A fresh & juicy BooOoomerang

Product launch in emerging markets

Photo by coolinsights

Have you ever drunk a fresh and tasty fruit drink from “Our Juice”, one of the brands of the company Vitmarks? What about “Minute Maid” then? No grudge born. Dear reader, you probably do not know that the first company quoted which only operates in the developing world, mostly domestically in Ukraine whereas Minute Maid is one of the leading juice manufacturers, with powerful resources at hand. This article will depict how the developing world is now the place to be in order to develop innovative solutions, responding to both the world’s needs through a “boomerang effect”. This effect will be emphasised thanks to two companies that upon closer analysis.

Vitmarks is an inclusive model of a local company that decided to achieve its economic growth by making its products accessible to middle and low-income consumers, and providing a high quality product that was previously considered to be a luxury consumer goods in Ukraine. In their business development, the company successfully managed to bring value in each step of its value chain.

Vitmark sources their own fresh fruits and vegetables from small-scale farmers (40,000 tons purchased in Poland) and 25 local large domestic suppliers in Ukraine under long-term contracts. The company also provides its suppliers with regular training, which helps them to increase quality and output. The company, through a marketing strategy of innovative packaging, promotion of juices and cost reduction, makes healthy juice constituted of vitamins and microelements essential for a good diet affordable for an untapped segment. Moreover, the firm pays its employees a third higher than similar jobs in the region.

Resultantly, Vitmark drove the demand for this type of product in the Ukraine from 199.4m litres in 2002 to 705.5m litres in 2008. Undoubtedly, a remarkable feat for such a small, local brand with limited resources. This thorough and effective execution even led its competitors to follow and copy the brand’s “white packaging”; consequently, companies such as PepsiCo with Tropicana in 2007 faced legal action as a result.

On the other hand, Minute Maid, a brand in the Coca-Cola Company’s portfolio; benefits from the resources of one of the most powerful companies in the world in order to accomplish its growth as a global leader in both the developing and the developed world.

One of the company’s particularities, and the one I would like to focus on, is that each area brings its own set of contributions to the other one in order to build and develop business and products differently. In their approach, the developing world can more accurately be seen as a laboratory to experience new business and product models bringing benefits that can also affect the developed market on the middle to long term future; for example, the exemplary success of Minute Maid “Pulpy” in China.

In China, the market for fruit juice is tremendous (China is the leader in off-trade fruit/vegetable juice volume in 2008 ). 100% juice drinks could however not be afforded due to the purchasing power of the targeted Chinese consumers. It was then conclude by market experts for Coca-Cola in 2003 that only a 10% juice could be sold with the addition of orange pulp to make the drink heavier in the mouth in order to get a taste perceived as a 100% juice by consumers. Hence, in 2005, Coca-Cola introduced Minute Maid Pulpy that was immediately successful and so, then extended this product to India, Indonesia, Taiwan, Vietnam and other Asian countries as well as Mexico (eastern Europe is next). The clever idea was that by adding pulp to the product they differentiate themselves from the competition and helped to bring back the fruit pulp trend. As a result, Minute Maid Pulpy has become the Coca-Cola Company’s first brand from an emerging market to reach the billion dollar sales mark in only 5 years. Now, the Coca-Cola Company is thinking about introducing Pulpy in the Australian market in 2011.

The lesson we can learn from both examples is that products primarily developed and launched in emerging markets can actually have a great future in the developed world thanks to a boomerang effect, or how a solution created by a multinational company for developing countries may come back for a launch in the developed countries as it has reached deep success and can then answer needs in the western world. Developing countries environment pushes companies to innovate and come up with new business model without compromising one’s profitability.

As a conclusion, taking into account the spectrum of a plummeting purchasing power lurking everywhere in the developed countries, companies like Minute Maid, or Vitmark have lots of potential to propose effective and sustainable money-saving and high quality products, based on what they already have developed in emerging markets. We can indeed see that the value of a low-cost, high quality drink during western crisis time which answers to the new need of the shifting behaving pattern of their consumers. The world balance of economic power is shifting, and breakthrough innovative products or business models like Vitmark can come from anywhere. Consequently, western companies should embrace it, and not shy away from taking risks and should start looking for such opportunities that developing economies can trigger.

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