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Country Market Analysis

Lipton Iced Tea in Argentina

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Price

Economic recession from 1998 to early 2003 unpredictable inflation

(see chart) devaluation of the paeso

Mounting social problems Unemployment rate of

17.3% for 2003 51.7% of the population is

below the poverty line (2003)

Past inconsistency of the economy may have an impact on the size of our target market.

-1.8%-0.7% 1%

25.9%

7.7%

-505

1015202530

Infla

tion

Rat

e (%

)

Year

Inflation Rate

1999 2000 2001 2002 2003

Argentina’s Economy

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Price

Argentina’s Economy Nominal GDP has grown from $289 billion in

2001 to $435.5 billion in 2003. GDP real growth rate: -14.7% (2002) to 8.7%

(2003) GDP per capita: $10,200 (2002) to $11,200

(2003) While there have been economic problems in

the past, the recent upswing of the economy is encouraging with increasing disposable income of consumers’ and, in turn, increased consumption.

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PriceMERCOSUR

Customs union that includes Argentina, Brazil, Paraguay and Uruguay, with Chile and Bolivia being associate members, and Venezuela has requested membership. The General Agreement on Tariffs and Trade

(GATT) Allows for free trade between member states Both of these groups would allow for easier

importation of needed materials into Argentina for production of iced tea.

Even though, trade is open to all potential exporters and importers however unclear customs requirements, inspections and product standards licensing procedures increase the cost of trade.

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PriceCompetition

Soft Drink Competitors Pepsi (including Pepsi, Pepsi Light, 7-Up, 7-Up Light) are

popular soft drinks Coke is another popular carbonated beverage in

Argentina Navita (manufactured by Coke) is a soft drink that is

flavored with the national beverage mate Sukita is a popular orange soft drink in Argentina Pomelo an increasingly popular fizzy grapefruit drink

Main focuses: youth, pop-culture, celebrity endorsers Average retail price of a 473ml soft drink is $.99

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PriceCompetition

Juice Competitors Kasfruit Juice, Kas, Tropicana and Gatorade

Orange juice is a popular drink that is extremely expensive

Nectar concentrates which is a sweet juice based drink

Apple juice is another beverage of choice in Argentina

A popular combination is fruit juice and milkshakes in areas of the country where more exotic fruits grow

Average retail price for 946ml juice is $4.79

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PriceCompetition

Bottled Water Eco de los Andes Glaciar Nestle Pureza Vital.

Main focuses: pure, natural, and good for your health.

Average retail price of 500ml of mineral water is about $1.00

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Price

*New age beverages includes herb based drinks, iced coffees and iced teas.

•Decrease in growth rate percentage → Economic recession (1998-2003)

•Stabilized growth rate → Upswing in Economy

•This should not be a deterrent in entering the new age beverages market in Argentina

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ProductLabeling Requirements

Name (description of product) Country of origin Quality, purity, or blending description Net weight Metric System Spanish Language (exception: foreign words and phrases of

common usage) Differs from Mexican or Chilean Spanish

It would be in the best interest of Lipton Iced Tea to use Spanish language media and labels in Argentina.

Business Implications Due to all of these restrictions on labeling Lipton Iced Tea

will have to change not only the language of it’s labels but also the content of their labels and the measurements of the product. A local adaptation of the packaging will be necessary.

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Product Pop – plastic Water – plastic Gatorade (sports drinks) –

plastic Usually small

convenience sizes that may be consumed on the go

Juice – Cartons Aluminum isn’t as widely

used because it’s hard to come by

Recyclable packaging By knowing the common

forms of packaging in Argentina Lipton will be able to decide which material to use to package it’s iced tea.

0%

10%

20%

30%

40%

50%

60%

70%

<500 ml 1 L 1.5 L 2 L

PopBottled WaterJuice

Percentage Volume Retail Sales

Bottle Composition

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Product

Mate is the national drink of Argentina Benefits- a hot tea and

stimulant Being such a popular

drink in Argentina it might be wise to consider a mate flavored iced tea to appeal to that segment of the market. Coke has successfully done this

Popularity of Mate may cause problems in introducing cold tea

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Place

Disadvantages of Importing

Imports vs. Exports for food and beverage market Imports 5% Produces 95%

Major challenge → knowledge Higher retail price

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Place

Food Product Production Centers: Florida Plant (Buenos Aires Province):

produces soups, purees, pastas, salsas, prepared meat Principal products include: Knorr

Mendoza Plant ( Mendoza Province): produces dehydrated vegetables

Pilar Hellmann’s Plant (Buenos Aires Province): Produces mayonnaise, mustard and salsa Principal products include: Hellmann’s AdeS, Ri-K, Fanacoa, Wilde

Pilar AdeS Plant (Buenos Aires Province): produces AdeS a soy product

La Rioja Plant ( La Rioja Province): produces olive oil, garlic and pasta, mustard Principal products include: Arisco, Beira Alta, Copisi, Malaguena, Petisco, Palmeiron, Savora, Ri-K, Fanacoa

Distribution Center Located in Ubicacion, Florida Plant,

Buenos Aires Province Receives finished products from the

plants and distributes to clients and other countries.

Daily dispatches a maximum of 280 trucks including a maximum of 270,000 boxes

14 loading docks

Despite the fact that Unilever produces and distributes many food products in Argentina, they partner with Argentinean firms for their beverage production and distribution.

Unilever’s Production Facilities

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PlaceProduction Facilities

Baesa Main bottling company in Argentina for

Pepsi Controls 87% of Pepsi’s bottling in

Argentina. Currently in negotiations with Embotelladora

Los Andes. Vast distribution chain with over 25,000

points of sale around the country.

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PlaceProduction Facilities

Ambev Sixth largest beverage company in the world and largest

beverage company in Latin America Argentine branch received Champion in the

Manufacturing Excellence Program award: Now considered a reference standard of excellence

AmBev’s network: 11,000 resellers Fleet of 16,000 trucks

41 beverage production plants Production and distribution facility in one.

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Place

Distribution Tibbett and Britten Group

Seventh largest logistics service provider in the world. Operations in 33 countries in 5 continents. Revenues of approximately $2.2 billion last year. Unicargo Group (acquired in 2001), based in Buenos

Aires, Argentina. Transports and Distributes food and drink products,

throughout Latin America Existing contracts with Unilever Bestfoods and Baesa

(First largest Pepsi bottler in Argentina) Handles 72 million cases per year A fleet of 500 commercial vehicles In 2000 revenue was $19 million

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PlaceBusiness Etiquette

More formal in Argentina than in the U.S. Business usually conducted in leisurely manner Prearranged meetings are a must and

promptness is also important North American vs. American The business etiquette of Argentina is important

to know since Lipton will be dealing with intermediaries if iced tea is introduced into the market.

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Place

Political Implications Contracts:

No specific format - can be executed verbally

However, usually given in writing through exchange of reversal letters

May not elect foreign laws to govern agreement Argentine courts will not recognize the

contract

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Place

Distribution Two types of traditional sales channels:

large-scale specialized retailers

The food retail market separated into three categories: Traditional (“mom and pop”) retailers Self-service mini markets/Convenience stores Supermarkets/Hypermarkets

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Place

Traditional Retailing Decrease in popularity:

1970 – 90% of total sales 2003 – 20% of total sales

Inefficient logistics:

Outdated Costly Longer delivery times

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Place

Self-service Mini Markets/Convenience Stores

Self-service mini markets = 26% of total sales (2002)

Convenience stores = 4% of total sales (2002) Convenience stores becoming more popular

Increased competition for traditional retailers Typical customers and customer habits:

Middle and upper-class as well as youth Impulse purchases

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Place

Supermarkets/Hypermarkets Market dominance:

36.7% of total sales (2002) Lower priced items:

Purchase directly from producers Stock larger quantities (economies of scale)

Consumer Behavior: Price vs. Value

Decline in Import purchases Convenience

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PlaceInfrastructure

80% of products transported with trucks Shelf Life = 18 months Storage = closed container, cool dry place

There are no special needs to have refrigerated trucking to ship Lipton Iced Tea in Argentina however, special care will be needed to ensure that the tea is not transported/stored in extremely high temperatures.

National Highways Rehabilitation and Maintenance Project: $450 million loan to rehabilitate the national road network.

Paved Highways=215,434 km Unpaved Highways=151,881 km

Argentina is spending money on their infrastructure so this will be an aid in getting our product to the consumer.

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Promotion Population = 39,144,753

Median age = 29.2 More youthful promotional campaign.

1 female to .97 males Target both males and females equally

Urban areas = 80% of total population Buenos Aires (and suburbs) = 35% of total

population Cordoba, Rosario and Mendoza = 10% of

total population

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PromotionPast Economic Recession Affecting

Promotion

Effect of economic recession on media sector: Circulation volumes, subscription fees, and the

level of advertising spending decreased

Effect of economic recession on consumer behavior: Argentine consumers:

More demanding and knowledgeable Starting to look more at quality, novelty,

flexibility, fast-delivery, and after-sales service Stabilizing inflation = more attention to small

price differences

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PromotionConsumer Behavior

Argentine consumers resemble Europeans very closely European promotions may be used with a slight localized

adaptation Segmentation is key:

Typically drink wine or mineral water with meals Lipton Iced Tea Target = impulse purchase drink that can be

enjoyed “on the go.” Lack of storage space and small disposable income = more

frequent trips to the store Environmentally friendly attitudes:

brand image with differentiated segmentation will be crucial.

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PromotionGrowing Consumer Segments

One-person households (17% of the total Argentine households) Value practicality and often pay premium prices in return

for service that allows them to save time. Perform frequent and small purchases and use

convenience channels. Double Income Couples Without Children

High disposable income Purchase high value-added products and services Urgency to save time = increased services (such as

delivery, automatic tellers and telephone banking) Households sustained by a working woman Consumers over 60 years old.

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PromotionPrint

High literacy rates (97.1%) → print media is the most widely used and effective method of advertising.

International papers and magazines, including a wide range from the U.S., are widely available at the numerous kiosks to be found around Buenos Aires.

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Promotion

High penetration rates: Paying TV subscribers

in Latin America = 58%

Potential audience approximately 21 million.

10 million TV sets in use The public and private

sectors operate radio and television stations.

200 cable companies operate throughout the country.

Generally aimed at the Buenos Aires market

46 television broadcasting stations

Major National TV Channels: America TV Argentina Televisora Color ATC Libertad Telefe’ Artear

Cable television channels: CNN International, CNN en Español, MTV, As well as channels from

Brazil, Chile, Mexico, France, Germany, Italy and others

Television

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PromotionRadio

170 AM stations 2000 FM radio stations Approximately 12 million radio sets Estimated average weekly listener

audience = 21 million. Generally aimed at the Buenos Aires

market

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PromotionInternet

4.1 million internet users in Argentina compared to 165.75 million in the U.S.

High access cost → limited use of the internet Argentina hosts 11 of the top 15 most visited Spanish

language sites Approximately half of the 700 Internet start-up companies in

Latin America are based in Argentina Increasing popularity of Internet advertising

Beginning stages Development of E-commerce is limited:

Internet illiterate consumers Prefer the security of direct purchasing Slow introduction of online retail

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PromotionAdvertising Expenditure By Medium

Television $245 million Radio $45 million Print $204 million Cinema $15 million Outdoor $62 million Online advertising is currently an

untapped medium for advertising.

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Promotion

Television (peak time): Avg. Cost for :30 is $2,996

Avg. Audience 129,153 = 2.3 cents per person

Radio (peak time): Average cost for :30 is

$441Avg. Audience 34,533= 1.3 cents per person

National Newspapers (1 page black and white advertisement ): Average Cost is $15,370

Avg. Audience 149,942= 10.5 cents per person

Magazines (1 page four color advertisement): Average Cost is $ 5,984

Avg. Audience 63,866= 9.3 cents per person

Outdoor: Billboards

Average Cost 1 month is $87,365

Posters Average Cost 1 month is

$8,333 Subway Boards

Average Cost 1 month is $ 161

Taxis Average Cost 1 month is

$23,473Cinema:

Average Cost for :30 for 4 weeks is $95,500

Media Costs

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Promotion

Introduction of Lipton Into Brazil Flavors: lemon and peach Sizes: 340 ml, tetra pack 1 liter, PET 1.5

liters, tetra pack 250 ml Produced and distributed by Ambev October 1999 Lipton Iced Tea reached the

leadership position of the cold tea market Given the geographical proximity and cultural

ties of Argentina and Brazil this information is promising for the iced tea market in Argentina.

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PromotionLipton’s Current Strategies

Worldwide Campaign: “Lipton is painting the world yellow” Brightness, vitality, and fun with natural goodness Lipton Flavors: “We’ve got your flavor!”

lemon, sweetened, unsweetened, green tea with honey, diet lemon, peach, raspberry, sweet tea with or without lemon, sweet tea extra sweet

UK Strategy: “Don’t knock it until you’ve tried it” “Has a disarming honesty in that it courageously embraces

the negative and openly admits that a lot of people knock the idea of drinking cold tea.” ~ Senior Brand Manager

Asian Strategy – Local Adaptation RTD tea that may be served hot or cold Introduction of Lipton Fusions

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Promotion

Advertising Examples United States Promotion = Evolutions and

Influences in Hip Hop- Lipton Brisk Iced Tea Music Mixer Website Applet: “Mix it up your way – Lay

down the tracks, pump up the beats and be your own Mix Master”

UK Promotion = “Don’t knock it until you’ve tried it” T.V. Commercial - Girl chatting on the phone with a

friend reaches into fridge and inadvertently picks up and drinks Lipton Iced Tea and to her surprise enjoys it

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QUESTIONS?