Marketing Strategy General Mills Project, Part B: Milkbuds Product Launch Professor Christine Moorman Monday, November 19, 2001 Team 6, Section 202 James

Marketing Strategy

General Mills Project, Part B: Milkbuds Product Launch Professor Christine Moorman

Monday, November 19, 2001

Team 6, Section 202

James AschbergerFederico Cánepa

Julio CubillánJavier DominguezMikael Granstrom

Aqualyn Laury

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Marketing Strategy Milkbuds Product Launch

Agenda

• Market Trends 2001-2005• Market Overview Nutraceuticals• ‘MILKBUDS’

– Product Strategy – Product Concept– Company Analysis– Distribution Analysis– Communication Strategy– Financial Projections

M A R K E T T R E N D S

2 0 0 1 – 2 0 0 5

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Global Trends in Food and Drinks

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Drivers of Innovation I

• Health issues– functional and pro-biotic ingredients– freshness– organic

• Pleasure issues– flavor– indulgence (guilt-free)– ‘eatertainment’– positive enhancements (stimulation)

• Presentation issues– packaging– convenience– format

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Drivers of Innovation II

• Convenience and ‘One-stop nutrition’• Blurring boundaries between breakfast, lunches, dinners, and snacks

– Size• Varying single serve options

– Timing• As an appetizer, a meal, a snack, or a dessert

– Location of consumption (portability)• Anywhere the consumer goes – always fresh

• Desire for additional variety and flexibility

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Health, Drivers, and Implications

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Pleasure, Drivers, and Implications

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Presentation Issues

• Convenience as the main driver– Variety (increased individuality)– Flexibility (amount of consumption, timing)– Availability (less planning, more different locations)– Portability – Storage– Handling (less experts)– Disposal

M A R K E T O V E R V I E W

N U T R A C E U T I C A L S

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Definition of Nutraceuticals

‘Functional foods and drinks that provide benefits beyond basic nutrition by way of added components and may prevent disease or promote health. These benefits can range from the prevention of

osteoporosis through calcium fortification, to the use of omega-3 in fats and spreads to lower cholesterol levels and added ingredients in

soft drinks that stimulate or promote muscle growth.’

Neil Broome, Datamonitor Consumer Markets Practice Area, 2000

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Nutraceutical Trends

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Key Product Categories

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Key Consumer Groups

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Demographic Note

• 35+ age group is growing faster than the total population– Incidence of conditions such as congestive heart failure and cancer

increase despite advances in medicine– Prevention preferable to cure– Maintain general well being– Increasing demand for digestive products

• Women as a good target audience– Often family decision maker– Weight-consciousness and skincare– Pregnancy and new mothers– Solutions for osteoporosis and menopause as two potential market

opportunities

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Key Geographical Regions

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Key Success Criteria

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Key Consumer Attitude Factors

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Key Consumer Attitude Factors: Consequences

• Consumers need to trust a brand so that health claims will be easily accepted

– Advantage of food and drinks manufacturers compared to pharmaceutical companies

– Use of branded ingredients to defend market positioning

• Use of a food and/or drink format, where benchmarking against non-functional products is more difficult

• Use active ingredients with proven effectiveness that address important health concerns that are not addressed by other products

• Increased legal liability and regulatory issues

M I L K B U D S

The snack you drink

A revolutionary nutritious productBy Yoplait

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Product Strategy• Leveraging General Mills’ business knowledge into a high-growth

market– Process knowledge of Yoplait (milk, yogurt, fruits)– Distribution knowledge of General Mills’ subsidiaries– Brand equity (track record, General Mills #1 position in the U.S.

yogurt market)

• Introduction of a new, innovative multifunctional drink, based on milk, yogurt and fresh fruit chunks to meet various customer needs

– Health and prevention • bone support, digestion, immune system

– Increased mental fitness– Quality and taste (no artificial flavors)– Flexibility

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Industry Analysis

• Food and drinks companies are under big innovation pressure due to high level of competition in a largely stagnant market

• Pharmaceutical companies face stiff competition in their core markets and are looking to expand their range of businesses

• Increased intensity of the ‘fight for the share-of-stomach’ between food and drinks companies, pharmaceutical companies, restaurant, fast-food chains, weight-loss programs and other players

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U.S. New Product Launches by Health-Positioning (1999)

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U.S. New Product Launches by Age Group (1999)

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Consumer Lifestyle Trends 2001 - 2005

• Increasing importance of health issues• Taste and quality of food as main decision variable• Market areas for nutraceuticals

– Standard plus (fortification with vitamins and minerals)• Standard plus for everybody

– Lifestyle (support mentally or physically demanding lifestyle activities)

• Lifestyle more for younger consumers

– Medical (competition with OTC and even prescription drugs)• medical more for older consumers

• Image-led consumption– Brand influences lifestyle and vice-versa

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Nutraceutical Market Trends 2001 - 2005

• Fast growing market• New market entrants into the food and drink industry

– Pharmaceutical companies– Ingredient manufacturers

• Increased volatility– Uncertain consumer acceptance of functional food and genetically

modified products

• Increasing regulatory pressures and uncertainty– Biotechnology and genetically modified organisms– Declaration of ingredients

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What kind of product are consumers longing for?

• Focus Group and additional one-on-one interviews suggest– Snack-drink solution that meets specific needs

• health, disease, energy

– Natural, organic, fresh, non-fat• Milk or juice as recommended solutions• Not too sweet (should be more refreshing)

– Appealing, indulgent• Premium product (reward mentality)• Real fresh fruit chunks to chew• High degree of autonomous portability (cupholder, bag etc.)

– Function• Bone support• Energy provider (mental energy)• Vitamins and minerals are regarded as givens• Improved digestion

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Drink Market Forecast - Fruit and Vegetable Volume(million liters)

Region Country 2000 2001 2002 2003 2004 2005North America USA 9196 9477 9670 9758 9834 10000Asia China 2358 2596 2887 3207 3573 3964Western Europe Germany 3110 3155 3208 3255 3312 3364Asia Japan 2306 2374 2444 2514 2575 2647Western Europe United Kingdom 1457 1584 1688 1787 1867 1986Eastern Europe Poland 814 938 1062 1185 1306 1470Asia Philippines 624 720 841 992 1184 1389Latin America Mexico 900 979 1056 1138 1217 1313Western Europe France 1144 1169 1185 1199 1215 1233Asia South Korea 1011 1060 1145 1160 1172 1217Latin America Colombia 795 836 880 929 985 1039Eastern Europe Russia 581 642 729 824 919 1030Australasia Australia 811 837 867 902 942 978North America Canada 833 866 893 917 936 964Eastern Europe Ukraine 434 514 602 691 779 901Latin America Brazil 808 812 836 853 875 893Middle East and Africa Saudi Arabia 361 409 464 529 600 681Western Europe Italy 550 572 595 621 649 676Western Europe Spain 508 518 526 534 540 548Eastern Europe Czech Republic 428 452 474 495 514 538Eastern Europe Hungary 306 342 370 392 408 438Western Europe Netherlands 335 349 367 387 410 431Asia Taiwan 298 305 312 320 329 337Western Europe Portugal 228 248 268 288 308 332

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Drink Market Forecast - Functional Volume (million liters)

Region Country 2000 2001 2002 2003 2004 2005North America USA 2912 3650 4682 5516 5812 6928Asia Japan 2397 2844 3194 3345 3484 3831Asia China 1180 1294 1419 1543 1675 1828Asia South Korea 279 291 316 327 342 360Asia Thailand 260 272 285 299 315 330Middle East and Africa South Africa 67 93 128 174 233 318Latin America Mexico 141 158 179 202 228 257Asia Taiwan 203 207 211 220 231 239Western Europe United Kingdom 118 133 145 154 162 176North America Canada 123 129 135 139 143 148Western Europe Spain 56 68 78 91 102 119Western Europe Germany 70 76 81 85 89 94Western Europe Italy 72 76 79 83 87 91Latin America Colombia 57 61 66 71 77 83Australasia Australia 63 69 73 76 79 83Latin America Argentina 30 35 42 50 59 70Western Europe Netherlands 33 39 45 49 53 59Asia Indonesia 31 34 38 43 50 56Australasia New Zealand 11 16 21 28 37 49Latin America Brazil 38 40 41 43 45 47Latin America Venezuela 21 23 26 29 32 36Asia Hong Kong, China 20 21 21 22 23 24Western Europe Norway 13 16 18 19 21 23Western Europe Sweden 14 16 18 20 21 23

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Drink Market Forecast - Functional Sales (million liters)Region Country Unit 2000 2001 2002 2003 2004 2005Middle East and Africa Turkey TL million 1,994,322.10 2,881,548.50 4,255,974.50 6,363,621.40 9,895,092.20 naAsia Japan ¥ million 672,348.30 788,573.40 880,720.90 924,040.20 960,058.20 1,050,755.60Asia Indonesia Rp million 458,984.50 498,587.40 558,339.90 641,013.40 751,897.90 850,994.40Asia South Korea Won million 457,763.90 476,486.40 505,689.10 520,488.30 538,207.30 560,475.10Western Europe Italy L million 213,719.00 226,135.60 241,560.70 259,731.80 277,093.80 295,685.40Latin America Colombia Col$ million 136,606.60 152,590.00 172,676.60 197,957.20 229,879.30 261,849.90Asia Vietnam VND million 33,699.50 41,288.90 48,711.20 53,097.70 59,461.60 naLatin America Venezuela Bs million 23,949.00 24,188.50 24,914.20 26,159.90 27,729.50 28,769.30Asia Thailand Bt million 18,714.50 19,682.50 20,742.50 21,903.70 23,176.10 24,448.80Western Europe Spain Ptas million 11,826.10 14,416.00 17,016.30 20,024.20 23,053.80 27,246.30Western Europe Greece Dr million 10,461.30 11,756.80 13,065.10 14,382.90 15,712.20 17,395.00Asia Taiwan NT$ million 8,171.60 8,222.80 8,538.90 8,988.70 9,538.40 9,916.50Asia China RMB million 8,119.00 8,612.90 9,083.90 9,583.90 10,078.00 10,637.60North America USA US$ million 4,866.10 6,111.10 7,964.40 9,220.30 9,511.30 11,290.70Latin America Mexico Mx$ million 2,399.90 2,920.00 3,601.00 4,340.00 5,121.20 6,190.40Asia Philippines Ps million 1,269.30 1,359.00 1,480.50 1,640.70 1,848.60 2,031.10Western Europe Portugal Esc million 1,255.20 1,353.90 1,453.60 1,552.40 1,651.20 1,768.30Western Europe Belgium BEF million 968.9 1,041.50 1,111.50 1,179.30 1,241.70 1,321.20Latin America Chile CH$ million 736.6 780.8 831.6 881.5 929.1 984.6Middle East and Africa South Africa R million 731.6 1,028.00 1,434.20 1,986.80 2,732.50 3,798.70Western Europe Austria ATS million 674.9 696.7 714.7 732.9 755.5 777Asia Hong Kong, China HK$ million 593.5 609.8 629.6 650.2 669.7 690.2Eastern Europe Czech Republic CK million 566.3 699.8 827.7 940.3 1,033.70 1,202.60Western Europe Sweden SEK million 560.2 636.3 706.9 769.4 803.6 879.9Western Europe Germany DM million 453.9 507.5 548.2 595.8 642.3 700.6Western Europe Norway NKr million 380.3 498.9 596.4 679.2 730.5 862.3Eastern Europe Slovakia SKK million 367.1 384.7 404.6 427.3 453.2 477.7North America Canada C$ million 323.3 342 359.2 373.7 385.8 403.2Australasia Australia A$ million 314.8 364.5 405.7 430.7 451.1 493.9Western Europe Netherlands NGL million 247.7 297 341.1 377 407 461.2Western Europe United Kingdom £ million 246.4 278.3 301.3 321.1 338.4 366.4Latin America Brazil R$ million 182 189.5 203.1 209.6 218.4 naWestern Europe France FF million 177.9 175.4 173.6 172 170.7 168.9Eastern Europe Poland PLN million 155.5 189.7 227.6 269.7 316.9 378.8Western Europe Finland FIM million 138.6 151.4 164.3 176.9 189.2 204.5Asia Malaysia RM million 106 113.2 121.8 131.2 141.3 151.9Latin America & Caribbean Argentina Pesos million 83 100.8 122.8 150.9 187.1 naWestern Europe Denmark DKr million 64.4 67.3 70.7 75.2 78.6 82.6Eastern Europe Hungary HuF million 63.2 75.8 89 101.5 111.7 128.8Western Europe Switzerland CHF million 41.4 45 48.3 51.8 54.4 58.2Australasia New Zealand NZ$ million 34.8 50.7 74.9 112.5 167.5 248.1Asia Singapore S$ million 24.6 25.8 27.1 28.5 30.1 31.7Middle East and Africa Egypt E£ million 15.2 16.2 17.5 18.8 20.4 22Middle East and Africa Israel NIS million 13.8 14.7 15.7 16.7 17.9 19.1Western Europe Ireland IR£ million 5.1 6.3 7.7 9.4 11.2 13.7Middle East and Africa Saudi Arabia SR million 0.7 0.7 0.8 0.9 1 1.1

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Dairy Market ForecastYogurt Volume

(million liters)

Region Country 2000 2001 2002 2003 2004 2005North America USA 131.8 118.9 110.3 103.2 98.2 94.2Australasia Australia 21.4 23.7 25.6 27.1 28.9 30.6Asia Japan 8 9.3 10.1 10.4 10.4 10.3Latin America Colombia 5.3 5.3 5.4 5.5 5.6 5.8Australasia New Zealand 5.2 5.6 6 6.4 6.8 7.3North America Canada 4.5 4.6 4.6 4.6 4.6 4.6Latin America & Caribbean Argentina 2.7 2.7 2.8 2.8 2.9 3Western Europe United Kingdom 2.5 2.7 3 3.3 3.5 3.8Middle East and Africa South Africa 2 2.1 2.2 2.2 2.3 2.4Middle East and Africa Israel 1.5 1.6 1.6 1.6 1.7 1.7Western Europe Norway 1.5 1.5 1.6 1.7 1.7 1.8Western Europe Denmark 1 1 1 1.1 1.1 1.1Asia Philippines 0.6 0.6 0.6 0.6 0.6 0.6Asia Vietnam 0.5 1.2 1.8 2.5 3 3.5Asia Hong Kong, China 0.2 0.2 0.3 0.3 0.3 0.3Asia Thailand 0.2 0.2 0.2 0.2 0.2 0.2Western Europe Ireland 0.1 0.1 0.1 0.1 0.1 0.1Western Europe Greece 0.1 0.1 0.1 0.1 0.1 0.1

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Product Concept• Name of the Product

– Milkbuds by Yoplait

• Unique Selling Proposition– Nutraceutical-enriched, shelf stable milk-yogurt-mix smoothie

• Premium Positioning – All natural, real fruit drink – Room temperature or cold consumption satisfaction

• Description– One size: 10.5 oz

• 10.5 oz: $1.39 single, $7.29 six-pack, $ 13.99 twelve-pack

– Food/Drug/Mass/Club retailers, convenience stores, drink machines, K-12 schools

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Our Product

• Refreshing milk-yogurt-mix drink– Creamy and smooth

• No artificial flavoring• Contains real fruit chunks to boost flavor sensation• New technology allows shelf stable positioning• Three flavors to start (Strawberry, Banana, Blueberry)• Four specific targets

– Mental power– Bone support– Improve immune system (prevention)– Improve digestion

• Use of a branded bacteria ingredient (positioning)

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Product Benefits

• Consumer realizes benefits from:– liquids– carbohydrates– protein– fibers– vitamins– minerals– Dextrose to supplement energy and hydration level

• Milkbuds delivers:– Nutrition with sole or complementary usage – Refreshment and hunger mitigation

• Probiotic to aid digestion (bifido bacterium)• Includes several cereal fibers

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The Bottle

• New functional form– Easy-grip bottle, small enough for child’s hands, twist-off cap

• Appropriateness– Will fit in car cup holder and standard bottle/cup holders

• Special aluminum seal – Freshness sealed, quality promise

• Trendy design (brand + coolness + fruits)– Playing of the incarnation idea of an actual milkbud

• Easy disposal– Recycle-friendly

• Promotional bottle packaging– Co-marketing with GM cereals and desserts

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Targeted Market

• Multi-stage roll-out– Stage one: U.S. (prime market, second highest growth potential)– Stage two: E.U. (newer to market, highest growth potential)

• Timeline– 2002 roll-out for U.S.– 2003 roll-out for E.U.

• U.S. ready, education needed in E.U.• Focus on families with kids, empty nesters, exercisers• Infiltrate yogurt and confectionary market – ease of use • Usage patterns

– Product can be consumed anytime, as a drink, as a snack or even as a light lunch

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Macroeconomic Competitive Pressures

• Limited population growth in the U.S.• Aging population• Internationalization of Trade

– Frequent and aggressive cross-border competition

• Retail pressure– Consolidation– Better information– Decreasing customer loyalty– Fight for shelf space

• Higher pace of working life

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Categorical Forecast - New Market Entry

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Competitive Analysis

Attribute Radar Plot

0

5

10Quality

Variety

Taste

Convenience

Low PriceNo Planning

Healthiness

Utensil/other needs

Indulgence Milkbuds

Danon

NutraGrain Bar

Home-cooked Meal

Fast Food Meal

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Competitive Groupings

• Direct competitors

• Indirect competitors

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The Business Opportunity

• Mathematical Equation:

– 18% growth in Functional products• Resulting from increased focus on health, lifestyle +

– Busier single and family lifestyles• Leading to more on-the-go consumption +

– Uniquely branded GM ingredient• Leveraging existing strengths in food portfolio =

Milkbuds by Yoplait: America’s first drink snack

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Company Analysis of General Mills

5.6%6.5%

9.4%

-1.0%

9.1%

3.1%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

GeneralMills

ConAgra Hormel Kraft Nestle Campbell'sSoups

Sales Growth of GM and Major Competitors (2000/2001)

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General Mills’ Growth Outlook

• To catch up with some of its competitors GM suggests growth by:

• Product Innovation– Enhances unit volume growth and market share gains

• Channel Expansion– Look beyond traditional grocery stores

• International Expansion– Target fast-growing markets

• Margin Expansion– Through productivity innovation

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Capabilities of General Mills

• Distribution and marketing skills– Great relationships with retailers enhances a better product fit in the

market

• Since taste and quality are of paramount importance, advantage of GM over several competitors (dairy, food, pharma) yoplait

• Proven track record in new product development• Able to leverage the strong brand equity

– Yoplait is one of GM’s star brands right now, and has overtaken Dannon in yogurt category

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Risks for General Mills

• Need for partner (ingredients) joint ventures with pharmaceutical company, because GM can provide process technology, distribution and marketing capability (plus customer knowledge)

• Constant product and research innovation can make consumers switch to other substitute products and decrease demand for Milkbuds

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Distribution Analysis• Have to identify the consumers’ needs and make the product

available to them• Two different consumer needs:

– Impulsive – high availability, e.g. convenience stores and drink machines

– Planned – part of every supermarket’s offering and available for home shopping

• Leverage the superior GM sales force’s relationship with retailers

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Distribution Trends

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Communication Strategy

• Address the health conscious part of the population• Stress convenience, preventive health care and improved life

style• Target women since they are the main decision makers at home• Reach her by lifestyle magazines, television advertisements and

in-store promotion

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Revenue Projections• Launch in 2002• Target to reach 5% of US households the first year (2002)

– A successful product is usually tested by 10% of the US households, and Milkbuds will target 50% of these households

• Repetition ratio of 40%, but loss in volume will be offset by international expansion.

– Europe and Asia are two fast-growing markets that are able to offset the decline of US sales

• Assumes that every household, on average, consumes 1 Milkbud per day

• Assume to sell six 1-packs for every one 12-pack and 6-pack sold– This makes the average price $1.234

• Since it is a new product, we assume that the competitors will apply a “wait and see”-tactic

– Leads to low competition the first year

• Due to first mover advantages and the strong Yoplait brand name, we assume the switching rate to be low

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Revenues 2002-2004

Revenue Projection 2001-2004

Year 2002 2003 2004

Number of US Households (million) 92.593 93.519 94.454

Product Penetration 5%

Number of Targeted Households (million) 4.630 4.676 4.723

Consumption of Milkbuds per year (1/day) (million) 1689.822 1706.720 1723.788

Average Price (dollars) 1.234

Revenues (million) 2085.241 2106.093 2127.154

Documents

Marketing Strategy General Mills Project, Part B: Milkbuds Product Launch Professor Christine Moorman Monday, November 19, 2001 Team 6, Section 202 James