Kikkoman Case Analysis

International Marketing Assignment

Submitted To: Dr. Satya Prasad Submitted By: AVIN SETH 11BSPHH010206

Kikkoman Case Analysis

Company Profile
Kikkoman is a Japanese firm, a public company listed on the Tokyo and Osaka stock exchange which is the worlds largest producer of soy sauce and a leading promoter of the product in non-Asian markets. Kikkoman is in every Japanese pantry and almost every US one, as well. Offerings of Kikkoman include varieties of soy and other cooking sauces, seasonings, and soy milk, foodstuffs, sake and wines, and some biochemical products. In the Asia/Pacific region, it sells ketchup, canned corn and fruits, and other Western foods under the licensed Del Monte brand. Business is divided into four segments: manufacture and sale of domestic foods (the largest), and others; and manufacture and sale of overseas foods, and wholesale. Kikkoman's roots run deep -- more than 350 years old, the company is controlled by the descendants of its founding families. The companys International operations are divided into 2 divisions: one for manufacturing and selling Kikkoman products and the other for the wholesale foods business. It sold products in more than 100 companies through a global network of sales offices, manufacturing plants and distribution centres. In 2002, Kikkoman soy sauce alone represented 39% of Kikkomans total sales and nearly 66% of its operating income. The international presence generated 34% of its total revenue and 63% of its operating income.

Kikkoman as a Brand
Kikkoman had uniquely taken a Japanese product and created a completely new market for it around the world. It was extremely difficult for the company to change the taste preferences of the people for a product that is usually has a black opaque colour and has a strong harsh taste. Another problem for Kikkoman was that it has been focusing on a very localized product and wanted to make it a Global Brand. Despite of all these facts Kikkoman became a Global renowned brand in the world.

Kikkoman worked on the 2nd quadrant of the above matrix to make a new product in the market. In 1883, one branch of Mogi family making soy sauce in Noda officially registered with the Tokugawa Shogunate the Kikkoman brand name and hexagonal logo trademark. The brand name Kikkoman also has significance: Kikko meant tortoise shell and man meant 10,000 and according to Japanese the tortoise was thought to live 10,000 years and thus the brand symbolized longevity. The hexagonal logo represented tortoise shell with Chinese character for 10,000 inscribed inside. Besides the emotional and logical connect of the logo with the Japanese people, the company promoted brand recognition and brand loyalty among the customers through traditional promotional methods like sponsoring sumo wrestlers and distributing paper lanterns and umbrellas embossed with the logo. To go global and establish brand name in foreign land, Kikkoman started shipping soy sauce to Hawaii and California in 1868 to serve the needs of Japanese immigrant communities. In 1879 Kikkoman brand name was registered in California and in 1886 in Germany as well. The brand won awards for excellence at the Amsterdam worlds Fair and the Vienna Worlds fair. Kikkoman used traditional brewing techniques and equipments for making soy sauce. The popularity of the brand and its loyalty among the customers increased because of it natural manufacturing technology and no use of any artificial technology.

Kikkomans Promotion Strategy

The company has a strong footing in the domestic market. In order to promote itself in the western countries it developed a new business strategy that included market research, advertising and consumer education and the goal was to enhance the appeal of soy sauce. For this the company offered cooking classes to Japanese housewives to demonstrate the versatility of soy sauce as a seasoning that went well with red meat and other western dishes. It sponsored cooking programs on television that emphasized the effectiveness od using soy sauce with a variety of foods. It even held prenuptial cooking classes where it provided complimentary soy sauce to the brides.

Kikkoman in US market
Kikkoman as it is a known brand in Japan and has a strong position in the domestic market it looked for growth opportunities in US to become global and have more and more profits in the kitty. The company basically follows a Global expansion strategy. The company followed a slow expansion strategy in US wherein initially it used to import soy sauce from Japan and sell it in US market for which they had to pay high shipping cost. The demand grew in the US market and to eliminate all the transportation expenses and to avoid delays in shipping material the company opened a manufacturing facility called Kikkoman Foods Inc. The plant helped the company in boosting its US operations. Sales increased annually at an average rate of 10% and the production capacity expanded form 2.4 million gallons in 1974 to about 21

million gallons in 2002. The company opened its 2nd US plant in 1998 and thus its operations went on increasing in US. The capacity of the new plant doubled in just five years. The company also responded to the changing demands of the US consumers as they responded quickly to the health concerns of people by introducing Kikkoman lite soy sauce. The company continuously introduces new uses for soy sauce for the customers providing them greater variety and options to select from as per the needs and requirements of the customers. Some of the reasons that led to the success of soy sauce in US are: During 1980s and 1990s more American people became sophisticated about oriental foods. Lot of Asian immigrants such as Koreans, Chinese, and Vietnamese came to live in US thereby providing more opportunities to the company to grow as these immigrants have the same taste just like Japanese. A number of Japanese companies had setup their US subsidiaries due to which lot of Japanese employees were brought to US who already had a taste for soy sauce and Kikkoman catered to this very well.

Competition There were two major US competitors: La Choy and Chun King. The competitors had larger marketing budgets which helped them to spend more money on promotions than Kikkoman. They provided deep discounts on their product offerings but Kikkoman decided to stay focused on its image of providing superior quality at a price higher than that of its competitors. In 1990, two Japanese manufacturers also joined in competition. They were strong competitors in the speciality segment which are Asian restaurants and oriental food stores, but Kikkoman never saw them as serious threat as the overall sales of the brands were less in comparison to Kikkoman and their presence in retail channels was minimal.

Expansion in Global Markets

Europe To be successful in European market Kikkoman took a lot of time because European countries have their own unique and highly developed culinary traditions which include speciality sauces. Kikkoman followed the same expansion strategy as it followed in US. In France it paid lot of attention on influencing cooking schools and professional chefs. Kikkoman opened it manufacturing plant in 1997 in the Netherlands and it planned to increase its production capacity from 7500 klts to 9000 llts in 2003. Asia Asian consumers already use soy sauce and the Asian countries had their own versions of soy sauce available at an economical price. Kikkoman introduced different varieties of soy sauce to cater to specific regional taste but at a premium price. In China the local soy sauce Chinese

brand is priced 5 to 6 times lesser than that of Kikkoman. Asian consumers prefer Japanese soy sauce but most of them could not afford the high pried Kikkomans soy sauce. So, Kikkoman targeted high end consumers and the company promoted themselves as the top selling brand in US. To be successful in the Asian market the company entered into Joint venture with President Enterprises, a Taiwanese soy sauce maker. The venture helped the company with providing knowledge and experience of selling soy sauce in a Chinese culture. Kikkoman improved the quality and productivity of plant by using it advanced level of technology. Kikkoman being a company that manufactures using natural brewing technique became more successful and this proved to be an added advantage for the company over other Taiwanese companies that used artificial methods for manufacturing soy sauce.

Challenges for Kikkoman

Kikkoman is seen as a low profile unadventurous company in Japan. Whereas it is seen as an aggressive company internationally because the sales force and the marketing strategies of the company are stringer in overseas market. The sales in Japan remained week. Some of the reasons are: Low population growth Deflation Intense competition

To be a winner in the Japanese market the President restructured the management wherein he implemented merit based pay and offered incentives that rewarded innovation and creativity, He also changed the motto of the company which is from customer oriented to consumer oriented. He wanted to focus on what the consumers are demanding and how they are changing. He brought the American capital to Japans domestic business. The employees were transferred form US business to Japan and the marketing department was asked to find new opportunities to use soy sauce in Japan. There was also a lot of opportunity for growth in the US market as only half of the population use the soy sauce which indicates that there are new potential customers available for the company. The company gave priority in developing new branded products as there was a fear that with only few branded products the company might not survive in the retail environment of 21st century. They educated the food service brokers and distributors and they focused on the quality and service of products when it came to addressing the institutional markets. The competition was increasing gradually in US food service channel; Chinese imports were increasing flooding the US markets with inexpensive products. All these factors posed a threat to the company and it needs to develop a strategy to revamp itself.