Unbelievable Adventures of Dolmio® Sauces in Russia:
Changing the Business Model and Searching for new Promotion Methods of Dolmio® Sauces for Pasta Bolognese You will submerge into the real business of Mars for a week and try yourself in the role of the company’s top manager. You and your team will have to solve a difficult problem: a few years ago, Mars launched a line of ready-made pasta sauces in Russia, but the rates of sales growth and product penetration are still far from reaching the target figures. Your goal will be to identify the key points where the promotion strategy has been vulnerable; to create a new business model for sales through alternative channels; and to offer ideas and ways to further promote the development of the ready-made sauces category among Russian consumers. You will manage the development of the Dolmio brand of ready-made sauces and make decisions that will determine the future of the brand – will it remain on the Russian market, or will it be replaced by more successful competitors?
Contents
Introduction
Mars, Incorporated
The market of sauces, condiments and spices in Russia
Marketing research of consumer preferences
Promotion and distribution channels for the product
Attachments
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Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Introduction Warm spring arrived early in Moscow this year. The snow disappeared in March, and on this April morning, the sun was shining brightly on the street. It shone through the windows of the business center which houses Mars office. The sunbeams scattered on the floor and the walls, and shone into the eyes of busy associates. Roberto, the general manager of the Mars Food segment, occupied the spot right next to the window, but he was not paying attention to the good weather, or the spring sunshine – all his thoughts were aimed at solving a complex business problem, and his mood was far from rosy. Roberto came to Russia from Italy seven years ago and began his work at the position of senior brand manager for the Mars Food segment, responsible for the launch and promotion of the Dolmio® brand of Italian Bolognese sauces. In 2008, following the resounding success of the sauces on the UK market, global management of the company turned its attention to other markets, including Russia, wishing to know whether or not it would possible to repeat the success. Analyses of market indicators offered excellent prospects. Just think about it – pasta consumption per capita in Russia was almost at a record level, six times surpassing one of the
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United Kingdom (6 kg vs. 1 kg). In addition, Russia had seen a substantial degree of penetration of meat grinders in households, suggesting that people often use ground beef, which, in turn, is an integral part of spaghetti Bolognese. Above of all, Russians characteristically consumed large quantities of lecho, tomato paste, and ketchup, suggesting that tomato sauces in general fitted their profile. Although the Russian market lagged behind its European counterpart in terms of income and its degree of development, trends and forecasts by analysts suggested that it would actively grow. The population’s income levels were on the increase. Consumers became more attentive to the choice of products, and began to pay attention to brands. Moreover, more and more women began to work and build a career that distracted their attention from family matters, and consequently, they devoted less time towards cooking. As a result there was a growing demand for products that could simplify and speed up cooking process. Moreover, it became clear that Italian food was very popular in Russia, as every fifth restaurant in Moscow had a menu more than 60% of which consisted of Italian dishes. The Italian restaurant business was growing, outpacing the
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
growth rate of the restaurant market by 10%. It seemed that all factors were converging, and the success of the new product on the Russian market was assured. Even the fact that sauces, designed for cooking specific dishes, did not exist on the market at the time, did not deter the management, and in 2008, it was decided to launch Dolmio® sauces in Russia. Roberto began his work on promoting the brand in Russia with great enthusiasm, believing that Dolmio® sauces would be loved by consumers, and would gain a strong foothold on the market. Italian cuisine was particularly close to him, evoking memories of the family dinners in his native Siena. Every mother of a large family would cook spaghetti Carbonara on Sundays, and wonderful aromas would spread from the kitchen to the whole house: she would fry garlic with slices of bacon, mix the egg yolk with cream sauce in a bowl, boil the homemade pasta, add a pinch of freshly ground pepper, then mix all of the ingredients, and the delicious hearty meal was ready. Since the launch of the line of Dolmio® Bolognese sauces, sales grew at a fairly steady pace, but growth slowed sharply after three years, in 2011, alerting the company’s management. The trends
Introduction with regards to the dynamics of product penetration were also far from optimistic. At times, the annual growth was less than one percent, and overall, less than 10% of the population had tried the product nationwide. In Moscow, the situation looked somewhat better: around a third of Muscovites had tried the new product up to and including 2013. However, Mars company had much more ambitious plans, and advertising campaigns were launched throughout Russia. By now, Roberto was already occupying the post of the general manager, took strategic decisions, and determined the development of the entire section as a whole, but continued to pay particular attention to the
Dolmio® sauces. Performance indicators increasingly showed that it was time to change something with regards to the brand. The question of effectiveness and cost-effectiveness of advertising, and of the business as a whole, was becoming crucial. In order to understand the causes of what was happening, Roberto and his team decided to conduct a comprehensive analysis, including a fundamental study of Russian consumers. To Roberto’s disappointment, the study revealed that families very rarely cooked spaghetti Bolognese as a dish (only in 0.3% of cases), when in fact, the Dolmio® tomato sauces were specifically created for that purpose.
It became clear that the company had a long way to go to not only introduce a new product category, but to construct a new model of consumer behaviour – namely, the inclusion of spaghetti Bolognese in the Russian people’s daily repertoire of dishes. It was necessary to completely revise the plans of the company, and to find an opportunity for long-term sustainable growth and good profitability at the same time. Roberto grabbed a notebook – he liked to meditate by drawing lines, figures and funny little men on sheets of paper.
After half an hour of active scribbling, a picture began to emerge in the notebook with regards to changing the product development strategy. First of all, it was necessary to conduct a market study of potential consumers, creating their profile and assessing the product’s growth potential; then, to determine which alternative sales channels could be used, and to develop a model of promotion and sales through alternative channels, combining target consumers and alternative channels within that model. In addition, of course, it was necessary to conduct calculations for these models (with a budget of 3 million rubles for all channels), and to calculate the maximum number of contacts within the budget. In future, time permitting1, it would be good for Roberto to think about ideas and ways to further promote and develop category of sauces for cooking as a whole2 (rather than just the Bolognese sauce) among Russian consumers.
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Bonus task Since the Russian market category has not yet emerged completely, there are several terms for this category – ready-made sauces, hot sauces, sauces for cooking. Within this category, there are several segments, which include pasta sauces, sauces for cooking of national dishes, etc.
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
Mars, Incorporated
Roberto got distracted for a moment, and looked at his diary. Today at 12 o’clock he was scheduled to meet with the trainees from the Mars Food unit, who were recruited as part of the Leadership Development program. In the afternoon, he was going to discuss with his colleagues the results of focus groups regarding DolmioŽ sauces. The story about the company and the presentation for trainees were ready, and Roberto once again ran through the text, mentally noting the key points.
Mars, Incorporated The Global History of Mars Mars, Incorporated was founded by Frank Mars, who started his business, together with his wife Ethel, by selling creamy caramel and inexpensive sweets that were handmade in their own kitchen. In 1923, Frank Mars with his son Forrest came up with the Milky Way® bar, which became a revolutionary product in the confectionery industry, and brought unprecedented growth and success to the family business. Sales rose eightfold, and by 1929, the company was employing around 200 people, while the main production site was moved to Chicago, Illinois. There followed another bestselling chocolate product in 1930, in the form of the Snickers® bar. Having grown up, Forrest Mars began to participate actively in the family business, and moved to England, where in 1932, dreaming about creating a company based
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on “mutual benefit” philosophy for all participants, and this concept is still the basis of the activities of Mars all over the world. Forrest Mars’s other famous invention was the chocolate candy M&M’s®, produced for the first time in 1940. In contrast to his father, Forrest Mars did not focus on confectionery alone. Success on the chocolate market was supplemented with equally impressive results in the food and pet food markets. Chappy®, Kitekat®, Whiskas® and Pedigree®, as well as Uncle Ben’s® cereals, remain among the leaders within their respective fields to this day. Instant rice appeared in Mars’s product portfolio in 1943. Forrest Mars thought of the idea of steaming the rice seeds, thereby providing them with heat treatment that removed husk from the seeds. In 1947 Forrest E. Mars documented his objective to build a business that creates a “mutuality of benefits” for all stakeholders.
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
In the late 1960-ies Forrest bought the business founded by his father. The combined company became known as Mars, Incorporated, with headquarters in Washington (D.C.). The next generation of the Mars family — Forrest E. Mars Jr., John F. Mars, Jacqueline Badger Mars - implemented the globalization of Mars, Incorporated and made a significant contribution to the development of corporate culture, formulating the Five Principles of Mars: Quality, Responsibility, Mutuality, Efficiency, Freedom. Today, Mars, Incorporated is one of the largest international companies. Daily over 75 thousand employees around the world use the Five Principles to improve the performance of the company, which in turn has a positive impact on people’s lives and the health of the planet.
Mars, Incorporated Mars in Russia Mars started business in Russia and CIS (Commonwealth of Independent States) markets in 1991, selling a range of food, confectionery and pet food products. In 1995 company launched its first chocolate factory in Stupino, Moscow region, to produce Mars bars. Then there was a petcare factory in StupinMoscow region, which started its ows production of cat and dog food. The second petcare factory was opened in the Novosibirsk region in 2002, the third – in Mirny, Ulyanovsk region, in 2009. The new Mars Chocolate factory was launched in Sherdakly, Ulyanovsk region, in 2012. To produce Royal Canin pet foods
Mars brands Today all Mars business directions are presented on the Russian market. In confectionery these brands are M&M’s®, Snickers®, Mars®, Dove®, MilkyWay®, Maltesers®, Twix®, Bounty®, A. Korkunov®. The company gained strong positions on the chewing gum market too. This segment brand pool includes Spearmint®, Eclipse®, Doublemint®, Hubba Bubba®, Five® (5), Orbit®, breath mints Rondo®, chewing sweets Skittles® and Starburst®.
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Mars built a factory in Dmitrov, Moscow region. And to produce food products the company launched a factory in Lukhovitsy, Moscow region in 2004. Moreover, as a result of the acquisition of Wrigley, Mars got two additional factories in Moscow and Saint-Petersburg. Currently, Mars operates nine factories and 34 offices. Annual turnover exceeds $2 bln in Russia and CIS. Its production is created and promoted by 7 thousand people in Russia, where Mars cooperating with more than 70 thousand people working in trade, logistics, transport companies and other related industries. The company manufactures 97% of the products it sells
One of the main Mars segments in Russia is pet food products. This segment brand pool includes Pedigree®, Whiskas®, KitekKat®, Chappi®, Sheba®, Cesar®, Perfect Fit®, Royal Canin®, Dreamies®, Catsan®. Moreover, two strong Mars` global brands Uncle Ben`s® and Dolmio® are also presented on the Russian food products market. Totally Russian market includes six $100 mln Mars brands.
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
within Russia. It also exports production to the Middle East and Asia-Pacific countries and 12 surrounding markets: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. In order to maintain a stable position on the market, it is important to pay a lot of attention to sales and distribution. Working in the Russian market has taught the company to be extremely attentive towards its business partners, supporting and monitoring them, ensuring that all terms of the existing agreements are being strictly adhered to. This strategy has allowed Mars to firmly establish itself in the
Russian market and successfully increase its sales turnovers, in spite of difficulties, crises and unforeseen circumstances. Specific features of Mars approach to manufacturing and corporate culture tended to the fact that the vast majority of components and raw materials (80%) is purchased in Russia. It supports 300 local suppliers in agriculture, warehousing and distribution. The company’s short term plans include strengthening its position in the CIS and Russian market, introducing new products to this market, and actively cooperating with suppliers in the field of ecologically clean manufacturing and ‘green’ business.
Mars, Incorporated Associates and Culture at Mars Mars associates work in an atmosphere of cooperation and harmony, and the company encourages their desire for further training and development. Such working conditions, in combination with the Five Principles Quality, Responsibility, Mutuality, Efficiency and Freedom - inspire and motivate more than 75 thousand employees. The company did not make use of private offices or any other barriers separating associates from each other. This helps ensures the effective exchange of information, the possibility of direct communication with management and contributes to the development the sense of community. Professional development opportunities of Mars associates are defined only by their abilities and quality of work, and in no way depend on the duration of their work in the company, age, gender, sexual orientation, ethnicity, religious beliefs or physical abilities. Mars compensates for the work of their associates a competitive salary and benefits. The main idea behind the Principle of Quality is to manufacture quality products that fully satisfy the consumer’s demands. “The consumer is our boss, quality is our job, and value for money is our aim.” The
Principle of Responsibility implies that each employee has an important job to do, and is responsible for carrying it out to a high standard. In accordance with the Principle of Efficiency, employees ought to do their job as efficiently as possible, spending a minimum of resources. The Principle of Mutuality implies mutual benefits in business relationships, and these benefits can take many different forms, and need not be strictly financial in nature. The Principle of Freedom - the last of the Five Principles. The company needs freedom to shape it’s future; the company needs profit to remain free. The development of a culture of leadership is a vivid example of the principle of mutual benefit in life. The company is confident that the business is sustainable in the long term that today is the development of leaders who will lead the company tomorrow. For associates this is an opportunity for professional and personal growth and, as a consequence, career opportunities. The company understands that people have different inclinations and talents: some want to grow and to become chiefs, and others to improve in their current work. Specialists in associates development discuss one-toone with each associates his development plan, taking into consideration how he sees his career at Mars. In the development of associates the company adheres to the concept of 70-20-10. It is considered that
70% of the success of the development of an associate depends on how he comes out in work out of his comfort zone, 20%, if he takes the opportunity to learn from others, and only 10% from theoretical training. Each associate has selected projects, mentors and trainings in accordance with its development plan. The adherence to the given principles by all of the company’s associates allows Mars to develop unique products, to make a profit, and to ensure its leadership in the global market for many years. Today, Mars is among Top-100 best companies to work for3. Factors that are taken into account when compiling this list include trust towards the management team, job satisfaction, camaraderie, salaries and bonus programs, methods of internal communication, training programs, and corporate social responsibility. These may seem to be ordinary factors that ought to be maintained at an appropriate level by any large global company. Nevertheless, they often play a crucial role in shaping the mood at work. Having finished his meeting with the trainees, Roberto thanked his new colleagues for their attention, said he was glad to see them in the ranks of the company’s employees, and expressed his hope that together they will be able
to achieve significant results – at Mars, it is precisely the coordinated work and teamwork that are the key factors for success. After the meeting, he went back to his work place – in spite of his higher position, Roberto occupied an ordinary table, and in no way stood out among his colleagues. Mars offices around the world are designed to resemble each other, which allows associates to feel themselves at home, even when they are on a trip abroad, in any country of the world, thousands of kilometres away from their families. The Moscow office is being maintained within the general democratic concept of the company, whereby there are no VIP areas or executive offices, and all associates work in a single open space. Roberto has always valued the general atmosphere of openness and freedom prevailing in the company, whereby any manager can easily be approached with a question, without having to overcome any barriers. Now Roberto’s attention turned towards a report on the state of the sauce market in Russia, which had been prepared by brand manager. Half an hour remained until his scheduled meeting with colleagues regarding the results of consumer marketing research, and he wanted to brush up on some of the figures and learn about the latest trends.
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
According to Fortune, 2014
The market of sauces, condiments and spices in Russia
The market of sauces, condiments and spices in Russia Structure and dynamics of the market According to the data from Euromonitor International, the 2014 figures for the Russian market of sauces, condiments and spices totalled 1,198 thous. tons and 211 billion roubles in volume and value terms, respectively. Russian consumers remain conservative in their preferences when choosing sauces and condiments, but more and more sauces with nontraditional flavours for Russian consumers are appearing on the market. Such products are also finding their buyers, and are gradually winning over the public. In general, the market of sauces, seasonings and spices in Russia can be characterised as steadily growing. No negative dynamics were noted there even during the economic recession. On the contrary, the market was steadily growing, albeit at a slower pace. The per capita consumption of sauces, condiments and spices in Russia is 8.2 kilograms per person (in 2013), which is quite high compared to other countries. Russia has the third highest per capita consumption of sauces, condiments and spices in Eastern Europe, and the eighth highest in the world. Japan leads the list with a per capita consumption figure of 15.6 kilograms. However, despite the
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high level of consumption in Russia, it’s structure fundamentally differs from the global trends. Russians prefer mayonnaise, it’s average consumption rate reaches 4.4 kilograms per year. This is the highest figure worldwide. Lithuania comes second in this ranking, with an average consumption rate for mayonnaise of 3.5 kilograms per capita. At least 55% of the total sales in the Russian market is taken up by mayonnaise, around 15-20% by ketchup, and roughly the same amount by other sauces, which prevail in the capital and other major cities. In terms of consumption frequency, 13.5% of Russians consume mayonnaise every day, while 39% of the population use it several times a week. Ketchup is consumed several times a week by a majority 31.6% of Russians. As for the sauces for cooking, one third of Russians consume them less than once per month. According to experts, the slow growth of the sauces for cooking market is primarily associated with the poorly developed culture of consumption of sauces in Russia. Consumers are quite conservative in their preferences, and most of them either use ordinary mayonnaise with their favourite dishes, or prepare their own sauces at home by mixing mayonnaise and ketchup with herbs and spices.
Business Case: Unbelievable Adventures of DolmioÂŽ Sauces in Russia
The market of sauces, condiments and spices in Russia Sections of the Sauce Market Mayonnaise The Russian mayonnaise market is quite saturated, and yet, according to Euromonitor International forecasts, it will continue to grow. Russian consumers habitually use mayonnaise to cook hot dishes, salads, cold appetisers, as well as with hot meat, fish, and other dishes. Affordable prices also lead to high sales. Furthermore, marketing activities of the market leaders’ enhance public interest towards the product. Additionally, the growing demand for fast food outlets is proving influential, as mayonnaise is used as the main sauce there. The number of fast food restaurants in Russia increased by 4% in 2014 compared to the previous year, reaching a figure of 24.5 thousand outlets. In comparison, the consumption of mayonnaise in North America – home of fast food – is much lower than in Russia. This trend is a result of, on one hand, the promotion of healthy eating, and on the other hand, of the growing consumer interest in other sauces. The
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average Russian consumer still has quite a limited understanding of the basics of healthy diet and dangers of fatty foods. Also, at this stage of market development, Russians know relatively little about the diversity of flavours of other sauces, and about the possibility of preparing various ‘healthy’ dishes. Ketchup The next most popular sauce on the Russian market is ketchup. Despite the fact that the Russian consumption of ketchup does not differ greatly from the Western European and global average, it takes up nearly 15-20% of all the sauces and spices sold in Russia. The per capita consumption of ketchup is about 1.3 kg per annum. The reasons for the popularity of this sauce in Russia are similar to those for the popularity of mayonnaise. Ready-made pasta sauces The pasta sauce market is relatively new and unsaturated in Russia. In terms of its size, it lags far behind the leading countries of the world, making up less than 1% of the Western European and American markets. In turn, the per capita consumption of pasta
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
sauces in Russia did not exceed the 0.1 kg per year figure for the third year running, which is approximately 20 times less than in the US and Western Europe, where 1.4 kg and 1.3 kg of the product are consumed per year, respectively. On the one hand, this indicates that the potential of this market has not been realized. On the other hand, it shows that manufacturers will have to overcome quite conservative preferences of Russian consumers. The most popular sauces among the Russian consumers – Arrabiata, Pesto and Bolognese – account for 63% of the market, another 10% is taken up by white sauces for pasta (Carbonara and mushroom sauces), while the rest of the market is taken up by less popular sauces. The Russian market of pasta sauces is growing more rapidly than in developed countries. Due to the their increasing purchasing power and opportunities to travel more, Russian consumers are increasingly likely to try new sauces and cook a variety of dishes that are specific to other countries’ cuisines.
The market of sauces, condiments and spices in Russia Market Forecasts According to the company Euromonitor International, the market of sauces, condiments and spices will continue to grow steadily over the next five years. With regards to 2015, it is expected that sales will grow by 2-3% in volume terms, and by 7.8% in monetary terms. Significant growth in value terms will be determined by the increase of the average price on the market. It is also expected that the structure of consumer preferences in this category will change. Retail sales of ketchup are expected to decrease by approximately 2% in real terms, while the sales of mayonnaise are to grow by 1%. The growth of the market will mainly be determined by the growing popularity of new flavours and sauces that are less familiar to Russians. Interest towards various national cuisines, as well
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as towards healthy and natural sauces, is expected to grow. Manufacturers and distributors are showing greater interest towards the category of ready-made pasta sauces: the dynamics of sales of these products are much higher than those of traditional dressings, such as mayonnaise and ketchup. After passing through phase of rapid growth (in 2011-2012, the growth rate reached up to 50%), the growth rate for the ready-made sauce market has decreased, but is still stable, with a figure of 6.5% being projected for 2014-2015. Competition has become tougher, and the players now have to share an increasingly narrow space on the market. It is expected that sales growth will be associated with expanded distribution, the growth of modern trade channels, and reaching new parts of the market.
Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Marketing research of consumer preferences
Marketing research of consumer preferences Having finished reading the report, Roberto looked at his watch and stood up to go to the meeting room. Each meeting room in the Food & Petcare office is devoted to one of the specific key brands of Mars, and is decorated accordingly. For example, the entire Petcare section is decorated with images of animals. Members of Roberto’s working team had already gathered in the Dolmio meeting room, which is decorated in the brand’s green colours, with the help of images and plaster casts of characters from the Dolmio family, as well as images of the products that are necessary for cooking the sauce. They were excitedly discussing the stories told by marketing manager Natalia, who had recently returned from a vacation in Sicily, and had enthusiastically shared her impressions of the sea, the nature, and the local cuisine. “I think that interest towards the Italian cuisine is growing in Russia, too,” said Vyacheslav, the tall young man in charge of working with distributors. “Yes, it is growing, but not as fast as we would like it to,” responded Roberto, as he took his place. “Mayonnaise and ketchup remain the dominant sections in the market, and occupy a good 60-80% share of the market of sauces and ready-made condiments. In Russia, even pizza is served with mayonnaise!”
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“There is also another problem,” remarked senior brand manager Yelena. “It is of a cultural nature, and is associated with the peculiarities of our mentality. For example, my mother and grandmother still believe that cooking by standing at the stove for several hours is a woman’s sacred duty, and a way to express her love towards the family. They firmly believe that the purchased sauces cannot surpass the taste of homemade gravy for meat or selfmade adzhika. Today, ready-made sauces are being bought mostly by young women who are free from such prejudices and open to culinary experimentation, or those who seek to minimise the time spent on housework, due to being busy at work.” “Yes, that is correct,” confirmed Natalia, who had already prepared a wide screen presentation, and was ready to talk about the results of marketing research of consumers. “I would like to point out three main conclusions that we have been able to formulate on the back of talking to focus groups and conducting numerous home interviews. First, we found that people in Russia are accustomed to cooking ‘from scratch,’ without using any half-stuffs. It is precisely the food that has been self-prepared at home that is considered most healthy and high-quality. Any woman still gets evaluated according to this principle. It also affects the time that women (our primary target
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
audience) are willing to spend on food preparation: one or one and a half hours are considered standard. It turns out that a variety of ways to simplify and accelerate the process of cooking are just beginning to take their place in the kitchen, but still not all women are willing to include ready-made solutions in the process. Then, we carefully considered the situation regarding consumption itself. Therefore, the second conclusion sounds simple: meat is everything! Meat (meat/fish ingredients, seafood, etc.) is an integral part of any dish without which people’s appetite seems to be impossible to satisfy. Meat is the component that provides a starting point for determining what the family will eat for lunch or dinner. This is partly because meat is the most expensive ingredient in a dish. In the process of making her decision, a housewife first decides which meat she will cook, then decides how to cook it, and only afterwards she selects the side dishes or accompanying ingredients. Another scenario is possible, whereby the housewife has an idea of preparing a specific dish (pilaf, for example), thereafter gathering all the necessary ingredients. In most cases, though, this only applies to a few traditional/specialty family dishes. Thus, the meat ingredients are taking up most of the attention, effort and investment to make the dish delicious, while considerably
Marketing research of consumer preferences less energy is devoted to the accompanying ingredients, such as pasta, cereals and vegetables. Therefore, by focusing people’s minds on the idea that the product is a solution for pasta, we risk falling into a trap. Perhaps we need to focus either on the entire spaghetti Bolognese dish, or even specifically on its meat component. By the way, the situation regarding the popularity of minced meat in Russian households is also not as rosy as we previously imagined. Minced meat bought in shops often fails to meet the housewives’ standards of quality, and they prepare it themselves at home, spending additional time and effort. Recently, minced meat and other types of meat have been displaced on the market by very affordable and easy-toprepare chicken meat. Thus, it appears that preparing mincemeat does not simplify the process of cooking dishes, including spaghetti Bolognese. Moreover, the idea of using minced meat is difficult to reach, because the desire to cook it comes to the housewives very rarely (it is either used
as an ingredient for a specific dish, or as a method of cooking beef, for example). The third important finding was that Russians have very traditional tastes and eating habits, and the majority of them do not tend to experiment. Again, this is a vicious circle, as a housewife is taking risks by wishing to cook something new. I am talking about the risk of a new dish not being liked by the family, leading to it not being eaten, and the money being wasted. In general, when people want something new, they can go to a cafe (one that serves Italian cuisine, for example), and they do not mind trying new dishes on their holidays, but they are not willing to start experimenting in their own kitchen. The Russian kitchens are ruled by very traditional dishes and win-win combinations of meat and side dishes, as you can see from the results of the study4. Of course, the degree of willingness to experiment directly depends on the nature of each person, so usually, we distinguish between several types of people who at various times are willing to
absorb certain innovations on the market. Roberto, we have prepared a chart with the types of consumers in Russia, and I will send it to you together with all the other materials regarding the research.” “Natalia, I would add another important fact,” said Vyacheslav. “Consumers in Russia demonstrate a significant lack of information regarding the assortment, composition and purpose of the sauces. For example, they do not understand the difference between ready-made sauces and mayonnaise / ketchup (which are universally popular sauces that are always present in the refrigerator), and do not know how to use them correctly. Thus, it was news to my friends that a jar of Dolmio’s Bolognese sauce is intended for single use only, and is to be used specifically for preparing that dish.” “Yes, thank you for adding that, Vyacheslav,” said Natalia. “Overall, we have come to the conclusion that our product was some what distant to the consumers. However,
we have some good news. Consumers really like the taste. They like the fact that the product is sold in a glass jar, allowing them to see the ingredients, and placing the emphasis on the naturalness of the product. Therefore, they do not doubt its quality.” “Thank you for the discussion, colleagues,” said Roberto, summing up the meeting. “I came to the conclusion that we should think carefully about who the target audience for our promotion should be: to which consumers should we be offering the product at the current stage of its development? And the main question is: how to convince consumers that spaghetti Bolognese with the Dolmio® sauce is a simple and tasty dish that can be prepared on a daily basis, rather than just on holidays? Answers to these questions will help us solve our primary objective: to increase our audience, stimulate and develop a culture of consumption, and expand into new sales channels.
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
See attachment 2
Promotion and distribution channels for the product
Roberto went back to his place, and once again reviewed the results of his meditations from earlier that morning. The only thing that was missing to get the work started was a plan regarding the advertising support for the brand and the sales channels. Roberto felt very comfortable in this territory, having earlier worked as a senior brand manager. He opened a new file on his laptop, and structured his thoughts on this subject in the form of separate notes.
Promotion and distribution channels for the product Brand awareness The map of the sauce market (excluding segments of ketchup and mayonnaise) can be divided into three main sections, relative to the average level of awareness and consumption of brands. The first section consists of leading brands that post high figures in terms of awareness and consumption. The second section consists of brands with a high degree of brand awareness and a relatively low level of consumption. This usually applies to premium and super-premium brands that are well advertised, but not affordable to all consumers. Also belonging to this second section are products that are either of inferior quality, or have problems with distribution: these brands are widely advertised, but they do not reach the consumer, or for some reason, consumers
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do not buy the products of this brand. The third section consists of brands with low rates in terms of awareness and consumption. As a rule, such brands have entered the Russian market recently, or they already occupy a specific niche. Dolmio速 is found in the second section: the Mars team has managed to achieve high brand awareness, which, however, was not followed by growth in consumption.
Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Promotion and distribution channels for the product Marketing Support The range of spaghetti Bolognese tomato sauces under the Dolmio® brand first appeared on the store shelves in 2008. Active advertising support in the form of television commercials was launched at the same time, which eventually led to the brand awareness reaching a figure of 81% and to correct brand associations among the buyers. In accordance with the global development strategy for the Dolmio® brand, its promotion requires adherence to a common platform and common values in all countries. The main value of the brand is the unity of the family. Therefore, Dolmio’s mission is to help people gather the whole family around the same table with the help of delicious dishes. According to the results of various surveys, between 60% and 80% of respondents in Russia prefer to have weekday dinners at home with the family, indicating that the promoted values are close to the consumers. The importance of these values has increased due to the
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modern way of life in big cities, where people are finding it increasingly difficult to gather together at the same time each day. Roberto specifically noted to himself that, since the brand is founded upon its Italian origin, the brand manager should not remove himself far from the Italian theme during communications. This theme defines the characters and the atmosphere of the brand. The family of dolls from the commercials is already inextricably linked to the brand, making it recognisable and allowing it to stand out among others. The sense of humour provides all brand-related communications with a very pleasant emotional tone, which also needs to be maintained in order to create a uniform brand. A wide range of sauces and condiments in stores complicates the selection process for the buyer. Therefore, brand support is also needed at the point of sale. The launch and subsequent sales of Dolmio® products were supported by promotional activities, the most economically efficient of which were offers such as ‘gift with a
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
purchase,’ as well as discounts. On location, marketing support was provided in the form of tasting of both the completely cooked dishes and the sauces in their pure form. Roberto remembered that, unfortunately, these particular activities were not very successful. In the first case, there was a large number of technical difficulties associated with the preparation of meals inside the stores, and in both cases, the number of successful contacts and additional purchases did not exceed the costs of organising such promotions. “Perhaps, the Mars Food business team has used up all its opportunities to bring about the success of a new product on the market,” Roberto wondered with disappointment. “Moreover, we have provided an active advertising support for the brand over the years, and the level of penetration and its dynamics still leave much to be desired. It is unlikely that an increase in advertising will affect this situation, and so we need to complement it and look for other, more effective and focal methods of promotion.»
Promotion and distribution channels for the product Sales channels The situation is equally ambiguous with regards to the sales channels. Despite the relatively high distribution, the profitability of sales leaves a lot to be desired. Cooking sauces (the Bolognese sauce, in particular) have shown good sales performances in hypermarkets and supermarkets. The figures are much worse in economy class stores, and they are very low in the traditional counter stores. This is related both to the varying total numbers of buyers, and to the varying profiles of customers in the different types of stores. Hypermarkets and supermarkets are visited by a large number of people with relatively high income, who have more opportunities to visit restaurants and travel abroad. For them, the Dolmio® Bolognese sauce is more familiar and accessible, while in economy class stores and counter stores, the proportion of such buyers is substantially smaller. Roberto noted to himself that all this leads to the fact that serving economyclass stores is becoming unprofitable for the company. A sales representative can only serve around 100 economy-class and counter-type stores, and due to the small amount of sales at such stores, the
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sales representative’s salary (relative to the percentage of sales) becomes too big. Serving hypermarkets and supermarkets is less expensive in terms of percentages relative to the sales. A sales representative can serve a smaller number of stores of this form (around 40) compared to the stores of economy-class and counter type, but the sales per store are much higher. Thus, the total volume of sales that can be provided by a sales representative is substantially higher at these larger types of stores. Nevertheless, the profitability of sales in modern trade channels is also very low. This is due to the fact that, unlike the counter stores, hypermarkets and supermarkets, as well as most of the economy-class stores, are owned by large companies and retail chains. These companies, with their numerous stores, occupy a large share in the market, and use this fact to their advantage, negotiating additional discounts and bonuses from suppliers that make up a significant percentage of the turnover. Thus, for various reasons, none of the standard sales channels provides opportunities for cost-effective and sustainable development. A possible solution is provided by alternative sales channels. These channels must meet the following criteria:
Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
1) A large number of potential buyers of cooking sauces. This can be achieved simply through a very large flow of customers, or through a higher concentration of target customers. 2) These channels should initially ease the barriers that arise when buying Dolmio® sauces for spaghetti Bolognese. Examples of such potential barriers may include «I do not think about the product» (bad channel compatibility with this type of product) and others. Examples of sales channels that do not remove, but actually strengthen the “I do not think about the product» barrier, include bakeries and press kiosks (in this case, the channel is quite well suited for selling chewing gum or chocolate bars). A reverse example would be a potential (currently non-existent) ‘Food of Italy’ store. If the consumer has a need for ‘quickly cooking something for dinner, one of the options being pasta Bolognese,’ then an additional barrier is formed at the point of sale due to a lack of products that are needed for cooking this dish, and which are usually absent from the stock at home. For example, the store may not sell readymade mincemeat, or it could be of poor quality, and this problem will cost the buyer
additional time and effort, making it difficult to satisfy his needs. 3) Low maintenance costs at the point of sales. The points of sales would either not require any visits for collecting orders and providing calculations, or would require relatively few of them. 4) Low concentration and bargaining power of client companies in the channel. There should be no big clients that occupy large sections in the sales market and have large absolute sales figures. This will not allow them to get an advantage during the negotiations, and to receive discounts and bonuses that will reduce profitability. 5) Sales in the channel should be carried out with an indication of the brand, and brand promotion should be achieved simultaneously with the sales. Therefore, classic restaurants and cafes will not be suitable, as it is impossible to identify specific brands of sauces there, but there may be other options regarding branded outlets in environments where food is consumed outside the home. Examples of such alternative sales channels may include shops specialising in the sale of meat and meat products, for which one could try to find a sales model linking
Promotion and distribution channels for the product mincemeat, spaghetti and sauce, and ways to promote this model to the target audience. Another example could be small mobile branded points used for the preparation and sale of pasta Bolognese as ready meals, which would be located in areas with large crowds of people, such as concerts and other public events. Roberto also had near at hand the data of retail sales for certain segments of sauces market5, but he was well aware that in order to solve his problem there was no sense in «burying» in figures, striving for accurate calculations. Firstly, any marketing research only partially reflects the reality (and the data from different research companies can vary greatly), and secondly, he needed these figures only to understand the trends and the general context, they did not help directly to respond to questions that were of current interest for him. Roberto finished analysing his notes and summarised the results of the day’s work. So, in order to change the strategy for the development of the product, it would be necessary to take the following steps: 1) Conduct quantitative market research to identify consumer groups that are most susceptible to purchasing this particular product (Dolmio® Bolognese sauce). 2) Create customer profiles, identify their needs, identify the barriers to the use of the product, determine the current level of consumption, and evaluate the potential for growth. 3) Identify alternative sales channels for Dolmio® Bolognese sauces. Develop a model for promotion and sales through alternative channels, whereby the model should bind target consumers to these channels. Also, the model should provide an even greater potential to overcome the barriers that arise when buying Dolmio® sauces. 4) Carry out calculations for these models (the budget will be 3 million roubles6 for all channels); obtain the highest possible number and the best possible quality of contacts7 within the available budget; suggest and justify the quality criteria for the contacts. 5) Suggest ideas for further promotion and ways develop the whole category of sauces for cooking (rather than just the Bolognese sauce) among Russian consumers8.
Having finished his work, Roberto leaned back in his chair with a sense of a pleasant fatigue and looked out of the window. It was already dark. The working day had passed quickly, but it had been very fruitful. Awaiting Roberto and his team was a rich and interesting week of heavy work on changing the business model for the sales and promotion of the Dolmio® Bolognese sauce, after which they would have to get together once again and discuss the results. Roberto did not doubt the quality of the work, confidence and motivation of his colleagues and was confident that they will be able to find a solution that will provide the company Mars with a breakthrough in the market of sauces for cooking.
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See attached Excel file 6 The budget is intended to create mutually beneficial ways to promote the product through alternative channels (marketing activities that can interest the consumer and convince him to make a purchase, and at the same time provide benefits to the sales channel)
7
5
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
Contacts are potential consumers of the product within a sales channel Bonus task
8
Attachments
Attachment 1 Penetration and purchase frequency of Dolmio速 in Russian Market
* Figures at the end of the year Source: internal data Mars
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Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Attachment 2 Top meals in Russia Base: 1963 respondents (the target audience - the people responsible for the preparation of food in the house and the purchase of products selected for a number of filters) Question for respondents: «What is the latest meal, which you have prepared?»
Source: Mars survey, 2014
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
Attachment 3 Cooking decision tree
Source: focus groups and household interviews, Mars survey, 2014
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Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Attachment 4.1 Cloud associations
Source: Mars survey, 2014
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Business Case: Unbelievable Adventures of Dolmio速 Sauces in Russia
Attachment 4.2 Top 10 associations, % of respondents’ answers
The total amount more than 100% because respondents could choose more than one answer. Source: Mars survey, 2014
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Business Case: Unbelievable Adventures of DolmioÂŽ Sauces in Russia
Attachment 5 Consumer typologies on the diffusion curve 10 %
Innovators 2,5 %
20 %
Early adopters 13,5 %
30 %
40 %
50 %
Early majority 34 %
60 %
70 %
Late majority 34 %
* The arrow indicates the estimated status for Dolmio Bolognese Innovators – open to new tatstes, inclined to experiment Early adopters – also easy to adapt to change, willing to taste new foods and combinations Early majority – tend to buy a new product when it has already established in the market and has become a popular Late majority – more conservative in their preferences, tend to buy a products that already most people buys Laggards – extremely conservative, not tend to experiments and new combinations in food Source: qualitative consumer research, Mars, 2013
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Business Case: Unbelievable Adventures of Dolmio® Sauces in Russia
80 %
90 %
100 %
Laggards 16 %
This case study was prepared by Changellenge>> — the leading case organisation in Russia www.changellenge.com info@changellenge.com vk.com/changellengeglobal facebook.com/changellenge
This case study was written for Mars, Incorporated www.mars.com