Question 3-1

Founded in 1869 by Henry John Heinz, the H.-J. Heinz Company sold food sauces. Its flagship product, Heinz Ketchup, has since grown to become one of the most valuable brands in the world today, and its products also include Classico pasta sauce and Lea & Perrins cooking sauce.

It has expanded to 200 countries and has an extensive product portfolio focused on ketchups and sauces, frozen foods and infant nutrition.

In 2015, Heinz merged with Kraft to become Kraft Heinz, making it the third largest food and beverage company in North America. Prior to the merger, Heinz knew that growth in developed countries was slowing and that in order to expand, it needed to venture more aggressively outside of the West.

Seeing the potential of Indonesia as an emerging market, it was eager to exploit it, even though the country was just recovering from the Asian financial crisis. With a population of more than 250 million and a population growth rate of 1.49%, Indonesia is expected to overtake the United States by 2043, making it the world's most populous country after China and India.

In 1999, Heinz announced its first investment in Indonesia, acquiring a majority stake in a joint venture with ABC Group, the country's largest producer of sauces and condiments. The rest, as they say, is history.

Heinz's success in Indonesia can be attributed in part to its recognition that it was impossible to have one global product and that it needed to fit into Indonesian culture. Heinz had to thoroughly understand the likes and dislikes of Indonesian consumers. The strategy behind Heinz's global expansion plan was simple; it did so by buying a local company that was doing well. All Heinz needed was to continue to adopt the local company's practices, not reinvent the wheel.

This is how PT Heinz ABC was born. The company that was acquired, ABC Group, is a large but low-profile company. It is the market leader in Indonesian kecap manis (a thick, sweet soy sauce that is eaten as a condiment or ingredient at almost every meal). It also produces Indonesia's top brands of sambar (a chili sauce), kecap asin (a savory soy sauce), ABC ketchup and fruit drink concentrate. Under the PT Heinz ABC banner, these condiments and sauces are sold under their original name ABC.

The company's main product line, soy sauce, is common in Indonesian cuisine and appears in most local dishes. In Indonesia, soy sauce is usually made from fermented soybeans and various spices and sugars. More importantly, different Indonesian cities and towns have their own local soy sauce recipes. Therefore, one of the biggest challenges for the soy sauce industry is to understand the local behavior. Here are two key issues.

1. Culture - The different regions of Indonesia have different tastes and preferences for their soy sauce, and local recipes for soy sauce have been passed down for centuries since the Chinese introduced soy sauce to Indonesia. Unlike Chinese soy sauce, which is thin and salty, Indonesian soy sauce is thick and can be salty, sweet, or a mixture of both.

2. Social - Indonesians prefer soy sauce that originates from their own region. This may be the result of their long history of consuming local flavors. This means that within a region, people's preferences will tend to lean toward one dominant flavor. For example, Indonesians living closer to Central Java prefer sweeter flavors than those living further away.

The PT Heinz ABC succeeded in identifying individual characteristics that play a key role in the food consumption of Indonesians. It studied their demographic and lifestyle characteristics. It learned that most Indonesians are not as affluent as Westerners and do not have refrigerators to store large bottles of soy sauce. Therefore it was necessary to make adjustments. Instead of the large glass bottles typical of Heinz ketchup or ABC sauce, it adapted them to less expensive plastic bottles and single-use pouches to reach a wider market, including the Indonesian rural working class.

PT Heinz ABC researched Indonesian housewives to improve their soy sauce recipes. When the studies showed that their soy sauce was too salty, the recipe was adjusted to reduce the amount of salt and increase the amount of other spices. These studies helped PT Heinz ABC stay in touch with consumer tastes and preferences to ensure that they always met the needs of their consumers.

PT Heinz ABC has also taken into account the geographical characteristics of Indonesia - 5,120 kilometers from east to west and 1,760 kilometers from north to south, a mountainous terrain with a string of volcanoes, and, 6,000 of the 17,508 islands are habitable. Distributing food nationwide in a cost-effective manner can be daunting. PT Heinz ABC took the initiative to utilize ABC's existing motorcycle distribution fleet. By keeping distribution costs low with this innovative distribution method, PT Heinz ABC is able to meet the affordability needs of Indonesians.

PT Heinz ABC is also always using social marketing. It has held various cooking and recipe competitions, each involving their sauces. These include the ABC Cooking Academy where chefs come up with new recipes involving ABC products. ABC also has a video series on YouTube called Heinz ABC Cooking Challenge where guest chefs from different hotels and restaurants are invited to showcase their recipes using ABC products. This helps them build a group of opinion leaders to promote their sauces, which in turn encourages viewers who follow these competitions and videos to use their sauces when cooking; by doing so, it helps them get used to the taste of their sauces.

However, the path to success is not always a smooth one. The Indonesian soy sauce market consists of 15 major producers, each with a market share of at least 1%. This means that competition within this market is fierce, and PT Heinz ABC faces strong competition from Unilever. As an Anglo-Dutch food company in a former Dutch colony, Unilever Indonesia has been in the country since 1933. As a result, it is a popular and recognized company among Indonesians.

To compete with PT Heinz ABC in the soy sauce market, Unilever acquired Bango, the second largest soy sauce manufacturer in Indonesia, in 2001. this acquisition began to make an impact on PT Heinz ABC's strong position in the soy sauce market. Over time, ABC's market share of sweet sauces shrank from 40% to 33%, while Bango's market share tripled to 32% in the same period. One reason for this situation was that Indonesian housewives felt that

ABC's sauce is much too salty compared to Bango's. Indonesian palates have shifted to more blended, less salty or too sweet sauces.

In response to the rising competition, PT Heinz ABC has taken a more social approach by running the ABC Heart Kitchen program every year to provide food to those in need. This helps their brand image as a socially responsible company and also helps to bring their sauces to a wider market through free samples. In 2014, PT Heinz ABC distributed over 100,000 servings of food. Coupled with their disposable pouches that cost just a few cents, PT Heinz ABC was able to properly demonstrate how easy their products are to use while cooking without having to pay a hefty price tag.

With these initiatives, PT Heinz ABC's market share grew to 22.44% in 2014, almost double that of its nearest competitor, Masako, which had a 12.03% market share.

Provide five recommendations for PT Heinz ABC to improve its current positioning. The five recommendations must include (1) product strategy, (2) pricing strategy, (3) distribution strategy and (4) marketing communications strategy, and (5) global marketing strategy. Each recommendation should be clearly justified by comparison with other alternative strategies. Please use the relevant marketing theories and concepts of marketing.