Haribo Case Study

Introduction

Nowadays, in a growing world trade, more and more companies are developing themselves at an international scale.

This is the case of Haribo, a well-known German food company, specialized in sugar confisery. Founded in 1920, the society is one of the leaders in the sugar confectionary segment with substantial sales of 715 millions of dollars in 2008 and a European market value share of 5.4%. How did they arrive to this point in a large and competitive market? To answer to this question, we’re going to study the company through an article and the use of a few frameworks.

ANALYSIS

Models choices

To really understand the company functioning, the use of four models could be interesting. To analyze the environment, SWOT analysis appears as the most suitable.

It permits by analyzing both extern and internal environment to understand the company situation and, in this way, draw conclusions to develop a competitive advantage. The analysis of the competitive environment through Porter’s 5 forces in parallel will reinforce the study. About internal functioning and strategy, the BCG and Ansoff matrix seems to be the most relevant, the article being about consumption changing and strategies established. The importance of each range of products and the understanding of the different strategies adopted will procure the possibility to find ways of development.

Use of models Porter’s five forces The confisery market is in growth.

In terms of value, it has increased of 3% in 2008 for a value of 127.9 billion and should reach 147.7 billion in 2013. In addition, offer in this place is very large: there are many big competitors as KraftFoods, Cadbury, Ferrero, Nestle or Cemoi. The competitive environment can be dressed in the Porter 5 forces diagram:

Figure 1 : Porter’s five forces

The market is concentrated and occupied by big groups.

In this way, threat of new arrivants is poor because the difference of structure is too important. Same conclusion about substitutable products, due to a strong investment policy of the companies present on the market. To continue, Haribo guarantee a high turnover rate of the shelves to the distributors which, conversely, can be strict on quality and hygiene. Their bargaining power is moderate. Finally, suppliers have a high bargaining power because they are few and are at the origin of the value-added created. In this way, big groups Haribo included, have a stable position, a high power and influence on their environment.

The range of the brand is composed of four types of products which are the jellied candies, the marshmallows, the liquorices with “the tenders” and “the Hards”, and the sugar-coated. This portfolio of products is evaluated in a BCG matrix to understand management choices and priorities:

Figure 2 : BCG Matrix

Stars are products with a rapid growth and a large market share, which generate lots of benefits. With dynamic investments, these products will become “Cash cows” when they we’ll be at maturity.

Tenders liquorices, considered as Cash Cows are products with low growth and high profit. Haribo has to maintain this position against competitors because they generate vital money to develop stars. Hard liquorices are products with a good growth but a little market share; they don’t give lots of profits. That’s why Haribo have to invest in this range to develop benefits or take off this range. In addition, the company has several products positioned on a depressed market or too much competitive market. They have to be deleted to limit costs.

Ansoff matrix Haribo has placed various methods to impose itself on the sugar confectionary market. Ansoff matrix categorizes the different methods of growth adopted:

Figure 3 : Ansoff Matrix

First, Haribo uses their flagship products to penetrate markets where they are present. Secondly, Haribo have a strategy of differentiation. It means that it offers to the customers a large offer in comparison of what already exists, with constant launches of new products. This success is due to an active innovation policy and quality products. However, today, consumption tendencies are changing.

Indeed, concern over health is growing and new restrictions against food advertising have been established. People are more and more worried about what they eat and tend to prefer healthy food because it comforts them. In this way, Haribo diversified its activities and adopted a new strategy to take market share away from its initial market. The company launched a new range of products, with less sugar and has successfully addressed the health trend by focusing on the nostalgia trend to encourage more consumption among adults, playing on the fact that this new range could remind them the sweets of their youth. Haribo has reached its current status by targeting 2 segments: adults and children.

Now, it focuses more on adults. SWOT analysis It’s possible gathering all the external and internal environmental factors affecting Haribo in a SWOT analysis, to have a best insight of its situation.

Figure 4 : SWOT Analysis

In front of this appraisal of the company’s situation, it’s possible to draw meaningful conclusions. In intern first, Haribo has many strong points, particularly its size, its brand image and its efficient strategy of differentiation. Secondly, at an external level, we see that health food is more and more important for customers and restrictions about food advertising prevent Haribo to develop itself on sweetened products. Haribo has to use of its strengths to invest in the opportunities.

To conclude, in the case of the «Haribo Case Study» article, four tools appeared as the most interesting.

They have been chosen because first, the SWOT analysis can sum up several frameworks and permit a global view of the company situation, secondly because some tools weren’t relevant in this case, example with the Diamond model of the International Product cycle. In addition, BCG and Ansoff matrix are directly linked to the article which is about new products and development issues.