Competition
Competitors consist of producers of allergen-free (including gluten-free) products that are available in Germany. Websites such as the AllergyFreePassport, Celiac Association gluten-free supermarket, and AG’s website were searched to identify such companies. A list of hundreds of firms was compiled, but this included various product offerings such as snacks, crackers, soups & sauces, meals and deserts, as well as food stores which offered these products. This initial list was narrowed to approximately 105 firms that offered a broad range of allergen-free products or specifically offered allergen-free baking mixes, but most of these were located in the U.S. This list was therefore further narrowed to three firms that were selling into the German market through online delivery: Bob’s Red Mill, Enjoy Life and Namaste, each of which offers allergen-free products and/or baking mixes.
Through German websites dedicated to the allergen-free food community, approximately 20 firms were identified. But only two, Schär and Hanneforth, were considered potential threats because they offer allergen-free products and/or baking mixes and have presence in Germany and across Europe. Hanneforth sells baking mixes to all European countries and Schär is recognized as a brand leader of gluten-free products not only in Germany but Europe. General Mills was also identified as a potential competitor because of its recent entry into the gluten-free market and because its branded products are available in stores internationally.
Online Competitors
Bob’s Red Mill, as the US leader in stone milling, produces more than 400 products, including a full line of certified gluten-free products and an extensive line of certified organic and free from some allergens products. Bob’s products are available at organic markets and local supermarkets throughout North America and can also be purchased online (Bob’s Red Mill, 2010). Its production facility is certified as Gluten-Free by the GFCO, but is not 100% allergen-free. But based on its size, the company likely has the resources to invest in developing allergen-free products and thus could become a competitor for online customers from Germany. Its competitive advantage would be its broader product line and its finished products. The cost of online ordering, when combined with shipping and handling fees, would limit this company’s competition with AG once AG has an established German distributor. However, with a significant growth market developing in Germany, Bob’s Red Mill could pursue a similar distribution strategy in Germany and likely has the resources to do so.
Bob’s Red Mill Strengths
Brand recognition (especially US)
(Assumed) available capital for marketing, sales, R&D and customer service support
US retail and online availability
Bob’s Red Mill Weaknesses
Only offers gluten-free and-some allergens –free products does not address all 8 allergens
Online only for German market
Risk to AG
Finished products and extensive line of baking products
Enjoy Life Foods, a manufacturer out of Schiller Park, IL, offers hundreds of gluten-free products and 138 pre-made products that are allergen-free. Enjoy Life Foods is currently available in stores in North American and Canada and online (Enjoy Life Foods, 2010). It provides 100% allergen-free prepared food, giving it a potential advantage in the German market, where customers seek the convenience of prepared foods. Without baking mixes, it is not a direct competitor to AG’s baking mixes, but could presumably begin to market the mixes that it uses in its prepared foods (just as it could become a buyer of MR mixes). However, as only an online provider, its prices are not likely to be competitive with AG’s products available through a German distributor.
Enjoy Life (and General Mills) websites create a community that goes beyond just ordering products on line, but form support groups, attaching their brand names to these groups and supporting the sales of their products in-stores as well as online.
Enjoy Life Foods Strengths
Provides allergen-free, gluten-free premade products (not mixes)
US and Canada retail and online availability
Community Focused & Customer Service Focused.
Enjoy Life Foods Weaknesses
Limited brand recognition
No mixes offered
(Assumed) limited capital available for sales, marketing and R&D
Available online in Germany
Risk to AG
Produces both gluten and allergen-free products from all 8 allergens
Namaste is a small manufacturer of allergen-free and gluten-free products located in Idaho. Namaste’s products are allergen-free, gluten-free baking mixes and pasta meals. Namaste products are sold in stores in North America, Canada as well as online. While it has a very similar product to AG’s mixes, it has the advantage of a broader range of allergen-free mixes and finished products. However, its online only availability in Germany creates high prices for the end user and limits its ability to compete in the German market.
Namaste Strengths
Provides allergen-free, gluten-free products and mixes
US and Canada retail and online availability creating more avenues for sales and marketing of products
Namaste Weaknesses
Product is not nationally recognized
(Assumed) limited capital available for proper sales, marketing and R&D
Available on-line in Germany
Risk to AG
Similar product offering
Broader range of products
Summary of online competition
The major weakness of these online firms is in the price that would be paid by the end buyer (after shipping, handling, and customs fees). However, any of these online firms could overcome this barrier with an entry strategy similar to the one recommended here for AG. Their competitive advantages would be in their broader product offerings, particularly in the offering of finished products. However, given the cost of new market entry, the most likely new entrant would be Bob’s Red Mill, which is large enough and has the necessary resources, to pursue international growth.
German Competitors
General Mills, a retail brand leader of food sales both in the US and globally (General Mills, 2010), is a recent entrant into the gluten-free market. Its brand is recognized globally and its products are accessible throughout the world in most retail outlets. It has a dedicated 24 hour live gluten-free website offering customer support that is rapidly building its brand in this gluten-free market.
While the company does not produce 100% allergen-free products or mixes, it has a strong research department that could develop allergen-free products or mixes specifically tailored to German taste preferences. Because of its size, it could enjoy cost savings from economies of scale that could be passed on as lower prices to consumers, even if they were purchasing online. General Mills has the brand name and resources (staff, technology, procurement and logistics) to gain a substantial market share, and its wide availability in local supermarkets could easily displace competitors in the market (both online and in stores). It therefore represents a significant potential threat to AG’s allergen-free mixes.
General Mills Strengths
Brand Leader throughout the world
Unlimited capital available for sales, marketing and R&D, customer support
Ability to generate new products
Community Orientated
Customer Service Focus
General Mills Weaknesses
Does not have an extensive product line; baking mixes
New the gluten-free market
Available on-line in Germany
Risk to AG (potential)
Ability to generate new products
Ability to set market price
Wide distribution network
Schär is a leader in the European market in the area of gluten-free foods (Schär, 2010). Its products are gluten-free flours, an extensive range of pasta and bread and a variety of bread substitute products, biscuits, snacks and much more. Schär has 8,000 stores worldwide and is available in Germany both in stores and online (Schär, 2010). It thrives on its latest technology and innovation and partners with local universities for on-site facilities to create new products.
Schär’s Strengths
#1 brand in EU (brand recognition)
Available capital for marketing, sales, R&D and customer support
Global retail and online availability
Schär’s Weaknesses
Focused on gluten-free market
Limited line of gluten-free baking mixes available
Risk to AG
Significant share of the market
Focused on customer-service support. Conducts market research on taste of their products
Ability to extend product offerings (potential threat)
Like General Mills, Schär has the resources and capital to develop 100% allergen-free line products, so is highly likely to become a significant competitor to AG. It has the advantage of local presence, varied gluten-free product line, brand name, established distribution network, and knowledge of the German market and taste preferences.
Hanneforth is a German manufacturer of gluten-free prepared foods, baking mixes and flours and some free- from certain allergen (one or two, i.e., soy or tree nuts) products. The free-from-some allergen products include fresh baked goods, baking mixes, flours to make breads, and cakes. It delivers fresh baked bread daily to 8 bakery partners. Its products are available in stores, bakeries (fresh baked daily) and online (Hanneforth, 2010). Its competitive advantages are in its prepared foods, which it sells along with its mixes, and its brand recognition. However, its allergen-free products do not address all 8 allergens. With its existing customers in bakeries, and its presumably small size, it may not have an interest in or capital for expanding into 100% allergen-free mixes. Rather, it may be more interested in the MR mixes as supplies for its baked goods, which could expand the appeal of its products beyond its current customer base.
Hanneforth’s Strengths
Brand recognition in the EU – (especially in Germany bakeries where partners include 8 bakeries and 50 bakery outlets)
Finished products and mixes
EU retail and online availability
Hanneforth’s Weaknesses
Only offers gluten-free and some allergens; does not address all 8 allergens.
Risk to AG
Produces prepared baking goods delivered fresh daily to its customers
Summary of German competition
There were no competitors in Germany that offered 100% allergen-free baking mixes or food products. Both General Mills and Schär have the resources and capital available to extend their product offerings and were identified as potential threats as well as potential purchasers for AG at the time of sale.
AG’s Competitive Advantages
100% allergen-free product: AG could be the first company to enter the 100% allergen-free market. While General Mills, Schär and Bob’s Red Mill have the resources to develop competitive allergen-free products, a rapid entry by AG would give it a first mover advantage.
Production facilities and expertise: Both Schär and General Mills will become significant competitors only after the additional investment required to develop allergen-free mixes, products, and to create or modify production facilities. Therefore, each company may be interested in purchasing Allergy Grocer’s product line and production facilities and expertise, rather than developing its own. General Mills may be more likely to value the MR brand, as a distinct product line under the broad General Mills branding umbrella, while Schär is more likely to want its own brand, which is linked specifically to the specialty foods market.
Allergy Grocer does have a significant strength in the manufacturing process and in its facility in the U.S., which could be of interest to General Mills as an alternative to transforming its own plants and facilities to produce allergy-free products and to Schär as an immediate option for expanding its product line.
Internal Risks
Brand Recognition
Schär and Hanneforth are well-established brands in Germany and General Mills is an established international brand. Although AG will offer a unique product in Germany, both Schär and General Mills have the capital to offer competing product lines, and Schär, as a local in-country firm, is most likely to respond to AG’s competitive threat with this type of product development. To mitigate this risk AG must utilize its first mover advantage and leverage its core competency in production to possibly attract investment from Schär and General Mills.
Access to German Market
Both Schär and Hanneforth have already established buyer networks to distribute their products, through supermarkets and bakeries. AG’s distributor will need access to schools and institutions, as well as bakeries and retail outlets, in order to gain market share.
No prepared foods
Both AG’s online competitors and its potential German competitors offer some prepared foods. The distributor strategy recommends that AG not compete with new
products, but seek buyers that will produce prepared foods from AG’s mixes.
Customer Support
Unlike Enjoy Life and General Mills, AG lacks both an online support group and extended customer service hours to support its brand development. The distributor strategy recommended here is for AG to support web development among the online retailer purchasers that will sell directly to consumers. The food distributor will directly manage all customer service inquires with the support of AG.
