Leipäjuusto Export Project Essay
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This paper aims to focus on producers’ strategy and steps when they try to enter new market place – Russia, with specific product. This product is Leipäjuusto. It is Finnish fresh cheese traditionally made from rich milk from cow that has recently calved. Then it was dried. It could be stored for a few years. To eat it, the dry and hard cheese was heated on a fire which softened it and produced an especially appetizing aroma. Commercial version is made of regular milk.
Even today Leipäjuusto can be dried. It has quiet mild flavour .
In this paper I would like to answer these questions: * What behavioural differences in consumption of this kind of cheese can be expected on the Russian market? * What are the key success factors for the project of introducing Leipäjuusto on the Russian market? * What strategy of entry to this market can be recommendable to Finnish SME producers? * What communication methods would be used to promote this product on the Russian market?
Cheese is one of the most nutritious products.
Its nutritive value, presence of amino acids, vitamins, salts of calcium and phosphorus is required for normal development of human body. Cheese is healthy and useful food for people of any age and especially for children. In terms of consumption possibilities cheese is one of the most universal kinds of food. First of all this is ready to serve product requiring no cooking. Cheese plate is a traditional member of table.
Major peculiarity of cheese consumption in Russia is the consumer perception of it as an “accompanying” product. In Europe (for example in France, Italy, etc.) cheese is an independent meal. In Russia cheese is just a part of something – sandwich, salad, soup or sauce. This leads to much weaker cheese consumption in Russia comparing to “traditionally cheese” countries with high consumption rates (in European countries it is 15 kg annually). In Russia cheese consumption rate was 4.9 kg per person annually (in 2009 according expert estimation), and in premium cheeses segment – just 149.7 gram/person . Russians still show preference for unprocessed cheeses.
They are regarded as natural and healthy. Furthermore, increased purchasing power, particularly in Moscow and St Petersburg, stimulates demand for premium cheese. Higher unit prices have not had an effect on demand. Russian consumers are open to paying a higher price for quality, and are relatively price insensitive, provided they obtain commensurately high standards of quality and flavour. Choice of cheese is determined mainly by consumption experience of this or that kind. Product freshness is also important. Brand is not important for Russian cheese consumers.
Hard cheese enjoys the highest demand in Russia being traditional and universal everyday food. Research shows the increasing popularity among Russian consumers of cheese featuring rich and intense flavours, especially those made from goat and buffalo milk.
Significant differences exist from region to region. It may come as a surprise, but some businesses report finding that the real differences between neighbouring regions in Russia may in fact be greater than between neighbouring European countries.
Domestic manufacturers enjoy higher consumer credit because consumers believe that domestic products are fresher, more natural and of higher quality. Patriotism of Russians is other factor to buy “Russian” product.
Foreigners often say that Russia lacks cheese-eating culture, pointing out that: * Russians do not eat enough “soft” cheeses, * Russians do not eat enough blue cheeses, and * Russians never eat cheese for dessert. Obviously, there is a “cheese culture” in Russia, but it is very different from Western Europe .
There is demand for Leipäjuusto in Finland. Russians come to Finland to buy this kind of cheese (especially consumers from the nearest regions of Russia). It means that it is not vital to change consumers’ behavioural or adapt product to it, when we think about SME company (its production is not many tons). Russian market is huge and it is possible to gain adequate amount of loyal consumers. Key success factors
As it was written before, quality and delicious flavour are key factors. Cheese should be fresh and made of natural sources only without chemical additives. Russians are buying cheeses according their experience. So it means that positive reference is very important factor how to successfully introduce this product on Russian market. It should be recommended to sell this cheese as premium product in higher price category. Finnish positive image (high quality, health and environmentally friendly approach) is next supportive factor.
Strategy of entry
Russia imports cheeses from more than 30 countries. Major cheese supplier is Germany (29 %). Another large supplier of cheeses to Russia is Ukraine (23 %). Finland is the third important supplier of cheeses to Russia with 11 % .
Major destinations of premium cheeses’ imports in Russia are Moscow and Saint Petersburg. Muscovites develop new eating habits and lifestyles. No wonder that Moscow is the biggest market for unconventional (for Russia) products. Muscovites live more in the European lifestyle; they are less conservative in their ways compared to other Russian cities .
Cheese market is the battlefield of large players: trade companies which distribute, pack/repack and even produce cheese; and retail chains which sell private label products. Leading companies control the bulk of cheese import as well. Distribution of imported cheese guarantees more stability to wholesalers than distribution only of domestic products .
Cooperation with large distributor (selling product under distributor’s brand) could be the most effective and easiest way to entry Russian market. As Finnish product it is recommendable to cooperate with Finnish company Valio Oy, which is one of the biggest cheese importer to Russia and “Valio” brand is well-known there. Leaving promotion and logistics of manufacturer’s product to distributor is additional advantage. It decreases producer’s costs; on the other hand price is lower of cause. But still it is the best way when entering new market. Leipäjuusto producer can use distributor’s huge knowledge of Russian market and experience. The best market places are Moscow and St. Petersburg in the beginning, as indicated above. Contract with chains on the local markets is other (alternative) method to entry Russian market. Regional peculiarity knowledge and well established relationship with local retailers is the most important factor when using this type of distribution.
Peculiarity of Russian cheese market is the dominance of unbranded products promoted under traditional names of cheese kinds (excluding Moscow and big cities where the average income level is higher and consumers buy quality branded product in attractive and convenient package) . The majority of consumers have poor knowledge of brands offered by the market. Some of Russian consumers already demonstrate certain brand awareness. However, brand awareness rarely stimulates consumers to try the product. Domestic producers market no-name cheese, foreign competitors supply cheese that has names to guide shopper’s choice.
Some foreign manufacturers have begun to be more competitive on the market creating “national” brands. Meanwhile, as incomes have grown, some consumers have started to turn back to international brands. International brands, particularly in the FMCG market, have benefited from a recognized reputation. Meanwhile, local brands are seen as high quality and benefit from Russians’ patriotic impulse to buy “Russian-made” products.
Promotion of own brand by producer should use integrated program, that combine price marketing (discounts, promotional price) and image marketing (POS-materials and merchandizing). Cooperation with chains on a local market should be very close (as we know, good relations are key to success when cooperating with Russian companies). It is important to use as much BTL as possible. POS-materials, merchandizing, sampling and demonstrations, it is short list of promotion techniques that should be used.
Highlighting product naturalness is also an important trend in branding. It is advisable to declare naturalness as corporate value and mission. “Natural” naming is very trendy on FMCG markets – on cheese market this trend is especially obvious .
Packaging is other part of promotion. Product exterior is very important. Cheese package (colours, pictures) should reflect its peculiarities and increase product recognition. Part of product could be covered only by transparent plastic film to show visual properties of the product. It is recommendable to use some Finnish symbol (for example state flag) to highlight the country of origin. Box package is common version for luxury type of cheese.
Russian market potential is huge. Cheese consumer base is growing on annual basis, in premium cheeses the growth is even faster. Experts forecast this trend to continue and by 2015 consumption rate of premium cheeses will reach 283.7 gram/person annually , from 149.7 gram/person in 2009. New trends to try new products (especially in Moscow and other big cities) and popularity of European style of cheese brands are auspicious factors.