Transcript Country Market Analysis: South Korea

Country Market Analysis:
South Korea
FLAG
South Korea
► Has
been a democracy since 1987
► Has a bilateral relationship with the U.S.
 Considers the U.S. friends, partners, and allies
  Great if Lipton decided to import from the
U.S.
► Younger
generations are starting to value
Western thinking ideals
  Would likely welcome the current Lipton
brand (without extensive alterations)
GDP Comparisons
► South
Korea’s economy is ranked 11th in the
world (by GDP)
 With a 9.8% CAGR
► Others:
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China – 7th (w/ a 7.5% CAGR)
Mexico - 10th (w/ declining GR since 2000)
Russia – 16th
Sweden – 19th
Argentina – 35th
Ease of Trade
► Trade
Restrictions:
 All regulations governing foreign retailers were
completely lifted in 1997
► Tariffs:
 7.5% average tariff rate on beverages
 Higher for fruit juices
Relatively inexpensive importation of
goods
►
Consumer Culture
► Eat
3 meals a day (often spicy foods)
► They serve hot Barley tea with most meals
 This may present a marketing opportunity
► Coffee
houses and bars are growing in
popularity among South Korean youth
 Possible market entry points
Consumer Culture
► Education
is the most highly valued aspect
of Korean culture (a virtue rooted in
Confucianism)
 Students are taught to protect society against
social injustices
 This may be an opportunity to build brand
equity by being (and promoting) a socially
responsible company
Iced Tea Industry
► Total
market size of the non-alcoholic beverage
market in South Korea = $2.4 billion
► Total market size of New Age Beverages in South
Korea = $191.6 million in 2003
► The Iced Tea industry in South Korea has a 5.4%
share of the New Age Beverages industry. This is
approximately a $10.4 million market.
►  There is already an established Iced Tea market
in South Korea; Lipton would not have to develop
a new market
Unilever in South Korea
► Unilever
already has
products in the South
Korean market:
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Skippy
Bertolli
Caress
Reguletto
Lux
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Dove
Ponds
Vaseline
Rexena
Unilever’s Competitive Strategy
► Unilever
has a “Path to Growth” strategy:
focus on a leading brand (and its product
mix), move into new channels, and drive
into new markets for sustained future
growth
► This strategy would work well, as South
Korea already has a Ready To Drink tea
market
Unilever Production
► Unilever
Best Foods Ltd. (Hong Kong):
 Produces:
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Soups
Sauces
Peanut Butter
Fruit Juices
Desserts
► Unilever
Ceylon Ltd. (Sri Lanka):
 Large producer of teas
Unilever Production
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Unilever Hindustan is distributed to:
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Greater China
Japan
Korea
Australia
New Zealand
Southeast Asia
Pakistan
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Bangladesh
Sri Lanka
Nepal
India
 This presents possible locations for import of Lipton
Unilever Strategy
► Unilever
Thai continued the Unilever strategy of
strengthening its lead position in the market in
Thailand:
 In only 2 years, green tea has become the fastest
growing product in the RTD tea segment
Thailand has a much lower GDP per capita
($7,400) then South Korea ($17,800). This means
that growth of Lipton Green Tea in South Korea
may be very successful
►
Pricing Issues
► RTD
tea is already in the South Korean
market and Lipton is in bordering countries
 Lipton has a peach flavored tea in Japan called
“Lipton Cool Peche” which retails for 140 Yen
($1.30) for a 500g can.
Pricing
Price Mark Up in South Korea
CIF (Cost/Insurance/Freight)
Tariffs
Other Costs
10%
7.50%
5%
Importer
15-20%
Distributor
10-15%
Retail Margin
10-15%
VAT
10%
Placement Issues
► Transportation
 Extensive highway and railway networks.
Ports, railroads, airports and highways are
stretched to capacity
 The government is planning a multi-billion
dollar expansion of the highway system.
 Korean roads are well-paved and maintained,
and most drivers comply with basic traffic laws.
►
can easily transport through trucking companies
 69 airports with paved runways
►
accessible international airports
Placement
 Transportation
 Korea is an adherent to TIR Customs Convention- a
guarantee to arrangement under which freight
shipments are permitted, to cross international borders
of member-nations without discharge of the cargo from
road vehicles or containers at border points for customs
inspection.
►
Faster, low-hassle delivery
 Free Trade Zones, (A port or an area designated by
the government of a country for duty-free entry of any
non-prohibited goods. Merchandise may be stored,
displayed, used for manufacturing, etc., within the zone
and re-exported without duties)
Cheaper cost for warehousing and manufacturing products in
S. Korea in comparison to other countries
►
Placement
► Market
Entry:
► There is already a Ready To Drink Tea
market in South Korea:
 Lotte Chilsung is the market leader and
already has established Hypermarkets:
►Lotte
Discount Stores carry the Magnet private label
brands
►Extremely powerful: has the ability to lock out small
competitors from distribution channels if they feel the
companies are a significant threat
Placement
► Lipton
has a 50-50 joint-venture with Pepsi to
move the Lipton brand into new distribution
channels and markets and to build sales of the
Lipton brand in the markets where Lipton is
already present (This has been done in Thailand
and Vietnam)
► Lipton sells RTD Tea concentrate to franchise
bottlers. Pepsi then distributes the Lipton
products.
Distribution
► Sales
through vending machines in South
Korea increased by 3.1% in 2001 reaching
284 billion Won ($249 Million)
 Growing trend in new cashless transactions at
vending machines:
 Mobile phone payments
 Prepaid cards
► 24-hour
convenience stores have grown by
an estimated 45% in 2002
Distribution - Retailers
RTD Market in Korea (Competitors)
Lotte Chilsung Beverage Co., Ltd (largest beverage producer in
Asia)
Coca-Cola – Nestea
Hanul Yeon Cha (Owned by Coca-Cola)
Pokka Corp.
1)
2)
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Ships to Korea from Singapore
Snapple
Through the Hanmi Corporation
7)
Heladiv
Kunyoung Foods Co.
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 Variety of companies already established in South Korea
6)
Positioning: Competitors
► Lotte
Chilsung:
 Emphasize fresh taste
 High quality
 Traditional
► Nestea
 Push a new-age image
 Young and “cool”
 Nestea in Korea
► Pokka
 “The people’s choice”
Current marketing strategies to consider when designing
a strategy for Lipton South Korea
 VERY important to emphasize product as high quality

Competition
► In
October 2003, Unilever entered a joint-venture
with Pepsi – principally to sell Ready To Drink
(RTD) tea concentrate to franchise bottlers
► Lotte Chilsung (based in Seoul, Korea) is the
largest beverage manufacturer in Asia. It
produces Pepsi branded drinks under license.
► This could present a number of options for
Lipton to enter the South Korean market with
their Lipton Iced teas
Product Issues
► Iced
Tea flavors
currently in the South
Korean market:
 Ceylon tea (Lemon
flavored)
 Oolong tea/Green
Tea
 Peach
 Whiskey flavored
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Mango
Lychee
Tarmarind
Lemon
Straight
Melon
Packaging
Sizes currently in the South Korean
market:
► Cans:
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(U.S. pop cans are 355ml)
240ml
250ml
175ml
173ml
215ml
238ml
245ml
340ml
Bottles:
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500ml bottles
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Koreans are very family-oriented
 Inconsistent volumes of cans lead us
to believe there is not a standard size
►  Iced tea is primarily consumed from
single serve containers, but there is also
a demand for family-sized bottles
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Packaging: Coca-Cola
 Coca-Cola’s objective was to
broaden their package portfolio
 Launched a 390mL PET package (similar
to the Lotte Chilsung 500mL PET bottle)
 Also launched 250mL can and the 330mL
can
 Coke also has a Peach and a Lemon
flavored Ready To Drink Nestea in Korea
Packaging: Heladiv
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Heladiv offers Ready To
Drink tea in “juice boxes”
 Another packaging option
They are sold in assorted
packs of 5:
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Peach
Lemon
Caramel
Apple
Strawberry
 Assorted flavors and
alternate packaging may be
possible options for entry into
the market
Packaging: Labeling
► Younger
generations are starting to value Western
thinking ideals
  Would likely welcome the current Lipton brand and
labeling (without extensive alterations)
► Language:
 Korean language must be printed on the label by law
► Korean
identity
language plays an important role in their national
 Hangul (phonetic alphabet) is the dialect used
► Also
► Koreans
instills national pride
favor very distinctive packaging
Packaging: Labeling
All imported food products should have Korean
language labels. Labels require the following
inscriptions:
► Product name: the product name should be identical to the
product name declared on the licensing/inspection authority
► Product type: by classification code as stated in the Food
Code, if no classification, product kind should be noted
► Importer's business license number, name, address,
and address where defective products may be
returned.
► Date of Manufacture: Mandatory only for specific products
such as sugar.
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Packaging: Labeling
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Date of Expiry / Shelf life: Food products should
identify shelf life in accordance with the Korea Food Code.
Content (weight, volume, # of pieces) all should be
indicated in parentheses.
Ingredients: All ingredients should be listed with
percentage content in descending order. Artificially purified
water is not considered a major ingredient.
Nutritional information: Special nutritional foods, health
supplementary foods, and products wishing to promote
nutritional content are required to have nutritional labeling.
Other items such as cautions, as designated by detailed
labeling standards for food use or preservation. Any
products that must be kept at low temperature, must be
clearly indicated.
Promotion: Advertising
► 100%
of South Koreans have a television
► Television has a daily reach of 92%
(compared to 75-85% in the U.S.)
  This means that television reaches a huge
proportion of consumers in South Korea
► “Drinks”
were the 7th largest product
category in terms of overall advertising
expenditures
 Beverages were not even in the top 10 in the
U.S.
Advertising Costs: Television
► 15
seconds of advertising during peak hours in
South Korea is about 9,000,000 Won (about
$7,900) depending on the station
► This is compared to well over $50,000 in the U.S.
► “Beverages”
are the fourth largest product
category for television advertising in South Korea
would be a promising medium for
advertising in South Korea
► Television
Advertising Costs: Magazines
►A
full page magazine ad in South Korea runs for
about 3,000,000 Won ($2,600) depending on the
magazine
► This is compared to well over $18,000 in the U.S.
► “Drinks”
are the 8th largest product category for
advertising in South Korea
► Some monthly magazines reach about 150,000
readers
advertising is a cost-effective
compliment or replacement to television
advertising in Korea
► Magazine
Advertising Costs: Others
► Radio:
 “Drinks” are the 5th largest product category advertised
in South Korea
 Radio has a 36% daily reach in Korea
► Internet:
 54% of South Koreans have access to the internet
► South
Korea has a 45% reach of the internet each week
 Only 46% of adults in the U.S. have internet access (as
of 2001)
are many different medias available in
Korea for advertising
► There
Promotions
► The
most popular spectator sports are:
 Soccer
 Basketball
 Volleyball
► The
most popular recreation activities are:
 Mountain Climbing
 Hiking
These would be good outlets for eventmarketing or advertising
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Market Segments
► 80%
of people in South Korea live in the 6 major
cities:
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Seoul (11 million)
Pusan (3.9 million)
Taegu (2.5 million)
Inchon (2.4 million)
Kwangju (1.4 million)
Taejon (1.3 million)
Most of the remaining population live in the surrounding
suburbs
Would present a small number of well defined
geographic regions to target with the Lipton
strategy
►
Target Market
► The
Ready To Drink teas are quite popular among
South Korean young adults
► Japan has experienced a similar growth in
popularity (among young adults)
► South Korea’s younger generations are proven to
value western thinking ideals
age distribution is most concentrated in
15-24 year-olds (15.4% of the population) and
25-34 year-olds (17.56%). This is one third of the
entire population
► Korea’s