Decision Case: Rougemont

Lucas Gunkelman

2 December 2010

Rougemont must decide to use the independent distribution system (IDS) to

distribute, market, and grow their fruit nectar product. The independent system allows for
the most flexibility, future growth options, and incentives for profits. The decision to use
the independent system will be supported through SWOT analysis, the 4 P’s of marketing,
and target market analysis. After the analysis of these criteria is made, the decision to use
the independent distribution system will be the obvious choice among the options.

SWOT Analysis
STRENGTHS

The strength in deciding to use the individual distribution system (IDS) comes
mainly from its flexibility. This option includes 6 Beijing natives that are to be the
salespeople and who are established in the city with contacts willing to try a new product in
their restaurant. So this way the individual salespeople (6 natives) have the ability to sell to
who they believe will be the best candidates for successful distribution. Also, the 35%
markup is a strong incentive to sell as much as you can to as many people as possible.
Flexibility also comes in the form of the salespeople being individuals, not a business, so if
Rougemont wants to expand to the smaller outlying communities they are able to do so
with the sales people they have. This allows for maximum coverage of the area that the
salespeople are willing to cover. This “may the best one win” strategy can be successful
since a new product needs to be pushed heavily to gain market share and recognition. For
this reason, the decision to use IDS is a smart one.

Another strength in this decision is the instant feedback of profits and sales. With
this close nit group of sales staff, the sales numbers, income numbers, etc. are readily
available to Rougemont when needed. This is a distinct advantage compared to the others,
as the state owned distributors have trouble communicating their numbers to the
companies, such as Rougemont, and the foreign distributors tend to get caught in debt
triangles with their selling practices. Since the salespeople will sell to established
acquaintances, they are likely to get payment in the 90-day window.

Both of the situations explained above are distinct strengths in deciding to use IDS
compared to the other distributing options.

WEAKNESSES

A weakness associated with the decision of using IDS is the competition to gain
profits in each salesperson’s zone may cause disputes among the salespeople and unequal
selling prices which is a common side effect of the “may the best one win” strategy. This
could be a major setback in that a business may not want to purchase the product at a
certain price because a few blocks away another business got the same product for a little
less and then a price war among the salespeople may result even though they work for the
same company. This can cause disputes among the sales staff that could be potentially
vitally harmful to the business. I feel though, if Lavoie were to decide to address this with
his staff and come up with an agreed upon way to settle disputes that arise (since I would
say it is eventually inevitable that at least one will come up) that would be a strong tool in
settling the disputes properly and fairly. The other two options for distribution would be
able to avoid this problem, or in any case Rougemont would not have to deal with it.

OPPORTUNITIES

The IDS decision offers a plethora of distributing and marketing options both now
and in the future. It allows the sellers to sell the product to whomever they desire to sell it
to; although I am sure Lavoie has a certain amount of control. They plan on going after their
target market of “yuppies” and “little emperors”. In order to reach them they can sell to mid
– high scale restaurants and hotels. I believe the decision to the restaurants offers the best
opportunity to reach their target market since the “yuppies” eat out every day and the
parents of the “little emperors” are willing to spend whatever is necessary on them for
health and satisfaction reasons. The sellers have and can form personal relationships with
the owners of these restaurants and hotels to ensure business transactions and payment.

The individual sales staff is encouraged to sell in order to get paid, so their efforts to
market and sell/distribute the product is directly proportional to how much they earn. This
direct relationship is a great way to really get their product off the ground. If in the future
the product expands to new cities/areas Lavoie can outsource to the other types of
distribution agencies, send a current will salesperson to the area, or hire more individuals.
This decision allows for a flexible future, which is necessary since the future of this product
is unknown. The IDS decision allows for a flexibility that the others options do not.

THREATS

The threats are obviously the other drinks in the market currently or ones that plan
on joining (DOLE, Tropicana).

 Domestic Fruit Drinks

o Low price/quality- 95% of market share of fruit style drinks, quality
is low, uses about 15% juice from concentrate – not considered to be
a major threat in the business of Rougemont since they are not
marketed towards Rougemont’s target market
o Medium price/quality- Snappy C – juice with fruit bits is similar to
Rougemont’s “meaty” fruit nectar – attractive packaging – could be a
major competitor with Rougemonts drink although Snappy C is
mainly sold in supermarkets while Rougemont’s product is not.
o High price/quality- Chengbao = strong competition – sold in
restaurants and hotels like Rougemont – high quality but virtually no
shelf life (5 days) = Distinct advantage for Rougemont (1 year shelf
life)
 Fruit Teas
o Very popular, very competitive with Rougemont’s product. Sold in
nearly every restaurant and seems to be taking the place of fruit
drinks in restaurants. Customers like the health benefits from tea so
fruit nectar must be marketed also as health beneficial to compete
with tea.
 Imported Fruit Drinks
 o Not major competition. Include, possibly, DOLE and Tropicana. Not
marketed to same target market (yuppies and little emperors) so
Rougemont is not currently worried about imported fruit drinks.

TARGET MARKET
The decision to target the market of yuppies and little emperors through IDS is a
wise decision for different reasons. The target locations are mid – high scale restaurants
and hotels in different locations that can be reached using IDS. They will be discussed
further now.

YUPPIES

This is the absolute perfect market to target. Deciding to target yuppies is smart
because it is a growing market (expected to grow rapidly for years to come), the market is
trying to decide how to spend its newly acquired money, and they tend frequent the
targeted locations on a daily basis. This means that daily the target market will be at the
targeted locations, which is a bull’s-eye for Rougemont. Yuppies are a young group, which
means if Rougemont can secure brand loyalty with this group, they will have success for a
long time coming. Yuppies may push the product onto one another or into other areas. IDS
can follow relatively easily by outsourcing or hiring another salesperson; this is an example
of IDS’s flexibility in action.

LITTLE EMPERORS

Little emperors are children from the one-child policy who get nearly unlimited
attention from family. This could literally mean that if this group grows to love
Rougemont’s product, that if they want it, they can have it, no questions asked. The decision
to go after this market is also a smart one. This group is also young, so establishing brand
loyalty is vital to ensure profits for a long time coming. IDS allows sellers to choose who to
specifically market to and gives them the freedom to market to the little emperors.

TARGET LOCATIONS

The decision to market to these restaurants and hotels is perfect because

Rougemont’s product is not a single serving, must be shaken (easier to remember if the
business has to remember not every single customer), and is a more select market (avoid
the 95% of low quality juices). This ensures the product will be used properly and get to
the decided on target market. IDS is the perfect way to market to restaurants and hotels
because the previously established relationships with the owners and the ability to push it
to other chains through word of mouth and person-to-person interaction.

4 P’s
The decision to use the 4 P’s in the below ways is best way to properly get the
product to target market. The comparisons will show that IDS is the best choice for
distribution both now and in the future.

 PRICE
o 35% markup on current price. This acts as both an incentive now
and funds to provide storage/distribution in the future if needed.
 o Same markup as Foreign Distributors but less than State Owned
Distributors. IDS, however, offers more flexibility and much greater
promotion than state owned so the difference is justified.
o 35% incentive helps push product into the market and create loyal
buyers of the product
 PRODUCT
o IDS lets individual how to store the product so it best suits the seller
and buyer’s needs.
o Shelf life of 1 year allows for storage in various places as it can sit for
a little bit which works with IDS’s flexibility
o Unique packaging allows it to be stored in various temperatures also
works with the flexibility of IDS
 PROMOTION
o IDS allows individual target markets to be chosen by sellers and can
be product can be pushed as far as the seller is willing to push it.
(Incentive helps here)
o IDS markets as much as it wants to – state owned does not
market/push product well
o Promotion of new product is vital to success and IDS offers the best
way to market as they choose when and where to market.
 PLACE
o IDS allows for selling to restaurants and hotels and the established
personal relationships of sellers allow for a more probable on-time
payment and current and future business opportunities.
o Deciding to market to restaurants and hotels is the perfect market
for IDS since personal relationships are essential. Knowing and
trusting the supplier and buyer is a key factor in successfully having
a long lasting relationship with a supplier and/or buyer and IDS
allows for that while the other forms of distribution do not.

CONCLUSION
Deciding to use IDS is the way Rougemont should go because it offers the best ways
to distribute, market, and grow their fruit nectar drinks. Not only does IDS offer flexibility
in distribution and marketing options that is unrivaled from the other types of distributors,
but also IDS offers the fast receiving of information and allows them to specifically target
the markets that Rougemont feels it will have the most success in.