Agenda
1. Introduction a. SCQ b. Recommendations c. Framework
2. Key Analysis a. Marketing b. Supply Chain c. Competitive Environment
3. Final Recommendation a. Implementation b. Key Takeaway
2
A changing business environment demands efficiency and new strategic investment
Situation The Russian ice cream market experienced a 3.9% CAGR1 over the past 4 years, but import reliance and two major economic shocks have kept industry profits in check.
Complication Market is becoming increasingly competitive and Ice-Fili has seen a reduction in market share by 50% over the last 5 years from industry diffusion. This is due, in part, to Nestle, a new foreign competitor.
Questions What can be done about Ice-Fili’s brand identity?
Where can production and distribution be improved?
How can Ice-Fili continue to grow in the face of competition?
Introduction Analysis Implementation
1) Based on production figures as revenue figures are distorted by inflation and FX volatility.
3
Key recommendations can address multiple issues and while reinforcing each other
Introduction Analysis Implementation
Recommendation Impact
Build brand awareness
Increase sales and potential price point
“Pull” availability through consumer searching
Streamline product mix
Lower production costs
Increase brand awareness
Strategic partnerships
Partner with regional players Cross-selling
Reduce wasted capacity
Expand into supermarkets and gastronoms
Leverages more on marketing efforts
A growing and less competitive channel
4
Focusing on key issues yields broad strategic principles addressed in a step-by-step plan
Introduction Analysis Implementation
What are the key issues?
What is the impact?
What is the ideal situation?
What are the key factors that need change?
How can we achieve these scenarios?
What are the next steps?
Issue Analysis
Area Goals
Master Plan
5
Industry Volume Growth in 2000
-3.5%
23.0% 25.0%
Ice Cream Beer Soft Drink
The 1% of sales spent on advertising is associated with falling sales volume. To boost ice cream demand, Ice-Fili needs to increase advertising budget.
Compared to the beer and soft drink industries, the ice cream industry only spends $5m on advertising annually
1%
2%
7%
Ice Cream Beer Soft Drink
% of Sales Spent on Advertising
Introduction Analysis Implementation 7
Advertising to masses
Masses demand more ice
cream
Industry growth,
No branding
Advertising efforts must clearly link brand to product
Ice-Fili must develop advertising that emphasizes the company and its top brands, on top of natural ingredients, in order to build brand equity among consumers.
Introduction Analysis Implementation 8
Lakomka 30%
Leningradskoe 20%
Batonchiki-Fili 20%
Other 30%
% of Ice-Fili Sales
25 30
50
170
Nestle Baskin-Robbins Metelitsa Ice-Fili
Number of Ice Cream Products
Ice-Fili needs to streamline its product mix in order to strengthen its strongest brands, while removing underperforming products that eat up capacity.
3 of Ice-Fili’s 170 products contribute to approximately 70% of total sales
Introduction Analysis Implementation 9
Advertising in ice cream industry is
extremely low
Advertising does not mention
company or brands
Brand portfolio is fragmented
Low demand for ice cream
Industry growth may not mean
growth for Ice-Fili
Underperforming brands are taking up capacity and
losing profitability
Issue Impact
Launch mass media campaign that focuses on company and brand strengths, while stream lining product mix
Focused marketing leads to large impact
Introduction Analysis Implementation
Goals
10
Currently, the capacity of production is higher than the demand of Ice-Fili’s ice cream
In order to satisfy the increasing demand, Ice-Fili needs to partner with regional producers to meet demand outside Moscow.
0
20
40
60
80
100
120
1 2 3 4 5 6
Capacity
Moscow Demand
Ex-Moscow Demand
Ex-Moscow Shortage
Moscow Excess
Introduction Analysis Implementation
Years after advertising
‘000 tons
12
Russian geography creates distribution issues; dispersion of population leads to high transportation cost
Other non-retail
Distribution
Equipment
Packaging
Labour
Specifically target distribution, equipment, packaging and labour costs will significantly reduce over cost
40%
28%
12%
10%
10%
Major Costs as % of Price
Introduction Analysis Implementation 13
Focusing on “marketing sensitive” channels also brings Ice-Fili into growing segments
9.5%
11.0%
70.0%
45.0%
15.1%
36.0%
Ice-Fili Target
Distribution Channel Mix
Restaurants
Supermarkets
Gastronoms
Minimarts
Kiosks
Introduction Analysis Implementation 14
49.0%
29.0%
17.0%
Industry
Ex-Moscow demand will soar above current capacity
28% of price is eaten up by
distribution costs
Current channel mix does not allow us to
capture growth
Inability to “transfer” capacity
from Moscow to outside.
A large part of profit is foregone if
distribute to ex-Moscow
Competitors will capture incremental
growth
Issue Impact
Form strategic partnerships to produce where demand is, while accommodating increased demand for bulk
New supply chain network accommodates marketing strategy
Introduction Analysis Implementation
Goals
15
Nestle achieved 2nd largest market share in 2000 and will continue strong.
Introduction Analysis Implementation
20
16.5
Ice-Fili Nestle
‘000s tons Sold in 2000
Local production Low costs
Heavy advertising Unique brand identity
Focus advertising on Ice-Fili company and top brands, with the help of improved distribution network to maintain strong market presence.
17
Baskin-Robbins leverages its know-how in franchise operations and international brand appeal to maintain dominance in café segment
Introduction Analysis Implementation
Franchise operations expertise
Specialized training, marketing, and advertising
Ice-Fili should not enter café segment, due to lack of expertise. Company should maintain strength in kiosks and mini-marts.
• Dominance in café segment
• International brand appeal
• High margins
18
Nestle has strong distribution network and advertising
Baskin-Robbins is dominant in café
segment
Ice-Fili could lose dominant market
position
High probability of failure if enter
segment
Issue Impact
Differentiate Ice-Fili brand based on premium, natural ingredients, and avoid café segment
New supply chain network accommodates marketing strategy
Introduction Analysis Implementation
Goals
19
Increase advertising, Streamline product
mix
Form strategic partnerships,
Increase gastronom exposure
Differentiate brand, Avoid café segment
Launch and maintain marketing campaign
Select and approach regional producers
Introduce “bulk” for family
Produce at regional level
Strengthen presence in supermarkets and gastronoms
Optimize product mix
Investigate international opportunities
Hig
h
Me
diu
m
Low
12 months+ 6-12 months 0-6 months
20 Introduction Analysis Implementation
There is a Russian saying, “A bad soldier is one who does not dream of becoming a general.” Even small companies dream of becoming large someday.
Anatoliy Shamanov
Key Takeaway
21
23
Ice-Fili Target Industry
Kiosks 0.7 0.45 0.49
Minimarts 0.095 0.11 0.29
Gastronoms 0.1511 0.36 0.17
Supermarkets 0.032 0.06 0.02
Restaurants 0.0219 0.02 0.0219
Distribution Channel Mix