Country Market Analysis

1. France Country MarketAnalysis March 2, 2005

2. Anna CeceBrandon MarkleyMegan OpsahlMegan Revoldt

3. Situation Analysis Entry of Uncrustables in France

4. 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.

5. 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.

6. 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.

7. 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.

8. Consumer Demand • 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)

9. 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.

10. 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.

11. 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.

12. Distribution • Production & Market Entry Options • Import Uncrustables from United States • Import from other EU Country • Produce Uncrustables in France

13. 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

14. France offers Attractive Real Estate Market • 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

15. 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

16. 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

17. 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

18. 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

19. 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.

20. 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.

21. Transportation

22. Major Rail Routes

23. 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

24. Qualified and Productive Workforce • Productivity in GDP per employee per hour in USD • France has highly productive workforce

25. 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

26. 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

27. 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)

28. Leading Hypermarkets

29. 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

30. 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.

31. 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.

32. 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

33. 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

34. 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)

35. 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

36. Commercial Television • Television is partly state-controlled and partly in private hands • All television channels carry advertising

37. Cost / Audience—Television • Add something here??? Interpret graph

38. Television Regulation • 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

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

40. Print • Magazines—Women’s • Profile—general women’s magazines featuring women’s interests: fashion, beauty tips, cuisine, child-care, and social/family issues

41. Newspapers • Leading distributed newspapers • Strong regional daily press—total circulation often higher

42. Outdoor • Outdoor Sites: 483,00 • Billboards • Transit Advertising • Illuminated Displays • Wallscapes • Le Metro—underground platform advertising

43. Outdoor Types and Costs :

44. 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.

45. 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.

46. 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.

47. 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

48. 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