Delissa in Japan
...ucts. Machinery was selected from United States, Germany, Japan and Sweden to effectively and efficiently produce the Delissa products. Advertising and marketing strategy After approving a substantial advertising and marketing budget from both the companies it was decided that Agria would saturate the market with the Delissa brand and try to portray it as new, natural and different from the other brands. The main message for distribution, promotion and advertising was the theme ‘natural dairy food is good to taste.’ The target audience were households with babies and housewives were identified as principal purchasers. Due to the daily buying habits of these housewives it was important to showcase the product as fresh, healthy and good tasting so that it can become a luxury product for mass consumption. Ever since the launch of Delissa products the advertising was not successful. The advertising messages seemed to be cluttered and the surveys conducted showed that there was very little brand awareness and most of the time the consumers were not sure what the advertisements were trying to say. The advertisements failed to highlight the fashionable image of Delissa. The advertisements were more concerned about showcasing the good taste of the products which did not help the company as most competitive products also had a good taste. The fresh from farm Swedish image that was highlighted in their advertisements also raised doubts about the freshness of the products. In addition to this the timing of airing the TV commercials was also not suitable and was not able to target the appropriate audience thereby losing its impact. Distribution Channel The distribution channel selected was not satisfactory and needs improvement. The order processing was over complicated and slow. The system was such that the order received by a sales person was sent to the depot, from there to the factory and from the factory the final product was sent first to the depot and was then forwarded to the stores. This lengthy procedure made the whole the system extremely slow especially for dairy products where freshness is judged by the date of manufacturing. This could also be a reason for large number of product returns (5.06%) as the consumers did not like to but products which were five-six days old. Also the fact that the larger cities such as Tokyo and Osaka did not have any street names made it difficult to distribute the products and there were many levels of distributors that had to be used to reach the retailers on a daily basis made the system very complex and costly. There was also a concern that the Nikko sales team was not giving much emphasis to Delissa products but due to the high costs of hiring their own sales team Delissa had to rely on the sales team of Nikko only. In fact inappropriate distribution channel was one of the major reasons for the poor performance of Delissa in Japan. The distribution costs were exorbitantly high at around 27% of the sales in 1994 and there were clear indications that Agria cannot make profit on Delissa products with such high distribution costs. Distribution levels were also very low at around 40% which were largely due to Nikko limited distribution network outside the metropolitan areas. Prevailing market situation and competition The Japanese market is large and has a lot of potential but the basic problem was that the Nikko’s Delissa organization was not very strong. The Japanese market was flooded by a lot of large companies making the market very competitive and as a result there was very low brand loyalty as consumers easily and readily changed preferences for a better deal. Delissa products were sold in large stores by Nikko in about the 71% of the stores selling Nikko’s products. But the actual figure could have been much less as Nikko did not provide very reliable information about retailers. The brand awareness for Delissa products was not very good as shown by a survey conducted by Oka agency in the Keihin metropolitan area. The unaided awareness for Delissa was around 3% which was far less than Meiji Bulgaria yogurt at 27 percent. Also the recall rate at 16% was not comparable to Meiji Bulgaria and Morinaga Bifidus. The survey also showed that of the 77% of the people who had consumed yogurt in the past one month only 3% of those had consumed Delissa whereas 28% had consumed Bulgaria and 15 percent had consumed Bifidus. Conclusions: Delissa’s entry into Japan had not produced the results it was expected to and Delissa managed only 3% market share in Japan after 10 years of operation. This dismal performance can be attributed to the inappropriate and unfocused advertisements which failed to make any lasting impact on customers and did more harm than good to the product range. The complicated, multi-layered and costly distribution channels were also not helping Delissa to be able to compete with other established brands and making the whole product range profitable. The company thus needs to follow an advertising, marketing and distribution strategy that will help it creating a good image in front of the customers and making them loyal and willing to buy Delissa products on a continuous basis. Recommendations The Japanese market although very tough and competitive there is still huge scope for Agria’s Delissa product line. Delissa’s entry into Japan has not produced the results it was expected to produce and the total market share is only 3 percent after 10 years of operations. However, it is certainly not the right moment to leave the Japanese market or to cancel its agreement with Nikko. This is because Nikko is not solely responsible for the dismal performance in Japan. In order to get hold of the market and increase the market share I would like to recommend the following: · It is first and foremost important to reduce the distribution costs and the time it takes to fulfill a customer order. For achieving this it is important to increase the number of depots close to major metropolitan areas in order to be able to fulfi...