Skippy Peanut Butter in South Korea Kelli Maxcy

Skippy Peanut Butter in South Korea Kelli Maxcy Evan Goslee Drue Zehler

Main Questions § Can Skippy effectively move into South Korea with a standardized approach? § Could Skippy make changes to better meets the needs of the South Korean market? § Could changes be made cost effectively?

Price § Korea per-capita income of 15. 07 million won ($12, 646) § $3 jar of peanut butter would cost about 3500 won § U. S goods have reputation of being very high quality however, Koreans are classified as very “price conscious” and are willing to sacrifice quality for low prices.

Product § Great reputation of U. S. food products allows U. S suppliers a strong position in this import market § South Koreans tend to enjoy spicy or salty foods

Product: Labeling § Korean labeling laws § Appeal of current Skippy label in a South Korean market

Product: Competition § Newell Korea- Creamy and Crunchy Peanut Butter § Packing- 340 g, 375 g, 510 g, 10 kg, 200 kg § China(Shangdong Area)

Product: Packaging § Plastic Jars vs. Glass § Squeezable containers § Different sizes

Place: Population Distribution § South Korea has a total population of 48, 598, 175 § Overall, Korea has become highly urbanized ever since the Korean War § ½ of the population lives in urban agglomerations of close to 1 million people § ¼ of the population lives in the capital city, Seoul § Result of the government trying to get people to live in urban areas outside of Seoul (Busan, Ulsan and Pohang)

Place: Transportation § Korea's transportation network is in desperate need of expansion § Highways: 86, 990 km of highways § About 1/80 are considered expressways § ¼ are unpaved roadways § Railways: 3, 125 km of railways § A new high-speed, direct railway is currently under construction that will connect Busan and Seoul § This will hopefully remove some of the congestion on the highways between these two major cities

Place: Transportation § Sea Ports § Ports and harbors are possibly South Korea’s most widely used transportation network for trading § Growth of trade activity and the fact that South Korea is a peninsula § Airports § There a total of 102 international and domestic airports in the largest cities § 69 have paved runways § 33 have unpaved runways

Place: Skippy Production § Skippy is produced only in the United States § There are 7 distribution centers in the US and 19 in other countries § Unilever is already present in South Korea § It is ranked 4 th among the leading companies in South Korea § Seoul Dairy, Haitai Dairy Company and Lotte Group all ranked higher

Place: Production § Legal regulations § Legally, Korean board meetings require the physical presence of all members § Therefore, all companies must appoint a representative director who resides in Korea § South Korea has a flat 10% value added tax on all imports S § South Korea imposes tariff rates in the range of 30% to 40% on most products

Place: Distribution § South Korea is one of the most ethnically homogeneous countries in the world § Koreans account for nearly all of the population § Korean is the official language although some English and Japanese is taught in the schools § Koreans are loyal to domestic companies rather than foreign companies

Place: Distribution § Local representation is essential for the success of foreign firms in the Korean market. § In the past, nationality was considered membership of the “Korean race” § President Roh Moo-hyun has started pushing the importance of foreign involvement in trading § South Korea is becoming more and more receptive to foreign products § South Korea’s leading import partners are Japan (20%), US (14%), China (12%) and Saudi Arabia (5%)

Place: Retailers § The Korean culture is quickly evolving into a more fast paced life style § Hypermarkets and supermarkets are the most popular retail outlets § Koreans prefer one stop shopping, discounted prices and bulk buying § Convenience stores and independent grocers are slowly being taken over by larger retailers § They are now offering new services to bring customers back into their stores § Offers many different imported food brands

Place: Competition § Peanut butter has a small presence in South Korea § The fats and spreads market is, as whole on the decline § The market is forecasted to decrease by 2. 6% by 2008 § Processed foods are rapidly gaining popularity § Fear of Mad Cow Disease has resulted in much of the population looking for protein in other foods such as soybean paste

Place: Competition § The butter segment accounted for 81. 7% of the South Korean fats and spreads markets § Low fat spreads held the smallest share with 1. 7% § Staple spreads include kimchi (a sweet sticky rice), soybean paste and soybean curd

Promotion § Blonde Skippy mascot is an American character § Current promotional efforts emphasize “fun and family” § Younger Koreans are more open and willing to abandon traditional consumption patterns

Media § 4 major broadcasting networks KBS I, KBS II, MBC, and SBS. KBS I and II are government owned. § MBC and SBS are independently operated but still strongly influenced by Korean government § All advertising slots must be purchased through the government.

Media § KOBACO, censors all advertising (television and radio) § Korean television only has an audience of 8 million but expected to increase to 11 million.

Internet § Huge use of broadband internet, currently 11 million internet using households constitutes about 68% of total households § Nearly all cellular phones in South Korea have internet access

Intellectual Property § S. Korea has property laws but are not enforced strictly like in the U. S. § Essential to get copyrights, trademarks, etc. registered with Korean government. § Local Korean attorney must be hired to handle the registration process