Country Market Analysis MEXICO Lipton Iced Tea LIPTON

Country Market Analysis MEXICO Lipton Iced Tea

LIPTON ICED TEA IN U. S. l Positioning: l l Target Market: l l Healthy alternative On-the-go refreshment Variety of flavors l sweet, un-sweet, lemon, raspberry, peach, green tea Adults who seek a healthy lifestyle Distribution: l Pepsi-Lipton tea partnership is the leading ready-to-drink tea producer in U. S. & Canada

TRANSITIONING INTO MEXICO l Issues to Consider: l l l How much will consumers be willing to pay in Mexico? Will the current product line in the U. S work in Mexico? Where do consumers in Mexico purchase iced tea, and how do we make it available to them? Is the consumer base large enough for Lipton Iced Tea to enter the Mexican market? How will the population become aware of our product?

AGENDA l Price: l l Product: l l Cultural differences and how competition influences product decisions Place: l l Factors that affect price Distribution options and advantages Promotion: l Ways to reach consumers

PRICE Considerations for a pricing strategy: l Disposable Income: l l Mexico is a relatively poor country Per capita: $9, 000* l l l *This is about ¼ of the U. S. average 40% live below poverty line Competitive Pricing: l Mc. Kormick, Nestea, and domestic brands l Consumers in Mexico are willing to pay a lower price for domestic brands

PRICE l Distribution Costs’ Effects on Pricing: l Partnership with Pepsi – reduces distribution and production costs l l Economies of scale Advertising Effects on Pricing: l TV and radio are the most effective forms of media, but are most expensive l Increased advertising may fluctuate prices

PRODUCT l Languages and Dialects: l 95% of people speak Spanish l l l Different interpretation for marketing strategies with the different dialects in the Mexican culture According to Mexican laws, you must translate your marketing literature, product manuals, labels, and warranties into Spanish High literacy rate of 92% l l Consumers will be better educated about product Less likely to misinterpret labeling or packaging

PRODUCT l Religion: l l Catholicism plays a major role in society and Government Mexicans value the meanings of symbols in a religious sense l Research logos to be used by Lipton for product

PRODUCT l Mexico’s unsafe drinking water l l Water source? Purified? Competition – other successful iced tea brands l Closely observe their strengths and weaknesses l l Flavors Colors Ingredients Obtain consumer feedback on already established brands of iced tea

PLACE l l Free market economy, very similar to U. S. Retail outlets in Mexico for new age beverages: l l l l Standard Grocers - 51. 6% (of the market’s value) Traditional grocers - 32. 2% Convenience stores - 5. 2% Kiosks - 3. 7% Discount grocers - 3. 4% Petrol Station stores -. 5% Vending -. 2%

PLACE l Additional Availability: l Movie Theaters l Cinemex - Mexico’s largest cinema chain § l l Pepsi is the supplier of cinemex’s drinks Street Vending Distribution Options: l Unilever Plant l l l Local Mexican Distributor l l Currently present in Mexico Needs to be adapted to produce tea Finding well respected Mexican distributors is difficult 50 -50 joint-venture with Pepsico

PLACE l Existing Presence in Mexico: l Unilever l l Several successful brands and production plants within Mexico Pepsi l l The Pepsi Bottling Group Mexico reaches 65% of the Mexican market place A well established, strong brand in the Mexican market Existing business relationships Strong brand loyalty

PLACE l Pepsi-Lipton International: l l l A 50 -50 joint venture between Pepsi and Unilever Uses Pepsico’s extensive bottling and distribution network Pepsi-Lipton International joint venture has proven to be extremely successful among other international markets

PLACE l Pepsi Bottling Group Mexico l l l 5 different territories 22 production facilities with water purification 180 distribution centers 5, 200 trucks on the road making deliveries each day 26, 000 employees 4 other Pepsi franchise bottlers serve the remaining regions

PLACE l Surface Transportation l l Railways: 12, 120 miles Highways: Total: 204, 800 miles l l 137, 600 miles unpaved Problems: l l Getting product to retail outlets Consumers getting to retail outlets and getting product home

PROMOTION l Population - 104, 959, 594 l l l Segmented market due to social classes l l l Growing 3 times as fast as U. S. Ever-expanding group of potential customers Mexicans are very status conscious To be considered when positioning product Television l Reaches 19, 284, 881 of 22, 268, 916 households in Mexico, or 84% of households have television

PROMOTION Commercial Television Channel Technical Penetration (%) Cost of 30 Second Spot on Network (in U. S. Dollars) 2 99% $22, 314 4 33% $2, 168 5 90% $11, 232 7 94% $8, 272 9 73% $2, 886 13 97% $10, 013 l. Basic channels reach large number of people l. Strong opportunity to market to the masses l. Peak times are between 7 pm-midnight

PROMOTION TV Advertiser TV Expenditure (in U. S. Dollar) Televisa $781, 000 TV Azteca $285, 400 Procter & Gamble $109, 012 Bimbo $105, 529 Coca~Cola $103, 178 Colgate $67, 044 Pepsi Cola $56, 508 Unilever $54, 680 l l Unilever – 8 th highest spending on Mexican TV advertising Established presence and relationships with advertisers and TV companies Know how to reach customers Sensitive and aware of Mexican customs l Business and personal

PROMOTION l Other Media Outlets: l l l Radio Newspapers Magazines Cinema Internet Radio is 2 nd strongest, while internet is only able to reach a small fraction of consumers

PROMOTION l Competition l “New Age Beverages” § l iced teas, sports drinks and bottled waters Iced Tea Products § Particularly are popular in Northern Mexico § l l Consumers are more influenced by consumption trends of the United States Mc. Kormick – leading brand of iced tea Coca-Cola – Nestea brand of iced tea

PROMOTION l Iced Tea Targets: l l Towards 25 -40 year old age group Those concerned with living a healthy lifestyle l l Nestea’s motto: “Cuando te sientes bien, se nota” (one can tell when you’re feeling good) Other Competition: § Gatorade § § Powdered drinks § § Low price creates high demand Liquid concentrates § § Dominant force in sports drinks market. Ease of handling and generally lower prices. Carbonated beverages

PROMOTION l Lipton must decide how to position itself in the existing market l l l Similarities with competition Differences between competition Coupons, Sales Promotions, Sampling l Standard groceries enable us to consider these types of promotion as an option

KEY CONSIDERATIONS l Pepsi-Lipton Joint Venture l l l l Production Distribution Unilever’s Existing Presence in Mexico = Free Market Economy High Television Penetration Existing Iced Tea Brands 40% of People Live Below Poverty Line

GRACIAS! ANY QUESTIONS?