AllStar Marketing Research



AllStar Marketing Research

Peru Marketing Report

BA 447 International Marketing

Deborah Duggin

Rachel Colvard

3 March, 2009

Situation Analysis

Company

Based in the U.S., Allstar Brands produces pharmaceuticals, non-prescription drugs, and other consumer products. The company has been very successful in the U.S., European, and Asian markets and is looking to expand its Allsmile brand toothpaste sales into Latin America. Currently Allstar’s Allsmile brand has obtained 13% of the world market sales for toothpaste. It is looking at all the different countries in Latin America to determine the best entry location for that sector.

Consumers

In general the consumers of toothpaste in Peru view economy as the biggest deciding factor (51.1%) in the brand and type of toothpaste. The second largest deciding factor was effectiveness (27%) followed by size (16.6%). This illustrates affectively the fact that the Peruvian people suffer greatly from poverty and generally low income.

Our Market research has discovered that the Economy and Healthy products are in the highest demand among the largest market shares. Younger and Families. They prefer the medium size tubes or pumps and are nearly evenly split between gel and paste.

Decision Criteria

Peru, Period 3

Cross Section: Younger, Families (79.4%/pop, 80.4%/demand)

Product Preferences

|Size |  |  |Delivery |  |  |

|Unit Sales (mill.) |26.0 |4.8 |15.4 |0.0 |46.1 |

|  | | | | | |

|Local 1 |68.8% |0.0% |76.2% |0.0% |64.1% |

|Local 2 |0.0% |100.0% |0.0% |0.0% |10.4% |

|Regional 1 |31.2% |0.0% |23.8% |0.0% |25.5% |

Local has the largest share of the economy market, which is the largest market in Peru, and the Healthy market. Local 2 has all of the White formulation market which only caters to about 15% of the population and Regional 1 carries the remaining marketing portions for Economy and Healthy. The demand for kids toothpaste is only around 4% leaving little opportunity in that market.

Brand Formulations

Peru, Period 1

|Brand |E |W |H |K |  |

|Argentina |10.6%  |88%  |14.6%  |0.96%  |14.7  |

|Brazil |6.1%  |79%  |10.0%  |1.04%  |28.6  |

|Chile |8.2%  |84%  |36.0%  |0.94%  |8.6  |

|Mexico |5.8%  |74%  |11.6%  |1.16%  |20.3  |

|Peru |5.3%  |71%  |N/A   |1.32%  |30.9  |

|Venezuela |5.2%  |86%  |22.2%  |1.38%  |21.5  |

|U.S. |12.5%  |76%  |8.4%  |0.91%  |6.4  |

Economy

Peru has the largest percentage of people that fall below the poverty line at 54% of the population. The country also has a significant unemployment rate of 8.7% and an inflation rate of 1.6%. The GDP per capita is the lowest of the other Latin American countries at $5,900, but Peru has the 3 largest GDP growth rate among those countries.

Peru exports more than it imports. It exports consist of the many different natural resources within the country such as; Zinc, Copper, Gold, Oil, Coffee etc. Its largest trading partner is the U.S. at 29.5% exports and 30.3% imports.

|Country |Pop. Aged 65+ |Urban Pop. |Pop. in 3 largest |Pop. Avg. Growth |Infant Mortality |

| | | |cities | |/1000 births |

|Argentina |10.6%  |88%  |14.6%  |0.96%  |14.7  |

|Brazil |6.1%  |79%  |10.0%  |1.04%  |28.6  |

|Chile |8.2%  |84%  |36.0%  |0.94%  |8.6  |

|Mexico |5.8%  |74%  |11.6%  |1.16%  |20.3  |

|Peru |5.3%  |71%  |N/A   |1.32%  |30.9  |

|Venezuela |5.2%  |86%  |22.2%  |1.38%  |21.5  |

|U.S. |12.5%  |76%  |8.4%  |0.91%  |6.4  |

Marketing Strategies

Product

We have chosen 4 product SKU selections that would be most effective in entering the Peruvian market with;

Economy/Medium/Tube/Paste

Economy/Medium/Tube/Gel

Healthy/Medium/Tube/ Paste

Healthy/Medium/Pump/Gel

Brand Formulations

Peru, Period 3

|Brand |E |W |H |K |

|Traditional |56.9% |86.3% |68.6% |68.3% |

|Self Serve |20.7% |10.6% |10.0% |13.0% |

|Hypermarket |21.7% |2.5% |20.3% |17.9% |

|Web/Other Home |0.7% |0.6% |0.9% |0.8% |

Promotion

We have chosen to market each individual product separately with 4 campaign ads. A few of these ads are being reapplied for use in Peru though 1 had to be adapted while 2 had to be translated. On average our budget for advertising would be 2million for each individual campaign in order to increase Allsmile’s brand equity to compete with the popular Local 1 brand.

Decision Summary

Peru, Period 3

Allsmile

|Campaign |Adapt. (000's) |Budget (mill.) |

|Younger/White/Spanish/Peru/2 yrs old |NA |PEN2.0 |

|Families/Economy/Spanish/Peru/2 yrs old |NA |PEN1.0 |

|Younger/Economy/Spanish/Peru/1 yr old |NA |PEN2.0 |

|Families/Economy/Spanish/Peru/1 yr old |NA |PEN2.7 |

Price

The pricing strategy we propose is to price the different products lower than the local and regional brands. The gel type toothpaste is more expensive than the popular Local 1 brand’s average MSRP for Families/Economy, but we feel that the 50% of the Younger/Families group that prefer gel toothpaste will buy because local 1 doesn’t offer it.

Product Pricing

Peru, Period 3

SKU's selected: Small, Medium, Large

|Brand |Avg MSRP |Avg |

| |(PEN) |Allowance |

|Allsmile |3.84 |4.0% |

|Local 1 |3.76 |5.0% |

|Local 2 |4.00 |5.0% |

|Regional 1 |3.92 |7.0% |

This table shows the relationship between Allsmile’s average MSRP and that of its competitors. The average allowance for fluctuating price for Allsmile is lower than any of its competitors, meaning different shopping outlets can charge too much above the MSRP.

|SKU |MSRP |Allow. |Sales Forecast |

|Economy/Medium/Tube/Paste |PEN3.47 |4.0% |2.7 |

|Economy/Medium/Tube/Gel |PEN3.89 |4.0% |2.4 |

|Healthy/Medium/Tube/Paste |PEN3.80 |4.0% |3.6 |

|Healthy/Medium/Pump/Gel |PEN4.19 |4.0% |2.4 |

This table shows the chosen SKUs and the MRSP for each individual brand formulation for Allsmile.

Manufacturing in Peru

The main argument for building a plant in Peru is that the shipping costs from the U.S. would be .30 compared to shipping from Peru as .005 in period 3.

Shipping

Consolidated, Period 3

  |USA

Plant |Arg.

Plant |Bra.

Plant |Chi.

Plant |Mex.

Plant |Peru

Plant |Ven.

Plant |  | |Argentina |0.030 |0.005 |0.010 |0.010 |0.020 |0.010 |0.010 | | |Brazil |0.030 |0.010 |0.005 |0.010 |0.020 |0.010 |0.010 | | |Chile |0.030 |0.010 |0.010 |0.005 |0.015 |0.010 |0.010 | | |Mexico |0.010 |0.020 |0.020 |0.015 |0.005 |0.010 |0.010 | | |Peru |0.030 |0.010 |0.010 |0.010 |0.015 |0.005 |0.010 | | |Venezuela |0.030 |0.015 |0.010 |0.010 |0.010 |0.010 |0.005 | | |

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