Table of Contents

Introduction

Iced Tea

Mexican culture of drinking tea

Mexican report of soft drink consumers

International soft drink manufacturer

Main body

Market factors analysis for USA manufacturer to consider

Political factors

SWOT analysis

Economic factors

Conclusion

References

THE UNIVERSITY OF DODOMA

COLLEGE OF HUMANITIES AND SOCIAL SCIENCES

SCHOOL OF BUSINESS AND ECONOMIC STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION AND STATISTICS

COURSE NAME: INTERNATIONAL MARKETING RESEARCH

COURSE CODE: BS 321

COURSE INSTRUCTOR: MR. ONESMO CHAWALA

DEGREE PROGRAMME: BCOM. IN INTERNATIONAL BUSINESS

SUBMISSION DATE: 31ST DECEMBER, 2012

NATURE OF WORK: GROUP ASSIGNMENT

GROUP MEMBERS:

NO. NAME REGISTRATION NUMBER SIGNATURE

1 KADENDULAH, JOSEPH T/UDOM/2010/03845

2 MAGEGE, EVA .M T/UDOM/2010/03851

3 RUHEMBE, NIOSHIMA .S T/UDOM/2010/03869

4 NANYARO, PRAYGOD .E T/UDOM/2010/03864

5 PAUL, FRANSIS T/UDOM/2010/03867

6 SADICK, SHAMIM T/UDOM/2010/03870

7 MRISHO, HASSAN .J T/UDOM/2010/03856

8 MUNISI, HENRY T/UDOM/2010/03859

9 KISAMO, JULIETH T/UDOM/2010/03847

10 LYIMO, JOHN T/UDOM/2010/03850

QUESTION: A major USA manufacturer of Iced Tea wants to enter Mexican soft drinks market.

1.0 Introduction

1.0.1 Background of Iced TeaIced tea (sometimes known as ice tea) is a form of cold tea, usually served in a glass with ice. It

may or may not be sweetened. Iced tea is also a popular packaged drink. It can be mixed with

flavored syrup, with common flavors including lemon, peach, raspberry, lime, passion fruit,

strawberry and cherry. While most iced teas get their flavor from tea leaves (Camellia sinensis),

tisanes are also sometimes served cold and referred to as iced tea. Unsweetened iced tea is

sometimes made by a particularly long steeping of tea leaves at lower temperature (one hour in

the sun versus 5 minutes at 80-100 °C). Some people call this "sun tea". In addition, sometimes it

is also left to stand overnight in the refrigerator.

In the United States, iced tea makes up about 85% of all tea consumed and is very popular as an

alternative to carbonated soft drinks, especially in the hotter southern states: it is ubiquitous in

restaurants, convenience stores, vending machines, and grocery stores. It may be freshly made on

premises or available in bottles and cans, and at self-serve soda fountains. Restaurants typically

give the customer the choice of sweetened or unsweetened.

1.0.2 Mexican culture of drinking teaMexico has numerous indigenous herbs that native cultures used to make infusions for centuries

before Spanish colonization. Teas from Europe and Asia were not introduced to Mexican

agriculture, however, and have yet to reach the level of popularity that they have in many other

countries. The climate of Mexico is diverse, ranging from deserts to mountain plateaus and

tropical rainforests in the southeast. The southeastern region may be suitable for cultivating

imported teas.

A small number of prominent establishments in Mexico City have formal tea rooms, where

British-style tea is served, including the Hotel Marquis Reforma and the Presidente Inter-

Continental Mexico City hotel. Mexican tea culture is known for its traditional tisanes which are

reputed to have medicinal properties. In recent decades, imported tea beverages have also

become popular in Mexico. Mexican tea recipes have grown in popularity beyond Mexico as

well.

1.1.2 Mexican report of soft drink consumersCentral and South America has an even more limited culture of iced tea consumption and each

consumer drinks barely half a liter each. Just three markets - Brazil, Mexico and Venezuela -

make up more than 75% of all the region's sales. Globally, Mexico ranked 11th in terms of the

number of new products launched in the soft drinks market in 2009. Majority of the launches

belonged to the juices category.

According to a recent report from the National Retailers Association (ANTAD), consumers of

soft drinks are buying more and more often from small independent grocery stores and

convenience stores than from supermarkets and hypermarkets. In 2008, it was estimated that

there were 8,250 convenience stores and 493,000 small independent grocery stores in Mexico –

which are the perfect outlets for impulse purchases.

Mexico is the fourth largest market for U.S. low-calorie (diet) carbonated soft drinks after

Canada, Australia and Japan. The United States is the fifth largest exporter of carbonated soft

drinks after Canada, Japan, South Korea and the United Kingdom.

Mexico is the number one consumer of carbonated soft drinks (per capita) in the world. Impulse

sales of soft drinks remain important in spite of the economic downturn as Mexicans to continue

to buy soft drinks above all other products to quench their thirst. According to a recent market

survey, all Mexicans consume large quantities soft drinks, regardless of social status. However,

with the declining economy in 2008, several supermarkets and hypermarkets have increased their

promotional activities targeting soft drinks to encourage more sales.

In Mexico, soft drinks sector is dominated by international manufacturers; Coca-Cola Export

Corp, Pepsi-Cola Mexicana and Grupo Peñafiel held a combined total volume share of 91% in

calendar year (CY) 2008. According to Euro-monitor International, the volume of smaller

privately labeled Mexican soft drinks increased in calendar year 2008 as more and more

consumers switched to lower cost brands in response to the worsening economy. Health and

wellness campaigns promoted by the Mexican government are expected to continue to hinder the

growth of high-sugar carbonates in 2009 and beyond. As a result, market analysts predict that

demand for diets soft drinks will continue grow as they are being perceived by the Mexican

consumers as being a healthier option.

2.0 MAIN BODY

2.1 Market/Industrial analysis of soft drinks (Iced Tea) in Mexico

Industrial analysis is a market assessment tool designed to provide a business with an idea of

the complexity of a particular industry. Industry analysis involves reviewing the economic,

political, cultural and market factors that influence the way the industry develops.

Major factors can include the power wielded by suppliers and buyer the condition of competitors

and the likelihood of new market entrants.

The following are the main factors US Iced Tea manufacturer must consider when conducting

industrial analysis in Mexico;

Market factors:

The US Iced tea manufacturer has to conduct its market analysis in Mexico so as to analyze

several market dimensions (Based on David A. Aaker) as follows:-

Market size; the market size is defined through the market volume and the market potential.

The market volume exhibits the totality of all realized sales volume of a special market. The

volume is therefore dependent on the quantity of consumers and their ordinary demand.

Furthermore, the market volume is either measured in quantities or qualities. Qualitative

measuring mostly uses the sales turnover as an indicator. That means that the market price and

the quantity are taken into account. Besides the market volume, the market potential is of equal

importance. It defines the upper limit of the total demand and takes potential clients into

consideration. Although the market potential is rather fictitious, it offers good values of

orientation. The relation of market volume to market potential provides information about the

chances of market growth. The following are examples of information sources for determining

market size:

Government data

Trade association data

Financial data from major players

Customer surveys

Hence the manufacturer of iced tea has to look the market sizes in terms of competitor’s sales

volume and their product demand and compare the demand of the new product (Iced tea). The

major competitors are coca-cola export corp, pepsi cola.

Market trends; Market trends are the upward or downward movement of a market, during a

period of time. The market size is more difficult to estimate if one is starting with something

completely new. In this case, iced tea manufacturer will have to derive the figures from the

number of potential customers, or customer segments. Besides information about the target

market, one also needs information about one's competitors, customers and product. Lastly US

Iced tea Manufacturer need to measure marketing effectiveness. A few techniques that the

company can use are, Customer analysis, Choice modeling, Competitor analysis, Risk analysis,

Product research, Marketing mix modeling. Market trends changes in the market are important

because they often are the source of new opportunities and threats. Moreover, they have the

potential to dramatically affect the market size.

Market growth rate; a simple means to be used by the US analysts of the Iced Tea company on

forecasting the market growth rate at Mexico is to extrapolate historical data into the future.

While this method may provide a first-order estimate, it does not predict important turning

points. A better method is to study market trends and sales growth in complementary products.

Such drivers serve as leading indicators that are more accurate than simply extrapolating

historical data.

Market opportunity; a market opportunity product or a service, based on either one technology

or several, fulfills the need(s) of a (preferably increasing) market better than the competition and

better than substitution-technologies within the given environmental frame (e.g. society, politics,

legislation).

Market profitability; while different organizations in a market will have different levels of

profitability, they are all similar to different market conditions. Michael Porter devised a useful

framework for evaluating the attractiveness of an industry or market. This framework, known as

Porter five forces analysis, identifies five factors that influence the market profitability:

Porter’s five forces

Is a frame work for industry analysis and business strategy development formed by Michael

Porter of Harvard business School 1979, it draws upon industrial organization economics.

Three of porter’s five forces refer to completion from external sources the remainder are internal

threats, which are close to the company that affect its ability to serve its customer and make

profit. Them being

a) Threat of substitute products. Fierce competitions exist among very few players. Having

duopoly industry or even intense rivalry between soft drinks say coke and Pepsi.

b) Threats of established rivals. The threat of substitute is reduced by expansion of products

portfolio. Many of alternative beverages e.g. juice and tea.

c) Threats of new entrants. Suppliers have less bargaining power. Many substitute for sugar and

packaging e.g. can syrup, sweetener, package, glass, and plastic metal can.

d) Bargaining power of supplier. Different levels of bargaining power exist among the groups of

buyers. Say vending machine (no buyer bargain power), fast food chain (more bargaining power)

e) Bargaining power of customer. Strong barrier to review entrants. Amount of capital

investment require large amount for entrants, exclusive territories in distribution channel and

access to retail channels.

2.2 Political factorPolitical concentrates on the key political factors likely to affect the industry. The results often

contain items about current and future political situations, governments grants , funding and

import or export initiatives supported by specific governments as well as the effect of wars or

deteriorating relationships with specific countries.

Government health campaigns; Health and wellness campaigns promoted by the Mexican

government are expected to continue to the hinder growth of high-sugar carbonates in 2009 and

beyond. As a result, market analysts predict that demand for diets soft drinks will continue grow

as they are being perceived by the Mexican consumers as being a healthier option. By so doing

the Iced tea manufacturer may use such an opportunity to get into the market with its Product

and acquire potential customers.

Legal restrictions, in order for the iced tea manufacturer to get into the market of Mexican, the

understand of basic laws governing the products and their use. Since Mexican Customs Law is

very strict regarding proper submission and preparation of customs documentation. Imported

health foods to be sold in the retail sector must be labeled according to the Mexican government

specifications. “General labeling specifications for pre-packaged foods and non-alcoholic

beverages”. Under this, nutritional information is voluntary, unless a nutritional claim is made

and in this case the label must be evaluated by the Mexican Department of Health’s Federal

Commission for the Protection against Sanitary Risk. This applies to most food items. Some U.S.

suppliers choose to develop special packaging for the Mexican market. This is fine as long as a

label is affixed to each package of the exported product prior to entering Mexico.

2.3 SWOT analysisStands for Strength weakness opportunities and threats

a) Strength

- Basic consumer needs

- Larger and growing market

- Different flavors and packages

- Low costs

- Non alcoholic

b) Weakness

- Negative claim; The U.S. continues to be among the top five suppliers of soft drinks to

Mexico despite Mexico's recent imposition of a 20% import duty. Health and wellness

campaigns promoted by the Mexican government are expected to continue to the hinder growth

of high-sugar carbonates in 2009 and beyond. As a result, market analysts predict that demand

for diet soft drinks will continue grow as they are perceived by Mexican consumers as being a

healthier option. The Mexican government is considering issuing a new Official Mexican

Standard (NOM) for soft drinks requiring the following health warning on soft drink labels, "El

abuso en el consumo de este producto puede causar obesidad" (The consumption of this product

may cause obesity).

- Traditional preservation

- Narrow range of materials

c) Opportunities-establish facts and use potential IPR

- New package material

- Replace alcoholic drinks

d) Threats

- Healthy issues.

- Environmentalism.

- Distribution costs.

2.4 Economic factorsEconomic focuses on overall economic situations, the strengths of consumer spending in the

company’s market segments the presents and future levels of government expenditure and how it

may affect the economy also exchange rates that influence the company.

3.0 Conclusion For the iced tea manufacturer to succeed in the Mexican soft drink industry, then demographic

factor on population of the country and the means of distribution has to be achieved. As long as

the Mexican people consider their language as the potential and influential factor of inducing

people perception on their consumption, hence all the information on the label must be in

Spanish and must include the following features Commercial/brand name, producer's name and

address, exporter's name and address, country of origin, importer's name, address and taxation

number, product description in Spanish, product description in English, preparation and handling

instructions, Net weight in metric units, date of expiration, Ingredients, Special warnings.

4.O References Kumar. V. (2000), “International Marketing Research” Upper Saddle River, NJ: Prentice

Hall

http://www.fas.usda.gov/scriptsw/attacherep/default.asp

http:/www.euromonitor.com

http://www.researchandmarkets.com/reports/1436380