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...ownies, and bread. Companies are rushing to finish new products and get them out on the market to meet this new demand just like Flaquitas. · Low-Fat Diet popularity: American low-fat dieters will also express interest in Flaquitas due to the fat content. The low-fat diet was the number one diet in the 1990s, but many consumers still believe that is the best way to lose weight. Diet and weight control data recorded by the National Weight Control Registry provides the diet and weight-control behavior of 3,000 American adults who have lost an average of 60 pounds and have kept it off for an average of six years. These dieters ate a low-fat, high carbohydrate diet. (9) Although the Flaquitas are low in carbohydrates, the low fat content makes them a healthy option for low-fat dieters to choose instead of the traditional corn or flour tortillas. · Diabetes is on the rise: The number of diabetics has grown drastically over the past few years primarily as a result of America’s obesity crisis. Flaquitas are low on the glycemic index meaning that they have few ingredients that the body will change into sugars during digestion. Those suffering from diabetes are taking steps to avoid foods that may be bad for them when there are alternatives available to them for the foods they used to enjoy. Flaquitas are a great substitute for the traditional flour tortillas because they are lower on the glycemic index. (11) There is a definite opportunity for Flaquitas in this market because they are a new healthier product that eliminates sugars that contribute to a diabetic’s condition. · Wellness Evolution: The low-carb and low-fat diets are part of an overall wellness evolution that has many facets to it. Flaquitas are composed of pure chicken protein as compared to the flour and corn tortillas that may have been fortified with soy protein. Protein derived from animal sources such as chicken contains all essential amino acids necessary for a well balanced diet. Wellness is a major force that will have a significant influence on consumer purchase behavior within a number of product categories and services. · The Broader Market for Mexican and Hispanic Foods: Elements of Hispanic culture are permeating mainstream American culture and having a broad influence on consumer tastes and buying patterns. Interest in food products of Hispanic origin, like tortillas, has spread to consumers who come from varied ethnic backgrounds and live in many parts of the US. Sales of the Mexican Foods category, as defined by Information Resources, Inc., which includes hard/soft tacos, tortillas/taco kits, Mexican food items and refried beans, posted a 3.3% compound annual growth rate in the 1998-2002 time frame (8) With the flavoring abilities of the Flaquitas, they can easily be a part of the Mexican/Hispanic food market. · International Perspective: Low-carb diets are a strong diet trend in the US as well as in the United Kingdom. A recent survey in the UK estimated that around 3 million people in the UK have tried the Atkins diet. The book, Dr. Atkin’s New Diet Revolution, recently replaced Harry Potter and the Order of the Phoenix at the top of the UK best seller lists.(6) Australians also have interest in the low-carb diet trend. Australia is typically slower in catching US trends and is just coming off of the low-fat trend. Australia is likely to be the next market to see a strong growth in low carbohydrate diets. · Tortilla Growth: Tortillas, a Mexican product, have achieved great penetration in the mainstream market. The Tortilla Industry Association (TIA) reported in its biennial market research study that tortilla sales were $5.2 billion for 2002 which is an increase of 9% from the 2000 reported tortilla sales and an increase of 57% over the past four years (3). The rapid growth of the tortilla industry is attributed not only to the growing Hispanic population, but to increasing tortilla consumption among Non-Hispanics as well. Researchers for TIA estimate that the tortilla industry will grow to be a $6 billion industry by the year 2004 as show in Figure 3.0, representing a growth rate of 8% over the past two years. Tortillas have also become the second highest selling product in the packaged bread category, surpassing even the highly popular bagel. (3) Simmons data show that tortillas are second only to salsa in the percentage of households that use Mexican products. In 2000, Americans consumed a total of 7 billion pounds of tortillas, which is equivalent to approximately 84 billion tortillas or almost one tortilla per American per day. The love for Mexican food by US consumers is further illustrated by the fact that Mexican food has become so mainstream that salsa beats out ketchup in sales and the margarita is the number one cocktail in the country.(3) Figure 3.0 Tortilla Growth 3.3 The Competition There are other low-carb tortillas on the market, but Flaquitas would stand out amongst the competition. Flaquitas contain only 2.6g of carbohydrates and 0g of fat as shown in Label 3.0. The closest competitor would be the Atkins tortilla which has slightly more carbohydrates and a higher fat content as shown in Table 3.0. The other substitute products vary in their carbohydrate, protein and fat contents. For those on low-carb diets, these three nutritional information pieces are the most important. Label 3.0: Flaquitas Nutritional Label Table 3.1: Flaquitas Comparison with Substitutes on Nutritional & Cost Information 3.4 Competitive Advantage An advantage over other competitors is that Flaquitas are composed of pure chicken protein as compared to the flour and corn tortillas that may have been fortified with soy protein. (1) Soy protein, unlike chicken protein, is really an incomplete protein that must be consumed with other proteins to become a complete protein. Flaquitas have the highest proportion of protein (12.6g) compared to any of the substitutes and therefore are an excellent food for building muscle mass or as a part of a high protein diet. By containing zero grams of fat and a low caloric content, Flaquitas would satisfy those on a low-fat diet as well. Flaquitas not only stand out amongst flour and corn tortillas, but they also tower above the low-carb tortilla competitors. The Flaquitas brand is a healthier tortilla due to the low-fat, high-protein content resulting in a larger market appeal. 3.5 Flaquitas’ complement products Flaquitas would benefit other food markets such as the salsa or margarita market. These are two complements associated with products like Flaquitas, see Listing 3.0. Consumers have a tendency to purchase more salsa and possibly more margarita mix as they consume more tortillas. TIA noted that Mexican food has become so popular that salsa beats out ketchup in sales and the margarita is the number one cocktail in the country. (3) Listing 3.0: Flaquitas Complements Salsa Margaritas Refried Beans Mexican Sauces/Seasonings 3.6 Market Entry ESMBA06 Teams 3 recommends that FDI market Flaquitas to a mainstream company and to use the name Flaquitas as the brand name. Mainstream marketers in the tortilla industry with the highest sales history include Kraft, Ortega, and Hormel. Once FDI finds a mainstream sponsor, there are several target markets where consumers can have easy access to the product. Some proposed market pathways are as follows: · Quick Serve Restaurants (QSR) like Taco Bell · Casual dining restaurants like TGI Fridays · Low-carb websites like www.synergydiet.com · Grocery stores like Kroger When dining out many menu items are of high-fat and high carbohydrate content, but with the introduction of Flaquitas consumers will have a healthier menu option. 3.6.1 Primary Market Focus: The primary focus for the market pathways will be toward the QSRs such as McDonalds, Wendy’s, Subway, and Taco Bell to provide consumers with the healthy new products that they expect and deserve. FDI is the company that can meet these consumers’ needs. For example, if Subway uses Flaquitas instead of their current low-carb tortilla they can reduce their Turkey Bacon Ranch Wrap by 2.4g of carbohydrates. When a dieter is limited to just 20 carbohydrates a day on the induction phase of Atkins, 2.4g of carbohydrates could mean another snack. 3.6.2 Market Versatility: Prior to adding spices to the product, the base Flaquitas wrap is tasteless. Flaquitas can then be formulated to suit each client’s needs by adding custom blended spices. The current spices in FDI’s inventory are as follows: · Spicy Mexican · Italian Herb · Asian Spice · Classic Garden Herb These spices incorporated in the tortilla itself along with other sauces in various recipes can create some unique menu items for the consumers. Flaquitas will not only impact the market today, but will create their own market by offering a unique product compared to the other wraps available today. 3.7 Market Limitations Many economists fear that low-carb products may eventually fizzle out because the low-carb diet is a trend. Although, it should be noted that the low-fat craze has fizzled and low-fat products still have good sales. They are more modest compared to their prime in the 1990s, but they still are a profitable venture and new low-fat products still are making it to the shelves in the supermarkets. The same fate is likely for the low-carb products. The time for the Flaquitas’ launch is now in order that FDI can participate in the exponentially high growth rate of low-carb consumers. 4. Sales and Marketing Strategies Rising popularity of low-carb products has manufacturers scrambling to meet the new demand. In order to ensure a successful product launch of Flaquitas into this new market, FDI and this economics team have identified Flaquitas’ benefits. To market these benefits, there must be adequate promotion of the product. We have also determined the potential market share and ways to distribute the product. From these assumptions, we have determined a pricing and cash flow strategy. 4.1 Product benefits In order to successfully market the product, FDI and our team have recognized the Flaquitas’ benefits listed below: · Chicken protein: Flaquitas are composed of pure chicken protein which contains all essential amino acids necessary for a well balanced diet. · Nutritional Content: Flaquitas have more grams of protein and fewer grams of carbohydrates than their competitors. Flaquitas also have no fat content. The low carbohydrate content ensures that Flaquitas are low on the glycemic index making them a diabetic friendly food. Flaquitas have a smaller calorie count than their low-carb flour and corn competitors when serving size is equalized. · Shelf Life: The Flaquitas formulation eliminates fat and other undesirable components therefore offering a longer product shelf life and reduced calories. · Minimal preparation time: Flaquitas satisfy the recent trend of consumers’ preference for foods that require minimal cooking time and effort, while offering great taste. · Flavors: Flaquitas offer a unique meaty texture. The isolated chicken protein is basically tasteless and can be flavored and seasoned to meet a variety of cuisines such as Mexican, Italian, Asian, and Caribbean as well as traditional American cuisine with endless possibilities of fillings. 4.2 Promotion and Distribution Strategies 1. Already Flaquitas have received publicity through at least three news outlets. Flaquitas and their inventors were featured in The Palm Beach Times in March 2004. Also in March 2004, the National ABC Radio News by Paul Harvey featured Flaquitas. Finally, the University of Florida through their weekly newsletter sent to thousands of UF graduates featured an article about Flaquitas. 2. Although this publicity is helpful, the initial marketing of Flaquitas must involve acquiring a mainstream marketer in the tortilla industry like Kraft, Hormel, or Ortega. 3. If possible, the next strategy would be to also add the Atkins brand name or Atkins approval stamp. Secondarily, we would recommend that FDI should try to also target the Zone and South Beach Diet manufacturers to add these diets to the label. 4. With increasing numbers of low-carb diners, more restaurants and fast-food chains like McDonalds, TGI Fridays, and Wendy’s are climbing on the low-carb bandwagon. By making Flaquitas “Atkins Approved”, we would recommend that FDI market the Flaquitas chicken wraps towards these quick serve restaurants and casual dining restaurant groups primarily, competing with corn and flour tortillas. 5. Our team also recommends that FDI focus on repackaging the Flaquitas to sell to online low-carb grocers and the traditional grocery store. This will allow health-conscious individuals to eat out or eat in with Flaquitas. Not only will Flaquitas be marketed as a low-carb, weight-loss food but also as a weight balance food. 6. As consumers are always looking for variety, FDI is already preparing for the future. During initial introduction, Flaquitas will be marketed as a chicken wrap. FDI is working on their future products lines which include fish, pork, beef, and soy protein wraps. ESMBA06 Team 3 would also recommend for FDI to target the international markets with the Flaquitas movement including Europe and Australia. 4.3 Market share: Understanding competitors’ market share and sales is essential in Flaquitas marketing. With this information, we propose a market share strategy for Flaquitas. 4.3.1 Tortilla Sales: Tortilla sales were $4.4 billion in 2000 which is an increase of $1 billion from 1998. According to Tortilla Industry Association (TIA) report as shown in Table 4.1, flour tortillas account for $1.75 billion in annual sales while corn tortillas chalked up $1.44 billion in sales in the year 2000. The remaining 27% of sales in 2000 were from tortilla-related products, which include tortilla chips and taco shells. Tortilla sales reached $5.2 billion in 2002 and are estimated to grow to $6 billion in 2004 according to researchers at TIA. (3) Table 4.1 Tortilla Sales & Poundage 4.3.2 Tortilla Consumers Demographics: Data from the Simmons National Consumer Survey for fall 2002 explains who buys flour tortillas, corn tortillas and other tortilla related products with respect to genders, ethnic origins, incomes, education and geographic locations. This, however, creates a challenge in marketing Flaquitas since it spreads the consumer into many different categories. Looking at the usage patterns by ethnic origins reveal some purchasing patterns. Consumers with Spanish/Hispanic origins purchase the highest percentage of Mexican food products at 73.30%. Asian consumers purchase the least amount at 40.80%. In another category, female respondents were only slightly more likely than males to purchase Mexican food products: 62.4% vs. 58.0%. Mexican food seems to be more popular amongst those with higher incomes contrary to popular belief. The purchasing behavior tops out at 70.0% for those whose yearly incomes are between $150,000 and $249,000. Educational differences in regards to Mexican food purchases go hand-in-hand with yearly incomes. 66% of college graduates purchase Mexican foods compared to 43.0% of consumers who do not have a college education. Breaking down the sales by region, more than half of all flour tortillas are purchased out West, while a quarter of tortillas are bought in South Central region. The remaining amounts are purchased in Southeast, followed by Northeast and North Central regions as shown in Table 4.2. The TIA also reported that 49% of tortilla manufacturers are small businesses with less than 50 employees. According to the report, direct sales methods accounted for 53% of tortilla sales in year 2002, while 47% were made through distributors. All of these numerous differences amongst consumers require general marketing strategies that reach the majority of the primary groups. One way to do this is to focus on commonalities between the groups such as a general desire for overall wellness and health. Please see Figures 4.2-4.6 for detailed information regarding the demographics of tortilla consumers. (3) Figures 4.2-4.6: Summary of Consumer Mexican Food Usage Figure 4.2 Use of Mexican Food by Region Figure 4.3 Use of Mexican Food By Age Group Figure 4.4 Use of Mexican Food by Gender Figure 4.5 Use of Mexican Food by Income Figure 4.6 Use of Mexican Food by Education 4.4 Growth Strategy: Our team is predicting an optimistic sales figure of 10,548,000 Flaquitas sold the first year. This prediction is based on 3.6% of the U.S. population (10,548,000 as of April 12, 2004) participating in a low-carb, high protein diet consuming one Flaquitas sandwich wrap each for the year. This is an optimistic assumption, but still a reasonable one. We recommend that FDI first sell Flaquitas with a 100% mark up at $0.35 each. Assuming tortilla sales reach $6 billion in 2004; Flaquitas would control 0.06% of the market share (see Table 4.7 for market share percentages) . Looking at this from a pessimistic view point, our team is predicting only 4,000,000 Flaquitas sold. With this more conservative approach, Flaquitas would control 0.02% of the market share. In either scenario the market share of Flaquitas is so low that the price is unlikely to be affected by the demand and supply of the competitor tortillas. As a five-year plan, our team would encourage FDI to look into ways to increase its sales and sale price each year to increase the Flaquitas’ market share and grow the company. This additional revenue could cover the research and development costs of expanding into international markets as well as additional product offerings. Table 4.7 Tortilla Market Share of Flaquitas Market Share Flaquitas Sales Expected 2004 tortilla market Flaquitas Market Share (%) Optimistic-sell 10,548,000 Flaquitas mark up of 50% ($0.25) $2,637,000.00 $6,000,000,000.00 0.04 mark up of 100% ($0.35) $3,691,800.00 $6,000,000,000.00 0.06 mark up of 200% ($0.52) $5,484,960.00 $6,000,000,000.00 0.09 Pessimistic-sell 4,000,000 Flaquitas mark up of 50% ($0.25) $1,000,000.00 $6,000,000,000.00 0.02 mark up of 100% ($0.35) $1,400,000.00 $6,000,000,000.00 0.02 mark up of 200% ($0.52) $2,080,000.00 $6,000,000,000.00 0.03 4.5 Price and Cash flow: The estimated total operating cost is approximately $1 million for each of the first five years to establish Flaquitas. Cost of sales is based on a five year averages (see Appendix 9.1 for the $1.1 million figure). This price assessment includes the facility, labor, equipment, raw materials, preparation, processing, packaging and other miscellaneous expenses. With the team’s optimistic sales figures of 10.5 million Flaquitas per year at $0.52 a piece, FDI’s average yearly costs would remain approximately the same but annual sales would total $5.5 million with an annual profit of $4.38 million. The pessimistic business plan is based upon producing four million Flaquitas per year, with predicted Flaquitas sales of $1 million a year at $0.25 each. These sales would generate a potential net loss of annual loss $8,543 annually which is $4.38 million lower annually than the optimistic business plan. Being that Flaquitas are a unique product compared to other various wraps on the market today, FDI should have no problem exceeding the pessimistic sales figure. 5. Manufacturing and Operations 5.1 Production and Distribution · Process: Flaquitas will be produced in a state-of-the-art manufacturing facility. Flaquitas production will begin with raw mechanically separated chicken and water. The chicken will be homogenized with water and ph adjusted to separate the protein product from other components. After filtration, the chicken proteins will be ph adjusted again and will undergo centrifugation to remove water. The protein product will then be combined with dry ingredients, blended at high speed, and fed to Teflon molds for cooking. After cooking, the Flaquitas will be packaged and ready for distribution. Distribution is expected to take place in refrigerated trucks to maintain consistent quality of the product. Figure 5.0 below provides full manufacturing details. (1) · Manufacturing: The Operations team of FDI will manage the Flaquitas production process using Lean Manufacturing Principles. Lean Manufacturing Principles promote the use of cellular processing, point-of-use storage, and inventory pull systems. o Cellular processing is the use of equipment that facilitates lower changeover times, giving manufacturers the ability to expand and contract production requirements rapidly in response to demand changes. As such, the Flaquitas team would utilize cellular processes that are easily scaleable and interchangeable to respond to changes in tortilla market demand. o Point-of-use storage is the concept of providing all of the supplies needed to maintain and operate a unit process within close proximity. This concept can help decrease downtime during changeovers and maintenance. Point-of-use storage could be utilized throughout the manufacturing facility, allowing operators to conduct maintenance on their own equipment, possibly resulting in higher on-stream factors. o An inventory pull system would allow production scheduling to be based on demand requirements rather than target inventory positions. Overall, these manufacturing concepts will lead to less finished product inventories, lower production downtime, higher overall equipment efficiency, and the ability to respond to sales demand and higher production needs quickly. · Quality: To ensure that customers receive the highest quality product feasible, the FDI should also consider implementing Six Sigma strategies. Six Sigma fundamentals will engage operators in process control training and increase troubleshooting skills. Long term, this strategy will also minimize the need for costly technical experts in the manufacturing facilities. Figure 5.0 Flaquitas’ Pr...