Interview with Janus Skøt, Export Manager Consumer International Summary
Data: 2 April 2008
Present: Janus Skøt, Export Manager Consumer International, Kristian Lund and Maria Wiese Place: Copenhagen
These are the interview areas investigated. They have been designed and framed to get information on Arla Foods‟ focus on Africa, growth opportunities and the potential for dairy products in Africa, with Sub-Saharan Africa as an operational case.
Introduction:
Arla Foods‟ corporate mission is to become Europe‟s leading dairy company (by sales volume) by 2010 through value creation and active market leadership. It is necessary to think in different modes if the goal is to be achieved. Arla is and to grow as a global company.
Factors influencing the search for new markets:
- Saturation in European markets - USA/Canada have import quotas
- Many requests are coming from the region
The emphasis market expansion is not very big when looking at the company from a corporate level.
Here are familiar markets more important. However, depending on where you are in the company, the focus changes.
A new strategy is being implemented for Consumer International. Emphasis is primarily on Spain, Poland, Greece, Russia, and the Middle East and the USA. These markets generate considerable sales volume due to the population size.
In Consumer International, countries like Poland and Brazil are more important than Africa.
However, growth is needed and although Janus Skøt, Regional Export manager, might have the responsibility of the smallest (relatively in Arla) markets, these markets are also the ones with the highest growth potential. Janus Skøt and Business Unit Overseas
There role of Business Unit Overseas in Consumer International:
- Nesting box for smaller, international markets - Find ways where Arla can grow its business
- Through existing markets / or NEW markets where the growth potential is large - Corporate expectation that this unit grows in volume as well as revenue!
Arla Foods have a special product portfolio for the export markets (thus very different from the products sold in Denmark)
Factors influencing how Consumer International assesses new markets:
There is no competition between departments per se. Demand determines where to produce milk and for which division/unit.
Growth of the business is the most important. For target markets the strategic work lies within each unit, at market level. There is no single strategy for growth markets – as long as you sell at the highest price. Indicators influencing market assessment:
- Population - PPP per capita
- Segmentation in real income
- No lobbying, no organization - do not want to establish themselves.
- EU sets guidelines. There is a market information secretary who communicates with the EU - and the Danish police of being who will represent the Danish companies.
- There are no standards of how much you'll earn, there are different rates, etc.
1. Consumer International wants to expand on the African market – why and how?
When serving the sub-Saharan African markets Consumer International rely on its experience and products from the Middle East and North Africa.
Consumer International has been present in South Africa for more than 30 years with products adapted for the western consumer.
In this respect, Africa is interesting because of the population configuration and that Consumer International has an existing product portfolio that fit the market (supermarkets and cooling facilities). There is already registered consumption of Arla‟s products in the West African region due to a high degree of parallel import from the Middle East. Thus, Arla has a strong interest in generating that sale by itself now that they know there is a demand for it!
West Africa – is the main focus area with most enquiries, however, the amount of orders varies much. Arla is dependent on the political system, which will be considered before entry on the market. Consumer International wants to be more proactive in responding to the numerous enquiries that the company receives from African distributors.
Janus has not been in West Africa to visit distributors, but could be a good possibility. Consumer International generally visits distributors when sales have started.
In West Africa Consumer International have had sporadic export to the region among other including sales to Benin, the Ivory Coast, Ghana, and Gambia. The countries in West Africa are probably increasing their demand of Arla Foods‟ products because they want to sell to the growing market and large market in Nigeria. In general it is mainly distributors and agents that make the request. Consumer International receives 10 requests from West Africa a week
East Africa – Is not considered as an interesting market as it perceived to be surrounded by political instability and conflict. However, the company does get enquiries from Tanzania and other East African countries.
South Africa and other markets
Consumer International is established in SA through local distributor in charge of marketing. CI has been in the market for almost 30 years, selling its key products, similar to the portfolio sold in South America.
Other markets include Angola with 2x Lurpack (North Africa lies in the “Middle East Division”).
Previous export: Ivory Coast, Senegal – Export faded out (prices, left alone)
Other countries in Africa that are/have been interesting: Benin, Togo, Ivory Coat (previously exported, have not kept in touch, and prices have risen has done that currently do not trade with Ivory Coast), Senegal (have previously exports/not done enough/prices too expensive) .
Have had requests from Tanzania, Gambia, and Zambia, however still at levels that are interesting to AF
2. What role do agents and distributors play in the African market?
They are the key to success, because they make it possible to enter the market and distribute the products. Overall the potential seems good in sub-Saharan Africa and Arla Foods takes part in selling the product to secure the best adaptation to the market. The company does not operate with test markets. The company is willing to sell its products in whichever market where the orders from distributors are large enough to profit from.
3. Which possibilities do you see for Consumer International‟s to be successful or limited on the African market?
Possibilities: Size of population, receiving numerous requests on a weekly basis from distributors.
Most agents and distributors request a large product portfolio of dairy products ranking from butter to high quality cheese. The company has a product portfolio that can be marketed in the region Limitations:
The countries in Africa are among the poorest in the world. Bureaucracy is a common feature in these countries which complicates business activities. West African distributors and agents are interested in visiting Arla Foods. However, they do not know the company well and vice versa. Arla Foods do not invites potential distributors to Denmark until a sale has been completed. Then they know this is the right customer to invite. Corruption is equally a huge problem for the company. We do not, however, have any experience from the African market at present.
It entails a large risk to establish in Africa in general and data is not available to assess the market and formulate strategies. Moreover, the conditions are constantly changing. For example in Angola should all products be provided with Portuguese label due to the political system. This increases the costs for Arla Foods.
Why is more cooperation needed between Global Ingredients and Consumer International ? Synergies in terms of sharing of information and timing of entry mode. By working together on entry strategies Global Ingredients is also likely to create a market for Consumer International products, which otherwise would not have been identified. In some countries both divisions share the same distributors
How can it be profitable to sell “Danish milk abroad” via export and processed milk/Consumer International products?
The Danish and Swedish cooperative owners are in focus here. There has been tendency towards alternative sourcing methods – not rejected but still not too positive towards the idea. The
Cooperative movement could limit the growth Arla is not built as a profit centre. The focus is always at providing the payments aconto.
Miscellaneous topics covered at the interview:
It seems to be the seller's market at the moment but things change quickly. Prices on food are rising, the dollar is low, oil prices are on the rise. The price of milk has risen 20% over the last year – Cooperative farmers have the final say Exports, also dependent on declining foreign exchange rates.
EU Quotas provide a dilemma for growth when exports based on local milk. Instead, focus should be on growing in value rather than in volume. Though, quotas have been increased by 2%
There will be more product and sales in the so-called Mælketrappe. It is ok that sales are lost in the lower levels of the processed dairy products as long as it opens up for more sales of the value-added products. The ultimate aim it to make everything as value-added as possible
Issues of risk assessment
- Risk Management lies at the different divisions/units. Consumer International has guidelines for freight, INCO terms.
- Risk diversification is a must. As a result, Arla Foods has spread to many markets beyond Denmark and the Middle East
- Arla Foods is hit by the low value of the U.S. dollar, but are glad to markets its products in Europe now that the Euro is strong
- Africa can help to spread risk and thereby focus on U.S. dollars markets and Latin America - can convert to the Euro.
- Currency is important