The case Questions: 1.Explain Homeland's current situation and...

The case Questions:

1.Explain Homeland's current situation and discuss their value proposition. Comment on whether or not it will transfer beyond Armenia. (7 marks)

2.Is the Vonzi brand transferrable to North American cultures?Explain your answer.(5marks)

3.Consider the three markets Homeland isconsidering for expansion (Canada, the U.S. and Russia). Select one market; and explain why you choose this market instead of the others. Consider both internal and external factors.(8marks)

4.Based on the new market you have selected, outline an expansion strategyfor Homeland and include the following implementation and marketing details:(30 marks total)

a.Expansion Objectives -make them realistic, clear and SMART(4marks)

b.Target market -be specific, provide #'s, and more than one potential market should be selected and described(8marks

)c.Distribution Channels(4 marks)

d.Branding -Would you change it orkeep it the same, and why?(4marks)

e.Marketing Mix (4 P's) -provide details and rationale for each element. (10 marks)

The CASE :

HOMELAND FOODS: THE SWEET FRUIT OF GROWTH

In late January of 2020, Hratch Jabrayan, a partner at Homeland Foods (Homeland), was contemplating the artisanal food company's international expansion into North American markets and an increase in exports to Russia. As part of that decision, Jabrayan was considering whether potential customers would appreciate and pay a premium for high-quality, organicallyproduced dried fruits and nuts. However, he was concerned that the greatest challenge would be the product line's brand name: Vozni("hedgehog" in Armenian). Was the brand name culturally transferrable? He alsowanted to know whether it was financially feasible to bring the product into Canada and the United States(US).Last, Jabrayan wondered how other elements of the marketing mix wouldneed to be adjusted for Homeland's entry into both the Canadian and US markets for dried fruit products. The decisions needed to be made quickly, because the company had to commit to purchasing the year's harvest at the end of July. COMPANY BACKGROUNDHomeland was founded in Armenia in 2019 when Jabrayan, a Canadian of Armenian descent, partnered with Razmik Arabian, an American of Armenian descent. The company produced two distinct product lines:Davit baby food (i.e., canned pureed vegetables) and Vozni dried fruits and nuts. These products were distributed locally and exported to Russia and Lebanon. Homeland's mission was to put the healthiest dried fruits on the tables of families across the world, to "bring nature to your table."THE DRIED FRUIT INDUSTRY Dried fruit had become more popular over the last 10 years as the move toward healthier lifestyles and eating habits was boostedby an increase in disposable incomes. Imports of dried fruit into Canada had steadily increased in recentyears, from 3,017 tons in 2017 to 3,460 tons in 2019 (Exhibit 1).1The products were used in several ways: They could be eaten on their own as snacks and used in baked goods and other meals. Dried fruit was also sometimes combined with nuts to create even tastier snacks.To create dried fruit, freshly picked fruit wasfirstwashed. Some manufacturers washed the fruit using a sugar-water solution, whichmade the fruit taste sweeter and masked the taste of lower quality fruit,and they added preservatives. Other companies used additives such as sulfites, ascorbic acid, citric acid, and colourings to make the dried fruit look brighter and fresher and to ensure a longer shelf life for the dried product. According to a report prepared for the Center for Agribusiness and Rural Development (CARD),there were several ways to dry fruit, ranging from using mechanical dehydrators to laying the fruit in the sun for several days at a time. The traditional method was to lay the fruit on racks in the sun; small, artisanal companies often continued to sun-dry their product, promoting a hand-finished approach to their food. This was inexpensive giventhat it used no electricity, yet it could take up to one week for the moisture levels to decline to the optimal percentage. Traditionalists claimed that the taste from sun-dried fruit was much sweeter and more intense; however,this process was uncontrolled,completely dependent on the weather, and entailed a greater risk of contamination.2Large-scale manufacturers often used mechanical dehydrators, which could accomplish the drying cycle in one to two days. In addition, a hybrid method was to lay the fruit on racks in glass greenhouses where the fruit was protected from the open elements, the conditions could be monitored and regulated, and the sun could still be used to dry the fruit.Laws varied according to jurisdiction, so companies exporting dried fruit had to be careful that their manufacturing processes adhered to a variety of laws in different jurisdictions.The North American dried fruit industry was large: In the US, the $5 billion sector3comprised 135 companies.4Two of the largest included Sun-MaidGrowers of California(privately owned by 750 farm families on 50,000 acres)5and Ocean Spray (another privately owned cooperative of 700 families across North and South America).6While each company had its own specialty (raisins and cranberries, respectively),they also produced an assortment of other dried fruit products. The demand for dried fruit in North America was strongly correlated to certain demographics. Householders aged 75 or older and married couples with children under the age of 18 living at home were the top consumers of dried fruit. Along with this, households withannual incomes of $100,000 or more and those who had earned at least a bachelor'sdegree were the most likely to buy dried fruit as snacks.7Consumers with higher disposable incomes and a more intentional focus oncultivatinga healthy lifestyle were willing to pay for organic produce. The costto certify a product as organic depended on the jurisdiction.The Armenian dried fruit industry was significantly smaller and less structured than that of North America. While the raw fruit was of high quality and the use of pesticides was limited because farmers typically could not afford to purchase them, the industry was profoundly impacted bytheclimate, and there was little government assistance for the industry. Modern technologies were not well used, there was little in the way of strategic marketing of the products, there was little volume produced, and there were poor quality-control practices. There was high demand for the dried fruit, partly because of the demand from diaspora Armenians as well asthat ofthe domestic market. However, there was also significant competition among a handful of key exporters. Dried food processing plants were taxed,whereas independent farmers had the advantage in that they were not taxed.8COMPETITIVE ANALYSIS Armenia was a land-locked country, nestled in a mountainous region bounded by Turkey, Georgia, Azerbaijan, and Iran,9with no seaports and limited capacity for rail transportation. Because of the costly Authorized for use only by Lesley Lessard in International Marketing at Centennial College from Jan 18, 2021 to Apr 16, 2021. Use outside these parameters is a copyright violation.Page 39B20A075infrastructure required to set up export channels, there was little interest in building mines, factories, or facilities for products that required extensive shipping. It also meant that the air was cleaner thanthatin countries where infrastructure resulted in higher levels of air pollution. Consequently, the fruit grown there contained fewer contaminants and tasted better.As a result, fruit tree farms became the most prominent way for the Armenian people to build businesses. This became even more attractive as the demand for dried fruits outside of Armenia steadily increased as the Armenian diaspora in various countries, including significant populations in the USand Canada, longed for a taste of home and as they shared the delicious products with their friends. Large wholesalers bought in greater volumes than small businesses could process. Large competitors would enter a village and offer to buy the entire village's harvest; small companies could only purchase the harvest from a handful of individual farmers. Turkey was the largest exporter of dried apricots to Canada and the second-largest exporter of mixed dried fruit and nuts to Canada in 2019. The USwas the top exporter to Canada of bothmixed dried fruit and nutsand "other"dried fruit in 2019and the third-largest exporter of dried apricots to Canada. The quantity and value of US exports were also noticeably greater than those of the other countries exporting dried fruit (Exhibits1, 2, and 3). Jabrayan wondered whetherthese large amounts meantwholesalers had made deals to obtain products from only certain countries, and he wondered whetherthat would pose a challenge for him if he chose to do business with a wholesaler. Dried fruit was sold in four ways: bulk stores, regular grocery stores, natural food markets, and online. Products aimed at bulk storeswere likely to containmore chemicals and additives in order to withstand the long shelf lives and exposed bin setups.Grocery stores sold small sealed bags of dried fruit and would place this fruit near the fresh fruit, in the baking section, near the snacks, or in the natural food sections. Natural food markets were the main location at which customers could buy organicand sugar-free products. Many online retailers sold organic foods in order to differentiate their products. The pricing strategies of dried fruit were quite diverse and often targeted either high-quality/high-price or low-quality/low-price customers. During independent commissioned research, Jabrayan found that the prices of dried apricots in North American stores ranged from $0.99 to $3.96 for 100 grams. Organic and chemical-free products were usually a dollar or two higher in price than were non-organic dried fruits;andorganic driedfruits, similar to those Homelandplanned to sell, were priced around $5 to $7 for 200-gram bags.10HOMELAND AND THE VOZNI BRANDJabrayan and Arabian founded Homeland in 2019 as a corporation registered under Armenian law. Arabian, who was also of Armenian descent and was from Los Angeles, California, lived in Armenia and oversaw the physical operations. Jabrayan lived in Toronto and was the primary investor and strategic decision maker. A local Armenian chief executive officer had been hired to provide expertise and manage the workers in Armenia. Homeland's mission was twofold: first, to provide customers with the best-quality products that were healthy and delicious,and second, to give back to the Armenian farmers and communities. Jabrayan accomplished this by giving his farmers fair wages and ensuring that they were compensated for overtime hours, as well as giving fiveper centofthenet profit back to the villagers. Authorized for use only by Lesley Lessard in International Marketing at Centennial College from Jan 18, 2021 to Apr 16, 2021. Use outside these parameters is a copyright violation.Page 49B20A075The products offered in the Vozni line included dried plums, figs, pears, apples, apricots,11peaches, a mix of all six with walnuts added, and dried Roma tomatoes. These were packaged in 200-gram plastic bags that stood upright on shelves (Exhibit 4). The fruits were sourced directly from village farmers and secured with a deposit to encourage farmers to take excellent care of the fruit, thereby ensuring that it was of the best quality. Homeland employees personally drove out to farms to gather the fruit when it was ready, sorted the fruit, washed it, and started the drying process in Homeland's own facilities. Displeased with practices he perceived as deceptive, Jabrayan decided he would ensure his company operated in a transparent and honourable way. Homeland washed the fruit in water only, dried the fruit, and then washed it again to ensure the cleanest and highest-quality final product, devoid of dirt, stones, and kernels. Jabrayan opted to sun-dry all the fruit that Homeland produced in order to maintain optimal taste. No sugars or chemicals were added.Upon investing in Armenia, Jabrayan found that the competition was high. However, because 90 per cent of the dried fruit produced in Armenia found its way to the Russian market, he knew there would always be a ready market for Homeland's products. In its first year of operation, 80 per cent ofHomeland's products were sold in Armenia,10 per cent were exportedtoRussia,and 10 per cent were exported to Lebanon. Jabrayan's experience in those countries supported the findings of a CARD research study conductedin 2006: Diaspora Armenians were the key consumers ofArmenian dried fruit products.12Jabrayan credited Homeland's success in 2019 to its active promotions and social media presence in Armenia, as well as its presence at farmers'markets, booths, tasting events, and other activities. Because its first year had been so successful, the company was able to buy a large piece of property in an Armenian village to construct a new greenhouse and production plant. The existing facilities were to be converted into a large drying station,while the new facility was to be used for washing and packaging stations. EXPANSION PLANSWith the current facilities and production, Homeland produced 12 to 15 tons of product in the first year of operation. Homeland aimed to increase production to 80 tons by 2022 and 100 tons by 2023. This would require increasing exports. Jabrayan was deliberating whether to begin exporting dried fruit and nuts to Canada or the US, or whether Homeland should focus on expanding exports to Russia.Jabrayan was concerned about managing the growth. He knew that the Armenian diaspora was actively looking to buy products from their homeland, but he also realized that he needed to be able to increase capacity and ensure a steady supply of raw fruits from farmers. He was concerned about not being able to source top-quality raw fruit and did not want to sell poor-quality products that might damage the Vozni brand. While Homeland was not large enough to buy an entire village's harvest, Jabrayan did hope to buy some of the best farms to use exclusively for Vozni products as the company expanded.He wondered what mix of fruit to buy. In his experience, figs, prunes, apricots, and peaches were the mostpopular dried fruits. Jabrayan was also concerned about how to import the product into Canada. Given that Homeland was an investment project for him and that he had other projects that required more of his management time, he felt it would be best to work with a broker who knew the market and the import process. According to a broker in Armenia, a 10-ton container (i.e., 20 feet long), which would contain 40,000 of the 200-gram dried fruit bags, cost $4,300 for the container alone, and it would take 45 days to travel from Armenia to Toronto. A 20-ton Authorized for use only by Lesley Lessard in International Marketing at Centennial College from Jan 18, 2021 to Apr 16, 2021. Use outside these parameters is a copyright violation.Page 59B20A075container (i.e., 40 feet long) would hold 80,000 bags and would cost $4,700. The paperwork per container in Yerevan, Armenia would cost approximately $500 regardless of the destination.13Brokerswouldalready havehad a distribution network in place. Jabrayan's discussions with a broker in Ontario revealed that dried fruits from Armenia were allowed into Canada duty free and required no special documentation. Broker fees cost $300 to $500 per container. The first container would likelybe taken for inspection by Canadian Border Services and the Canadian Food Inspection Agency because it was a first-time export to Canada, and the cost of inspections was about $3,000. There were no other customs fees to import dried fruits to Canada. Jabrayan was confident he could sell the 200-gram bags for $7.99 each. He estimated variable production costs to be $2.66 per 200-gram bag of fruit.Diaspora Armenians living in Los Angeles, California had contacted Homeland about exporting to the US. While there were about 64,000 Armenians living in Canadamostly in the Greater TorontoArea (GTA)/Hamilton and Greater Montreal/Laval areas (approximately 23,300 and 23,555,respectively;see Exhibit 5)14there were about 1.5 to 2 million Armenians in the US. Approximately 205,000 Armenians lived in California, with 105,000 living in the Los Angeles area.15Consequently, California represented another potential export market for Homeland (Exhibit 6). Estimates to ship a 20-ton container by sea from Georgia to New York, then overland to Los Angeles, amounted to approximately $5,800. There were about 2.5 million Armenians living in Russia16, which represented a third growth market for Homeland. Jabrayan hoped that the Russian market could grow to 50 per cent of the company's sales because it was 20 per cent cheaper to transport the finished products into Russia than into North America. Homeland could sell directly to stores or through distributors. Distributors and retailers each typically wanted a 20 per cent margin. The retail price in Russian stores was set at no more than $5.00. DISTRIBUTION CHANNELS FOR HOMELAND'S PRODUCTSThe dried fruit import industry in Canada was rather unconcentrated: 86 companies imported dried fruit valued at $34.2 million in 2019,17with the sixlargest players making up almost a third of the combined market share. Jabrayan anticipated that the largest competitors and distributors in Ontario would beBulkBarn, Dollarama, Compass Food SalesCompany Limited, and Conagra FoodsInc.,among other traditional players such as LoblawsInc.,Metro, and SobeysInc. Other chains included Whole Foods Market Inc., with six stores in the GTA;Goodness Me!,with five locations in the GTA;Hamilton;and other independent grocery outlets. Diaspora Armenians were the entry target market that Jabrayan was considering. With their widespread populations in North America and their strong ties to their homeland, it seemed to be a natural niche market into which to expand. Jabrayan wondered if pursuing this market was a viable way to expand the brand or if it would limit the popularity of Homeland's products among North Americans if the focus was only on Armenians. He wondered which distribution channel would work the best for targeting Armenians and which would work the best for targeting average North Americans.Jabrayan learned that todistribute through mainstream outlets, Global Standards 1 (GS1)codes had to be included. GS1 Canada was a Canadian entity that issued Global Trade Item Numbers (GTINs): Each stock-keeping unit (SKU)contained unique product identification numbers, whichusually appeared below the barcode. Vozni products would obtain a GS1 company license,18which Jabrayan estimated to cost $50 per SKU.As Jabrayan reviewed the Vozni line, he wondered which distribution method would work best with his product. As organic fruit with no additives, the fruit needed to be in sealed packages to maintain their Authorized for use only by Lesley Lessard in International Marketing at Centennial College from Jan 18, 2021 to Apr 16, 2021. Use outside these parameters is a copyright violation.Page 69B20A075quality and uphold a shelf life of one year. He contemplated the wholesale grocery store channel and considered which section would best showcase his product(e.g., near fresh fruits, in the baking aisle, with bulk items, or in the natural food aisle). The idea of natural food stores was appealing, yet this would mean directly competing with other organic brands,and Jabrayan wondered if that would affect his brand's ability to differentiate. Jabrayan was also curious if online retail was a good option for his products and if online platforms fit the brand image well enough to pursue. Regardless of which distribution channel he chose, he knew he would have to add approximately $1,400 per year to his marketing budget. Distributors typically wanted a 35 per cent margin, and retailers sought a 40 per cent margin.Jabrayan also considered traditionally multicultural food stores in the GTA. For example, Ararat International Fine Foodsin North York was familyowned and specialized in Middle Eastern and European goods. It had been operating for nearly 50 years andcatered to the needs of diverse ethnic groups.19Arz Fine Foods, located in Scarborough, provided authentic fresh, frozen,and prepared Middle Eastern and Mediterranean foods.20Finally, Jabrayan considered the largest ethnic foodchain in the GTA, March Adonis, with its three locations: two in Mississauga and one in Scarborough. The stores, which originated in Quebec and were now partially owned by Metro, offered a wide variety of specialty, deli, and general Middle Eastern grocery items.21Last, Jabrayancould distribute through mainstream stores such as Loblaw, Sobeys, and Metro, especially if he wanted to broaden his appeal to non-ethnic consumers. However, he worried that these chains would require constant brand support and high slotting allowances orlisting fees. They would also typically penalize Homeland in the event of any supply chain breakdowns or late deliveries.THE MARKETING MIXBrandingHomeland sold its dried fruits and nuts under the Vozni name. The branding was well understood in the Armenian market: vozniwas the Armenian word for "hedgehog."Jabrayan was concerned about the heavy reliance on the hedgehog character. He had grown up with the stories about hedgehogs living in farmers' fields. Because they ate insects and snakes, the stories about them protecting the best fruit in the fields grew into legends. Armenians immediately understood the connection between hedgehogs and high-quality fruit, but Jabrayan was concerned that the connection would be lost in the North American market. All Homeland dried fruit and nut products were sealed in attractive white plastic packaging with a prominent image of a hedgehog embracing the fruit (Exhibit 4). The brand slogan was rather simple: "The hedgehog's choice is perfect!"22The dried fruit wasvisible through a transparent portion on the front of the plastic bag, so customers could see the quality of the products. The packages displayed the Eurasian Conformity mark (EAC), a certification that indicated theproducts conformed to all technical regulations and had passed all assessment procedures of the Eurasian Customs Union (ECU).23In addition to communicating that it used an all-natural drying process, Homeland was taking steps to have the products certified as "organic," allowing the brand to use the USDepartment of Agriculture (USDA) Organic seal on the products. The process of USDA organic certification was time consuming and could become costly depending on how the agents structured their fees.24One agent's website estimated a cost of approximately $3,000.25To obtain permits and laboratorycertification in Canada cost $800 to $1,000.Authorized for use only by Lesley Lessard in International Marketing at Centennial College from Jan 18, 2021 to Apr 16, 2021. Use outside these parameters is a copyright violation.Page 79B20A075PackagingThe packaging contained a description of the contents in three languages (Armenian, Russian, and English), as well as the necessary product, certification, and company information. This offered flexibility in communicating to the target audiences in the export markets. However, while Jabrayan was concerned that the presence of foreign languages would destine the brand for the "ethnic foods" section of stores, he knew that to export to Canada required French labelling and that export to the USrequired Spanish labelling on the packaging. Yet Jabrayan truly believed in the success of the premium dried fruit brand in the GTA, beyond the ethnic market of the Armenian diaspora. He estimated that a typical North American consumer might be persuaded by the nutritional value of the dried fruits for snacking and baking. PromotionJabrayan also wondered whether and how Homeland should promote its products in the chosen market(s) given that it planned to use distributors and retailers. What adjustments would have to be made to their website (see Exhibit 7)? OTHER CONSIDERATIONSJabrayan was concerned about the impact of currency fluctuations, especially the wild fluctuations in the Russian ruble. He was alsoconcerned about the stability of transportation from Armenia to Russia, as the products would have to go through Georgia, which had had a somewhat strained, tumultuous diplomatic relationship with Russiathat had economic implications for bothArmenia and Georgia. Furthermore, entering the Russian market had often been challenging due to higher levels of corruptionand "facilitation payments"to place products on the shelves of supermarkets and other distributors, which had dissuaded investors from market expansion.26The sweet taste of his homeland was one Jabrayan wanted to share with the world. He also wanted to ensure that good-quality and healthy dried fruits were available to families around the world. Having received requests from Armenian friends and family in Canada made him even more interested in bringing the products to Canada.The fact that there were already Canada-Armenia bilateral trade agreements in place made iteasier for Homeland to export their products to Canada.DECISIONJabrayan knew he needed to make a recommendation for expansion to his partner. His main concern was which export market Homeland should focus onCanada, the US, or Russia. In making that decision, he wondered which distribution channels would be most appropriate for the chosen market. He also questioned whether the Vozni brand name would transfer culturally to the North American market and whether North American consumers would be willing to pay a premium for the high-quality, organicallyproduced dried fruits. He also knew that, despite his own desire to bring his products to Armenian Canadians, he also needed to make a financially sound decision.