Delissa in Japan

1. Main Problem

After 10 years in Japan, Agria’s Delissa yogurt brand’s market share is too low – just 2-3%, compared to the double-digits in USA, Germany and the UK. Agria is seeking a way to improve the situation.

Alternatives: Agria’s Delissa line of fresh dairy products can:

A. Maintain its presence in Japan and stay with the current franchisee (Nikko),

B. Maintain its presence in Japan and change the franchisee, or

C. Pull out from Japan.

2. SWOT Analysis

Strengths:

- Agria is a Sweden’s leading dairy products cooperative, powerful national and international organization (name recognition). /”By 1991, more than 1.1 billion Delissa yogurts and desserts were being consumed per year worldwide. In fiscal year 1990, Delissa had sales of $1.6 billion and employed 4,400 people in and outside Sweden.”/

- Product variety /”yogurts, desserts, fresh cheese, and fresh cream”/.

- Distribution /”Ekman's idea of know-how transfer ventures, whereby a local licensee would manufacture yogurt using Swedish technology and then market and distribute the product using its own distribution network, had enabled Delissa to penetrate over 13 foreign markets with considerable success and with a minimal capital outlay.”/

- Promotion: /“Delissa was very active in sponsoring sports events, and Bjorn Robertson, himself a keen cross-country skier and sailor, offered his personal support to Delissa's teams around the world.”/

- Japan entry strategy: substantial advertising and sales promotion budget.

- Priced at 15% above competitive products, Delissa's image was "fashionable."

Weaknesses:

- Lack of franchising experience for Agria /”Industrial franchising was rare in the 1970s, and Swedish dairy products firms did not usually invest money abroad.”/

- “When you enter a market like Japan, you are on your own. If you don't speak the language, you can't find your way around.”

- Distribution: delivery procedure is too long for fresh food products. Ordering system is overcomplicated and slow (paper forms instead of a phone order).

- It “seems” like Nikko’s sales force devotes only small amount of their time to Delissa brand, preferring to push other products.

- Current advertising does not differentiate Delissa from other products (all brands taste good!). Moreover, “fresh from the farm” was understood as imported from Sweden – therefore not really fresh!

- Nikko's limited distribution network outside the major metropolitan areas.

- Lack of a real marketing function in Nikko is a great handicap in a market as competitive as Japan.

- Limited line: Agria fails to fulfill Nikko’s growing requests for puddings that are more popular in Japan than yogurts.

- High level of product returns (most likely, customers do not believe products are fresh).

- Wrong timing of TV advertising is chosen (at night when intended for children).

- “We thought we were in control but we weren't.”

- Nikko people, trained to sell the drinking milk line, lacked specific knowledge about the eating milk or yogurt business.

- Poor communication between the partners and a mass of conflicting data.

- Frequent turnover of managers responsible for Japan has interrupted the continuity of the project.

Opportunities:

- High potential for growth /with the market evolving rapidly towards “Westernization,” there is a general interest in American and European products, including yogurt./

- “Market is large with high potential - particularly amongst the younger population.”

Threats:

- Social/cultural: Per capita consumption of yogurt in Japan is low compared to Scandinavian countries. Sales of yogurt in Japan are seasonal. Lack