Mexico’s Market Audit and Competitive Analysis
Executive Summary
Odwalla Inc. deals in producing fresh fruits and vegetables beverages. The company, which has a variety of other drinks, has other products such as organic foods for the bars. Odwalla has established its brand across United States and possesses substantial market share. The company is willing to venture into a new market, Mexico. One of the reasons that the company stands out is because it has very unique advertising methods, which incorporate colorful names and unique packaging. Odwalla Inc. has several benefits to expanding into the Mexican market. One of the benefits is the increase of sales for their products. New markets offer new opportunities therefore increasing Odwalla’s sales in this case. Another advantage of the company’s expansion to Mexico is the large number of population targeted by their products. The company targets children between the age of 0-14 years a and people in between the ages of 25- 54 years who make up 27.9% and 40.4% of the population respectively. The figure indicates that the target consumers make a significant portion of the population thus making them an important consumer target. Mexico is also a producer of the majority of fruits and vegetables throughout the year, with that said it will be easy for the company to source for the freshest fruits and vegetables to produce its products and reduce transportation costs. Therefore planning to expand throughout Mexico is one of the biggest opportunities for the company. In addition, Odwalla has the opportunity to cater mass market by focusing on psychographics, demographics, and buying habits of consumers. However, there are some challenges that the company may experience as it wishes to expand into new market. One of the challenges that Odwalla Inc. may experience is the competition from other companies that have established themselves in the region. Large companies’ such as Jugos de Valle, which is a subsidiary of the Coca- cola company, may prove to be difficult to beat in the market scene. In addition, creating customer awareness is yet another challenge, as the customers would be unaware of the brand, huge investment in advertisements and promotion is required in order to attract the target audience. Another challenge that company may face is the steady flow receiving of fruits and vegetables. Diseases and change of weather patterns prove to be difficult for the steady flow of these raw materials for production. Odwalla would need to revise its pricing strategies, as the population of Mexico is not affluent as of United States. There is a huge difference between per capita income of Mexico an United States, selling bottled juice for $3 in Mexico can be challenging for the company. In conclusion, the market analysis for Odwalla Inc. is promising for the company’s products. This is due to some of the factors outlined such as the consumer target and the availability of raw materials for production. However there are a few challenges such as competition from other companies that should be a cause for concern.
I. Introduction
Odwalla Inc. is a company that is popular for its juice beverages that are made from real fruits and vegetables. They also make nutritional bars and other drinks that are soy-based. Their products are well known for their colorful packaging and imaginative names that make them all unique. Most of the Odwalla products are sold in supermarkets, club stores, natural stores, and specialty stores in the United States. Odwalla’s main product focus is the different beverages they have available. They have a variety of juices, energy style drinks, smoothie drinks, and dairy-free soymilk. They pride on their products being made with fresh produce for their drinks and organic foods for the bars. Since Odwalla uses fresh fruits and vegetables for their drinks, some of their drinks are seasonal and not always available to buy year round. Odwalla’s product prices and product availability a lot of the time is affected by the weather condition, disease, and natural disasters that occur and it affects what produce is available at the time of year that they can use for their juices and bars. Odwalla’s main goal is to provide a variety of beverages that taste great and are good for you too. Mexico is a great country for Odwalla to expand its products into because it is a place that grows many different, fresh fruits and vegetables all year long. Mexico is one of the main places that grow the produce that the United States uses and it could be beneficial for Odwalla to expand their products there because the transportation procedure could be cut and it is a great way to keep the juices at the freshest point possible.
II. The Product
A. Odwalla Inc. products are perceived by the intended market as a convenient healthy snack or beverage for consumers on the go or health conscious. This new product entering Mexico’s market will be a fresh healthy update within the food industry and is guaranteed as a consumer favorite. The products are not only healthy for consumers; they also are great taste, which influences other consumers to spread the word and purchase Odwalla products.
1. Relative Advantage
Odwalla’s relative advantage will be the ability to grow the fresh fruit and vegetables needed for the beverages, all year around. Mexico is known for its farming and seasonal produce that is sold in Mexico and also exported and sold in the United States. Mexico’s ability to grow its own fruit, gives Odwalla a great advantage in entering the market there.
2. Compatibility
One brand that Odwalla Inc. would be very similar to that is already in the Mexico market would be Jumex Juices & Nectars. When Odwalla first enters the market, they will have a challenge to reach consumers because of the already established brand recognition and loyalty with the Jumex brand. With that in mind, Odwalla has the opportunity to gain new consumers through offering more than what Jumex offers, which is the variety of drinks including energy, smoothie and protein ones. Odwalla also carries snack products such as organic bars.
B. Major Problems or Resistance to Product Acceptance
The only major problem Odwalla would have entering the market in Mexico, would be the established consumer and brand relationships and loyalty with Jumex as stated before. The market is willing to accept new products, but when entering with an already well known product, it makes it harder to market and sell.
III. The Market
A. Market Product will be Sold
1. Geographical Region (s)
We are looking to sell our product in an area that has significant foot traffic. This is because even if people do not stop by, we are still getting viewed by consumers. Our main stores would be set up in Tijuana where many tourists stop by so we have tourist sales as well as regular sales from the Mexican population. We will have stores in Mexico City where a good majority of malls are in Mexico. According to mexiocity’s website, there are literally dozens of outlets in Mexico City.
2. Demographics
As far as the demographics are concerned, we are going to focus on the middle income families. We feel that the Mexican middle class will continue to grow throughout the years and we want to capture this potential market in the economy. According to the economist, many teenage Mexicans are going to school and getting a degree. This means that there is a greater likelihood of an expansion in the middle class as time goes by as well. We will also be focusing in on an age group which we feel greatly impacts our product. This age group is middle aged Mexicans which covers the Mexican population ages of 25-54 years of age. According to mundi’s website, this age encompasses about almost half of the entire Mexican population.
3. Psychographics
We will focus our efforts on good upstanding citizens of Mexico. We will do this by marketing ourselves as a company that values each sale and is not looking for the quick sale. We will make an effort to develop customer relationships so that word of mouth marketing will be in our favor. We will help out the environment in Mexico so that consumers know that we also have good morals. We are also targeting the people that like to go out and eat often. We are also targeting them because we will put our products in stores next to common restaurants.
4. Consumer Buying Habits
a. Product Use Patterns
We feel that Mexicans value their products greatly and try to use it as long as they possibly can. So we will make our product so that it can last a while and at the same time continue upgrading it so others may want the newer version of our product. We will market the middle income families by showing and demonstrating our product in malls so that the families can see what we have to offer them.
b. Product Features References
According to santandertrade’s website, Mexicans are well aware of the cost benefit ratio and will compare it to their normal preferences. This means that the features that our product brings to the market will have to outweigh other features offered by other companies. This may mean we may need to raise prices but we need to do so in a way of keeping the cost benefit ratio beneficial to consumers.
c. Shopping Habits
According to ecointerest’s website, they show a graph that emulates that Mexicans are still willing to pay for food and beverage even after the recession. We can use this to our advantage by placing our product in stores that our next to food courts with the hope that we may draw some spontaneous buyers. We will look to place our product as well in Targets and Walmart since they carry grocery items that will draw many consumers.
5. Distribution
a. Typical Retail Outlets
We will do our best to get our product into some of the well -known stores in Mexico City. We feel our product would do better at first than trying to open up a store in Mexico City just because there are so many stores there. After our product gets seen in many stores and outlets in Mexico City, we will launch some stores because than we have consumer awareness of our product. According to ecointerest’s website, many people are looking to buy products cheaper. With this mind, we will try to stay away from mom and pop stores only because we fear these stores going out of business shortly.
b. Middlemen? Wholesale?
We will not be using middlemen because we fear the association of middlemen with the drug cartel’s and drug trafficking rings. According to the Chicago tribune, more than 70% of Colombian cocaine gets smuggled through Mexico. We do not want the hysteria that we are using the same middlemen and thus our goods may have drugs in them.
6. Advertising and Promotion
a. Advertising Media Used to Reach Market
The media typically used to reach our market in Mexico is the television. According to the latinlink’s website, more than half of the Mexican population watches television for about three hours a day. So we will be making commercials that just seem to blend in to television programs so that the consumer will be enticed to watch the whole commercial instead of changing the channel.
b. Customary Sales Promotion
We will put heavy emphasis when promoting our product. We feel that if we do not that our competitors are going to have a stronger strategy than us in the long run. By doing this, we are going to hopefully increase our sales enough to a point where we have extra equity to increase our store outlets. We are hoping to enter this market with enough force to one day drive other international companies out of the market.
7. Pricing Strategy
a. Typical or Customary Mark-ups
Our pricing strategy will most likely be typical because our target market does not have the greatest amount of discretionary income to use. According to ecointerest’s website, the Mexican population would be more willing to buy goods if the price is cheaper. So this fact only reinforces that we will have to keep our prices low in order to sell product.
b. Types of Discounting
We will use coupons in order to help drive sales up and keep prices low. Also we will do little discounts during any holiday recognized in Mexico.
B. Compare and Contrast Your Product with the Competitor Product(s)
In Mexico the main competitors to Odwalla are Jugos del Valle, Grupo Jumex, and Grupo Industria Lala. There are no distinct features with these juices. However Jugos del Valle is a subsidiary of Coca-Cola de Mexico and that is a dominant brand in Mexico and that creates Jugos del Valle to be a top competitor to look out for. The packaging of all these juices follows the health regulation of Norma Oficial Mexico. Pricing also follows the regulations that are provided by the government in Mexico.
Promotion and advertising methods of the competitors in Mexico is mainly through the radio and occasionally television. Even in the United States, if you turn on Telemundo a juice commercial is likely to appear.
The distribution channels for these juices are roughly the same. There is the supplier, factories to package the juices, the wholesaler and distributor and then the grocery stores, super markets, convenience stores all where the consumer can get the juices.
C. Market Size
The target market in Mexico for Odwalla would be 0-14 years and 25-54 years. The makeup of this target market is respectively 27.9% and 40.4% of the total population in Mexico. The target here is trying to reach out to the children who like juice as well as the adults who have children in that age range. Grocery stores and supermarkets will be the main places for putting Odwalla on the shelves,
The sales volume for juice in Mexico is roughly 70% of the market. Jugos del Valle makes up roughly 25% of that 70% and is a subsidiary of Coca-Cola de Mexico where as Odwalla is a subsidiary of Coca-Cola in the U.S. so there could a joint share of the market. In regards to units sold in the first year, more than likely 3,000 units could be sold.
D. Government Regulations
To start with importing in Mexico an application known as pedimento will need to be filed and registered with the Federal Taxation authority of Mexico known Hacienda. NAFTA will also need to be involved in regards to the trading and importing of Odwalla from the U.S. to Mexico. Norma Official Mexico (Nom) is the go to regulations agency guide that will need to be complied with for all imports. Further in to Nom, the Ministry of Health in Mexico will need to be dealt with in regards to the food additives and human consumption. The General Health Law, the Federal Law on Animal Health, and the Federal Law on Plant Health will all need to be followed for imports into Mexico. Special labelling is required and can be determined from the NOM. Information on the label must be in Spanish and are to include the following: product name, brand, list of ingredients, net content, manufacturer and importer’s information, batch number, expiration date, preferred date of consumption, nutritional information, and if the product is sold in multiple packages (i.e., not individually sold). Beverage container packages are also to comply with the regulations of NOM (Nom-002-SSA1-1993).
Sources of Information
http://www.mexicocity.com/v/shopping_centres/
http://www.economist.com/blogs/americasview/2013/06/mexico-s-middle-class
http://www.indexmundi.com/mexico/demographics_profile.html
http://latinlink.usmediaconsulting.com/2013/10/the-latest-on-media-consumption-in-latin
america/
http://articles.chicagotribune.com/1995-09-18/news/9509180111_1_mexican-traffickers-colombian-cocaine-amado-carrillo-fuentes
https://en.santandertrade.com/analyse-markets/mexico/reaching-the-consumers
http://www.mexgrocer.com/mexican-beverage-brands.html
http://www.euromonitor.com/juice-in-mexico/report
http://www.odwalla.com/
http://mexicolaw.com/LawInfo05.htm
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