of any kind are open to many

calamities; many factors can influence impending disasters on

relationships between partners in the long run. For instance

companies can have differing objectives, control issues,

contribution problems and differences in culture context in

international business. Nevertheless it’s not all doom and gloom for

relationship strategies, there are many protocols businesses should

regularly carry out in order to manage diverse relationships and

collaborative arrangements. The first step is to identify and

understand these issues in order to be capable of suppressing the

dark side of relationships. Whether companies are in long term or

short term arrangements it is necessary for them to constantly

evaluate the relationships, regular assessments helps to strengthen

links and foresee any crisis in the future. Adopting a rotational

system for personnel will also help to freshen up relations with new

faces. Establishing common goals and keeping profitability in mind

will also help firms to keep relationships strong; however the main

aspect to building a strong successful relationship is to avoid

suspicion, falling into a spiral of suspicion can have disastrous

affects if managers start questioning minor behaviours of their

partners. Once companies arrive at crisis situations, it should be

looked at as an opportunity to reinforce relations and improve on

what they started. A lot of the time however it isn’t possible for

companies to kiss and make up, they make carry on psychological

scars that suppress performance and as a result previous conflicts

could arise again, consequently for this reason a dissolution may be

necessary for the benefit of both parties. The nature of business

relations is such that they do not tend to carry on indefinitely but it

is better for a business to enter and exit networks a number over a

period of time, while constantly maintaining and investing into

these relationships (Anderson & Jap: 2005)

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3. Decis ion Making Process for Country Expansion

The decision making processes used to determine the first country

expansion was the interactive multi-criteria to identifying potential

foreign markets (Kumar et al: 1993) and Michael Porters extended

porters analysis for the overall global industry for food intolerance

products. The multi-criteria approach was used to more bring

together secondary research from the first two stages and then

apply that information with Porters 5 forces analysis to determine

the attractiveness of the industry. The aim of this was to gain a

better overall view of the global environment from analysis, in

addition using Harrell and Kiefer (1993) Business portfolio matrix

to plot each country’s attractiveness to the companies’

compatibility with the countries, which gives a better view of which

country is more attractive. This matrix was drawn up from the

secondary research conducted. (See appendix 3 and 4 for Business

portfolio matrix and porters 5 forces analysis).

Both processes used have their own advantages and disadvantages

on the implications for the overall decision making process,

according to Kumar et al the benefit of using this approach is that

it takes into account multi criteria objectives of the firm, reduces

sets of optimal solutions, cost affective, easy to adopt and flexible

enough to be applied to a wide variety of firms. Taking into account

qualitative and quantitative data the model also helps to aid

managerial decision making process, however the downfall to the

methodology is that it requires data on a particular variables across

all countries, the problem here is that data needs to be available

most importantly, this proves difficult when researching under

developed regions like Sudan since consumer markets and

infrastructure has not developed fully. Moreover data needs to be

reliable to make clear judgements and decisions while also being

comparable so to compare one market with another. For certain

information this can be difficult to attain (Kumar et al: 1993). The

model requires secondary information for the first two stages of

screening and identification; however in the third stage primary

data is vital to gain a better insight into the market as secondary

data is not enough to make sound judgement and decisions, at this

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stage managers would need to use local marketing expert to carry

out the necessary research and deploy the information back to HQ.

This part of the process can be lengthy and costly if dealing with a

high culture context market as collecting primary data in those

regions could be slowed down by language, literacy, access to

technology or other professional services. Calculating a desired

entry strategy and market depends on a repeated process of a cycle

of operations, in other words an iterative process. This method

helps to filter information in an “add and drop” function to arrive at

an appropriate method on entry and market. Porters 5 forces was

used to aid the decision making process however the model has

been heavily criticized over the last 30 years, some of the main

criticisms are as follows. The model assumes static market

structures as it does not take into account the environment that

affects complex industries and technological forces that are

capable of shifting structures, changing business models and entry

barriers (Lynch: 2009) Porter sees all forces as threats and the

need for competitive advantage over customers, suppliers and

markets, however it does not consider strategic alliances, closer

relationship with suppliers and higher level of customer

engagement with companies. According to Downes states that

porter should include 3 more forces to the model; these are

Deregulation, Digitalization and Globalization, macro-economic

forces drive changes in industries every day Porter does not

recognise this either. (Larry Downes: 1997)

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5. Market Entry Strategy: Direct Export ing employing independent agents and distr ibutors

Direct exporting has the long term benefit for companies who want

to oversee their operations in international markets; this helps to

influence costs, develop market and marketing channels in the long

term and control over marketing mix decisions in local markets.

(Johansson: 2009) However there are also many obstacles in the

way to achieving the fruits of exporting, according to (Rundh:

2001) one of the main problems to international export is the

economic distance to the market; SME’s limited resources can

affect production capacity and cause other financial problems.

Market structure and environment of markets also has a huge

influence on the international interest of SME’s, underdeveloped

environments and market structures can hinder product

distribution to meet demand. On the other hand other markets

which have intense local and global competition may also hold back

exporting interests, high levels of consumer tastes and preferences

would require SME’s to invest more resources into achieving high

levels of product customization and function in order to meet

demand well. The middle men who carry out activities in

international markets also need to be competent with local culture,

lifestyles and languages as these can prove to be obstacles for

SME’s.

Other factors increasing complexity of exporting is though

individual country import regulations, tariff and non tariff barriers

to entry, governmental, political and technology. According to

(Hollensen: 2003) mentions that direct exporting through agent or

distributors impacts control over market prices because of tariffs

and lack of distribution control, problems in communication may be

influenced by cultural differences in relaying information back to

HQ.

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6. Recommendations: Direct Export ing to China

A justified recommendation for your choice of one country, and one initial course of

action

International expansion is a long term process and certainly a long

term commitment, companies do not expand into overseas trade for

overnight returns but the original thought is for the long term

advantage a company gains from entering into this process. This is

why I have chosen China as the first country choice for expansion,

my justification is as follows; China recently became free from

governmental control in 1978 and since then the number of private

companies has shot up from a few hundred thousand to over 6

million (Tse: April 2010) indicating the potential companies see in

China. It’s clear that the country still has political and

governmental concerns that are causing unrest but China has made

clear efforts in improving its international relationships and ties

with western countries such as UK and agreements with

Association of South East Asian Nations (ASEAN) has opened up

markets into china. The China-Britain Business Council has also

been set up to increase and facilitate business relationships from

UK into China; these strong relationship links would aid ABC foods

expansion plans into China and also make exporting easier. The

required China Compulsory Certificate (CCC) for quality and safety

for foreign manufactured goods can be acquired for exporting

through the CBBC.

The legal landscape into China has improved, statistics from doing

businesses survey suggests efficient and hassle free business

environment (Datamonitor: China Country Factfile: 2010). This will

help in overcoming any legal problems when entering or during the

stay of the process.

China also offers resources to ABC’s advantage, low labour costs

and much agricultural potential offers the chance to cultivate raw

ingredients for manufacturing of products. This type of investment

would help reduce overseas logistics costs and at the same time

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build distribution channels in China.

A newly industrialised country like China is still in the growth

stages of development, this presents many opportunities for a

company like ABC because the food intolerance market has not

fully developed. Product variety of food intolerance products in

China are less compared to the Canadian food intolerance market

(See appendix Category data 5 and 6) it indicates that the

consumers have not developed preferences and tastes like the

Canadians therefore leaves the market open for a variety of niches

that ABC can utilize. In addition to this, 2009-2014 sales forecasts

for food intolerance sector in China is at 572 million compared to

198.7 million in Canada (See appendix 9 and 10 for Sales forecasts)

Forecasts are based across all intolerance products in the market

which China only has a third of compared to Canada yet annual

growth for China is predicted three times as much compared to

Canada in the same time span. This shows the level of growth and

potential expected in China in the future.

In addition to these statistics: the competition facing ABC in both

countries vary, in Canada the market is populated by many

companies including global players such as Heinz, Nestle and

Unilever compared to only a few local companies in China (See

appendix 7 and 8) According to Euromonitor the competitive

landscape in Canada has been influenced by the economic

downturn thus companies are increasing investment in marketing

and advertising as well as product innovation due to rising

competition (Euromonitor: Food Intolerance Canada: 2010) it

suggest the levels of investment ABC would need to sustain in

order to compete in such a competitive environment, a strategic

option that carries a lot of financial risk.

In contrast with the competitive landscape in China where all three

major players in the industry are domestic manufacturers with no

significant multinational presence to date (Euromonitor: Food

Intolerance China: 2010). By all means not suggesting that the

market in China is secure haven seeing that the threat of new

entrants is still high and entry barriers are low to global players so

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eventual entry is possible, however to ABC the market in China is

more attractive and achievable compared to Canada and less costly

to enter and to compete with competition, consequently the low

entry barriers make direct exporting easier for ABC as there will be

plenty of room for new product introductions, consumers will be

less biased towards purchasing high quality foreign brands as

tastes and preferences are still developing.

Academic research points out that for SMEs like ABC exporting is a

appropriate way of starting the internationalisation process,

(Rundh: 2000) research states that companies to a great extent

have been starting and developing their process of

internationalisation by direct or indirect export. The reason direct

exporting is an appropriate method of entry for ABC is because the

company can slowly learn and gain knowledge about the

internationalisation process to consequently transitionally increase

its activities in overseas trade through this incremental learning

process. The point is ABC are new to international trading and with

out taking on too much risk and commitment in the early stages,

direct exporting acts as a learning bridge to the international

market with out over stretching their competencies. Using overseas

agent also helps because they normally have an established set of

contacts in the market, something that ABC would need to do on

their own if entering alone. Research by (Crespi et al: 2008) backs

up the learning process firms go through when using exporting an

entry mode strategy, suggesting firms improve by learning from

exporting when interacting with different buyers, suppliers and

other firms innovating (Crespi et al: 2008).

The initial course of action to be taken is to conduct primary

research in the chosen market to further validate all the statements

that have been made in this report, further analysis of research will

help to clearly define strategic options available to ABC to help

facilitate the expansion into China.

“Yes, it’s a tough market. And yes, your competitors may have gotten there first. But the biggest mistake would be choosing not to invest in China”.

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By Edward Tse

Is it Too late to enter China? April 2010

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Appendix

1. Reworked Swot Analysis

Strengths

A can-do attitude

Quickly established a brand that is

highly regarded by stakeholders in

the home market

Good profits in the first 3 years

Marketing focused

Able employees

Weaknesses

Very limited knowledge outside the

home market

Profit slowed in 2010

Opportunities

Some, but limited, in the home

market for the foreseeable future

What overseas opportunities?

China; Sales in lactose and gluten

intolerance products expected to

grow, increase in demand for food

intolerance products due to the

diabetes epidemic.

Rapidly expanding affluent middle

class along side China’s economic

growth, substantial middle class

has increased the number of

products and brands available in

china, Chinese consumers like

foreign food products see

Threats

The usual! Competition......

Tianjin Alpha Health Production Co

Ltd leader in food intolerance

products with 30% share in China:

no multinational presence

Likely entrant of other competition,

Low barriers to entry

Levels of political and social unrest

in China from corruption, inequality

and poverty may lead to problems

in economic reform.

“IPR cases increase” identifies

copyright infringement, ABC would

need IPR protection when

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bibliography for news artilcles

“Imported Food Market Grows”

and “imported foods gain favour of

Chinese buyers”

Gap in Chinese markets for special

milk formulations, gluten free

bakery products, baby food and

pastas.

Chinese health care not doing

enough to accommodate diabetic

illness and gluten free food needs,

possible opportunity of alliance.

Britain and China business

association and trade agreements

make easier imports into China.

No recent acquisitions or mergers

in food intolerance market,

opportunity for ABC foods to form

alliances and networks.

Guan Xi networks useful in china to

develop relationships

Café bar report from GMID shows

huge increase in coffee culture and

forecasted huge growth, ABC can

target companies Starbucks and

Costa Coffee to stock their gluten

free product for Chinese

consumers. See “Starbucks to sell

gluten free pastry

Canada; Growing demand for food

intolerance products, sales

exporting

Canada:

Agropur Cooperative share 54%

and Saputo 26% within lactose-free

dairy products market,

Kinnikinnick Foods with 25% of

share, recognised for sandwich

bread, Bagel, donuts and cookie

products.

Heinz Canada own majority share

in gluten-free baby food of 91%

Increased levels of competition in

Canadian market lead companies to

invest more into marketing and

innovation of products. High

Barriers to entry

High marginal effective tax rates

Sudan; high political instability,

rising security threats

Weak economic performance

High unemployment rates

69% of population live in rural

areas under poor living condition

No country match for Sudan

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expected to reach $199million by

2014, growing demand for gluten

free bakery products as sales reach

$10million and supermarkets

increasing natural health and food

portfolios shows gap for more

gluten free pasta

Growing elderly population and

immigrants from other parts of the

world with food intolerance needs

fuel demand and growth expected

to increase over coming years.

Market substantially covered in all

areas by current companies

Low business taxes in Canada

Government effective and stable,

government preferential to small

businesses than large corporations

in terms of R&D

Sudan: very limited information

available to determine any

opportunities: Expansion to Sudan

very unlikely

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2. Culture Context Matrix – Geert Hofstede Cultural Dimensions

Countr

y

High

or low

context

culture

?

Individuali

st or

collectivist

?

High

or low

power

distanc

e?

Masculi

ne or

feminin

e?

Uncertai

nty

avoidanc

e: weak

or

strong?

Canada Low High

Individuali

stic

Low –

stable

cultura

l

enviro

nment

Masculi

ne

Medium

China High High

Collectivist

society –

from

communist

rule

High

power

distanc

e

countr

y –

high

levels

of

inequa

lity

Masculi

ne

Strong

Sudan High Collectivist High More

masculi

ne than

feminin

e

Strong

Hofstede, Geert. "Geert Hofstede Cultural Dimensions Resources."

Geert Hofstede Cultural Dimensions. Web. 25 Oct. 2010.

<http://www.geerthofstede.com/geert_hofstede_contrarian_position

.shtml>

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Culture will play a major role in the international expansion of ABC, also taking into

account E.T Halls “Silent language in overseas business” there are lot of culture

related business practices that ABC would need to adapt to, from relationships with

suppliers, distributors, customers, employees and even right down to how they market

their products. Cultural context can not be ignored if ABC is aiming to develop a

sustainable competitive advantage on foreign soil.

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3. Business Portfolio Matrix Country Attractiveness

Harrell G D and Kiefer R O (1993) Multinational market portfolios in

global strategy development, International Marketing Review, Vol 1- No 1

The Business portfolio matrix was put together from the secondary

research conducted, plotting each countries attractiveness with the

compatibility. We can see that China is highest plotted, Canada is

in the middle and Sudan at the bottom. Sudan is a country that is

still very under developed and there are not many comparative

advantages between ABC and the country in order to develop a

sustainable competitive advantage, rather entry into this LDC

would be to help develop the nation further. Canada has many

benefits that are compatible with ABC, however the level and type

of competition would make it very difficult for entry and to develop

awareness among a very high developed consumer base therefore I

have plotted China at the top for the sheer opportunity, market size

and potential it offers to ABC. High quality products are what the

consumers want and that’s exactly what ABC has, the fact that ABC

have product ranges that are not even available in that market

shows the potential growth and niche markets, add that to the 57

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different ethnic groups, over 20 provinces and population of

1.3billion its hard to say that the country has no future prospect.

The main issue for ABC is to adapt to the hugely diverse

environment in China, it is an opportunity that can not be missed.

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4. Porters (1980) 5 forces analysis for Global Food Intolerance

market

Threat of buyers

Low concentration, high numbers, low bargaining power

Threat of Substitutes

High number of substitutes in mature market Canada, low levels of substitutes in emerging markets and new growth markets Sudan and China respectively

Threat of Suppliers

Raw materials expensive but suppliers have relatively low power, low concentration and higher number means lower bargaining power

Global Competitive Rivalry

Global market dominated by Unilever, Danone, Nestle and Heinz but competition is low in the food intolerance market

Domestic competition: domestic competition high in mature market Canada as there are many global players operating in the market, low levels of competition in new growth market china, only 2 major domestic players. Sudan low competition, emerging market has developed enough for companies to compete Foreign competitionAll markets open to foreign competition, China has more risk of being entered by foreign competition because of potential market and dominant players like Unilever, Nestle and Danone and Heinz have potential to enter market with ease and barriers to entry are lowStrategic Groups No strategic groups seem to show yet, global market still in growth stage of industry life cycle and more growth through the years will eventually reveal global competitors and strategic groups

Threat of New Entrants

Barriers to entry into market are low for existing global players such as Danone and Unilever, R&D and marketing related costs affordable to diversify product portfolio to match country environments. Higher barriers to entry for initial starter in terms of costs however not a major issue.

Summary: Threat of New Entrants MediumGlobal Competitive Rivalry LowThreat of Suppliers LowThreat of Substitutes Low-to-Medium depending on sub

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marketsThreat of buyers Low

Michael Porters 5 Forces analysis favours the global food intolerance industry; threats across all levels are low showing an attractive global industry

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5. Category Data: China

Table 1 Sales of Food Intolerance Products by Subsector: Value 2004-2009

RMB million

2004 2005 2006 2007 2008

2009

Diabetic Food 83.2 118.5 142.3 170.0 205.4

236.2

- Diabetic Bakery 82.8 118.0 141.6 168.9 203.8

234.3

Products

- Diabetic Confectionery 0.4 0.5 0.8 1.1 1.5 1.9

-- Diabetic Chocolate 0.2 0.2 0.3 0.4 0.5 0.6

Confectionery

-- Diabetic Sugar 0.2 0.3 0.5 0.7 1.0 1.4

Confectionery

- Diabetic Spreads - - - - - -

Gluten-Free Food - - - - - -

- Gluten-Free Bakery - - - - - -

Products

- Gluten-Free Baby Food - - - - - -

- Gluten-Free Pasta - - - - - -

- Other Gluten-Free Food - - - - - -

Lactose-Free Food - - - - - -

- Lactose-Free Dairy - - - - - -

Products

- Lactose-Free Ice Cream - - - - - -

- Lactose-Free Milk - - - - - -

Formula

Other Special Milk - - - - - -

Formula

Food Intolerance 83.2 118.5 142.3 170.0 205.4

236.2

Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,

Euromonitor International estimates

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Table 2 Sales of Food Intolerance Products by Subsector: % Value Growth 2004-2009

% current value growth

2008/09 2004-09 CAGR 2004/09

TOTAL

Diabetic Food 15.0 23.2 183.8

- Diabetic Bakery Products 14.9 23.1 182.8

- Diabetic Confectionery 26.1 36.9 381.1

-- Diabetic Chocolate Confectionery 15.9 29.7 267.2

-- Diabetic Sugar Confectionery 30.8 40.6 449.9

- Diabetic Spreads - - -

Gluten-Free Food - - -

- Gluten-Free Bakery Products - - -

- Gluten-Free Baby Food - - -

- Gluten-Free Pasta - - -

- Other Gluten-Free Food - - -

Lactose-Free Food - - -

- Lactose-Free Dairy Products - - -

- Lactose-Free Ice Cream - - -

- Lactose-Free Milk Formula - - -

Other Special Milk Formula - - -

Food Intolerance 15.0 23.2 183.8


Euromonitor International estimates

27

6. Category Data: Canada

Table 1 Sales of Food Intolerance Products by Subsector: Value 2004-2009

C$ million

2004 2005 2006 2007 2008

2009

Diabetic Food 8.6 8.9 9.2 9.6 9.9

10.1

- Diabetic Bakery 2.6 2.7 2.8 2.9 3.0 3.1

Products



Confectionery

-- Diabetic Sugar 0.1 0.2 0.2 0.2 0.2 0.2

Confectionery

- Diabetic Spreads 2.2 2.3 2.3 2.4 2.4 2.4

Gluten-Free Food 14.3 15.3 17.6 20.0 22.3

24.4

- Gluten-Free Bakery 4.8 5.3 6.4 7.9 9.1

10.4

Products

- Gluten-Free Baby Food 0.5 0.6 0.6 0.7 0.7 0.8

- Gluten-Free Pasta 1.2 1.2 1.3 1.4 1.4 1.5

- Other Gluten-Free Food 7.8 8.3 9.3 10.1 11.0

11.8

Lactose-Free Food 67.5 71.7 76.4 81.7 85.7

90.3

- Lactose-Free Dairy 42.0 44.7 47.7 51.3 53.9

56.8

Products

- Lactose-Free Ice Cream 19.9 20.7 21.5 22.2 22.7

23.1

- Lactose-Free Milk 5.6 6.4 7.2 8.1 9.2

10.3

Formula

Other Special Milk 35.1 33.5 31.7 33.1 32.7

28

32.0

Formula


156.8

Source: Official statistics, trade associations, trade press, company research, store checks, trade

interviews, Euromonitor International estimates

Table 2 Sales of Food Intolerance Products by Subsector: % Value Growth

2004-2009

% current value growth

2008/09 2004-09 CAGR 2004/09

TOTAL

Diabetic Food 2.3 3.4 18.2

- Diabetic Bakery Products 2.8 3.9 20.8

- Diabetic Confectionery 2.7 3.8 20.3

-- Diabetic Chocolate Confectionery 2.6 3.7 19.7

-- Diabetic Sugar Confectionery 5.0 6.5 36.7

- Diabetic Spreads 0.8 2.2 11.6

Gluten-Free Food 9.4 11.3 71.0

- Gluten-Free Bakery Products 13.4 16.7 116.2

- Gluten-Free Baby Food 4.1 7.9 46.2

- Gluten-Free Pasta 3.2 5.0 27.5

- Other Gluten-Free Food 7.2 8.6 51.4

Lactose-Free Food 5.3 6.0 33.7

- Lactose-Free Dairy Products 5.5 6.2 35.3

- Lactose-Free Ice Cream 1.7 3.1 16.3

- Lactose-Free Milk Formula 12.9 12.9 83.8

Other Special Milk Formula -2.0 -1.8 -8.7

Food Intolerance 4.1 4.6 25.1

Source: Official statistics, trade associations, trade press, company research, store checks, trade

interviews, Euromonitor International estimates: EUROMONITOR

29

7. Market Share Analysis: China

Table 3 Food Intolerance Products Company Shares 2005-2009

% retail value rsp

Company 2005 2006 2007 2008

2009

Tianjin Alpha Health 26.5 27.9 28.4 28.9 29.6

Production Co Ltd

Beijing Lvde Food Co Ltd 35.2 37.1 37.8 38.2 19.2

Shanghai Meijing Food 0.1 0.1 0.2 0.2 0.2

Co Ltd

Others 38.2 34.8 33.6 32.7 51.0

Total 100.0 100.0 100.0 118.3

100.0

Source: Trade associations, Trade press, Company research, Trade interviews, Euromonitor International

estimates: EUROMONITOR

30

8. Market Share Analysis: Canada

Table 4 Food Intolerance Products Company Shares 2005-2009

% retail value rsp

Company 2005 2006 2007 2008

2009

Agropur Cooperative Ltd 20.3 20.9 21.0 19.3 19.4

David Chapman's Ice 11.6 12.1 12.1 12.5 12.9

Cream Ltd

Saputo Inc 2.8 2.8 2.8 9.1 9.3

Mead Johnson Nutritionals 5.5 5.1 8.4 7.9 7.7

Abbott Laboratories Inc 3.3 3.2 3.1 3.1 3.3

Gay Lea Foods Co- 3.0 3.1 3.1 2.7 2.7

Operative Ltd

Kinnikinnick Foods Inc 0.9 1.1 1.4 1.3 1.6

Parmalat Canada Ltd - - - 1.5 1.5

Glutino USA 0.8 1.1 1.4 1.4 1.4

Ross Chocolates 1.1 1.2 1.2 1.2 1.2

Distribution Co

Nestlé Canada Inc 1.0 1.2 1.2 1.2 1.0

Gourmet Distributors Ltd 0.9 0.9 0.8 0.9 0.9

Unilever Canada Inc 0.5 0.5 0.5 0.5 0.5

Heinz Co of Canada Ltd, 0.4 0.4 0.4 0.4 0.4

HJ

Boulangerie St-Methode, 0.3 0.3 0.3 0.3 0.3

La

El Peto Products Ltd 0.2 0.2 0.3 0.3 0.3

Neilson Dairy Ltd 5.2 5.3 5.4 - -

Artisanal 1.4 1.4 1.4 1.4 1.3

Private Label 0.2 0.2 0.2 0.2 0.2

Others 40.7 38.9 35.1 34.9 34.0

Total 100.0 100.0 100.0 99.1

100.0

Source: Trade associations, Trade press, Company research, Trade interviews,

Euromonitor International estimates.

31

9. Sales Forecast for Food intolerance Sector China

Table 5 Forecast Sales of Food Intolerance Products by Subsector: Value 2009-2014

RMB million

2009 2010 2011 2012 2013

2014

Diabetic Food 236.2 285.5 348.0 414.2 485.1

572.0

- Diabetic Bakery 234.3 282.9 344.4 409.4 478.8

564.0

Products



Confectionery

-- Diabetic Sugar 1.4 1.9 2.8 3.9 5.2 6.8

Confectionery

- Diabetic Spreads - - - - - -

Gluten-Free Food - - - - - -

- Gluten-Free Bakery - - - - - -

Products

- Gluten-Free Baby Food - - - - - -

- Gluten-Free Pasta - - - - - -

- Other Gluten-Free Food - - - - - -

Lactose-Free Food - - - - - -

- Lactose-Free Dairy - - - - - -

Products

- Lactose-Free Ice Cream - - - - - -

- Lactose-Free Milk - - - - - -

Formula

Other Special Milk - - - - - -

Formula


572.0


Euromonitor International estimatesEUROMONITOR

32

10. Sales forecasts for Food Intolerance products for Canada

Table 6 Forecast Sales of Food Intolerance Products by Subsector: Value 2009-2014

C$ million

2009 2010 2011 2012 2013

2014

Diabetic Food 10.1 10.3 10.5 10.9 11.3 11.7

- Diabetic Bakery 3.1 3.2 3.3 3.4 3.6 3.7

Products



Confectionery

-- Diabetic Sugar 0.2 0.2 0.2 0.2 0.2 0.2

Confectionery

- Diabetic Spreads 2.4 2.5 2.5 2.6 2.6 2.7

Gluten-Free Food 24.4 26.6 29.4 32.8 36.8 41.5

- Gluten-Free Bakery 10.4 11.7 13.3 15.2 17.5 20.3

Products

- Gluten-Free Baby Food 0.8 0.8 0.8 0.8 0.9 1.0

- Gluten-Free Pasta 1.5 1.5 1.6 1.7 1.7 1.8

- Other Gluten-Free Food 11.8 12.6 13.7 15.1 16.6 18.4

Lactose-Free Food 90.3 95.5 100.7 106.5 113.1

120.3

- Lactose-Free Dairy 56.8 59.9 62.8 66.2 70.0 74.3

Products

- Lactose-Free Ice Cream 23.1 23.6 24.2 24.8 25.6 26.4

- Lactose-Free Milk 10.3 12.0 13.7 15.5 17.6 19.7

Formula

Other Special Milk 32.0 31.0 29.8 28.4 26.8 25.1

Formula


198.7


Euromonitor International estimatesEUROMONITOR

33

11. Diabetes suffers statistics

SudanPercent with diabetes (20-79 years), 2010 (national) 3.3

Percent with diabetes (20-79 years), 2010 (comparative)4.2


Number of people with diabetes, 2010675,300

CanadaPercent with diabetes (20-79 years), 2010 (national)11.6



Number of people with diabetes, 20102,866,100

ChinaPercent with diabetes (20-79 years), 2010 (national) 4.5



Number of people with diabetes, 201043,157,200

http://www.diabetesatlas.org/map

These statistics show the numbers of food intolerance suffers in the chosen countries, as we can see China has a more than both Sudan and Canada put together, this give us an insight into how big the markets are across all countries. While reading this report it is essential to remember than demand for diabetic friendly products are driven by medical conditions. This makes segmenting targets

34

http://www.diabetesatlas.org/map

slightly difficult as anyone at any age can have diabetes, rather than segmenting by traditional methods we would need further breakdown of statistics to determine who the segment is and how many of them they are. For example if there was a high number of diabetes in children in a region of China, then ABC would need to develop products that are related to children and then market them to parents. Further research into these statistics would be needed to develop a clearer view of segments and target markets.

35

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41

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42

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44

when interacted with different buyers, suppliers and other

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