“To share with our community a message of health and hope for a better life” (Sanitarium, 2015) is the mission statement of Sanitarium. After the successful implementation of “Up and Go” in Australia, expansion overseas is the next stage that Sanitarium should take in order to spread its mission to the world.
The purpose of this report is to analyse potential cultural and economic factors that would affect the introduction of Sanitarium’s Up and Go into the foreign, developing market of Brazil. The report firstly provides a synopsis of Sanitarium as well as a background into the product itself which surmises that it is a breakfast drink which is targeted toward time poor individuals and to a lesser extent health conscious people. The report goes on to discuss the relevant economic and cultural factors of Australia which contributed to the success of Up and Go in this market. Australia’s high levels of GDP per capita, the fact it is a developed economy and high rates of urbanisation means that a large segment of the market have the disposable income to purchase Up and Go and overall do not have to travel far to access a retailer for it.
The Australian cultural analysis indicates that Australian culture is monochromic and low context, in which individuals seek power and success and privilege individualism over relationships. Due to this career focus in conjunction with the growing social trend of healthy living, Up and Go has been successful as it has provided a convenient and quick, healthy breakfast option to these time poor individuals
The Brazilian economic analysis indicates that it is a strong developing economy with relatively high GDP and strong labour force statistics. There is a strong urbanisation trend which will impact on the marketing and distribution channels that Up and Go would utilise. Additionally the total population (202. 033, 670) and the age distribution (skewed toward youth) demonstrate that Up and Go has a very large potential market among the young working class if it can deliver effective marketing communications.
The Brazilian cultural analysis indicates that Brazil is a polychronic, high context society in which relationships between individuals and a work life balance is more important than personal successes. This is crucial for Up and Go to comprehensively understand as it influences not only their marketing communications but how business operations should be shaped in order to effectively capture the market. There is also a growing social trend towards healthy living, therefore low sugar products should also be exported to Brazil.
Based on the above analyses, this report illustrates the level of adaptation needed in order to be successful within the Brazilian market. This involves extending the product line to include flavours that are locally grown in Brazil (papaya, oranges). Additionally language changes would need to be made to the packaging as the official language in Brazil is Portuguese.
This report then identifies adaptations to the marketing mix and outlines an overall marketing strategy that could be used in order to capitalize on the opportunities presented in the Brazilian market. This includes utilizing the Delphi technique to acquire a team of experts to guide decision making and provide more detailed knowledge on the cultural context. Finally, this report suggests that incorporating locals individuals in as much of the processes as possible such as hiring local PR companies, employing local staff, using local produce and using indirect exporting as a method of expansion, would effectively capitalize on the polychronic culture of Brazil and hence provide the greatest chance of success for Up and Go in Brazil.
Background of Company and Product
This report focuses on the prospect of exporting Up and Go (Sanitarium Health and Wellbeing) from Australia to Brazil.
Sanitarium Health and Wellbeing is a food company under combined ownership of Australian Health & Nutrition Association Limited and New Zealand Health Association. Their focus is primarily on breakfast cereals and the encouragement of a healthy lifestyle. Sanitarium was established in 1898 and currently produces over 150 products (Ltd., 2015). The primary product line of the company is “Weet-Bix”, which is popular in the Australian cereal market (Marketing Plan Sanitarium, 2012).
Up and Go is a breakfast drink which launched in 1997 and has experienced steady growth in Australia and New Zealand (Sanitarium: Our Products, 2015). It provides a convenient alternative to the traditional cereal foods offered in the market. Its marketing campaigns are often targeted towards young, fit and healthy people with busy lives (Automatic Films, 2010).
The segment of the Brazil market which Sanitarium could target with Up and Go are the working class and fitness conscious people (to a lesser extent). The working class are busy in the morning, so the product could make their life easier and allow them to increase the efficiency of their morning routine. In addition, the drinks are easy to handle, they are non-messy and they are healthy. This initial observation provides a potential opportunity in the market (Marketing Plan Sanitarium, 2012)
Based on the population figures (see appendix) we can determine that Australia’s population is largely focused around major cities (Melbourne, Sydney, Brisbane). Resulting from this we can infer that a majority of employment for the nation is going to be centered in these cities and so marketing efforts and distribution channels need to be established in these areas. However a potential hindrance to the success of Up and Go in Australia is its low population density at 2.95%. This implies that the population outside of urban agglomerations are widespread which limits the potential growth of the firm in Australia without significantly increasing costs.
The figures related to economic performance and budgetary position (see appendix) illustrate that Australia is has a relatively large disposable income in relation to the rest of the world. (OECD Better Life Index: Australia, 2015) Therefore this helped create industry attractiveness for Up and Go. The three dimensions for measuring industry attractiveness are relative size, growth (which implies capacity to spend) and whether the particular market suits the strategic objectives of the firm (Fletcher & Anderson, 2014). The rising disposable income over the 2000-2012 period (see appendix), coupled with the growing cultural trend for healthy eating, has helped Up and Go grow within the Australian market, such that they have expanded their product line to include new flavours (banana, caramel, 2x protein) (Sanitarium: Our Products, 2015)
The cellular and internet adoption rates within Australia are 105% and 80% respectively. This greatly increases the penetration and reach of marketing and promotional strategies as well as decreasing the overall costs of distribution (Heng, Heermann, Samaranayake & Sath, 2013)
The below suggests that on average people go to more than one high school and that almost 90% go on to tertiary education. Due to the time poor nature of students and high disposable income due to lack of commitments (Australian Bureau of Statistics - Hitting the Books: Characteristics of Higher Education Students, 2013) this presents a strong opportunity for Up and Go to gain a greater market share in the beverage industry by fulfilling this niche. Furthermore this generation is tech savvy (Business Zone, 2014) and hence tailoring the composition of an IMC plan towards this tendency decrease advertising and communication costs as well as capitalising on an opportunity in the market.
Labour Market and Income
The current labour market statistics in Australia (See below) show that for the 12 million people labour force in Australia, the labour force participation rate is slowly decreasing for youth between 15-24. This means that the potential market size for Up and Go is declining and hence there will be increased pressure and competition in the marketplace as a result. However the total labour force participation rate is fairly stable. Data related to income shows that incomes have been slowly increasing. So the overall effect on potential growth is unclear.
According to Elliot, T (2010) culture “includes all the characteristic activities and interests of a people” (Page 14). These are measured along various dimensions which have been analysed in this report. The following is an analysis of Australia, with the cultural analysis of Brazil to follow later in the report.
Australia was colonized by the British Empire in 1788. It served as a British colony until its independence in 1901 (Lawrence & Davies, 2011) The Australian culture developed with respect to the country’s historical ties with Great Britain. The typical Australian family consists of four people with two adults and two children (Australian Social Trends, 2013). However, this is often affected by various factors including Australia’s ageing population, technological advances and immigration patterns (Australian Institute of Family Studies, 2015).
The standard of living in Australia is comparatively higher than the rest of the world. Australia ranks above average in key aspects such as health status, education and skills, but below average in work-life balance (OECD Better Life Index, 2015). However in recent times Australia has experienced an increasing obesity rate. Almost two thirds of Australian adults are overweight as well as twenty five percent of children being either overweight or obese (OECD Better Life Index, 2015). This has prompted the social trend of healthy eating and fitness (Wyn & Woodman, 2006), which Up and Go has capitalised on.
An important model to incorporate into a cultural analysis is Hofstede’s cultural dimensions. This model applies a framework for examining and comparing cultures based upon important factors. Under this model, Australia is considered as a low context culture. In terms of power distance, this factor is low for many Australian organisations as hierarchy is established primarily for convenience (The Hofstede Centre, 2015). Due to the expectation for individuals to take care of themselves and their families, Australia is classified as highly individualistic (The Hofstede Centre, 2015). The Australian attitude of craving success and the emphasis placed on achievements imply that Australia possess a highly masculine culture (The Hofstede Centre, 2015). Australia is largely indifferent in terms of uncertainty avoidance. This means that business is relatively tolerant of uncertainty and individuals are often calm during ambiguous circumstances (The Hofstede Centre, 2015). In terms of time orientation, Australian’s are generally short-term orientated and indulgent due to their impulsive, desire driven spending habits and emphasis for timely results (The Hofstede Centre, 2015).
Up and Go as a product succeeds in the Australian culture because of the fact that its consumers have a relatively high standard of living, live busy family lives as well as government policies which promote healthy eating habits.
The population statistics (see appendix) shows that there is a large potential market due to the growing market size. This combined with the age distribution of Brazil (positively skewed) show that a large percentage of the population are in the age demographic that Up and Go could target. Therefore, marketing communications should be targeted towards the needs and wants of this demographic. Furthermore, although the statistics on population density are discouraging upon first glance, the growing urbanisation trend allows for more focused distribution channels to be developed. This would allow Up and Go to build up a reputation in major urban centers before this trend starts declining.
Economic Statistics and Activity
The economic and income statistics highlight there is inequality within Brazil. However as they are a strong developing economy with a high percentage of employment coming from services, there is a strong potential market for Up and Go if they can implement a pricing strategy so that is competitive in the market place (as the data indicate that roughly 66% of the labour force only earn between US$108 and US$704 a month) (see appendix)
Brazil’s connection with the Amazon means it has wide access to natural resources including wheat and sugarcane. This provides Up and Go access to some key ingredients in their product, which serves to both capitalise on social trends of people favouring local production as well as lowering overall costs in the long run (after indirect exporting is successful) by not needing to import wheat.
Transportation and Infrastructure
When entering a foreign market with a new product, firms should consider the infrastructure and transportation as these affect distribution channels. Brazil’s road and runway conditions are poor and hence affect the ability for goods to be transported long distances. Due to the FIFA World Cup in 2014 and the Olympic Games in 2016, the government has recently issued an infrastructure stimulus, totaling $65bn, aimed to improve and build new roads, airports, ports and railways in the future opens new possibilities (Leahy, 2015). The size of ports poses a problem for the efficiency of Up and Go’s logistics as there are there are often long queues for smaller ports. In the future, the Brazilian government wants to focus on infrastructure projects to guarantee economic growth.
Channels of Distribution
In Brazil, several distribution channels exist, like agents, distributors, import houses, trading companies and others (Brazil Business and Investment Opportunities, 2013). Generally, it is possible to enter the Brazilian market with foreign imports, However it is recommended and sometimes even legally required to use the help of a local agent or distributor (this is known as indirect exporting (Fina & Rugman, 1996)) In Brazil it is often difficult to work with only one distribution partner because of regional economic disparities, taxation and infrastructure, firms should seek legal representatives to ensure that payments will be made and trademarks are protected. Setting up a subsidiary is an option for firms. Joint ventures and Licensing are also common in Brazil. Because of high import and storage costs as a result of government policies, it is not common to have a huge inventory in Brazil.
Determining the various media platforms utilised in a particular area and targeting marketing communications toward these channels is crucial in determining the success in the overall marketing strategy (Randolph & Viswanath, 2004). The statistics (see appendix) illustrate that Brazil is improving their technological infrastructure and there is wide penetration of computers, televisions and magazines throughout the country. Therefore it follows that Up and Go should primarily utilise these media channels in its marketing communications. An interesting note is that Brazilians prefer receiving direct mail, which stems from its culture which favours strong personal interactions. Therefore, this could be capitalised on by Up and Go to create strong relationships and create a competitive advantage for them in the market.
Other Important Economic Factors
Imports area around ($241.9 billion) and included machinery and electrical and transport equipment from China and the US predominantly. The exchange rate was 2.36 BRL per US Dollar in 2014 and is expected to continue increasing.
A noteworthy aspect for Up and Go to consider is that Brazil cut down trade barriers in the past but still calculates import taxes and sales taxes which can be high due to the fact that the government favours local businesses and produced products.
The labour force statistics (see appendix) indicate that employment levels are quite strong and hence there is a large market of business people that Up and Go can target their marketing communications towards. Nevertheless, firms must consider the existence of child labor, racial discrimination and underpaid women in less industrial regions, even though it is illegal.
The communication system is considered to be well developed and efficient. They have landlines and mobile services, TV, radio and Internet access. Brazil is on rank 6 in term s of mobile and fixed telephones. Almost 50% of the population has access to Internet. (See appendix) However, urban areas are more modern and developed in terms of communication than the rural areas.
The data (see appendix) illustrates that Brazil is a large landmass that borders several South American countries. It has a tropical (or sub-tropical) climate and is home to the amazon rainforest. These factors show that the weather conditions are similar to Australia and therefore a cold drink like Up and Go for energy may be preferable as a healthy breakfast option.
An analysis of the family structure and age distribution shows that there is close relationships among family, as extended kin groups are the norm. Hence there is a stronger influence that word of mouth advertising can have on the success of the product. Additionally, there are more inputs into the buyers decision making process (reference) so there must be careful market research undertaken by Sanitarium so that they do not suffer negative repercussions of these factors. Additionally, the age structure illustrates that there is a larger potential market among those in the business age demographic and hence marketing communications should be targeted toward those consumers.
The political and legal system in place favours local produce and local businesses and hence the Brazilian government has created policies and legislation to favour this (Investing in Brazil, 2012). Additionally, due to the various international treaties and alliances Brazil is involved in (see appendix), it could help penetrate a much wider market through word of mouth advertising during recesses within meetings of these major alliances.
Hofstede’s cultural dimensions (masculinity v femininity, power distance, individualism v collectivism, and uncertainty avoidance and time horizons) can be used as a tool for determining the social structure of Brazil. The full analysis is detailed in the appendix however it can be surmised that Brazil is a High context culture ( where strong relationships and trust are crucial to interacting with society. They are long term oriented and prefer personal interactions when conducting business (reference)), that is Polychronic (Where developing relationships is more important than sticking to a schedule. Poor punctuality is usual and meeting durations are flexible) (reference)
When approaching negotiations within the Brazilian culture there are several important things to consider. Firstly it is important to greet with a long handshake and maintain steady eye contact. Business talks are often interrupted and highly animated so it is important to remain both calm and patient and negotiations often end up taking a significant amount of time to complete (The Hofstede, Centre, 2015).
Applying Hofstede’s cultural dimensions is important when analysing Brazil’s culture. In terms of power distance Brazil’s culture believes that hierarchy is important and that superiors should be respected (The Hofstede Centre, 2015). In terms of individualism, there is a degree of interdependence among members of society. In terms of business it is important to establish trustworthy and long-term relationships (The Hofstede Centre, 2015). Brazil’s culture has a low tolerance of uncertainty with reference to rules and regulations Control is important to eliminate or avoid unexpected circumstances (The Hofstede Centre, 2015).
Brazil’s culture is classified as being high context. This is due to the importance of establishing strong relationships and developing trust (The Hofstede Centre, 2015). It is only when trust has been established that contracts are able to be negotiated. These contracts are often long term orientated with a large emphasis placed upon their implicit context. Brazil’s culture is also polychromic in nature. This means that appointment should be made often two weeks in advance and that personal involvement is prioritised over meeting deadlines (Everything Culture, 2015).