Country Market Analysis March 2, 2005

Anna CeceBrandon MarkleyMegan OpsahlMegan Revoldt

Situation Analysis Entry of Uncrustables in France

Assessment of Potential Market

Competition Ralcorp—Krusteaz

Involved in the frozen food convenience sector General Mills

1960—Purchased Siscuiterie Nantaise—France’s leading sweet biscuit and sandwich cookie company.

1990—Entered into joint venture with Nestle, began to market cereal.

1990—Entered into joint venture with PepsiCo, began to market snack foods across France.

Competition Continued… Frozen Food Competitive Landscapes

High quality food products with an American image can find a niche in the French market.

McCain Foods Dominating the French frozen food sector

Nestle S.A. The world’s largest food manufacturer In 2002, Nestle generated revenues of $64.6 billion

Saveurs de France – Brossard Designs and manufactures frozen specialties and industrial pastry

products Has five production sites and distributes all its products through its

Brossard Distribution Company.

Consumer Behavior

Consumer’s Food Behavior A typical breakfast is a bowl of café au lait, a croissant

and a thin loaf of bread smeared with butter and jam. Bread is usually bought on a daily basis.

Smucker’s has developed a relationship with schools in the United States In France school children have a two-hour lunch break—kids can

go home or eat at la cantine (cafeteria).

Children eat a snack after school—le goûter—usually includes cookies, bread and jam, or chocolate.

Consumer’s Desire for Convenience Global influences impacting food consumption patterns

and behavior. Desire for foods that are quick and easy to prepare. Key issues: portability and single serve packaging The movement toward convenience in eating—evident in

the growing consumption of frozen and prepackaged foods.

Advantages of Market Entry According to a recent consumer survey conducted by

Carrefour, one of France’s leading retail chains, the best-selling grocery items are: Biscuits, breads and jams

The bread market is highly fragmented—brand recognition is much less important than in other consumer markets.

Per capita Consumer Expenditure on Bread and Cereals 1990 vs. 2003 France—272.44 (1990) compared to 326.24 (2003) Percent of Country Total: 2.00 (2003)

Consumer Demand

Consumer Demand continued…

Frozen Food Advantages Market Value

The French frozen food market grew by 1.0% in 2003 to reach a value of $5.99 billion.

Market Value Forecast In 2008, the market is forecast to have a value of 6.45

billion, an increase of 7.7% since 2003. Market Segmentation

Frozen ready meals dominate the French market. In 2003, frozen ready means accounted for 51.8% of the market.

Consumer Demand

Challenges for Market Entry Freshness and taste are main focuses in France. Frozen Food Sector

Market Analysis Although the frozen food sector presents opportunities, the

market remains static compared to an era of all-round global growth.

During the next five years, the market is expected to experience consistently low growth rates. By 2008, the market is forecast to reach a value of $6.45 billion, which equates to a CAGR of 1.5% in the 2003-2008 period, again lower than the European market.

Consumer Demand Continued… Challenges

Freshness and taste are main focuses in France. Frozen Food Sector

Market Analysis The frozen food market in France appears to be struggling

somewhat in an era of all-round global growth. Despite accounting for 7.1% of global sales of frozen foods, France has experienced relatively static growth in recent years and this stagnation is expected to continue into the future.

During the next five years, the market is expected to experience consistently low growth rates. By 2008, the market is forecast to reach a value of $6.45 billion, which equates to a CAGR of 1.5% in the 2003-2008 period, again lower than the European market.

Distribution

Production & Market Entry Options Import Uncrustables from United States

Import from other EU Country

Produce Uncrustables in France

Production Facilities United States

Smuckers has 12 plants in US Now producing Uncrustables in Scottsdale, Kentucky

Europe Smuckers has a facility in Livingston, Scotland

France International Flavors & Fragrances Inc. (Dijon)

Sales Offices, manufacturing, creative laboratory

France offers a highly diverse and attractive market for locating logistics facilities, ample opportunities to buy, build or lease.

Rents for logistics facilities are significantly lower in France than in the other European countries.

Comparison of Rents in the Logistics Sector

France offers Attractive Real Estate Market

Tariffs Community Integrated Tariff (TARIC) system Raw materials enter duty-free or at low rates Manufactured goods are subject to rates between 5 - 17% Processed products entering the EU and France are subject to

additional charges—based on the % of sugar, milk fat, milk protein and starch in the product

Import & export transactions exceeding 12,500 euro in value must be conducted through an approved banking intermediary

Documents required to import into France Shipping documents Commercial invoice Bill of lading or air waybill Certificate of origin Other documents

Market Entry New-to-market products usually enter through

importers/distributors. The U.S. supplier should: Submit product descriptions and price quotations Determine required import documents

Need local agent or representative Can penetrate the market through:

Central buying office Specialized importer/distributor

Building Relationships Central Buying Offices or Purchasing

Departments Create interest in your product First meeting Discussion and commercial offer

Importer Establish a contact Check the Supplier’s reliability Commercial Offer

Logistics Strategic Location of France

France borders 7 other countries—no other country offers closer access to so many key European markets.

"With its geographical location, connections to a well developed motorway system, and the high speed train networks with access to the tunnel, France is ideally situated to meet level of service requested by our customers. These factors and the quality of the workforce were important criteria in our decision to double our warehousing facility in France.“ Takao Amase, President of Bridgestone/Firestone Europe

Transportation Logistics Ports in France

French ports handle more than 345 million tons of merchandise a year. Five of Europe's 15 busiest ports are in France. Marseilles is the leading French and Mediterranean port, with 92,4 million tons of cargo in 2002.

Railways in France The high-speed rail network provides fast and exceptionally

safe connections between France's major cities and many European countries.

Features of France’s Infrastructure More than 11,000 km (6,800 miles) of

maintained super-highways with the lowest traffic density in Europe.

- Two Paris airports handle 20% of the total European Union airfreight.

- French ports are among the most modern in the world. Users take benefit from a large range of

computerized processes which have completely changed sea and waterway transportation, giving them access to the most competitive multimodal platforms.

Transportation

Major Rail Routes

Labor Issues Length of working week—35 hours maximum Overtime regulations—130 hours maximum Vacation period—5 weeks per year Paid leave and public holidays—11 per year Minimum wage— € 7.61 per hour Social Security—health and maternity leave,

death and disability, unemployment and family allowance benefits 30-40% of gross salary mandated for social security

Qualified and Productive Workforce Productivity in GDP per employee per hour in USD

France has highly productive workforce

Consumer Related Issues

Targeting Smucker’s currently targets in the U.S. :

Moms/parents France—females between the ages of 20-44 account for 34% of

the population Schools Middle Class

France—Middle managers & professionals = 10.7% of active population; White collar workers = 23.5% of active population

Do not target kids—legal and corporate cultural reasons

Positioning Smucker’s current positioning in the U.S. :

Convenient for on-the-go consumers Low-cost Lunch or snack product

Implementation in France Increasing acceptance of sandwiches Growth of pre-packaged food sector

Distribution Primary Retail Channels

Hypermarkets (Hypermarchés) Supermarkets (Supermarchés) Department Stores (Grands magasins) Convenience Stores (Magains populaires) Gas-Marts (Boutiques de stations d’essence) Traditional outlets (Magasins de detail traditionnels)

Leading Hypermarkets

Groups/Buying Offices Market Share (Value)

Carrefour 26.2%

Lucie Leclerc Systeme U 23.8%

Intermarche 14.4%

Auchan 12.9%

Opera 15.7%

Others 7.0%

Total Hyper and Supermarket Food Sales 100%

Product Issues Feature Smucker’s peanut butter

and jelly Peanut Butter is not widely used

Round, crust-less sandwich made of white bread Potential snack for children who do not

like crust The bread market is highly fragmented—

brand recognition is much less important than other consumer markets

Grape flavor is typical American jam

Storage—freezer required 2001: Possession of Freezer—40.7 per 100

households

Labeling Labeling Requirements—Labeling must provide consumers with

precise information that answers six questions about the product: What is it? What is it used for? What is if made of? What much does it cost? How is it used? When should it be used? Also must include—country of origin, name of vendor, bar code price

labeling (GENCOD)

Labels should be worded in such a way so as not to confuse the consumer. For example, “Peanut Butter” should be denominated as “Pate

d’arachide” and not “beurre d’arachide” since it does not actually contain any butter as defined by French regulations.

Packaging U.S.—Uncrustables are packed in 4, 10, or 18 sandwiches per

box French decree of 1992 established that it is the responsibility of

producers, importers or generally persons responsible for the marketing of a food product to contribute or provide for the elimination of all the packaging waste matter. Eco-Emballages Companies can fulfill their legal requirement through paying a license fee Grants them the right to use the "green dot" on packaging they put on the

market.

The Green dot logo on a package is an environmental seal indicating that the packaging manufacturer participates in a municipal waste disposal system for recycling. The application of this logo on food labeling is not mandatory for

all companies.

Packaging Continued…

Decree n° 98-638 of 28 established in July 1998—provides the essential requirements concerning: The design Composition and manufacturing of packaging The reusable and recoverable nature of packaging—

especially for material recycling

Two main sets of rules apply to sales promotions:

1.) Regulation of sales with a prize/gift (ventes avec prime)

2.) Regulation of gambling, lotteries and promotional games• Test to determine whether an operation is a prohibited

lottery—Illegal if all of the following are present:• An offer to the Public• Payment to Participate• A chance of winning a Prize• A game based wholly or partly on chance

Promotions All sales promotions must be in French “loi Toubon” It is possible to display a slogan or copy in English,

provided that a French translation is also displayed. Example: McDonald’s ‘c’est tout ce que j’aime’ (I’m lovin’ it)

Media Availability

Television Number of Households—24,894,737 Number of Television Households—23,650,000 Television Penetration—95 percent

Average minutes viewed per day per adult: 212 minutes

Commercial Television

Television is partly state-controlled and partly in private hands All television channels carry advertising

Channel Technical Penetration

(%)

Daily Hours of

Transmission

Ad Mins Per Week

TF1 100 24 967

France 2 100 24 589

France 3 100 21 523

Canal+ 79 24 189

La Cinquième 91 16 288

M6 93 24 924

Cost / Audience—Television

Add something here??? Interpret graph

    Peak Rate Peak Audience 30 sec Peak

  30 sec (000)s CPT (€)

Channel Peak Time € Adults H/W Adults H/W

TF1 2000-2200 66,775 7,031 3,554 9.5 18.8

France 2 2000-2200 26,912 4,566 2,410 5.9 11.2

France 3 1900-200 12,483 4,246 2,247 2.9 5.6

Canal+ 1930-2030 7,744 867 326 8.9 23.8

LaCinquième 1700-1900 1,191 730 408 1.6 2.9

M6 2000-2200 26,589 2,556 1,184 10.4 22.5

The Bureau de Vérification de la Publicitié (BVP) The BVP has two main activities:

1.) Pre-clearance for television advertisements

2.) Development of effective self-regulation guidelines and recommendations

Conseil Supérieur de l’Audiovisuel (CSA) Monitors television and radio content: advertisements and television

sponsorship

Television Regulation

Radio Commercial Radio Stations—15 Radio Households (2001)—24,107,000 Average Adult—Listening Minutes per Day—173 Costs / Audience :

Station Type Peak Time Peak Rate (30 sec) €

Peak Audience

000s

30 sec peak CPT

€

RTL Generalist 0700-0900 11,503 1,582 7.7

RTL2 Music 0700-1200 2,376 281 9.8

Europe 1 Generalist 0700-0900 9,375 1,160 8.5

Europe 2 Music 0700-0900 3,992 476 10.5

Cherier FM Music 0900-1100 3,962 464 9.0

Nostalgie Music 0900-1100 4,881 682 7.3

NRJ Music 0700-0900 5,178 700 9.0

Print

Magazines—Women’s Profile—general women’s magazines featuring women’s

interests: fashion, beauty tips, cuisine, child-care, and social/family issues

Magazine Circulation Frequency Rates (B/W) Rates (Color)

Advantages 550,000 Monthly Euro 18,300 Euro 24, 800

Femme Actuelle

1,385,216 Weekly Euro 24,850 Euro 37,650

Marie France 206,299 Monthly Euro 13,111 Euro 13,312

Newspapers Leading distributed newspapers

Strong regional daily press—total circulation often higher

Newspaper Circulation

Frequency Readership Rates (B/W) Rates (Color)

La Croix 90,000 Daily (Mon-Sat)

n/a Euro 12,653 (Regional Rates)

Le Figaro 352,651 Daily (Mon-Sat)

1,705,000 Euro 71,700 n/a

La Liberation 156,077 Daily 887,000 Euro 29,900 Euro 47,600

Le Monde 361,254 Daily 2,164,000 Euro 67,000 Euro 90,100

Le Parisien 360,505 Daily n/a Euro 38,860 Euro 54,400

Outdoor Outdoor Sites: 483,00

Billboards Transit Advertising Illuminated Displays Wallscapes Le Metro—underground platform

advertising

    Number of Cost per Panel

Type Size Sites per Week (€)

VIACOM OUTDOOR  

Master 12m²+8m² 4,429 333

Profil Dynamique 12m²+8m² 3,876 315

12-Dec 12m²+8m² 2,724 408

Pick Up 12m² 1,881 219

Premium  8m² 638 497

AVENIR  

Empir 12m²+8m² 4,800 323

Agir 12m²+8m² 2,800 308

Ravir 12m²+8m² 2,500 405

Cerclo 12m²+8m²  1,400 225

FRANCE RAIL  

Twins National 120x174  2,200 65

Outdoor Types and Costs :

Media Regulations

In 1992 a new decree came into force to ensure advertisements on television do not take advantage of children’s inexperience and immaturity.

Advertisements on television should not: Urge minors to purchase products or services by exploiting

their inexperience or credulity. Urge minors to persuade their parents or any third party to

buy the product advertised.

French Advertising Law

Advertising Food Laws September 2005—advertisers in France will have a choice between

including health warnings on TV ads for any food or beverage with added sugar, salt or sweetener, or paying a tax equal to 1.5% of their annual ad budget to a national institute to promote healthier

eating. Advertising to Children

Advertising and marketing to children—largely dealt with by self-regulation.

Recent addition to the self-regulated codes of practice—addresses the problem of childhood obesity: Advertisers should not depict and promote snacking, compulsive eating,

excessive eating and an inactive way of life.

Comparative Advertising Comparative advertising is now allowed under

strict conditions Forbidden in certain media: packaging, invoices, fares

Must be objective, fair, truthful Comparisons can only be made in relation to

characteristics of the products that are essential and significant, verifiable and relevant.

Price Issues Value Added Tax (VAT)

Sales tax levied on the sale of goods and services. VAT is generally charged at one of two rates:

The standard rate of 19.6% The reduced rate of 5.5%--applicable mostly to agricultural

products and foodstuffs

Duty Rates Retail Price influenced by costs of producing

product and competition

Summary

Advantages of Market Entry Consumer Behavior Transportation Infrastructure and Logistics Highly qualified and productive workforce Media Availability

Disadvantages of Market Entry Smucker’s brand recognition Language Storage statistic—Freezer