Country Market Country Market Analysis:Analysis:

South KoreaSouth Korea

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South KoreaSouth Korea

►Has been a democracy since 1987Has been a democracy since 1987►Has a bilateral relationship with the U.S.Has a bilateral relationship with the U.S.

Considers the U.S. friends, partners, and Considers the U.S. friends, partners, and alliesallies

Great if Lipton decided to import from Great if Lipton decided to import from the U.S.the U.S.

►Younger generations are starting to Younger generations are starting to value Western thinking idealsvalue Western thinking ideals Would likely welcome the current Lipton Would likely welcome the current Lipton

brand (without extensive alterations)brand (without extensive alterations)

GDP ComparisonsGDP Comparisons

►South Korea’s economy is ranked 11South Korea’s economy is ranked 11thth in the world (by GDP) in the world (by GDP) With a 9.8% CAGRWith a 9.8% CAGR

►Others:Others: China – 7China – 7thth (w/ a 7.5% CAGR) (w/ a 7.5% CAGR) Mexico - 10Mexico - 10thth (w/ declining GR since 2000) (w/ declining GR since 2000) Russia – 16Russia – 16thth

Sweden – 19Sweden – 19thth

Argentina – 35Argentina – 35thth

Ease of TradeEase of Trade

►Trade Restrictions:Trade Restrictions: All regulations governing foreign retailers All regulations governing foreign retailers

were completely lifted in 1997were completely lifted in 1997

►Tariffs:Tariffs: 7.5% average tariff rate on beverages7.5% average tariff rate on beverages Higher for fruit juices Higher for fruit juices

► Relatively inexpensive importation Relatively inexpensive importation of goodsof goods

Consumer CultureConsumer Culture

►Eat 3 meals a day (often spicy foods)Eat 3 meals a day (often spicy foods)►They serve hot Barley tea with most They serve hot Barley tea with most

mealsmeals This may present a marketing This may present a marketing

opportunityopportunity

►Coffee houses and bars are growing in Coffee houses and bars are growing in popularity among South Korean youthpopularity among South Korean youth Possible market entry pointsPossible market entry points

Consumer CultureConsumer Culture

►Education is the most highly valued Education is the most highly valued aspect of Korean culture (a virtue aspect of Korean culture (a virtue rooted in Confucianism)rooted in Confucianism) Students are taught to protect society Students are taught to protect society

against social injusticesagainst social injustices This may be an opportunity to build This may be an opportunity to build

brand equity by being (and promoting) a brand equity by being (and promoting) a socially responsiblesocially responsible company company

Iced Tea IndustryIced Tea Industry

► Total market size of the non-alcoholic Total market size of the non-alcoholic beverage market in South Korea = $2.4 billionbeverage market in South Korea = $2.4 billion

► Total market size of New Age Beverages in Total market size of New Age Beverages in South Korea = $191.6 million in 2003South Korea = $191.6 million in 2003

► The Iced Tea industry in South Korea has a The Iced Tea industry in South Korea has a 5.4% share of the New Age Beverages 5.4% share of the New Age Beverages industry. This is approximately a $10.4 million industry. This is approximately a $10.4 million market.market.

► There is already an established Iced Tea There is already an established Iced Tea market in South Korea; Lipton would not have market in South Korea; Lipton would not have to develop a new marketto develop a new market

Unilever in South KoreaUnilever in South Korea

► Unilever already has Unilever already has products in the products in the South Korean South Korean market:market:

SkippySkippy BertolliBertolli CaressCaress RegulettoReguletto LuxLux

DoveDove PondsPonds VaselineVaseline RexenaRexena

Unilever’s Competitive Unilever’s Competitive StrategyStrategy

►Unilever has a “Path to Growth” Unilever has a “Path to Growth” strategy: focus on a leading brand strategy: focus on a leading brand (and its product mix), move into new (and its product mix), move into new channels, and drive into new markets channels, and drive into new markets for sustained future growthfor sustained future growth

►This strategy would work well, as This strategy would work well, as South Korea already has a Ready To South Korea already has a Ready To Drink tea marketDrink tea market

Unilever ProductionUnilever Production

►Unilever Best Foods Ltd.Unilever Best Foods Ltd. (Hong (Hong Kong):Kong): Produces:Produces:

SoupsSoups SaucesSauces Peanut ButterPeanut Butter Fruit JuicesFruit Juices DessertsDesserts

►Unilever Ceylon Ltd.Unilever Ceylon Ltd. (Sri Lanka): (Sri Lanka): Large producer of teasLarge producer of teas

Unilever ProductionUnilever Production

UnileverUnilever HindustanHindustan is is Greater ChinaGreater China JapanJapan KoreaKorea AustraliaAustralia New ZealandNew Zealand Southeast AsiaSoutheast Asia PakistanPakistan

This presents This presents possiblepossible

distributed to:distributed to: BangladeshBangladesh Sri LankaSri Lanka NepalNepal IndiaIndia

locations for import of locations for import of LiptonLipton

Unilever StrategyUnilever Strategy

►Unilever ThaiUnilever Thai continued the Unilever continued the Unilever strategy of strengthening its lead position in strategy of strengthening its lead position in the market in Thailand:the market in Thailand: In only 2 years, green tea has become the fastest In only 2 years, green tea has become the fastest

growing product in the RTD tea segmentgrowing product in the RTD tea segment

► Thailand has a much lower GDP per Thailand has a much lower GDP per capita ($7,400) then South Korea ($17,800). capita ($7,400) then South Korea ($17,800). This means that growth of Lipton Green Tea This means that growth of Lipton Green Tea in South Korea may be very successfulin South Korea may be very successful

Pricing IssuesPricing Issues

►RTD tea is already in the South Korean RTD tea is already in the South Korean market and Lipton is in bordering market and Lipton is in bordering countriescountries Lipton has a peach flavored tea in Japan Lipton has a peach flavored tea in Japan

called “Lipton Cool Peche” which retails called “Lipton Cool Peche” which retails for 140 Yen ($1.30) for a 500g can.for 140 Yen ($1.30) for a 500g can.

PricingPricing

Price Mark Up in South Korea  

CIF (Cost/Insurance/Freight) 10%

Tariffs 7.50%

Other Costs 5%

Importer 15-20%

Distributor 10-15%

Retail Margin 10-15%

VAT 10%

Placement IssuesPlacement Issues

►TransportationTransportation Extensive Extensive highwayhighway and and railway railway networks. networks.

Ports, railroads, airports and highways are Ports, railroads, airports and highways are stretched to capacity stretched to capacity

The government is planning a The government is planning a multi-billion multi-billion dollar expansion of the highway systemdollar expansion of the highway system. .

Korean roads are well-paved and maintained, Korean roads are well-paved and maintained, and most drivers comply with basic traffic and most drivers comply with basic traffic laws.laws.► can easily transport through trucking companiescan easily transport through trucking companies

69 airports with paved runways69 airports with paved runways► accessible international accessible international airportsairports

PlacementPlacement TransportationTransportation Korea is an adherent to Korea is an adherent to TIR Customs ConventionTIR Customs Convention- -

a guarantee to arrangement under which freight a guarantee to arrangement under which freight shipments are permitted, to cross international shipments are permitted, to cross international borders of member-nations without discharge of borders of member-nations without discharge of the cargo from road vehicles or containers at the cargo from road vehicles or containers at border points for customs inspection.border points for customs inspection.► Faster, low-hassle deliveryFaster, low-hassle delivery

Free Trade ZonesFree Trade Zones, (A port or an area , (A port or an area designated by the government of a country for designated by the government of a country for duty-free entry of any non-prohibited goods. duty-free entry of any non-prohibited goods. Merchandise may be stored, displayed, used for Merchandise may be stored, displayed, used for manufacturing, etc., within the zone and re-manufacturing, etc., within the zone and re-exported without duties) exported without duties) ► Cheaper cost for warehousing and manufacturing Cheaper cost for warehousing and manufacturing

products in S. Korea in comparison to other countriesproducts in S. Korea in comparison to other countries

PlacementPlacement

►Market Entry:Market Entry:►There is already a Ready To Drink Tea There is already a Ready To Drink Tea

market in South Korea:market in South Korea: Lotte ChilsungLotte Chilsung is the market leader and is the market leader and

already has established Hypermarkets:already has established Hypermarkets:►Lotte Discount Stores carry the Magnet private Lotte Discount Stores carry the Magnet private

label brandslabel brands►Extremely powerful: has the ability to lock out Extremely powerful: has the ability to lock out

small competitors from distribution channels if small competitors from distribution channels if they feel the companies are a significant they feel the companies are a significant threatthreat

PlacementPlacement

► LiptonLipton has a 50-50 joint-venture with has a 50-50 joint-venture with PepsiPepsi to move the Lipton brand into new to move the Lipton brand into new distribution channels and markets and to distribution channels and markets and to build sales of the Lipton brand in the build sales of the Lipton brand in the markets where Lipton is already present markets where Lipton is already present (This has been done in Thailand and (This has been done in Thailand and Vietnam)Vietnam)

► Lipton sells RTD Tea concentrate to Lipton sells RTD Tea concentrate to franchise bottlers. Pepsi then distributes the franchise bottlers. Pepsi then distributes the Lipton products.Lipton products.

DistributionDistribution

►Sales through Sales through vending machinesvending machines in in South Korea increased by 3.1% in 2001 South Korea increased by 3.1% in 2001 reaching 284 billion Won ($249 Million)reaching 284 billion Won ($249 Million) Growing trend in new cashless transactions Growing trend in new cashless transactions

at vending machines:at vending machines: Mobile phone paymentsMobile phone payments Prepaid cardsPrepaid cards

►24-hour convenience stores have grown 24-hour convenience stores have grown by an estimated 45% in 2002by an estimated 45% in 2002

Distribution - RetailersDistribution - Retailers

RTD Market in Korea RTD Market in Korea (Competitors)(Competitors)

1)1) Lotte Chilsung Beverage Co., LtdLotte Chilsung Beverage Co., Ltd (largest beverage (largest beverage producer in Asia)producer in Asia)

2)2) Coca-Cola – NesteaCoca-Cola – Nestea3)3) Hanul Yeon ChaHanul Yeon Cha (Owned by Coca-Cola) (Owned by Coca-Cola)4)4) Pokka Corp.Pokka Corp.

Ships to Korea from SingaporeShips to Korea from Singapore5)5) SnappleSnapple

Through the Hanmi CorporationThrough the Hanmi Corporation6)6) HeladivHeladiv7)7) Kunyoung Foods Co.Kunyoung Foods Co.

► Variety of companies already established in South KoreaVariety of companies already established in South Korea

Positioning: CompetitorsPositioning: Competitors

► Lotte Chilsung:Lotte Chilsung: Emphasize fresh tasteEmphasize fresh taste High qualityHigh quality TraditionalTraditional

► PokkaPokka ““The people’s choice”The people’s choice”

►NesteaNestea Push a new-age Push a new-age

imageimage Young and “cool”Young and “cool” Nestea in KoreaNestea in Korea

Current marketing strategies to consider when Current marketing strategies to consider when designing a strategy for Lipton South Koreadesigning a strategy for Lipton South Korea VERY important to emphasize product as VERY important to emphasize product as high high qualityquality

CompetitionCompetition

► In October 2003, In October 2003, UnileverUnilever entered a joint- entered a joint-venture with venture with PepsiPepsi – principally to sell Ready – principally to sell Ready To Drink (RTD) tea concentrate to franchise To Drink (RTD) tea concentrate to franchise bottlers bottlers

► Lotte ChilsungLotte Chilsung (based in Seoul, Korea) is the (based in Seoul, Korea) is the largest beverage manufacturer in Asia. It largest beverage manufacturer in Asia. It produces produces PepsiPepsi branded drinks under license. branded drinks under license.

►This could present a number of options for This could present a number of options for LiptonLipton to enter the South Korean market with to enter the South Korean market with their Lipton Iced teastheir Lipton Iced teas

Product IssuesProduct Issues

► Iced Tea Iced Tea flavors flavors currently in the currently in the South Korean South Korean market:market:

Ceylon tea (Lemon Ceylon tea (Lemon flavored)flavored)

Oolong tea/Green Oolong tea/Green TeaTea

PeachPeach Whiskey flavoredWhiskey flavored

MangoMango LycheeLychee TarmarindTarmarind LemonLemon StraightStraight MelonMelon

PackagingPackaging► Sizes currently in the South Korean Sizes currently in the South Korean

market:market:► Cans:Cans:

(U.S. pop cans are 355ml)(U.S. pop cans are 355ml) 240ml240ml 250ml250ml 175ml175ml 173ml173ml 215ml215ml 238ml238ml 245ml245ml 340ml340ml

► Bottles:Bottles: 500ml bottles500ml bottles

► Koreans are very family-orientedKoreans are very family-oriented► Inconsistent volumes of cans lead Inconsistent volumes of cans lead

us to believe there is not a standard us to believe there is not a standard sizesize

► Iced tea is primarily consumed Iced tea is primarily consumed from single serve containers, but from single serve containers, but there is also a demand for family-there is also a demand for family-sized bottlessized bottles

Packaging: Packaging: Coca-ColaCoca-Cola

Coca-Cola’sCoca-Cola’s objective was to objective was to broaden their package portfoliobroaden their package portfolio

Launched a 390mL PET package (similar Launched a 390mL PET package (similar to the Lotte Chilsung 500mL PET bottle)to the Lotte Chilsung 500mL PET bottle)

Also launched 250mL can and the Also launched 250mL can and the 330mL can330mL can

Coke also has a Peach and a Lemon Coke also has a Peach and a Lemon flavored Ready To Drink flavored Ready To Drink Nestea Nestea in in KoreaKorea

Packaging: Packaging: HeladivHeladiv

► HeladivHeladiv offers Ready To offers Ready To Drink tea in “juice boxes”Drink tea in “juice boxes”

► Another packaging Another packaging optionoption

► They are sold in assorted They are sold in assorted packs of 5:packs of 5: PeachPeach LemonLemon CaramelCaramel AppleApple StrawberryStrawberry

► Assorted flavors and Assorted flavors and alternate packaging may alternate packaging may be possible options for be possible options for entry into the marketentry into the market

Packaging: LabelingPackaging: Labeling

► Younger generations are starting to value Younger generations are starting to value Western thinking idealsWestern thinking ideals Would likely welcome the current Lipton brand Would likely welcome the current Lipton brand

and labeling (without extensive alterations)and labeling (without extensive alterations)► Language:Language:

Korean language must be printed on the label by Korean language must be printed on the label by lawlaw►Korean language plays an important role in their Korean language plays an important role in their

national identitynational identity Hangul (phonetic alphabet) is the dialect usedHangul (phonetic alphabet) is the dialect used

►Also instills national prideAlso instills national pride

► Koreans favor very distinctive packagingKoreans favor very distinctive packaging

Packaging: LabelingPackaging: Labeling► All imported food products should have Korean All imported food products should have Korean

language labels. Labels require the following language labels. Labels require the following inscriptions:inscriptions:

► Product nameProduct name: the product name should be identical to : the product name should be identical to the product name declared on the licensing/inspection the product name declared on the licensing/inspection authorityauthority

► Product typeProduct type: by classification code as stated in the Food : by classification code as stated in the Food Code, if no classification, product kind should be notedCode, if no classification, product kind should be noted

► Importer's business license number, name, address, Importer's business license number, name, address, and address where defective products may be and address where defective products may be returnedreturned..

► Date of ManufactureDate of Manufacture: Mandatory only for specific : Mandatory only for specific products such as sugar.products such as sugar.

Packaging: LabelingPackaging: Labeling

► Date of Expiry / Shelf lifeDate of Expiry / Shelf life: Food products should : Food products should identify shelf life in accordance with the Korea Food identify shelf life in accordance with the Korea Food Code.Code.

► Content Content (weight, volume, # of pieces) all should (weight, volume, # of pieces) all should be indicated in parentheses.be indicated in parentheses.

► IngredientsIngredients: All ingredients should be listed with : All ingredients should be listed with percentage content in descending order. Artificially percentage content in descending order. Artificially purified water is not considered a major ingredient.purified water is not considered a major ingredient.

► Nutritional informationNutritional information: Special nutritional foods, : Special nutritional foods, health supplementary foods, and products wishing health supplementary foods, and products wishing to promote nutritional content are required to have to promote nutritional content are required to have nutritional labeling.nutritional labeling.

► Other items such as cautions, as designated by Other items such as cautions, as designated by detailed labeling standards for food use or detailed labeling standards for food use or preservation. Any products that must be kept at low preservation. Any products that must be kept at low temperature, must be clearly indicated.temperature, must be clearly indicated.

Promotion: AdvertisingPromotion: Advertising

►100% of South Koreans have a television100% of South Koreans have a television►TelevisionTelevision has a daily reach of 92% has a daily reach of 92%

(compared to 75-85% in the U.S.)(compared to 75-85% in the U.S.) This means that television reaches a This means that television reaches a

huge proportion of consumers in South huge proportion of consumers in South KoreaKorea

►““Drinks” were the 7Drinks” were the 7thth largest product largest product category in terms of overall advertising category in terms of overall advertising expendituresexpenditures Beverages were not even in the top 10 in Beverages were not even in the top 10 in

the U.S.the U.S.

Advertising Costs: TelevisionAdvertising Costs: Television

► 15 seconds of advertising during peak hours in 15 seconds of advertising during peak hours in South Korea is about 9,000,000 Won (about South Korea is about 9,000,000 Won (about $7,900) depending on the station$7,900) depending on the station

► This is compared to well over $50,000 in the U.S.This is compared to well over $50,000 in the U.S.

► ““Beverages” are the fourth largest product Beverages” are the fourth largest product category for television advertising in South category for television advertising in South KoreaKorea

►Television would be a promising medium for Television would be a promising medium for advertising in South Koreaadvertising in South Korea

Advertising Costs: MagazinesAdvertising Costs: Magazines► A full page magazine ad in South Korea runs A full page magazine ad in South Korea runs

for about 3,000,000 Won ($2,600) for about 3,000,000 Won ($2,600) depending on the magazinedepending on the magazine

► This is compared to well over $This is compared to well over $18,00018,000 in the in the U.S.U.S.

► ““Drinks” are the 8Drinks” are the 8thth largest product category largest product category for advertising in South Koreafor advertising in South Korea

► Some monthly magazines reach about Some monthly magazines reach about 150,000 readers150,000 readers

►Magazine advertising is a cost-effective Magazine advertising is a cost-effective compliment or replacement to television compliment or replacement to television advertising in Koreaadvertising in Korea

Advertising Costs: OthersAdvertising Costs: Others

► Radio: Radio: ““Drinks” are the 5Drinks” are the 5thth largest product category largest product category

advertised in South Koreaadvertised in South Korea Radio has a 36% daily reach in KoreaRadio has a 36% daily reach in Korea

► Internet: Internet: 54% of South Koreans have access to the internet54% of South Koreans have access to the internet

►South Korea has a 45% reach of the internet each weekSouth Korea has a 45% reach of the internet each week Only 46% of adults in the U.S. have internet Only 46% of adults in the U.S. have internet

access (as of 2001)access (as of 2001)

►There are many different medias available There are many different medias available in Korea for advertisingin Korea for advertising

PromotionsPromotions

►The most popular spectator sports are:The most popular spectator sports are: SoccerSoccer BasketballBasketball VolleyballVolleyball

►The most popular recreation activities The most popular recreation activities are:are: Mountain ClimbingMountain Climbing HikingHiking

► These would be good outlets for These would be good outlets for event-marketing or advertisingevent-marketing or advertising

Market SegmentsMarket Segments► 80% of people in South Korea live in the 6 80% of people in South Korea live in the 6

major cities:major cities: Seoul (11 million)Seoul (11 million) Pusan (3.9 million)Pusan (3.9 million) Taegu (2.5 million)Taegu (2.5 million) Inchon (2.4 million)Inchon (2.4 million) Kwangju (1.4 million)Kwangju (1.4 million) Taejon (1.3 million)Taejon (1.3 million) Most of the remaining population live in the Most of the remaining population live in the

surrounding suburbssurrounding suburbs

► Would present a small number of well Would present a small number of well defined geographic regions to target with defined geographic regions to target with the Lipton strategythe Lipton strategy

Target MarketTarget Market

► The Ready To Drink teas are quite popular The Ready To Drink teas are quite popular among South Korean young adultsamong South Korean young adults

► Japan has experienced a similar growth in Japan has experienced a similar growth in popularity (among young adults)popularity (among young adults)

► South Korea’s younger generations are South Korea’s younger generations are proven to value western thinking idealsproven to value western thinking ideals

►Korea’s age distribution is most Korea’s age distribution is most concentrated in concentrated in 15-24 15-24 year-olds (15.4% of year-olds (15.4% of the population) and the population) and 25-34 25-34 year-olds year-olds (17.56%). This is one third of the entire (17.56%). This is one third of the entire populationpopulation