Large and Small Company Globalization Tactics for International Product Expansion and Distribution

Globalization has become an irreversible dynamic mechanism through which the whole world, represented disproportionately as the business/consumer populations, has become increasingly aware of itself through Information and Communication Technology (ICT) and, this being the case, is transitioning all that was once boundary limited toward the limitless potential profits it now implies. More specifically, it is now making possible the ability to conduct lucrative business from anywhere in the world to anywhere in the world. But there are some limits and restrictions that only come to the fore as big and established business makes the expected expansion efforts by using its own resources for the express purpose of this expansion while smaller, more specialized niche markets have to make distribution arrangements with established parallel competitors as an expansion methodology which both, increases product awareness and profits globally for them.

Kraft is the largest food company in the US and 2^nd in the world (behind Nestlé) with annual revenues approximately $40 billion (Business Wire, Chicago, Dec. 18, 2008) and sales in more than 155 countries. Kraft products include snacks, beverages, chocolate confectionary, enhancers, deserts, convenient meals, natural, process and cream cheeses. The company maintains a strong market position in the US while simultaneously making major strides in Europe which was a bit of challenge for them until the acquisition of Danone’s Lu cookies and crackers business early in 2008 gave them a 54% sales increase for that company in the first 9 mos. to 8.36 billion (Katy Humphries, Dec. 16, 2008) accounting for about ¼ of Kraft’s total revenue of $31.43 billion within the same time frame. Now that’s the kind of muscle through carefully planned strategy and large investment resources a company this size can muster. This particular move more than offset a slight slump in the domestic sales of 0.9% it was experiencing in the same time period. Moreover it employs the internet to continually use online surveys and other PR methodologies for public reaction analysis to further identify consumer pulse as regards foods and beverages. To this end, it is talking with Apple about providing, through iPhone tech, digital assistance from Kraft so that, while in the grocery store, a customer can access from the Apple store an iPhone application for recipes that list necessary ingredients from Kraft as well as other great food ideas. Now that’s convenience in a timely and expedient fashion! These kinds of ideas will put them further ahead of most competition. Recently it has adopted GS1 standards in Russia to facilitate data synchronization which will reduce supply chain costs and increase efficiency. Using the Global Data Synchronization Network (GDSN) based on GS1 standards, Kraft also plans to use this to synchronize product catalogues in multiple countries as well. It has the facility to adapt regionally for compliance requirements in product acceptance so as to make these challenges minimal as it basically establishes, on a regular basis, a fully functional plant for its products and works with the local and federal governments of the countries it operates in. To this end, it is creating local employment opportunities, further endearing its acceptance there. Kraft even has its own independently implemented system of checks and balances for quality control which may differ from one country to another in terms of flavors, textures, ingredients, nutrients but overall quality is standardized. It doesn’t seem that Kraft is going to be in any serious economic downturn any time soon and, if anything, it is one of the strongest companies in the world and, in my opinion, caters to a basic human need that, no matter what the economy, you always have to go home and eat something and that’s a product Kraft can provide multitudinously.

Hanson’s, on the other hand, is a smaller company that began way back in 1935 as a true natural fruit based health drink and natural sodas maker with about  a dozen employees and sales of about $17 million and was in the fringe market for refreshments until around 2002, when it introduced the Monster Energy Drinks line of product. This is where this company’s story gets silly as, even though they produce various other fruit drinks and juices as well as branching out to health food bars and health snacks, this one energy drink line became responsible for an 80% of projected $600 million analysts stated for 2006 and more than 80% of Hansen’s total profit for that time frame! Furthermore, in the 4 ½ years from its inception, stocks rose 6,000%!! Now I know little about stocks but in my book, that’s just insane rarely, if ever, heard of for any company. Many analysts kept saying it was just a fad and that what goes up must come down, hard. Well, this little company rose to No. 2 on Fortune’s Fastest growing companies list in 2007 and in this time frame, holds a $28 billion market value (Investor’s Guide, 2007). It has been using Britain’s Cadbury Schweppes for distribution in US and Mexico but it has recently signed a distribution agreement with Comercializadora Eloro, a subsidiary of Grupo Jumex for distribution throughout Mexico of Monster Energy Drinks line, excluding Baja and Sonora, starting Jan 2009, necessitating a termination fee to Cadbury Schweppes of around $5 to 6 million which could be higher or lower. Now that it has that distribution to Mexico it went further in signing with Coca-Cola System another distribution agreement for the same Monster Energy Drink line to six Western European countries, Canada and select US territories. The six W. E. countries include Britain (ironic since Cadbury Schweppes is Britain based), France, Belgium, the Netherlands, Luxemburg and Monaco. For a time it was the No. 2 energy drink behind Red Bull but, according to AC Nielsen Data (Oct. 6, 2008) it says Monster Energy ® is #1 by volume in USA. This company then does depend on established larger company distribution networks for its success on the global market scale but it is a fully realized market strategy that, at least, for this company, has made it one of the biggest small enterprises in USA. It is also indicative that, as far as the ICT tech goes, the bigger companies have most of this in place so that, in the distribution agreement, Hansen’s gets to use their already established modes for all that becomes necessary in the product’s sales abroad. They even made a deal with PepsiCo for distribution through their networks abroad, where Coca-Cola doesn’t go so, how’s that for playing as a neutral company in using two well know fierce competitors to the advantage of Hansen’s product expansion strategy? Although Hansen’s meteoric rise from a small obscure local California based company to a globalized, billion dollar international commerce player may be unique, it certainly has me inspired in that, no matter how small a company, you can play with the big boys if you know how to make friends in high places. In the future, Hansen’s may decide to a buy off but the recent economic downturn has had less effect on sales with net sales up 15.3% in 3^rd quarter of 2008 meaning Hansen’s is in no hurry as speculation has talk about either Coca-Cola or PepsiCo appropriating Hansen’s Natural.