Breaking into the US ketchup market Essay
The US table sauces market has been performing well, with functional ketchup selling well in restaurants as-well-as in take-away. Their Ketchup market reached a value of $4. 93 billion in 2004, having grown with a compound annual growth rate (CAGR) of 7. 2% in the 1999-2004 periods. (Sheffield University 2005, [Online]) This growth was considerably stronger than that of the global market itself leading to the US markets share increasing by 32. 2% between 1999 and 2004, accounting for 15. 5% of the global market by the end of this period (Datamonitor 2004, pp. 18-25[Online]).
The leading revenue source for the US functional table sauces market in 2003 was the ketchup (sweet) sector, which accounted for 37% of the market’s value. In value terms this sector was worth $1. 88 billion in 2004. The curry sauce (spicy) sector generated the second largest revenues in 2004, reaching a value of $53. 7 million, equivalent to 13% of the market’s value. During the next five years, the ketchup market is expected to experience steadily declining growth rates. By 2008 the market is forecast to reach a value of $7. 52 billion, a CAGR of 5. 4% in the 2004-2008 period, higher than the
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The US table sauces’ growth rate compares averagely to those of other regional markets. (Datamonitor 2005, [Online]) As our research indicates, the sweet sauce sector is leading the US market, followed by the spicy sauces sector. Thus it naturally follows that a combination of the two will be able to capture a large part of both markets. Target Market Analysis Selecting a target market starts from the basic fact that different customers need different things. Our targeting strategy is that we going to produce a new product in an already developed market.
As discussed above the Americans always a welcoming hand to any kind of new food, which is a tremendous advantage for us. We are the answer for people who want to taste something other than the available sauces. We are going to be dealing with two commonly used products in the American market – ketchup and spices (Chilli). Our best differentiating strategy would probably be to promote different taste to the consumers as Sweet-Chilli Ketchup. Providing our recipe in all the restaurants as a condiment for the burgers, pizzas, hot dogs in fast food outlets and for the homes make us to target all sects of the market.
As for age segmentation, a product like ketchup is consumed by all age groups, but more so by youngsters. However, it might prove to be a bit spicy for young children. Keeping this in mind, our target group would be rather broad, ranging from age from 12 to 35. As discussed earlier the US market is some thing different. It has seen many dynamic changes. Basically the adopting culture of innovative food items has made USA different from other countries. The potential market for new edibles has made it the prime attraction for many companies looking to launch their products in new countries.
The consumer profile of the most of the Americans would suggest that they prefer to eat out rather than in home. And added to that the busy life style is forcing the people to eat out during office hours. The restaurants are concentrating in this aspect. Which is creating a great market for the food industry. Hence, the market is ripe for the launch of a new product like sweet-chilli ketchup. Market Analysis: Political Analysis We will start off with some a very brief explanation oft the political system in USA. USA is one of the biggest democratic countries, containing over 50 states.
Each state has a governor elected by the people, who is responsible for that particular state along with the 2 senators working under him. Above all these there is a president who is elected by the people. It is a very stable Government, which bodes well for us as exporters, as there are unlikely to be any drastic changes that would affect our business. It has an independent judiciary which interprets the constitution and acts as a final court of appeals. There are varying political factors surrounding the US environment.
The political factors include government regulations and legal issues and define both formal and informal roles under which the firm must operate. Examples include tax policy; environmental regulation; trade restrictions and tariffs and political stability. General government framework for USA shows a population of 293. 7m (July 2004, Census Bureau estimate). The fiscal year is starts October 1st and finishes September 30th. The major electorate voted separately in 2004 for Democrat 48. 3 %, Republican 50. 7 %, and 1 % of the popular vote for other fractions.
The Republicans’ key major political platforms included ” to promote low tax rates and a limited welfare system, combined with a strong military and a tough criminal justice system. ” In the other hand the Democrats tend to be pro-labour and have, since the 1960s, been more inclined to espouse liberal attitudes towards civil rights and welfare expenditure. (The Economist Intelligence Unit, 2005, pp. 16-17). The tariffs on products of interest to a large number of developing countries are very high in the USA. In this instance the tomato ketchup import tariff is 7.
9 (Das, 2005 [online]) and also the importing company is obligating to pay VAT on the imported goods in USA. However, the main platform tax liberalization suggests that VAT for ends good will be diminished. This will reflect the ketchup price and will make our product more competitive. Unfortunately the import tax will stay stable for EU nations in the next 4 years. According to the Bush administration “prioritized packages of tax cuts to stimulate demand, although conventional economic wisdom points to the ineffectiveness of fiscal stimuli for short term demand management” (Zodrow, G. R.2002 p. 134) , and a number of commentators have raised concerns over the sustainability of the fiscal position given rapidly diminishing surpluses and falling tax receipts.
Despite increased security, the US will remain fundamentally an open society, with few restrictions on the movement of people and goods. Exporting to the US should not prove to be a problem, and we can feel assured that the product will not face any extraordinary complications during the export stages. Economic Analysis After the Second World War, USA became a superpower. It has been a force to reckon with for many years.
It is self evident that USA is one of the most influential countries in the world. It has a good relationship with Ireland, which is our manufacturing base. There is no serious trade conflict between two countries during last 10 years. And the trade between the two countries shows an increasing trend in the future. However, some import restrictions and quotas are applied by the US government due to their trade deficit and increasing unemployment rate. From the legislation aspect, the most powerful and critical government department for our company to market in the US is FDA (Food & Drug Administration).
Our product should meet the quality standard of sauce Standard regulated by FDA, but as Heinz ketchups already has so many products in the US market, we do not anticipate this to be a huge problem. The US has the largest and most technologically powerful economy in the world. According to the USA Department of Commence, Bureau of Economic Analysis, the GDP (Gross Domestic Product) of 2004 is 11. 735. 0 billion current of dollars, with a per capita GDP of $37,600. (Datamonitor 2004, p25-29 [Online]) From the years 1994 to 2000, the country enjoyed a solid increase in real output, low inflation rates, and a drop in unemployment to below 5%.
The year 2001 saw the end of this boom performance, with GDP increasing only 3. 2% and unemployment and business failures rising substantially. The response to the unfortunate terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. In 2002, a moderate recovery took place, with the GDP growth rate rising to 3. 5%. In the first half 2002. Since March 2003 the war between a US-led coalition and Iraq shifted resources to military industries. It also caused uncertainties about investment and employment in other sectors of the economy.
Last year, the US economy experienced a positive growth of GDP by 6.6, although this growth is offset by the devaluation of dollars (Datamonitor 2004, p25-29 [Online]) In this market-oriented economy, private individuals and business firms make most of the opportunities. The governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than business in Western Europe and Japan in decisions to expand capital plant and develop new products. At the same time, the barriers for foreign companies to enter the US market are lower than those to enter the European and Japanese market.
At the moment, the most serious problem in the US economy is trade deficits, which can not be reversed in the short run. As a result of long-term trade deficits, the US owes a great amount of debts to other countries. These increasing debts threaten the security of the American economy. And another result of the nation’s debt is inadequate investment in economic infrastructure. Moreover, as those “baby boomers” will retire in future, the rapidly rising medical and pension costs will make government’s burden heavier. Lastly, the incomes of lower group families have not increased for some time.
However, all-in-all, the positives far outweigh the negatives, and we believe that taking into account the frequent usage of ketchup in the country, USA remains our best choice for ketchup-related exports. Social Analysis Before entering into a market it is very important that the Social factors analyzed. This is because a company has to adopt the culture of that country so they can penetrate that market. The success or failure of a product depends on the customers, so as a launcher of a new product we must adopt the culture of the United States in order to gain the market.