Spring Valley of Australia - Assignment Example

Spring Valley of Australia 1. Introduction Spring Valley of Australia has been bottling fresh energy drinks since 1957. They have innovative juice styles and flavour combinations and they are committed to quality and great taste. Spring Valley was taken over by Cadbury’s Schweppes when it had an approximately 27% share of Australian single share juices in the convenience segment (Cadbury, 2000). Spring Valley wants to set up a processing unit in Thailand and for this the management has sought a PEST analysis and a SWOT analysis. 2. Pest Analysis of Thailand 2.

1 Political environment Thailand is an attractive choice for exporters and it welcomes foreigners (Teoh, 2009). Thais have willingness to work with and trade with other nations. The political situation is precarious and can flare up at any time. There have been frequent changes of Prime Minister in the past three years but change in government does not affect business. Economic policies do not change when political changes take place. 2.2 Economical environment Thailand is South-East Asia’s second largest economy.

There is low competition for market entry into Thailand (Teoh, 2009). Australia and Thailand have an existing healthy economic relationship. The Thailand Board of Investment is offering incentives such as tax holidays and relief from import duties for agri-processing companies that want to set up unit in Thailand. The Thai government has taken action to counter the global financial crisis (Dfat, 2009). They are also offering subsidies to deal with rising fuel costs. 2.3 Socio-cultural environment Although English is spoken widely in major cities, knowledge of the local language is essential (Teoh, 2009).

Participating in government sponsored trade shows can help to overcome this barrier (Chou, 2006). Consumers are losing taste for carbonated soft drinks and they are thirsting for something else such as ready to drink tea or energy drinks (Strenk, 2008). To penetrate into the Thailand market it is essential to demonstrate a point of differentiation, concentrate on higher value products and run ongoing market promotion campaigns (NZTE, 2007). This is essential because the society has adopted a westernized attitude towards consumption.

Because of sedentary lifestyle people have become obese and are looking for natural health products but these have shorter product life cycle (Austrade, 2009). Food consumption pattern of Thai consumers is changing. Imported brands are popular with overseas educated Thai consumers and the middle class who have higher disposable incomes. A typical Thai family spends about 35% of their total income on food and beverages and the ratio of imported food to domestic food is 30:70 (Austrade, 2008). People have become health conscious and they are concerned about physical appearance as well as prevention of heart diseases and cancer.

Consumers in Thailand do not remain loyal to one brand. Consumers like to be well informed before making a purchase. There are significant differences in the two cultures – Australia has low Power Distance Index (PDI) while Thailand has high PDI as per Hofstede (Geert, 2009). Nevertheless, this position has not been forced upon the Thai society. Rather they accept it as a part of their culture heritage. Australia is predominantly a Christian community while Buddhism is prevalent in Thailand.

Both these issues – high PDI and the difference in religion would not be a deterrent as the government has a friendly attitude towards foreigners and investors. 2.4 Technological environment It has excellent rail, road, air and sea connections (Teoh, 2009). Natural health products can be best sold through multi-level marketing (MLM) or direct selling companies. This helps in dissemination of information to Thai consumers who want to take an informed decision before making any purchase (Austrade, 2009).

The distribution channels most commonly used in Thailand include the MLM companies and pharmacies although well being concept stores and health stores are increasing. Business relationships with local, operators that have existing distribution channels help. Large volumes of products can be transported through sea freight which takes about two weeks from Australia to Thailand (Austrade, 2008). There are a variety of service providers that handle the customs and freely distribute around the country. 2.5 Legal environment Intellectual property protection is secure (Teoh, 2009).

Australian exports have to be registered under TAFTA and accompanied by a TAFTA Certificate of Origin to benefit from the preferential tariffs (Chou, 2006). Thailand – Australia Free Trade Agreement (TAFTA) has facilitated two-way trade between the two countries, increased transparency, encouraged international best practice, in addition to bilateral cooperation customs procedures, government procurement, competition policy and intellectual property protection (Dfat, 2009). 3. SWOT analysis 3.

1 Strengths The proximity and close time difference to Thailand makes the country viable for exports (Teoh, 2009). Australian food has always been seen as healthy, high quality, clean and green and of nutritional value. In Thailand, the tariffs for Australian agriculture and food products are 60% less than those from competitors from other countries (Chua, 2006). This advantage has been created by TAFTA. TAFTA ensures greater access for Australian products and will improve prospects for services trade and investment (Dfat, 2009).

Spring Valley is backed by the Cadbury’s brand which would help in easier market entry into Thailand. 3.2 Weakness The consumer taste for healthy drink has grown and the industry has expanded. However, manufacturers have been forced to look overseas for fresh fruits as the crop has been poor (Baker, 2007). Export levels have remained low while the value of fruit juice imports has grown. Competition within Australia is increasing from substitutes. The sugar-free beverages are competing closely with juice in the increasingly health conscious market. 3.3 Opportunities The food and beverage market value at the end of 2006 in Thailand was US$ 22, 523.

1mn while the per capita expenditure was only US$ 341.2mn (NZTE, 2007) There is a growing interest in western brands. There is product growth in the soft drinks and beverages. The entire ASEAN regions is expected to become one economic region in a few years and hence establishing a business now in Thailand could mean greater opportunities in times to come (Teoh, 2009). Thailand is a large fruit producer and TAFTA has created real opportunities for many Australian food products, particularly wine, fruit, and confectionery (Chua, 2006).

Thailand's high tariffs on many processed food products have been a major impediment to the expansion of Australia's exports but with TAFTA new opportunities have arisen (Dfat, 2009). Due to increase in inflation, slower economic growth and political turmoil, natural food products have become expensive and consumers are looking for cheaper options (Austrade, 2009). Energy drink at this time would be able to catch a sizeable market. The government supports the cause of natural health food through the campaign 'Thailand: Strong People, Strong Country'. 3.4 Threats Multi national retailers dominate the Thailand retail sector.

Red Bull, the UK energy drink maker and market leader have a strong hold in the Thai market and have been in Thailand for over 20 years (Marketing Week, 2006). They sell across the country through bars. In 2003, Thailand clamped down on advertising by energy drink brands which would make it difficult for new comers to get established in the market (Mulchand, 2003). Energy drink firms are prohibited from advertising the product benefits or showing packaging on broadcast or print media without an accompanying warning.

This imposition would not affect the existing brands in the market. The US holds 10-15% of the food and beverage market in Thailand but this is gradually declining (Austrade, 2008). 4. Analysis and conclusion Even though the per capita expenditure in emerging markets is low in the food retailing sector, the overall growth is stronger than mature markets (Strenk, 2008). The business environment in Thailand is conducive for the juice industry as consumers are health conscious, the government support exists and the two nations are governed by TAFTA.

The political situation does not impact the businesses. The SWOT analysis reveals that Spring Valley has definite strengths on which it can build ad enter the Thailand market. Cadbury’s brand name will allow it easier penetration. Besides the market in Australia has become competitive and fresh fruit crop has been poor. Thus it would be advantageous for Spring Valley to enter the Thai market at this juncture. However, both competition and opportunities are intense. Competition in any industry will remain but since opportunities are immense, Spring Valley is strongly advised to enter the Thailand market.

Overall the situation is conducive to growth in the sector. References Austrade. (2009). Natural health products to Thailand. Accessed online 29 August 2009, from http://www.austrade.gov.au/Natural-health-products-to-Thailand/default.aspx Austrade. (2008). Processed food to Thailand. Accessed online 29 August 2009, from http://www.austrade.gov.au/Processed-food-to-Thailand/default.aspx Baker, J. (2007). Juice toasts a bright future. Accessed online 29 August 2009, from http://www.

smartcompany.com.au/retail/juice-toasts-a-bright-future.html Cadbury. (2000). Cadbury Schweppes Acquires Australia's Spring Valley Juice Brand and Wave Flavoured Milk. Accessed online 29 August 2009, from http://www.flex-news-food.com/pages/1413/Australia/Beverages/Cadbury-Schweppes/Milk/cadbury-schweppes-acquires-australias-spring-valley-juice-brand-wave-flavoured-milk.html Chua, R. (2006). The Australian advantage in Thailand. Accessed online 29 August 2009, from http://www.nswbusinesschamber.com.au/default.aspx?content=/channels/International_trade/Country_information/Asia/thaifoodsector.xml Dfat. (2009).

Thailand Country Brief - March 2009. Australian Government: Department of Foreign Affairs and Trade. Accessed online 29 August 2009, from http://www.dfat.gov.au/geo/thailand/thailand_brief.html Geert. (2009). Geert Hofstede™ Cultural Dimensions. Accessed online 29 August 2009, from http://www.geert-hofstede.com/hofstede_thailand.shtml Marketing Week. (2006). RED BULL: Red bull spreads its wings. London: Jun 1, 2006. pg. 33 Mulchand, S. (2003). Thailand clamps down on energy drink advertising. Media. Hong Kong: Oct 31, 2003. pg. 4 NZTE. (2007). Market Profile for Retail Food & Beverage in South East Asia.

Accessed online 29 August 2009, from http://www.nzte.govt.nz/explore-export-markets/market-research-by-industry/Food-and-beverage/Documents/FandB-retail-market-in-Southeast-Asia.pdf Strenk, T. (2008). Sipping Away. Beverage World, 127 (1786), 36. Teoh, A. (2009). Trade and Investment in Thailand. Accessed online 29 August 2009, from http://www.dynamicexport.com.au/export/managing/trade-and-investment-in-thailand/ Company website: http://www.springvalley.com.au/contents/About_Us