- Introduction
What is the frozen food industry?
Food is frozen in order to maintain the quality and preserve it in a fresh state when there is a time lapse between the time the food is produced or cooked till the time it is consumed. This process helps elongate the shelf life of the food that is, in another situation, spoilt and considered not fit for consumption after a certain time has passed.
It is a very old process of preserving food, apart from pickling the food items. It began in the 17th century and has been adopted by several organizations as well as individuals ever since the Neolithic and Paleolithic times. The areas where snow and ice were not naturally available had to rely on man-made methods to freeze food and the technology to do so has evolved massively. From home preservation by packing food appropriately to industrial refrigeration and cold storages are all ways and means to achieve the same objective.
Since the food quality and texture are both maintained when the food is stored in low temperatures, this has become the most popular method of food preservation and a refrigeration unit is available in almost every household worldwide. Traditional Chinese food which requires it to be fresh when eaten suits this method of preservation too.
Company background (WanChai Ferry)
Wanchai is located in the busy commercial areas of Hong Kong there are several commuters that come by to take the Wanchai Ferry on the pier. This city is the birthplace of Wanchai Ferry, which was established by Madame Chong. It is a brand that produces perfectly prepared traditional Chinese food which is frozen and available in countries like the Asia, United States and Europe. The frozen food is prepared to ensure fast and mess free cooking process for Chinese cuisine, which could otherwise take very long to be done. It offers convenience to the customers and suits a fast lifestyle (Jain, 1993).
- Analysis of 4 season's company strategy and what is the new opportunity
Current strategy: 4P
- Place: The products of Wanchai Ferry frozen Chinese food is available in the United States, Asia and some parts of Europe.
- Product: The product is a perfectly cooked Chinese meal which is fast, convenient and tastes just as good as a home cooked or a restaurant meal. This is a meal in a box concept which has something to suit each taste bud.
- Pricing: The food is priced competitively within all the markets that it is operating it.
- Promotion: The promotion of the product is done via online and social media which is cost friendly as well as wide spread (Simon, Butscher and Sebastian, 2003).
New opportunity
For Wanchai Ferry that is already a multinational organization and spread across several countries, the Canadian market is a new opportunity that it can venture into. Geographical expansion to new countries with customized flavours will help Wanchai Ferry capture a good market share and enhance its overall brand name and image. More Chinese immigration and international students come to Canada, therefore, it is a good opportunity to import Wan Chai Ferry’s traditional Chinese frozen food from China to Canada.
There are several Chinese workers and laborers that have migrated to Canada when the Canadian Pacific Railway was constructed. So there is already an existing market for Chinese food in Canada. The demand is currently being fulfilled through dine-in eateries and take outs. The frozen food market is rich but does not have much option in terms of Chinese food due to its authenticity requirements at the time of consumption.
The food has obviously been authenticated according to the flavours of the region and the dine-in are focussed at producing exotic nostalgia for the customers.
Wanchai Ferry has a good opportunity to launch its products here which will compete in the market by providing an option to the customers of being able to reproduce this nostalgia at the comfort of their homes and without any added time or effort in the process.
- Analysis of Canada’s Frozen food industry: demand estimation
Current demand for Wan Chai Ferry in china and USA
The enhancement in the lifestyle of the people in China and the westernization of the culture has led to several changes in the eating habits of the Chinese people. Although traditional meals are still preferred, they are now required to be quick, tasty, authentic and yet without creating a mess to clean up after the meal.
Demand for frozen food in Canada
The frozen food market in Canada is valued at Canadian Dollars 5.2 Billion. It is seeing a marginal rise year after year with the growth percentage being 2 from 2012 to 2013 (Passport, 2014). The market of packed foods in Canada has strong and well known players such as Frito-Lay Canada, Cadbury Adams Canada and Nestle Canada Inc. which sell everything from sweets to baby food in the packed variety (Planscape and Regional Analytics, 2010). Within this is the frozen food category is just a small percentage. Amongst that then the Chinese food served to customers as frozen food is even rarer and hence there is a market wide open for this category (Nawaratne, 2012). San Quan is the only available brand that currently has a brand name in Chinese frozen food in Canada and also has the maximum market share. Wanchai Ferry is more into dumplings that are frozen and sold but San Quan offers varieties of products including rice balls, wheat flour products and even flour pastry. It is also based in China and operates in a similar manner as Wanchai Ferry does. This is an analysis of the profile of the competitors in the market (Porter, 1987).
The population of Chinese in Canada
Canadian population forms 0.5% of the total world population. Within Canadians the largest visible minority groups is of the south Asians and the next group is that of the Chinese immigrants. People who have a Chinese background or authentication make a total of approximately 4% of the Canadian population (Picot & Hou, 2011). This includes the mixed Chinese races and people originating from other ethnic backgrounds (Chan, 2011). As of 2011, the census showed that this number was up to 1.3 million people (NHS, 2011). Appendix A shows the distribution of the Chinese population within Canada. Statistics project that by the year 2031 the number of Chinese people in Canada will be anywhere between 2.4 to 3 million including the mixed Chinese population (NHS, 2011).
With the maximum immigrants from China shifting to Canada during the construction of the Canadian Pacific Railway, the number of people that belong to the Chinese race but have been born are now more than the immigrants. In 2001, this was about 25% of the total Chinese group of people in Canada.
This clearly shows that although the background of these people is Chinese the influence of the up-brining is Canadian within the Chinese people living there. The diversification of the race is leading to a change in the cuisine too, that is, different blends are being created of the traditional Chinese food (Hamlett et al, 2008). The authenticity of the food is being lost with every new generation and hence the demand for Chinese frozen food is expected to rise with the proportion of the rise in the Chinese Canadian population.
Demand estimation in traditional Chinese frozen food in Canada
As mentioned in the point earlier, the Chinese population in Canada is a visible ethic group and amongst the largest in the minority groups. The Canadian born Chinese have a large percentage within this sub-group. The generations of immigrants have an obvious demand for Chinese food and prefer the packed and frozen foods category for the convenience that it offers.
Apart from this major group, Chinese food is popular among the locals too having been influenced with the culture of the Chinese people in the vicinity. This influence comes mainly from the several Chinese Cafes and social circles that are existing in Canada.
The third group that has a demand push for Chinese frozen food in Canada is off the immigrants of the other nationalities from the South East Asia. This is the most prominent sub group and has a lot of influence on the demand of the Asian influenced cuisines.
- Comparison of "4 Season's own brand in Canada" and "partnering with a local company"
The strategy suggested to Wanchai Ferry towards the establishment of the brand in Canada are:
Seasons Own Brand in Canada:
This strategy is to highlight the products versatility which could be used in any season and time of the year without losing the authentication of the food. It is easily available and the marketing should be focussed on the fact that the product suits the lifestyle of the Canadian people. This is an aggressive marketing strategy which allows the operations of the company to stay as is within the export of products to any other country and relies on the brand name and image (Whitelock, 2002).
Partnering with a local company
This strategy requires Wanchai Ferry to amend its existing operations by venturing into the Canadian market jointly with another local company. The advantages to this strategy is that the local company would bring the local knowledge of the market to the company and there are pre-established contacts to rely on for the operations of the work.
Eventually this strategy can allow the production to be shifted to the respective country of export which would save on the costs as well as provide a diversification of the management of the company to be able to focus on important strategic decisions instead of being concerned with production (Quintens, Pauwels and Matthyssens, 2006).
Pros for establishing in the Canadian market
- Is already in US market, it should be easy to have the Wanchia Ferry brand established in Canada
- Is a well-known brand for Chinese food and popular amongst the locals who crave “authentic” food
- It’s usually easy to cook and quite fast to serve
- Lots of foreign like Chinese food apart from the immigrants.
Cons for establishing in the Canadian market
San Quan is already existing in Canada, it would be the largest competitors and beating the already established market share would be difficult to gain instantly. The industry has 80% penetration by San Quan and Wanchai Ferry will initially have only 10% of the market share, with the last 10% being with the other local producers.
Statistics support
Comparison of the cost and benefit of the two proposed strategies:
Strategy 1: Own Brand
The benefits of this strategy include that authority of the Wanchai Ferry management would be binding and there will be no dilution of power or responsibility (Valuckaite and Snieska, 2007). But it also has a greater cost associated with it which includes the cost of market analysis, research, establishing contacts, shipping costs from China to Canada, marketing and selling costs. The variable cost for making per dumpling remains the same regardless of the strategy that the company adopts, that is 5.88 YEN per dumpling. The detailed calculation is seen in appendix E. The total fixed cost on the other hand is estimated at 703,788 YEN if the company chooses to establish own brand in the market.
Strategy 2: Partnering with a local company
This strategy offers a clear cost advantage with the local company sharing in the responsibilities of the market research, analysis and contacts to establish the business. In fact, depending upon the type of the business, these things may already be available with the company which would be that the mentioned costs get eliminated entirely. However, the power and authority of the management of Wanchai Ferry would be diluted by the adoption of this method.
As mentioned above, the variable cost per dumpling remains YEN 5.88 but the fixed cost at the adoption of this method is 663,648 YEN.
Estimate profit and the “sensitivity analysis”
Dumplings have a 50% share in the total Chinese food market in Canada. See appendix B for the sales of frozen foods in Canada whereas appendix D shows the total market share and the segregation of the Chinese food. In appendix F, it is explained that the company’s profits affected by the change in market share would be proportional on either of the strategies selected. The base share selected is 15% and the increase in the share by 10 and 25% are calculated together with the same percentages of the decrease in the market shares. The profit received is estimated to be higher in case the strategy of establishing own brand in every scenario. This is because of the sharing of the profits with the partnering brand would be an important aspect of the deal.
Lastly, appendix G shows that the price set could potentially be higher due to the growth strategies when using own brand for marketing rather than when partnering with another brand to establish the business.
- The research and results
Own brand or partnering
As per the research, the costs of the partnering are lower but the authority of the Wanchai Ferry brand may be lesser and get further diluted since the operations would be based in Canada and not in China. The suggested result is to hence go with the partnering strategy. Within this, it is further advised that the Wanchai Ferry brand acquire or contract into a joint venture with a local brand which would be a clear definition of the authorities and responsibilities.
- Recommendations: How to create value
Future plan
The first step of the strategy would require the Wanchai Ferry management to search for a suitable partner (Samiee,2008) to merge with for its operations in Canada. The profits initially would be less compared to the own brand strategy but the ultimate aim to establish the brand in the market and making sure that the opertaions are taken care of locally will reduce the price and increase the sales numbers. Hence, as an overall perspective this strategy would be more suitable for a company such as Wanchai Ferry which aims to expand and establish as a well-known brand for dumplings in the Canadian market.
Customer values
A marketing plan depicting customer values that the company has must be enumerated. Appendix C shows that in the new market the company will need to focus on the market and product development together with the diversification of the products (Ansoff, 1957) to ensure longevity and continued acquisition of further market share.
References
Ansoff, I. (1957) Strategies for Diversification, Harvard Business Review, Vol. 35 Issue, pp. 113-124
Chan, A. (2011) The Chinese in Toronto from 1878: From Outside to Inside the Circle. Dundurn, Toronto, ON.
Hamlett, J., Bailey, A.R., Alexander, A. & Shaw, G. (2008) Ethnicity and consumption, South Asian food shopping patterns in Britain, 1947–75. Journal of Consumer Culture, 8, 91–116.
Jain, Subhash C. (1993). International Marketing Management, Wadsworth: India
Passport. (2014). Packaged food in Canada. Euromonitor International.
Porter, Michael (1987). "From Competitive Advantage to Corporate Strategy". Harvard Business Review. May–June (3): pp. 43–59.
Nawaratne, Y. (2012) Ethno-cultural vegetables in Ontario: understanding the value chain. Unpublished MSc Thesis, University of Guelph.
NHS profile, Canada. (2011). National Household Survey (NHS), 2011. Retrieved on November 25, 2014 from http://www12.statcan.gc.ca/nhs-enm/2011/dp-pd/prof/details/page.cfm?Lang=E&Geo1=PR&Code1=01&Data=Count&SearchText=canada&SearchType=Begins&SearchPR=01&A1=All&B1=All&Custom=&TABID=1
Picot, G. & Hou, F. (2011) Divergent trends in citizenship rates among immigrants in Canada and the United States. The Daily, Statistics Canada. [WWW document]. URL http://www.statcan.gc.ca/daily-quotidien/111012/dq111012c-eng.htm (accessed on 22 November 2014).
Planscape and Regional Analytics (2010) Holland Marsh Agricultural Impact Study. Friends of the Greenbelt, Toronto
Quintens, L., Pauwels, P. and Matthyssens, P. (2006), “Global purchasing strategy: conceptualization and measurement”, Industrial Marketing Management, Vol. 35, pp. 881-91.
Samiee, S., 2008, “Global marketing effectiveness via alliances and electronic commerce in business-to-business markets”, Industrial Marketing Management, Vol. 37 No. 1, pp. 3-8.
Simon, H., Butscher, S. and Sebastian, K.-H., 2003, “Better pricing processes for higher profits”, Business Strategy Review, Vol. 14 No. 2, pp. 63-7.
Valuckaite, A., Snieska, V., 2007. Export Pricing in Business-to-business Market. ISSN 1392-2785 ENGINEERING ECONOMICS. Vol. 54(4), pp. 103-109
Whitelock, J. (2002) Theories of internationalisation and their impact on market entry. International marketing review. Vol. 19(4), pp. 342-347
Appendices
- Distribution of Chinese population in Canada:
Source: NHS profile, Canada. 2011. National Household Survey (NHS), 2011.
- Sales of frozen foods in Canada
- Ansoff Growth matrix
Source: Ansoff, I. (1957) Strategies for Diversification, Harvard Business Review, Vol. 35 Issue, pp. 113-124
- Total market:
- Sales in 2014 & 2015(document: “Frozen Processed Food in Canada”)
- Prediction for Chinese frozen food in Canada
- 1,346,510 out of 31,241,030 (http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/demo26a-eng.htm), 4.31% Chinese in Canada (2006)
- Cost calculations:
https://www.ic.gc.ca/app/scr/sbms/sbb/cis/benchmarking.html?code=31141&lang=eng
Use Sanquan's Revenue as an example: ¥2,676,000.00
Overall,
- Sensitivity analysis:
- Price set:
- If use own brand: ¥35
- If cooperating with others: ¥25
Source: http://clients1.ibisworld.com.proxy.lib.sfu.ca/reports/us/industry/operatingconditions.aspx?entid=236#RAP
