Research report UCC Coffee

Benelux B.V.
Tutorgroup 3

Merijn Schiks
Michiel
Bloemendaal
Laurens Coenen
Andries
Wesselingh
Ellen Gommers

BD2HV
Niels Willemsen

12-06-2014


1
Preface

We are a group of students studying for their Bachelor of Business Administration and we made
an export plan for UCC Benelux, the host company of quarter 4 of the second year.

In the past 8 weeks we made an export plan for UCC Benelux which compared Russia and
Croatia as possible export countries. These two countries are the central subjects in this report.
For each country have we investigated how the internal analysis, external analysis, logistics, the
financial aspects and the legal issues could be filled in. At the end have we made a decision about
which country we prefer to export to and we will give advice to UCC Benelux.

We hope you will enjoy reading this report.

Regards,

Andries Wesselingh
Laurens Coenen
Merijn Schiks
Ellen Gommers
Michiel Bloemendaal



2
Table of contents

Preface ..................................................................................................................................................... 1
Table of contents ..................................................................................................................................... 2
Introduction ............................................................................................................................................. 3
C1 Organisation profile ............................................................................................................................ 4
C2 Methodology ...................................................................................................................................... 6
C3 Theoretical framework ....................................................................................................................... 8
C4 Export plan Russia .............................................................................................................................. 9
4.1 Country analysis Russia .............................................................................................................. 9
4.2 Internal analysis of UCC Coffee Benelux, are they capable of exporting? ............................... 10
4.3 External analysis Russia ............................................................................................................ 10
4.4 Logistics .................................................................................................................................... 14
4.5 Financial analysis Russia ........................................................................................................... 15
4.6 Legal analysis ............................................................................................................................ 16
C5 Export plan Croatia ........................................................................................................................... 17
5.1 Country analysis of Croatia ....................................................................................................... 17
5.2 Internal analysis of UCC Coffee Benelux, are they capable of exporting? ............................... 18
5.3 External analysis Croatia ........................................................................................................... 18
5.4 Logistics .................................................................................................................................... 22
5.5 Financial analysis Croatia .......................................................................................................... 22
5.6 Legal analysis ............................................................................................................................ 23
C5 Advice ............................................................................................................................................... 25
Sourcelist ............................................................................................................................................... 27
Appendix ................................................................................................................................................ 29



3
Introduction

UCC Coffee Benelux wanted to grow and expand their market share by exporting to a patriotic
country, for this they asked us to make two export plans and advise them which is the best.
This report consist of two export plans and a comparisation between the countries Russia and
Croatia. After analyzing both countries, an advice for exporting has been made. We have
discussed the following subjects:

First of all we made a quick scan to get a better view of UCC itself. We then proceeded to analyze
the company for its capability of exporting. In the internal analyses the companys strengths and
weaknesses are discussed.

Second, we analyzed the countries using various methods, models and theories After getting a
proper view of both countries we took a closer look at the coffee market, the competitors and
the current trends. We then made a financial analysis and took a look at the legislation and
logistics.

When all of this was done, we made a comparison between the pros and cons of each country.
Finally we gathered all information and decided on which country UCC should export to. An
advice about our decision was set up.





4
C1 Organisation profile

General information
In de Dry Swarte Mollen started as a small producer of coffee and tea in 1818. In 2012 they
were taken over by the UCC group and were renamed to UCC Coffee Benelux. Since then they
have been responsible for the sale of private label coffee in Europe. They have grown into the
market leader for private label and single portion coffee in Europe. They have over thousand
employees and an annual revenue of over 250 million Euro. Ever since the takeover the export
in Europe has been managed by the export department which only consists of three members.

Culture
One of the important things of UCC Coffee is that they have a passion for coffee which shows in
everything they do. They do not only care about making a huge profit but also feel responsible
for the farmers and the environment. They believe that working together will be the best for
everyone.

Strategies
They have several strategies to make sure that they can complete their goals of growing and
becoming the biggest roaster in Europe. For one they use a low cost strategy. By optimizing
processes they can realize an advantage on costs compared to competitors. Besides focusing on
operational excellence they focus on customer intimacy as well. Since UCC only makes private
labels they deliver exactly what the customer wants. They can completely adapt their products
from taste to packaging depending on the customers wishes. UCCs strategy for growing
revolves around exporting to countries they are not exporting to yet.

External
UCC is not your average retailer that sells products to consumers. Instead UCC focusses on the
business to business and the indirect side. Instead of selling directly to consumers, UCC sells
their products, own brands but mainly new brands to retailers. On their own turn these retailers
sell the products to the consumer. This is mainly done by making a new brand for a customer.
Since this will be the customers brand, also known as a private label, the customer can decide on
basically everything, what kind of taste they want, how much, what kind of packaging etc.
Because of this UCC has almost no products of their own but mainly make products and brands
for other companies.

When looking at the industry you can place it in several groups, most importantly the markets
for consumables, drinks and hot drinks. These markets only grew in the last several years and
are very likely to be growing even more in the upcoming years.

An important factor when doing business are your competitors. Especially on the coffee market
there are a couple of big players that rule the market. Some of the main competitors focus more
on developing a brand and selling high quality coffee. UCC takes a different approach by focusing
more on private labels and good coffee for a low price. Other than the direct competitors like
Douwe Egberts and Nespresso you also have the indirect competitors. These include for example
suppliers of substitutes like tea.

The actual coffee beans are bought on one of the two world markets located in New York and
London. From there they get transported to one of the roasteries located all around Europe.
These roasteries produce coffee for the country they are located in as well as neighbor countries.





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DESTEP
It is always important to look at current trends for the market you are operating in and for the
country you are going to export to. These trends can be analyzed and divided into 6 groups using
the DESTEP model. On a demographic level, the population in Europe is growing and aging,
which is positive for the coffee market. As for the economic situation, we are still climbing out of
the economic dent the financial crisis left on us which, obviously, is not positive for anyone. A
social trend is that people are paying more attention to their health and caffeine which is one of
the main ingredients in coffee is not good for your health. Technology has never been in a better
place than now, so new inventions like nanotechnology will certainly offer new options for
packaging for example. Sustainability and the ability to recycle has also never been more
important and due to the world trade organization it has never been easier to do business
around the whole world.

Internal
When trying to expand or export it is important that you look at the internal situation as well,
this is to make sure that the organization actually is capable of exporting. First of all the systems
have to be correct and should be able to handle more traffic. One of the most important things
system wise is that UCC changed how they export. While before every country or factory did this
themselves, they now have a separate export department at their headquarters. This
department took over everything concerning export. The management style in this department
is a participating style. They do not have a clear leader in the department. This is rather
important since even though it is only a small department, the communication needs to be really
good. The export department is run by only three employees which is rather small for such a big
company. Because they make use of a lot of agents in different countries they are able to handle
all the work. However since there is only three people in export department they need to be very
skilled, work very hard and have a lot of experience, which in this case they have, do and are.




6
C2 Methodology

The motive
United Coffee Benelux BV is one of the largest coffee companies in Europe. The company is
market leader within the private label and single portion coffee sector. The retail business
consists of local supermarkets and distributors who want to sell coffee using their own brand
and label. United Coffee Benelux BV provides them with coffee meeting their demands
concerning quality, flavour, packaging and branding. In the out-of-home market McDonalds is a
well-known customer. (Avans, Blokbloek, 2014)

United Coffee Benelux BV already has a fair market share in several of the main European
countries. However, they want to expand to patriotic countries. There are several reasons for
companies to go abroad. First, expanding business to the patriotic countries to gain a larger
market share. This could be done when companies have reached a mature state in the home
market. Another reason for going abroad is to catch up with the competitors that are also
expanding to the patriotic countries. The production and labour costs in other countries could
be a lot lower. Also, United Coffee Benelux BV can expand their customers range when going
abroad. Moreover, exporting can help protect the company against domestic market swings and
business cycles. Extra inventory that isnt selling in the domestic market can earn a profit in the
patriotic countries. The most important reason for UCC Coffee Benelux BV is to gain a larger
market share and to increase their turnover and profit. (Leeman, Export Planning, 2010)
(Adema, 2014). Their question for us is if it will be profitable to export to the patriotic countries,
and if so, what approach should they use?

For this assignment, the focus is on two different countries: Russia and Croatia. Both countries
will be examined by drawing up an export plan for each of them. With the results of these
exports plans, the country with the most opportunities will be picked for export and an advice
for approaching this country will be given. (Avans, Blokbloek, 2014)

Main question
Which country is the most attractive to export to: Russia or Croatia, and which arguments are
decisive?

Objective
To deliver two export plans for the export department of UCC Coffee Benelux, one for Russia and
one for Croatia, and to make a decision between the two to optimize and increase turnover,
profit and market share on the 12th of June 2014.

Motivation Research methods
First, we will use mostly desk research. This is because all these questions are fact based and can
be found on the internet, in articles, in books etc. To make sure that, even though we are only
using desk research, the information we use is valid we try to find multiple sources. We make
sure that the sources that we use are valid and have reliable information by using the different
databases provided by school, such as Kaluga.
Second, we use a mix of field research , which is an interview with Willy Adema, and
deskresearch. Much internal information cannot be found just by doing deskresearch.
More in-depth information is given when someone from UCC Benelux tells what the strengths
and weaknesses of the company are, like previous experiences in the past. In order to increase
validity we will use deskresearch as a check tool in order to give as much accurate information
as possible.



7

Marketline is the new database for the second main sub question and provides additional data
for most of the countries in the world. Especially interesting when exporting to Croatia and
Russia. Fact check that with the interview and the validity is increased.

Third, Google scholar is used, which provides scientific publications on different subjects, like
Porters 5 forces model. It also has publications about market entry modes. A lot of information
will be provided by a marketing related book called the principals of marketing. This book
provides much information with regards to the STP-model, even more so than the export
planning of Joris Leeman. On the other hand, a competitor analysis needs more scientific and in-
depth information. In order to increase validity both databanks and books will be used to
answer this main sub question.

Besides, other sources such as Academic Search Elite, HBO, Kennisbank and an interview with
Willy Adema from Fabory have lots of information regarding the export plan. Academic Search
Elite is an English database which includes all kind of disciplines like economics, healthcare,
management, communication, education, computer science and technology. This databank gives
the access to more than 2000 English magazines. The HBO Kennisbank is a Dutch databank
which gives access to results of investigations from advanced education and makes them
available to reuse. These databanks are reliable because it only gives students and teachers the
access for specific researches. These were the quantity investigation methods. We also will use a
quality investigation method like an interview with Willy Adema from Fabory. This mix of
methods will increase the validity of the investigation results and leads to triangulation.

Finally, interesting sources like: Marketline, Exportplanning and the Dutch chamber of
commerce are used in our export plan. Marketline is a source were you can find full-text
rapports about companies, country profiles and articles from experts about markets and so
forth. The book Export planning by Joris Leeman is all about the subjects that are included in an
exportplan. The site of the Dutch chamber of commerce is a pretty reliable source. The chamber
of commerce focuses on the most important aspects related to successfully setting up a business
in the Netherlands. They also operate independently and employs experts staff such as
international trade consultants to help to start export activities. These were the quantity
investigation methods. We also will use a quality investigation method like an interview with
Willy Adema from Fabory. This mix of methods will increase the validity of the investigation
results and leads to triangulation.



8
C3 Theoretical framework

Step 1: Market definition
This is the part where we decide on which type of market we wish to operate, this is done
describing the business domain using 3 different dimensions, who, what and how. This is also
known as the model of Abell & Hammond.

Step 2: Internal analysis
Here we take a look at whether or not a company is capable of exporting. This is done by
describing different parts about the organisation, export potential, management, financial and
culture. At last we will be making a strength-weakness analysis.

Step 3: Export Country selection
In this step we will take a look at a lot of different countries and decide which ones are
interesting to export to. Some useful information to know when deciding are several financial
rates, consumption rates and differences in culture.

Step 4: Customer analysis
In this step we will use the STP model (segmentation, targeting and positioning) in order to
arrange the segmentation of the export market in target groups in order to establish the
appropriate relationship with the appropriate customer.

Step 5: Industry analysis
This is the part where we take a look at different aspects in order to assess and industry. we
start with the export appeal and go on to the opportunities and threats in the industry. This can
be done using the 5 forces of porter.

Step 6: Competitor analysis
Using the 5 forces of porter we can analyse the comption within a business line as a while.
Different types of competition and the 8-step-plan can be described.

Step 7: Distribution analysis
In this chapter we decide on the export entry strategy, direct export and indirect export are both
usable. Internal factors, external factors and types of export are all factors to influence your
choice.

Step 8: Confrontation matrix
In this step the goal is to make a confrontation matrix, the strength will be matched with the
opportunities and these combinations will define a strategy. The models used are Treacy &
Wiersema and Generic competition from porter.

Step 9: Export marketing mix
The 8 ps will be described here, product, place, presentation, promotion, personnel, politics,
price and physical distribution.

Step 10: Financial Feasibility
This is where the financial aspects of the export plan will come to light. Financial rates in best
and worst case scenarios will be given for a few years in advance.



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C4 Export plan Russia

4.1 Country analysis Russia

Market definition
Instead of selling directly to the customer, UCC Coffee Benelux sells their goods to the retailer.
By doing this UCC Coffee Benelux basically only uses B2B and only sell the coffee indirectly to
the consumer. Due to this UCCs main customers are supermarket chains and wholesalers. The
way UCC differentiate from their competitors is usually by price or due to the fact that they can
provide the customer with every kind of taste and packaging they want. The supermarkets in
Russia can be divided depending on their prices. There are low priced supermarkets such as,
Avoska, Kopeika and Pyaterochka, middle ranged supermarkets such as, Selgros Cash&Carry
and Moi magazine and upper ranged supermarkets such as Azbuka Vkusa, Bakhetle and Globe
Gourmet. (Russia.angloinfo, 2014) Whereas they all sound nice, UCC will probably need to focus
on a couple of them. Since UCC has a good quality price ratio it would be good for them to focus
on the low to middle ranged supermarkets. Due to their big factories they can provide a
relatively good quality for a relatively low price making it ideal to focus on those two markets.
Also UCC Coffee solely on supermarkets in Moscow, St. Petersburg and Novosipirsk.

Financial / consumption rates
One important factor that needs to be taken into account when exporting to another country is
the exchange rate of the currencies. In Russia they use the Russian ruble while in Europe we use
the Euro. The current exchange rate is :
1 Euro = 46.58 Ruble. 1 Ruble = 0.024 Euro. (XE, 2014)
This makes it quite cheap to export to Russia.

Another important factor to look at is the gross domestic product of a country since that can
heavily influence the demand for certain products. The GDP of Russia was 2014.80 billion in
2012, representing 3.25% of the worlds' economy. This was also the highest it ever was in the
history of Russia. The GDP dropped quite a bit in 2008 due to the economic crisis but only grew
after that and the forecasts suggest that it will only keep growing, making it an ideal market to
export to. (economics, 2014)

A third important factor to take into account when evaluating countries is the amount of usage.
How much demand is there for coffee and how much coffee is bought. Whereas the consumption
of coffee in Russia is growing fast their consumption at the moment is rather low. Russian
citizens drink 1,7kg coffee on average a year. This might sound like a lot but compared to other
countries this is rather low. However, Russia does have a lot of citizens totaling their coffee
consumption on 242.500 ton which is a bit above the average. (Adema, 2014) (Euromonitor,
Coffee in Russia, 2013)

Country information
When exporting or doing business with/to a new country it is important to take a look at the
cultural differences between the two countries. Since this can heavily influence the way business
is done and can actually make or break the success of your company and therefore it is
important to look at. The (business) culture in Russia is very strict. They value authority and
respect. While Russians might be very outgoing in their private time, they are very formal and
strict when doing business. Russians also try to avoid risks at all costs so you need to make sure
that you have a solid plan if you want to succeed in Russia. Once you are on good terms they will
open up more, so it is really important to gain their trust first.

When looking at the geographical factors some problems might arise. Of all the patriotic
countries Russia is probably the furthest away. Russia is also one the biggest countries in the


10
world which can cause problems with the logistics. On the bright side, most of the Russias
population is located in the big cities. So the initial distribution will not cause problems but once
the big cities are covered it might cause problems.

Demographic wise Russia is a good country to export to. There is a huge population which is
mostly located in the cities (74%). The average age is around the 30 which are ideal candidates
for drinking coffee.

Political wise Russia does have some risks. Russia has never been known as the most stable
country, usually doing whatever they want. This has caused problems before and it might cause
problems again in the future. With risk at every corner, you can never know for sure with Russia
which is far from ideal. Not only the political risk is high, but the commercial risk is high as well.
While this risk is fairly high on average, it is not something to disregard quickly. (Delcredere,
2014)

4.2 Internal analysis of UCC Coffee Benelux, are they capable of exporting?

What are UCC Coffee Benelux strengths?
UCC offers lower prices than their competitors. There is already a lot of experience when
exporting in Eastern-Europe. The storage capacity of UCC Benelux is quite high. Also, UCC
delivers complete end-to-end solutions: from producing the products to packaging and
delivering. UCC coffee has a managing director that is constantly in touch with foreign agents,
retailers and other clients. Furthermore, UCC Benelux operates on different market segments
like the in- and out of home market. Also, different levels of quality products can be made, from
basic coffee to fairtrade coffee. Finally, the export
marketing department has a lot of knowledge and experience.

What are UCC Coffee Beneluxs weaknesses?
However, UCC Benelux lacks in innovation when it comes to their products. Most of the time
UCC Benelux misses some sort of brand value where the customers can relate to like, for
example, Douwe Egberts. They are following the strategy of the competitors and the result may
be that the market is more saturated than what it seems in the first place.
Also, only three export employees is quite a small team and when the Managing director is away,
only two employees are in the office. Also, the coffee price is fluctuating severely on the NYMEX
exchange market. Therefore, predicting financial results can be quite difficult.

4.3 External analysis Russia

Consumer analysis
The branch in which UCC Coffee is active is the hot drinks sector. They specifically focus on the
coffee market. UCC does not sell their coffee to the consumer, but instead of that they sell it to
supermarkets and hypermarkets. UCC also sells their coffee to the out-of-home markets, but
these will not be discussed in this export plan. Overall, the branch is hot drinks, the market is
coffee and the segmentation is supermarket and hypermarket chains.

The segmentation strategy: micro marketing suits UCC Coffee Benelux best. More specific, micro
marketing can be split up in two different strategies: local marketing and individual marketing.
Local marketing will not be needed in this export plan, but individual marketing will. Individual
marketing is also called one-on-one marketing and it focuses on adjusting the products to the
wishes of the customer. UCC Coffee is able to adjust their products to what the customers want.
If the customer wants to have a private label, UCC Coffee will make it. If the customer wants blue
packaging, it will be done. So UCC Coffee can focus itself on different supermarkets, but it will


11
adjust its products to every single one of them. This is in line with their value strategy of
customer intimacy. (P. Kotler, 2012)

Industry analysis
There are certain factors of influence to UCC Coffee which they have to keep in mind when
exporting. These external factors are put in the following DESTEP analysis.

Demographic
The most important thing when exporting to Russia is that you should not be scared by the size
of the country since the biggest part of the population is located in the big cities. The amount of
people living in the cities will only increase. This makes it easier to export to Russia since you
only have to focus on the cities.

Economic
The Russian hot drinks market has been growing at a low, but steady rate, usually just above a
growth of 2% per year.

The coffee segment was the markets most lucrative in 2012, with total revenues of $2.4bn,
equivalent to 64.5% of the markets aggregate.
The 2009 slowdown hit the coffee store chains more than retailers.

Social
The consumer market has changed greatly in recent years. Lifestyles have become busier with
longer working ours, more women joining the workforce and a rising number of single-person
households. These trends have led to increasing demand for convenience products which led to
a growth in the fast food sector.

Ecological
The Fair Trade segment within the hot drinks sector is on the rise in Europe and North America.
These shoppers are not just price-driven, but interested in values such as welfare and the
livelihoods of the farmers, and will pay extra for such values. (MarketLine Industry Profile,
2013)

Political
Over the past years, Russia did not have a very stable political climate. If this trend continues,
than this could have major consequences for the economy.

Many of the leading food retailers in Russia have developed their own private label ranges to
compete with the premium brands, and the biggest areas of growth are organic and Fair Trade
products. (MarketLine Industry Profile, 2013)

Competitor analysis
Using Porters 5 forces we can analyse the competition within a business line as a whole. The hot
drinks market will be analysed taking manufactures of hot drinks as players. The key buyers will
be taken as retailers of hot drinks, and growers of tea leaves, coffee beans and cocoa beans as the
key suppliers. Figure 1 shows the ratios between the 5 forces. In this analysis we will only look
at one force: the internal competition (degree of rivalry).

The Russian hot drinks market is highly fragmented, with the top three players holding only a
little more than 33% of the total market by volume. These players are: Orimi Trade; Nestle S.A.
and May Company. These are large roasters and roast over 3000 tons a year. (MarketLine
Industry Profile, 2013)



12
The existence and rising popularity of premium and gourmet coffee brands, such as Senseo and
Lavazza, means that demands for greater variety and high-end products is on the rise and this
increases rivalry in the market.

The degree of competition is strengthened by low switching costs and limited possibilities of
product differentiation, giving the advantage to the well established players who can offer low
prices. High exit costs act as an exit barrier within the hot drinks market.

Even when the consumer confidence was at an all-time low during the economic downturn, the
hot drinks market was able to remain relatively unaffected. Consumers continued to seek
comfort in their favourite hot beverage. This growth points to some underlying resilience in the
hot drinks market, suggesting that is has the potential to further expand once the economy picks
up.

The leading players operate with high economies of scale allowed by bulk productions and this
may provide to be a considerable entry barrier for newcomers.

Overall, rivalry in the hot drinks market is assessed as moderate. (MarketLine Industry Profile,
2013)

SWOT-Analysis
UCCs strengths and weaknesses are underlined in a SWOT-analysis together with the external
opportunities and threats. From there on, a confrontation matrix is set up, together with a SFA-
analysis. The SWOT-analysis as well as the SFA-Matrix can be found in the appendix.

Confrontation matrix

opportunities Threats
Busier
lifestyl
es
Coffee
segmen
t was
most
lucrativ
e in
2012
Fairtrad
e coffee
combine
d with
private
labels
are
rising
Three big
competito
rs
Differe
nt
currenc
y
Leading
players
operate
with high
economi
es of
scale
Strengths Able to
produce
everything
1 3 5 5 1 1
Lots of
experience
1 1 1 3 1 3
Deliver whole
product
3 1 3 3 1 3
Low priced 5 5 1 3 1 3
Weaknes
ses
No Russian
cultural/marke
t knowledge
1 3 1 5 1 1
Dont speak the
language
1 1 3 3 1 1
No innovation
in products
1 5 3 1 1 1



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Combinations:
1. The busier lifestyle of the ultimate consumers will lead to more coffee consumption.
People are making longer working hours and more women are joining the workforce.
Because of this trend will these people drink more coffee during their work. They will
buy their coffee at out-of-home places like Starbucks and that is how they will learn to
like coffee. Finally they will buy it more often at supermarkets for in-home consumption .
If these consumers can buy coffee for a low price would that be a huge opportunity.
2. The coffee segment in Russia was the most lucrative one of all hot drinks in 2012. It
would be more lucrative if UCCs consumer has the opportunity to import the coffee for
a low price.
3. Fair Trade coffee combined with private labels are rising in Russia. UCC is able to
produce everything what the client want. This is also a huge opportunity.

Distributor analysis
UCC Coffee already uses Agents in other countries to represent their company. So a logical way
for UCC Coffee Benelux to enter Russia, would be through an agent. An agent works for an
independent company or as a freelance salesman that sells on behalf of the exporter, in return
for a fee. Using an agent for exporting to other countries, is an indirect form of export. This
means that there is a no direct contact with the customers. An advantage of this entry mode is
that UCC Coffee will not have to hire new employees. Furthermore, this agent already has
knowledge of the Russian coffee market and its marketing channels. Hiring an agent means that
UCC Coffee Benelux will have lower financial risks. However, the sales will depend on how the
agent works and the profit margins will be lower.

The main supermarket chains in the retail sector are Metro AG (429 supermarkets) , OJSC
Magnit (5.523 convenience stores), X5 Retail Group N.V. (306 supermarkets and 70
hypermarkets). Most of these big supermarket chains operates its stores under various brand
names (MarketLine Industry Profile, 2013).

UCC Coffee already works together with a supermarket chain that sells in Russia. This one is
Metro AG. However, UCC is not selling its coffee to these stores in Russia yet. So this could be a
good entry point for the Russia hot drinks market. (MarketLine Industry Profile, 2013)

Supermarkets/hypermarkets form the leading distribution channel in the Russian hot drinks
market, accounting for a 47.9% share of the total markets volume. (MarketLine Industry Profile,
2013)




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4.4 Logistics

When doing business and when you are trading goods you always have the issue of the logistics.
The goods are made at the factory and somehow need to get to the buyer. If this was not
complicated enough, we are dealing with export here so this needs to be international as well.
There is always the question of who is going to pay for what and who will be responsible for
what. To solve this they came up with the so called INCO terms. These are a couple of set ways in
which the whole logistic process is described. The main points are who is responsible for the
goods until when and who pays for what.

UCC Coffee Benelux mostly uses the INCO term Exworks. This means that the seller does not
have to do anything. They make the products and keep them in their own storage. The buyer is
responsible for paying for the transport and is also responsible for the risks over and during
transport. Since UCC is the seller in this case they profit the most by using this term because they
do not have to do anything. While the buyer gets extra costs and risks. Cost wise this is the best
way for UCC since by using this term they do not get any extra costs from the transportation
itself. (Leeman, 2010)

However since Russia is not a part of the European Union, UCC will have to pay a certain import
fee. Since they export roasted coffee, in beans which means that they have to pay 9,3% but not
less than 0.19 euro /kg on MFN duty. On top of that they also have to pay fee to get the custom
clearance they need, this amount is anywhere between 500 and 30.000 Rubles depending on the
amount of coffee they export. (Europa m. , 2014)

Legal documents
When transporting goods to Russia you need to have a couple of documents for the goods to be
allowed into Russia. One of these documents in the invoice of the sale, including information
about the exporter, the importer, the goods, shipping costs and prices. You also need to include a
list of contents, describing exactly what is in the container. Then you need to have a document
depending on the way you transport the goods. A CMR-waybill for transportation by truck, CIM-
waybill for transportation by train or a bill of landing for transport by ship. A standard form
used for declaring goods for export with customs is a so called Enig document.

Specifically for Russia you are also going to need a certificate of origin and a hygienic conclusion.
Then for food products you will need to provide the product with a product description in
Russian. Here you need to describe stuff such as country of origin, amount, date of expiration etc.
(Twentepoort, 2014)

Packaging
Packaging can differentiate a lot depending on the customer. Certain things have to be on there,
just like in The Netherlands. These things include the amount in the product, the ingredients,
who the manufacturer is, information for allergies etc. An important thing is that it has to be in
Russian. Other than that Russia does not have any other specific rules concerning packaging.
(RVO, Etiketteringsvoorschriften, 2014)



15
4.5 Financial analysis Russia

Calculation of sales price
When deciding the sales price for Russia, a look has been taken on Coffee prices from Azbuka
Vkusa and Perykryostok. The last company sells Milano Coffee for 350 Rubles a 500g
(Perykryostok, 2014) and Bella Crema Coffee for 186 Rubles a 500 gram (Perykryostok, 2014).
Azbuka vkusa is a supermarket that has a broader range of products. For example, they have
Nescafe for 1285 Rubles per 500 grams and Dazbog Coffee for 120 Rubles per 500 grams
(Azbuka Vkusa, 2014). When deciding the sales price it is important to stick around 120RUB to
350RUB.

When it comes to packaging the standard price is 0,275. The Cyrillic writing and the Russian
language barrier overall makes the packaging more expensive. Translation costs would drive up
the packaging price around 0,29 cents a package. The standard price per Kilo was 3,50 a kilo.
There is an option to go for a higher quality coffee of 5,00 a kilo or a lower quality coffee for
2,00 a kilo. The Russians like high quality foreign coffee, but the price will remain unchanged at
3,50 for competition purposes. A negative effect on sales will occur when deciding to change
the price to 5,00 a kilo.

The cost of sales are calculated according to numbers that UCC Coffee Benelux usually uses.
Commission is at 3% due to a large volume that is produced for Russia. Payment discount for
customers is at 2% and the NCM prize will be set at 0,25%. Delcredere and buyers credit where
open to interpretation and we choose to use 2,5% for Delcredere and 0,01 for these. The
commission is chosen because an agent will be involved. The payment discount is provided for
clients who pay within 15 days. And the NCM insurance is for the risk of trade with different
companies. When dealing with scammers, a delcredere may be the solution as it guarantees the
payment of clients.
Also, the buyers credit is set at 1 month, this will mean that 6% interest is lost over the money
while no money is received. That means that this calculation is calculated into the cost price,
30/365*6% is 0,005. The total of these numbers gives us 0,308 as cost of sales.

A margin of 0,40 cents is chosen, this is an average number as the usual margin is between 0,20
and 0,60 cents. There are a lot of competitors within Moscow and St. Petersburg, but other big
cities have fewer competitors and to penetrate the Russian market 0,40 cents is a safe margin
for introducing the product.

All this equals a sales price per kilogramme of 4,68 which means 2,34 per item. When
exchanging Euros into Roubles we see that 1 EUR=46,86 RUB. This means that the sales price
per kilogramme is 219,12 Roubles and the sales price per item is 109,56 Roubles. The stores
and supermarket chains will add their own profit. The store price will be somewhere around
158 Roubles .

Last of all the transportation costs are calculated. Since UCC Benelux is using Exworks, this is
irrelevant. But it could be useful for other incoterms like Free On Board and Duties Delivery
Paid.

Forecast profit and loss for First three years
In Russia there are 144.000.000 inhabitants. The forecast is that only the three biggest cities are
reached. Moscow, Saint Petersberg and Novosibirsk have a total population of
11.500.000+4.800.000+1.400.000= 17.700 million people. The population in comparison with
the rest of the country is 17.700 million/144 million= 11,42%.
Of those 11,42% of the total Russian population, only 25% drinks roasted coffee.
That is 11*0,25=2,86% of the total Russian population. That is 2,86%*144.000.000=4,118,400
million people. Russians drink 1,7 kg of coffee per capita. That is 1,7kg*4,118,400=7,001,280 kg


16
of coffee. The expectation is that 1% buys UCC Coffee in the first year, 1.5% in the second year
and 2% in the third year.

With these assumptions a profit and loss forecast for the next three years are made as well as a
liquidity statement for the first year. A steady increase in profit each year and expect to rise even
further over the course of the next years. The profit and loss forecast as well as the liquidity
statement can be found in the appendix.

There is also a worst case scenario which can be applied to every year. In this case sales are
around 0,66% instead of 1% of the reached population that is expected to buy coffee. In that
case only 972900 kg of coffee will be sold in Russia, which means that sales are only 244800 kg
in each quarter of the first year. The worst case scenario can be found in the appendix.

4.6 Legal analysis

There are several liabilities for the seller and buyer. For one the seller, UCC, has to make sure
that the products are safe and of the promised quality. UCC also has to make sure that they
provide the consumer with the information they need by putting the right information on the
package. Since UCC will change their package according to the wishes of the buyer, the buyer will
be responsible for making sure that the information they want on the package is correct. Since
UCC uses the INCO term Exworks this means that the buyer is responsible for the transport and
everything that goes wrong during the transport. (Europa, 2014)

UCC had problems in the past with parallel imports. To fix this they centralized all the export
activities in Europe by making a central department who solely focusses on dealing with all
aspects of export. This way everything regarding exports is done by one and the same
department and therefore prevents parallel imports. This not only solved these kinds of
problems but also made sure that everything is done in the same way preventing a lot of
communication errors.

Since Russia is not a part of the European Union there are separate laws for exporting to Russia.
In addition to the documents and certificates you need for the transportation of goods you will
also need to have a customs import declaration, a declaration of dutiable value, a pro forma
invoice, passport of deal and a business registration certificate. As you can see you need a lot of
documents to be allowed to export goods to Russia. This makes it considerably harder to export
to Russia than to a country in the EU for example. (Europa, 2014)



17
C5 Export plan Croatia
5.1 Country analysis of Croatia

Market definition
When deciding in which type of market UCC Coffee Benelux would like to export to in Croatia,
the Model of Abell & Hammond is needed. The type of market in which they would like to
operate is a transparent market with the local distributors and supermarket chains as
customers. The product that they want to sell is coffee from the Robusta or Arabica bean with
many different blending possibilities. They want to do this due to the possibility to blend your
own coffee.

Financial/consumption rates
An important rate is the gross domestic product for each country. Croatia has a GDP of 56,44
billion USD, this is a decline of 0,4% down from the last quarter of 2013. Over the last 6 quarters
the GDP from Croatia had an average decrease of 1,12% (Trading Economics, 2014). The GDP
per capita is 13.227,47 USD as of April 14. This is a steady increase over the last quarters. Which
led to an increase in purchasing power.
The currency exchange as direct quote for the Kuna is: EUR 0,13 = 1 HRK on 9-6-2014. Therefore
it is relatively cheap to export to Croatia (Trading Economics, 2014).

With 4 kilograms of coffee per capita, Croatia does not stick out among European countries; it
belongs somewhere in the middle. However, calculating the time Croatians spend consuming
coffee, alongside other social activities, would place the country above average in terms of caf
society indicators. Because of deep rooted habits, it was difficult for any of the new formats to
set foot in coffee; therefore, this made the achievement of fresh ground coffee pods and coffee-2-
go (coffe in plastic cups to be consumed on the go) in 2013 all the more impressive. It may as
well be that those innovative formats have managed to secure themselves a permanent post
among the few acceptable ways to consume coffee in Croatia (Euromonitor, 2013).

Country information
Cultural differences should be taken into account and there are several business related habits
that we cannot ignore. The Croatian people tend to have a very open way of communicating to
people they are close to and work with. However they are more formal when talking to their
boss or people outside their close environment (Amanda Moffatt, 2011). It is an informal
business environment where socializing and hospitality are important factors. The major
business agreements are usually made in local bars or restaurants. The organizations are very
focused around groups of people and it is hard to penetrate them (Mole, 2003). Croatian
companies have a strong leader and he or she has to make strong choices and has to take
responsibility for them. Bosses are not part of the team, but keep a distance. Formal meetings
are not as formal as they sound like, they are not important in the strategic matter and are
mostly used for gathering information (Mole, 2003). When looking at Croatia through a
geographical perspective, then the location of the country is very decent. The travel time to the
country is not too long and close to different roasting plants.

The demographic data that we have for Croatia is relevant in terms of age spread across the
population. People from the age 15 and up drink coffee. This means that with more seniors than
children, Croatia is an attractive market.

When looking at the political risk for Croatia, we see that there is a very low political risk in the
short term, but in the long term the risk is slightly above average (Delcredere, 2014). When
looking at the trade relations we see a very high commercial risk (Delcredere, 2014). This can be
of bad influence and is not to be taken lightly.



18
5.2 Internal analysis of UCC Coffee Benelux, are they capable of exporting?

What are UCC Coffee Benelux strengths?
UCC offers lower prices than their rivals. There is already a lot of experience when exporting in
Eastern-Europe. The storage capacity of UCC Benelux is quite high. Also, UCC delivers complete
end-to-end solutions: from producing the products to packaging and delivering. UCC coffee has a
managing director that is constantly in touch with foreign agents, retailers and other clients.
Furthermore, UCC Benelux operates on different market segments like the in- and out of home
market. Also, different levels of quality products can be made, from basic coffee to fairtrade
coffee. Finally, the export
marketing department has a lot of knowledge and experience.

What are UCC Coffee Beneluxs weaknesses?
However, UCC Benelux lacks in innovation when it comes to their products. Most of the time
UCC Benelux misses some sort of brand value where the customers can relate to like, fore
example, Douwe Egberts. They are following the strategy of the competitors and the result may
be that the market is more saturated than what it seems in the first place.
Also, only three export employees is quite a small team and when the Managing director is away,
only two employees are in the office. Also, the coffee price is fluctuating severely on the NYMEX
exchange market. Therefore, predicting financial results can be quite difficult.

5.3 External analysis Croatia

The branch in which UCC Coffee is active is beverages. They specifically focus on the coffee
market. They do not sell tea or other hot beverages, just coffee. Furthermore, UCC Coffee sells to
businesses, more specific: supermarkets. They also focus on selling to out-of-home markets, but
these wont be treated in this export plan. It would be advisable for UCC Coffee Benelux to focus
on selling to supermarket chains, this way they can gain a bigger market share. In short, the
branch is beverages, the market is coffee and the segmentation is supermarket chains. There will
be no distinction between domestic or foreign supermarket chains, since UCC will have to export
to both of them to be profitable. (P. Kotler, 2012)

The segmentation strategy: micro marketing suits UCC Coffee Benelux best. More specific, micro
marketing can be split up in two different strategies: local marketing and individual marketing.
Local marketing wont be needed in this export plan, but individual marketing will. Individual
marketing is also called one-on-one marketing and it focuses on adjusting the products to the
wishes of the customer. UCC Coffee is able to adjust their products to what the customers wants.
If the customer wants to have a private label, UCC Coffee will make it. If the customer wants blue
packaging, this will be done. So UCC Coffee can focus itself on different supermarkets, but it will
adjust its products to every single one of them. This is in line with their value strategy of
customer intimacy. (P. Kotler, 2012)

UCC has chosen to use a mediocre quality and a low price. Competitors of Nestl are known for
their quality but they have high prices. Franck is a popular company in Croatia, they will be one
of the biggest competitors to UCC Coffee since they have a very good price-quality relation. The
fact that UCC Coffee can adjust their products to the customers wishes is something the
competitors cannot do. So UCC will position itself through this.

Industry analysis
There are certain factors of influence to UCC Coffee which they have to keep in mind when
exporting. These external factors are put in the following DESTEP analysis.




19
Demographical
Sub urbanisation has caused Croatians to move to the cities more. This demographical trend
empowered the caf society trend, since people are taking over the habits of the people that
were already living in the cities.

Economical
Like many other countries, Croatia was affected by the economic crisis that started in 2008. This
was also seen in the Hot drinks sector. The demand for hot drinks in Croatia decreased from
2008 till 2013, from there on it seemed to ease. Coffee wasnt as badly affected as other hot
drinks such as tea, this is due to the fact that Croatia has a caf society. There has been a
growth in the consumption of private label products, since the buying power of people has
decreased. The consumption of private label foods and beverages in now 19,1% in Croatia. (Jong,
2010) (Euromonitor, 2014) (Mila, 2014) (Marketline, 2013)

Social
Consuming coffee is seen as a social activity in Croatia. Croatians easily spend an hour and a half
for drinking a cup of coffee. In the last few years this trend has developed itself, making Croatia a
Caf society. When Croatian want to drink coffee, they are not just buying coffee. Instead, they
make it a whole social activity, for example: meeting with friends or with a business partner.
(Mila, 2014)

Technological
Since 2013 there has been a change in consuming coffee, Croatians started to make use of the
concept: coffee-2-go (coffee in plastic cups, which can be consumed on the go). This trend was
impressive, since Croatians find it difficult to change their deep rooted habits of drinking coffee
in a caf. Furthermore, there is a new trend evolving: pop up coffee stands. Instead of having to
go to a caf, coffee stands are now being put up in the middle of the street, so Croatians can enjoy
their cup of coffee faster. (Mila, 2014)

Ecological
Another upcoming trend that is not specifically for Croatia but more for Europe as a whole, is the
increase of using Fair Trade products. Consumers that are buying fair trade products are not
just price-driven, but they are interested in values such as the livelihood of the farmers and
other environmental factors. They dont mind paying extra for Fair Trade products. UCC Coffee
already delivering Fair Trade products, so they can easily respond to this trend. (MarketLine
Industry Profile, 2013)

Political
Croatia has become a member of the European Union in July 2013. This means that the trade
barriers have vanished. This will make export procedures for UCC Coffee a lot easier.
Furthermore, Croatia is the first one on the list to change their currency to the euro. This can
simplify the process of doing business in Croatia for UCC Coffee. (Marketline, 2013)

Competitor analysis
The biggest competition for UCC Coffee Benelux comes from national companies. In particular
Franck and Atlanta Grupa, which are both Croatian companies. These two companies have a big
market share. Franck is the biggest player in Croatia, and has a retail value share of 46%. Its
leadership in Croatia is caused by its longstanding presence in Croatia, which has also created
brand recognition and consumer loyalty. Francks prices are reasonable and they are known for
their quality coffee. Atlantic Grupa has become an important player in the market since 2010,
when it acquired business form Droga Kolinska. (Euromonitor, 2014) (Euromonitor, Coffee in
Croatia, 2014) (Franck, 2014)



20
Most of the important multinationals are already present and accounting for shares in Croatia.
Nestl Adriatic is the most outstanding one of these. However, the local players are much more
capable of innovations that the internationals. (Euromonitor, Hot drinks in Croatia, 2014)

SWOT-Analysis
UCCs strengths and weaknesses are underlined in a SWOT-analysis together with the external
opportunities and threats. From there on, a confrontation matrix is set up, together with a SFA-
analysis. The SWOT-analysis as well as the SFA-Matrix can be found in the appendix.

Confrontation matrix



Option 1: UCC Coffees roast plant is located in Switzerland. This means that the transportation
to Croatia is very easy. The overall infrastructure in Croatia is good. In addition to having easy
transportation, Croatia has become the 28
th
member state of the European Union in 2013. With
this membership, a free trade zone was established, meaning that when exporting to Croatia,
there will be no import tariffs. So option one is: transportation to Croatia by truck.

Option 2: There is fierce competition between the coffee companies that are active in Croatia,
so UCC will have to distinct itself from its competitors. Market leader Franck has a strong brand
reputation and a high consumer loyalty. Nevertheless, UCC Coffee will have a good chance of
gaining market share in Croatia, since they have the means of adjusting their products to the
customer wishes. They can respond to almost every demand of the customer, which makes them
a very attractive company to import from. So option two is: adjusting the product to the
customers wishes to get a competitive advantage.

Option 3: As already stated above, there is a fierce competition between the coffee companies in
Croatia. UCC is able to distinguish itself from these countries, not only through their ability of
OPPORTUNITIES THREATS
Became
part of the
EU in
2013, Free
trade zone
Caf-
society,
developing
trend of
coffee to go
Different currency Fierce
competition
from some
well-known
competitors
Economic
crisis, that
has caused a
decrease in
buying
power
STRENGHTS Roast plant in
Switzerland,
easy
transportation

5

1

1

1

3
Good price-
quality relation
1 1 3 5 3
Able to adjust
the product to
the customers
wishes

1

3

1

5

1
WEAKNESSES Language
barrier
1 1 1 1 1
No knowledge
of the Croatian
culture
1
3

3

5

1
No innovation
in products
1 3 1 3 1


21
adjusting its products to the wishes of the customers, but also through their good price-quality
relation. UCC produces and sells its coffee relatively cheap, which can make a difference for
customers. Furthermore, they are able to produce private label products which are on the
increase due to the economic crisis. So option three is: trying to get a competitive advantage by
offering the highest quality coffee to customers.

After analysing the SFA-matrix It can be concluded that option two has the highest score. So
adjusting the products to the wishes of the customer to create a competitive advantage is a
method UCC could use when exporting to Croatia. There is no need to put up a new strategy for
this, as they are already making use of the value strategy: customer intimacy.

The overall competition in Croatia between coffee companies is high. But if UCC holds on to its
strategy of customer intimacy and adjusting the products to the wishes of the customers, it will
be able to beat the competition and gain market share.

Distributor analysis
UCC Coffee already uses Agents in other countries to represent their company. So a logical way
for UCC Coffee Benelux to entry into Croatia, would be through an agent. An agent works for an
independent company or as a freelance salesman that sells on behalf of the exporter, in return
for a fee. Using an agent for exporting to other countries, is an indirect form of export. This
means that there is a no direct contact with the customers. An advantage of this entry mode is
that UCC Coffee wont have to hire new employees. Their export department only consists of
three employees, so sending one of them over to Croatia, without having to hire a new one is not
an option. Furthermore, this agent already has knowledge of the Croatian coffee market and its
marketing channels. Hiring an agent means that UCC Coffee Benelux will have lower financial
risks. However, the sales will depend on how the agent works and the profit margins will be
lower.

The main foreign supermarket chains in the retail sector are Billa, Kaufland, Ipercoop, Lidl,
Mercator, Metro, DM and Interspar. The retail sector also consist of domestic supermarket
chains such as Plodine, Konzum, and NTL. Most of these big supermarket chains have their own
purchasing sections, which buy, store and distribute their products in a central point. These
buying units are also importing products, for example from wholesale importers.

UCC Coffee already works together with supermarket chains that sell in Croatia. These are Lidl
and Metro. However, UCC Coffee isnt selling its coffee to these stores in Croatia yet. So it could
be an opportunity for UCC Coffee Benelux to use these existing partnerships with Lidl and Metro
for expanding in Croatia. Liddl has 84 stores in Croatia, which are spread all over the country
and Metro has seven. This means that having contracts with these supermarket chains can have
a big influence for UCC Coffee. The tourism in Croatia is developing. Most tourists that come to
Croatia are German, Dutch or from Belgium. These tourists are used to buying their groceries at
stores like Lidl, it makes sense for them, while they are on holiday, to buy their products in
these stores in Croatia too. It would be a good opportunity for UCC Coffee to establish a
partnership with Lidl, because there is a very likely chance of selling enough coffee. (At least
during the holidays) Nevertheless, UCC Coffee has to sell coffee to more supermarket chains than
only Lidl to be profitable. Konzum is Croatias largest domestic supermarket chain(70 stores), so
if UCC Coffee could establish a partnership with this company, they will be able to sell a lot of
coffee in Croatia, even when the holiday season is over. (Adema, 2014) (Wikipedia, 2014)
(Wikipedia, Metro Cash and Carry, 2013)


22
5.4 Logistics

When doing business and when trading goods you always have the issue of the logistics. The
goods are made at a factory and somehow need to get to the buyer. If this was not complicated
enough, we are dealing with export here so this needs to be international as well. There is
always the question of who is going to pay for what and who will be responsible for what. To
solve this the so called INCO terms were invented. These are a couple of preset terms in which
the whole logistic process is described. The main points are who is responsible for the goods
until when and who pays for what.

UCC Coffee Benelux mostly uses the INCO term Exworks. This means that the seller does not
have to do anything. They make the products and keep them in their own storage. The buyer is
responsible for paying for transport and is also responsible for the risks over and during
transport. Since UCC is the seller in this case they profit the most by using this term because they
do not have to do anything. While the buyer gets extra costs and risks. Cost wise this is the best
way for UCC since by using this term they do not get any extra costs from transportation. By
using the INCO term Exworks, UCC will not get any of the transportation costs.

Packaging
Since 2013 Croatia is a member of the European Union, which means that they now have to
follow all the rules and ways of the European union. For the packaging this means that the
package needs to have certain information, something to remember is that everything on the
package needs to be in Croatian. The information that has to be on the package is very general
information that always needs to be on there. This includes things such as name of the product,
manufacturer, amount, nutritional value, date of expiration etc. (RVO, 2014)

Since Croatia is now a member of the European Union you are allowed to transport goods in and
out of the country due to the European laws on free movement of goods. You do need to provide
the goods with certain documents about the content of the goods but that is the same for every
country in Europe. So this will not cause any problems since UCC already know what to include
(European Union, 2012).

5.5 Financial analysis Croatia

Calculation of sales price
When deciding the sales price, we looked at the prices that Plodine and Konzu charge for their
products. Plodine sell A-brand, Nescaf, coffee for 87,48kn a 500g (Plodine, 2014), while they
sell their B-brand, Jubilarna, for 28,74kn a 500g (Plodine, 2014). Konzum sells two products in
packages of 500g, Victoria and Mljevena, for 26,49kn and 23,9kn (Konzum, 2014). So when
deciding the sales price it is important to stick around 23,9kn to 87,48kn.
The standard price for packaging is 0,275, we decided to make it 0,300 because of the
translation of the different packages. The standard price for the coffee is 3,50 a kilo. We had the
chance to increase it to 5 to gain higher quality or decrease it to 2,00 to lower the quality.
While the Croatians prefer high quality coffee, we decided to keep the quality at 3,50 for
competition purposes. Higher quality became too expensive and will probably have a negative
effect on the sales.

The cost of sales are calculated according to the numbers that UCC Coffee Benelux usually uses.
Commission at 3%, Payment discount at 1% and the NCM prize at 0,25%. Delcredere and buyers
credit where open to interpretation and we choose to use 2% and 0,005% for these. The
commission is chosen because we work with an agent. The payment discount is when paid
within 15 days and the NCM prize is for the risk calculation of trade with different companies.
The delcredere is the guarantee that there are no scammers, Art 7:429 BW. The buyers credit is


23
set at 30 days, this means that we lose 6% interest over the money while we havent received it,
which means that we calculate it into the cost price, 30/365*6% gives 0,005%. The total of these
numbers gives us 0,249 as cost of sales.
We chose a margin of 0,30 cents, this is rather low since the usual margin is between 0,20 and
0,60 cents. We decided to start with this since it leads to a safer way of introducing our product
to a market. If we are successful, we can decide to increase the margin over the course of a few
years.

All these prices together account for a sales price of 4,53 per kilogramme which means 2,26
per item. When using the currency of 1EUR = 7,58KN we see that the sales price per kilogramme
is 34,32 kn and the sales price per item is 17,16 kn. This is a good price to compete with in the
current market. The 17,16 kn is not the store price, since the stores and supermarket chains will
add their own profit margin etc. We reckon that the store price will be somewhere around 25 kn.
See appendix sheet cost price UCC Benelux.

Last of all we calculated the transportation costs. These are irrelevant for Exworks but could be
used in FOB, DDU and DDP as incoterms.

Forecast profit and loss for First three years
With the stores where UCC Coffee could get a partnership with, we are able to reach 80% of the
Croatian population. If 1% of them buys UCC Coffee then the sales are: 4,4 mln * 5,1 kg =
22.440.000 kg coffee -> 22.440.000 * 80% * 1% = 179.520, the same formula is applied to
upcoming years, where we estimated the increase of population that buys UCC Coffee. See
appendix

With these assumptions we made a profit & loss forecast for the next three years and a liquidity
state for the first year. We see a steady increase in profit each year and expect it to rise even
further over the course of the next years. See the appendix for the profit & loss forecast and
liquidity state.

We also made a worst case scenario which can be applied to every year. We decided that 120000
kg sales a year is the absolute minimum, which means that less than 0,70% of the reached
population will buy our coffee. 120000 kg of sales a year means 30000 a quarter. See the
appendix for the liquidity forecast worst case scenario.

5.6 Legal analysis

There are several liabilities for the seller and buyer. For one the seller, UCC, has to make sure
that the products are safe and of the promised quality. UCC also has to make sure that they
provide the consumer with the information they need by putting the right information on the
package. Since UCC will change their package according to the wishes of the buyer, the buyer will
be responsible for making sure that the information they want on the package is correct. Since
UCC uses the INCO term ExWorks this means that the buyer is responsible for the transport and
everything that goes wrong during the transport.

UCC had problems in the past with parallel imports. To fix this they centralized all the export
activities in Europe by making a central department who solely focusses on dealing with all
aspects of export. This way everything regarding exports is done by one and the same
department and therefor prevents parallel imports. This not only solved these kinds of problems
but also made sure that everything is done in the same way preventing a lot of communication
errors.



24
Since Croatia recently joined the European Union they now have to follow all the rules and laws
of the EU. Due to this you automatically use the trade laws that are used in the EU. Since UCC
already exports to other countries in the EU they will not find any new problems regarding trade
laws. Neither will there be laws that restrict, limit or prevent exporting since the EU specifically
has laws to prevent that within the EU. Custom control will disappear but since Croatia is not
part of the Schengen area yet, there will still be police control. (europa.eu, 2013)


25
C5 Advice

We have chosen Croatia to be the country to export to and therefore the advice given below is
focused on Croatia, Russia will be mentioned but briefly.

Croatia has joined the European union as the political climate in this country is stable.
Also, Croatia will adopt the euro in the near future. Consequently, this will make export
procedures a lot easier for UCC Coffee as the exchange rate risk will be significantly reduced,
whereas Russia is bound to fluctuations of the Ruble.

Both Croatia and Russia were affected by the economic crisis of 2008. However in Croatia, Coffee
didnt had as much of a decline as the other hot drinks, due to the high coffee consumption.
The consumption of private label foods and beverages in Croatia is at a significant level of 19,1%.
Moreover, the purchasing power of Croatia has increased significantly in the past few years.

The Croatians have a Caf society whereas Russians dont see coffee drinking as a social
activity. When the average Croatian wants to meet friends or meet with a business partner, they
drink coffee outdoors. This is seen in the consumption pattern of Croatia. The average Croatian
citizen drinks 5,1 kg of coffee, whereas the Russian consumer only drinks 1,7 kg at of this
moment. But, as mentioned later, Russias coffee market is growing tremendously. Especially, in
the three biggest cities. Maybe in a few years they can compete with Croatian consumption .

The competition in Croatia is fierce. The biggest competitors are national companies called
Franka and Atlanta group. However, UCC Coffee is able to distinguish itself from the Croatian
competitors through adjusting the product to the wishes of the customer.

Croatia is within the European Union, which makes transportations a lot easier, no more need
for specific documents. The documents for each country within the EU are the same. Since UCC
Coffee Benelux works with Exworks the transportation isnt directly applicable to UCC Coffee but
it definitely is a positive matter for the Croatian supermarkets. Croatia being part of the EU
makes the packaging Easier, in Russia it could cause unforeseen problems. Also transportation
into Russia is a lot harder for supermarket chains because of different regulations.

When deciding on which supermarket chains to export to, Croatia is a better choice than Russia.
Supermarket chains like Lidl and Metro are chains that are all over Europe and we already have
contracts with them. This makes it easy to arrange deals with those chains in Croatia. we decide
to use these supermarket chains together with some local ones like, Konzum and Plodine, we are
able to reach 80% of the population. We decided to use an Agent in Croatia because they have
more knowledge about the market and are usually experienced. Russia has some attractive
supermarket chains as well, there is Sedmoy Continent which has over 100 stores in Moscow.
But the contacts we have with the Croatian stores makes them the better choice.

When looking at the sales price we came up with 17,16 kn. This is a good price to compete with
in the current market. The prices for 500g roasted coffee are around 25 kn. The 17,16 kn is not
the store price, since the stores and supermarket chains will add their own profit margin etc. We
reckon that the store price will be somewhere around 25 kn. See appendix sheet cost price UCC
Benelux. The costs price calculated for Russia is higher and therefore harder to compete with in
the market.




26
The expected financial results for Croatia a positive. These is an expected profit for the first year
of 53.856 with a steady increase up to 107.712 over the course of three years. Russia has
positive results for the first three years as well, the expected profit for the first year is
28.005,12 and has a steady incline up to 56.010,24 over the next 3 years. However Croatia is
more reliable looking at the consumption patterns.

Conclusion
We choose to export to Croatia because it has some very appealing factors. The statistics show
that the country has a high consumption of coffee per capita. And the culture they have when
doing business is easy to adapt to. The accession of Croatia to the EU is a big plus when looking
at the free movement of goods and financial stability. The market is relatively easy to enter and
we can enter the market with a competitive price. Last but not least, the financial results look
promising.

Russia has some very promising statistics when looking at the rise of coffee consumption over
the years and when looking at the possibilities to enter the market. The downsides however
make it hard to choose it as a country to export to as of this moment. The political instability, no
European Union and the difficult business culture make it a bad choice. In the future when they
solved their political insecurity and fixed their corruption rates it is an attractive market to focus
on.


27
Sourcelist

Personen:
Adema, W. (2014, 4 16). Gastcollege UCC. 's-Hertogenbosch, Noord-Brabant, Nederland.
Adema, W. (2014, juni 02). Internal analysis. (L. Coenen, Interviewer)
stagiaire, B. (2014, 4 22). Interne Analyse . Interne Analyse. Den Bosch: Avans.
Websites:
Akthar. (2011). Government structure and businesscycles. Opgeroepen op mei 14, 2014, van Kaluga:
http://link.springer.com.ezproxy.avans.nl/article/10.1007%2Fs11892-010-0161-z
Amanda Moffatt, I. K. (2011). Croatian Cultural Profile. Diversicare.
Avans. (2014, 5 13). Blokbloek. Opgehaald van Avans.
Delcredere. (2014). Country Risk Croatia. Belgium: Delcredere.
Delcredere. (2014). Landenrisico. Opgeroepen op juni 10, 2014, van delcredere:
http://www.delcredereducroire.be/nl/landenrisicos/#focusCountry=RU&focusContinent=&fil
ter=undefined&min=0&max=7&tab=undefined
economics, T. (2014). Russia. Opgeroepen op juni 10, 2014, van Trading economics:
http://www.tradingeconomics.com/russia/indicators
Euromonitor. (2013, May). Coffee in Russia. Opgeroepen op juni 10, 2014, van Euromonitor:
http://www.euromonitor.com/coffee-in-russia/report
Euromonitor. (2014, May). Coffee in Croatia. Opgehaald van Euromonitor:
http://www.euromonitor.com/coffee-in-croatia/report
Euromonitor. (2014, May). Hot drinks in Croatia. Opgehaald van Euromonitor:
http://www.euromonitor.com/hot-drinks-in-croatia/report
Europa, m. (2014). Opgeroepen op juni 11, 2014, van madb Europa:
http://madb.europa.eu/madb/atDutyDetailPubli.htm?datasetid=MAAT-RU14-
03v001&hscode=0901210001&countries=RU&datacat_id=AT&keyword=&submit=&pathtoi
mage=http://madb.europa.eu/at/images/&showall=F#
Europa, M. (2014). Opgeroepen op juni 11, 2014, van madb Europa:
http://madb.europa.eu/madb/datasetPreviewIFpubli.htm?datasettype=prod
europa.eu. (2013, 6 28). Croatia's accesion to the European Union. Opgehaald van Press releases
database: http://europa.eu/rapid/press-release_MEMO-13-629_en.htm
European Union. (2012). Official journal of the European Union.
Franck. (2014, June 10). About us. Opgehaald van Franck: http://www.franck.hr/kave/
Jong, K. d. (2010, June). Private labels in Europe. Opgehaald van see.retail, see.market:
http://www.google.nl/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&ved=0CDAQFj
AC&url=http%3A%2F%2Fiplc-europe.com%2Fwp-
content%2Fuploads%2F2014%2F02%2Fseemarket.pdf&ei=VESYU7TTGYSrOrK5gNAE&usg=AF
QjCNF4gZP9cACeLBHX9Rlej7GKcPz4OA


28
Konzum. (2014, 1 1). Konzum. Opgeroepen op 6 10, 2014, van Konzum.hr:
http://www.konzum.hr/content/advancedsearch?SearchText=kava+500g
Marketline. (2013, October). Croatia, In depth pestle insights. Opgehaald van Marketline:
www.marketline.com
MarketLine Industry Profile. (2013). Food Retail in Russia. London: MarketLine.
MarketLine Industry Profile. (2013). Hot Drinks in Russia. London, UK: MarketLine.
Mila, S. I. (2014, February 10). Croatian Coffee Terminology. Opgehaald van Select Italy:
http://selectitaly.com/blog/croatia-travel/blend-in-by-getting-your-croatian-coffee-
terminology-right/
Mole, J. (2003). Mind Your Manners: Managing Business Cultures in the New Global Europe. London:
Nicholas Brealey Publishing.
Plodine. (2014, 6 1). Plodine. Opgeroepen op 6 10, 2014, van Plodine.hr:
http://www.plodine.hr/files/File/KATALOGWEB23.pdf
Russia.angloinfo. (2014). Opgeroepen op juni 10, 2014, van russia.angloinfo:
http://russia.angloinfo.com/lifestyle/shopping/grocery-shopping/
RVO. (2014). Etiketteringsvoorschriften. Opgeroepen op juni 10, 2014, van RVO:
http://www.rvo.nl/onderwerpen/internationaal-
ondernemen/landenoverzicht/rusland/wetgeving/handelswetgeving/producteisen/etiketteri
ngsvoorschriften
RVO. (2014, June). verpakkings en etikketeringsvoorschriften. Opgeroepen op juni 11, 2014, van RVO:
http://www.rvo.nl/onderwerpen/internationaal-
ondernemen/landenoverzicht/kroati%C3%AB/wetgeving/handelswetgeving/producteisen/ve
rpakkings-en-etiketteringsvoorschriften
Trading Economics. (2014). Tradingeconomics. Opgeroepen op 6 9, 2014, van Tradingeconomics.com:
http://www.tradingeconomics.com/croatia/gdp-growth-annual
Twentepoort. (2014). Opgeroepen op juni 10, 2014, van Twentepoort logistiek:
http://www.twentepoort-logistiek.nl/transport/rusland
UCC Benelux. (2014, mei 14). history of UCC Benelux. Opgehaald van Google Schiolar:
http://www.ucc-europe.co.uk/about/history/
Wikipedia. (2013, November). Metro Cash and Carry. Opgehaald van Wikipedia:
http://en.wikipedia.org/wiki/Metro_Cash_and_Carry
Wikipedia. (2014, June). Lidl. Opgehaald van Wikipedia: http://en.wikipedia.org/wiki/Lidl
XE. (2014, June). Valuta calculator . Opgeroepen op juni 10, 2014, van XE:
http://www.xe.com/currencyconverter/convert/?Amount=1&From=RUB&To=EUR
Books:
Leeman, J. (2010). Export Planning. Amsterdam: Pearson Benelux bv
P. Kotler, G. A. (2012). Marketing, de essentie. Pearson Benelux.


29
Appendix
Index
Subquestions ......................................................................................................................................... 30
1. How can the two countries be analysed? .................................................................................... 30
2.How is the internal analysis for UCC Coffee Benelux, I.E. are they capable of exporting? ......... 30
3. What does the external analysis look like for each country? ..................................................... 30
4. How can the logistics be described? ............................................................................................ 30
5. Which financial aspects should be taken into consideration? .................................................... 30
6. What are the relevant legal issues? ............................................................................................. 30
7. How can we decide between Russia and Croatia? ...................................................................... 31
External Croatia ..................................................................................................................................... 31
Swot analysis ..................................................................................................................................... 31
SFA matrix Croatia ............................................................................................................................. 32
External Russia ...................................................................................................................................... 33
SWOT analysis ................................................................................................................................... 33
SFA Russia .......................................................................................................................................... 34
Financial Croatia .................................................................................................................................... 35
Financial Russia...................................................................................................................................... 39




30
Subquestions
1. How can the two countries be analysed?
a. What is the market definition, using the model of Abell & Hammond (who, what and how)?
b. What is the currency exchange rate?
c. How high is the Gross Domestic Product?
d. What does the consumption pattern in coffee look like for the inhabitants?
e. Are there any important cultural differences?
f. Is the distance to and distance between countries a relevant factor?
g. How do the countries rank on the BERI scale?
h. Is the demographic data favourable for the country selection?
i. Is there a political risk that should be taken into account?
j. How are the trade relations between the countries?a
2.How is the internal analysis for UCC Coffee Benelux, I.E. are they capable
of exporting?
a. What does the organisation structure look like?
b. How can the aspects of the 7S model be described for UCC Coffee Benelux.
c. What are UCC Coffee Benelux strengths?
d. What are UCC Coffee Benelux weaknesses?
e. How can the export potential of UCC Coffee Benelux be described?

3. What does the external analysis look like for each country?
a. How can the customers/consumers be analysed, using the STP model? (Customer analysis)
b. Which developments in the market should be considered using the DESTEP model? (Industry
analysis)
c. How can the competitors be described using Porters 5 forces model? (Industry & Competitor
analysis)
d. How does the 8-step-plan look like for each country? (Competitor analysis)
e. Which main types of market entry are relevant? (Distributor analysis)
f. Which entry strategy should be chosen (Agents or distributors)? (Distributor analysis)
g. How can the marketingmix be applied?

4. How can the logistics be described?
a. How are we going to transport the goods to the country?
b. What are the transportation costs?
c. What should be taken into consideration regarding packaging?
d. What kind documents are needed for transportation?

5. Which financial aspects should be taken into consideration?
a. What influence does the difference between currencies have?
b. What does the development of the sales plan look like?
c. How should the profit & loss and cash flow statement put together?

6. What are the relevant legal issues?
a. What are the contractual terms of sale going to be between the buyer and seller?
b. What are the liabilities for the seller in general and what specific product liability may be
expected?
c. Which trade laws will be agreed upon and how will disputes be handled?
d. How can counterfeiting and parallel imports be avoided?
e. Are there any laws or any other measures that restrict, limit or prevent exporting?


31
7. How can we decide between Russia and Croatia?
a. What are the pros and cons of each country?
b. How do we distinguish the importance of the different pros and cons?
c. Are there any other factors which could be of influence?
d. How do we deal with country specific factors?
External Croatia
Swot analysis
Strengths Weaknesses
UCC Coffee offers a low price compared to other
companies
They are able to adjust the products to the
wishes of the customer
They deliver the whole product, from roasting
to packaging.
Their roast factory is in Switzerland, making it
easy to transport to Croatia
Already existing partnerships with some big
supermarket chains that are also active in
Croatia
There is no innovation in products, they follow
their competitor
No knowledge of the Croatian culture and
market
They dont speak the language

Opportunities Threats
Croatia recently became a member of the
European Union, making it easy for UCC Coffee
Benelux to export this country, since theyre
now part of the free-trade-zone.
Croatia is a caf society, and the trend of coffee
to go is now also developing.
Pop up coffee stands
There are a few big competitors that are
already active in Croatia and which have a good
brand reputation and consumer loyalty.
Different currency
The economic crisis has caused the
consumption of coffee to increase














32


SFA matrix Croatia
Subject Weighing Option 1 Option 2 Option 3
Suitability
Compatible with
the law
5 5 5 5
Follows the
trend
3 1 4 1
Makes use of
new
technologies
2 1 3 1
Meets the
customers
needs
4 1 5 4
Feasibility
Knowledge of
employees is
present
2 1 3 2
Production
capacity is
available
4 5 5 5
The budget is
available
5 5 4 3
Company is able
to produce the
products
5 1 3 5
Profits margins
are still high
enough
3 5 4 2
Acceptability
How big is the
risk?
4 5 4 2
Customers 5 1 5 5
Management 4 5 4 3
Government 1 5 5 5
Total: 151 198 166








33
External Russia
SWOT analysis
Strengths Weaknesses
UCC is able to produce everything
what the client asks for.
UCC offers a low price compared to
other companies.
UCC delivers the whole product, from
roasting to packaging.
UCC has more than 200 years of
experience in the hot drinks market.
No knowledge of the Russian culture
and market
UCC do not speak the language
There is no innovation in their
products, they follow their competitor.
Opportunities Threats
Busier lifestyles with longer working
hours, more women joining the
workforce and a rising number of
single-person households.
The coffee segment was the markets
most lucrative in 2012, with total
revenues of $2.4bn, equivalent to
64.5% of the markets aggregate.
Many of the leading food retailers in
Russia have developed their own
private label ranges to complete with
the premium brands, and the biggest
areas of growth are organic and Fair
Trade products.
There are already three big
competitors (Orimi Trade; Nestle S.A.
and May Company) active in Russia.
These are large roasters and roaster
3000 tons and over a year.
Different currency
The leading players operate with high
economies of scale allowed by bulk
productions and this may constitute a
considerable entry barrier for
newcomers.





















34
SFA Russia
Subject Weighing Option 1 Option 2 Option 3
Suitability
Compatible with
the law
5 5 3 3
Follows the
trend
3 5 4 3
Makes use of
new
technologies
2 2 1 2
Meets the
customers
needs
4 4 3 5
Feasibility
Knowledge of
employees is
present
2 3 2 4
Production
capacity is
available
4 5 5 5
The budget is
available
5 4 4 4
Company is able
to produce the
products
5 5 5 5
Profits margins
are still high
enough
3 2 3 3
Acceptability
How big is the
risk?
4 2 3 3
Customers 5 4 3 2
Management 4 3 4 4
Government 1 4 4 4
Total: 176 156 172











35
Financial Croatia






36
Kg coffee each truck Packages each kg Packages each truck
Transportation
costs 24000

2

48000



Costs transport to Croatia

Transportation costs each package in
3000 0,0625

Sales after 1 year 179520
Population reached, that buys
UCC Coffee
Sales each quarter 44880

Year 1 1%


Year 2 1,50%
Sales price per kg in
euros 4,527

Year 3 2%



Sales after year 2 269280

Tons coffee 22440000
Sales Each quarter 67320

Population
reached 80%



Sales after year 3 359040


Sales each quarter 89760

Liquidity forcast expected





1st quarter 2nd quarter 3rd quarter 4th quarter
Income:


Sales on account

203.187,58 203.187,58 203.187,58 203.187,58
VAT *1


Total:

203.187,58 203.187,58 203.187,58 203.187,58



Expenditures:


Costs of
manfactoring

178.555,08 178.555,08 178.555,08 178.555,08
Costs of sales

11.168,50 11.168,50 11.168,50 11.168,50
VAT *2




Total expenditures:

189.723,58 189.723,58 189.723,58 189.723,58






Net-revenu 13.464,00 13.464,00 13.464,00 13.464,00
*1 No VAT because it is an intercommunautaire delivery and is therefore a 0% VAT rate
*2 VAT is not calculated here because it is hard to find out which part of the VAT is to be paid and
which isn't. Coffee pads and coffee for example are free of VAT because they are imported, the filter
of the coffee is VAT calculated because it is made in the Netherlands.



37
Profit & loss expected year 1



Turnover


Account

812.750,31



Costs



Costs of
manufacturing 714.220,32
Sales on account


Costs of sales

44.673,99


758.894,31



Profit/loss 53.856,00

Profit & loss expected year 2



Turnover


Account

1.219.125,47



Costs



Costs of
manufacturing 1.071.330,48
Sales on account


Costs of sales

67.010,99


1.138.341,47



Profit/loss 80.784,00

Profit & loss expected year 3



Turnover


Account

1.625.500,62



Costs



Costs of
manufacturing 1.428.440,64
Sales on account


Costs of sales

89.347,98


1.517.788,62



Profit/loss 107.712,00



38
Liquidity forcast minimum





1st quarter 2nd quarter 3rd quarter 4th quarter
Income:


Sales on account

135.820,57 135.820,57 135.820,57 135.820,57
VAT


Total:

135.820,57 135.820,57 135.820,57 135.820,57



Expenditures:


Costs of purchasing

119.355,00 119.355,00 119.355,00 119.355,00
Costs of sales

7.465,57 7.465,57 7.465,57 7.465,57
VAT




Total amount of
expenditures: 126.820,57 126.820,57 126.820,57 126.820,57






Net-revenu 9.000,00 9.000,00 9.000,00 9.000,00

Profit & loss account minimum



Turnover


Account

543.282,29



Costs



Costs of
manufacturing 477.420,00
Sales on account


Costs of sales

29.862,29


507.282,29



Profit/loss 36.000,00









39
Financial Russia




40





Sales after 1 year 70,012,8
Population reached, that buys
UCC Coffee
Sales each quarter 17,503

Year 1 1%


Year 2 1,50%
Sales price per kg in
euros 4,676

Year 3 2%



Sales after year 2 105,018

Tons coffee 7
Sales Each quarter 26,252

Population
reached 2,86%



Sales after year 3 140,025,6


Sales each quarter 35,006


1st quarter 2nd quarter 3rd quarter 4th quarter
Income:
Sales on account 81.849,42 81.849,42 81.849,42 81.849,42
VAT
Total: 81.849,42 81.849,42 81.849,42 81.849,42
Expenditures:
Costs of purchasing 69.461,45 69.461,45 69.461,45 69.461,45
Costs of sales 5.386,69 5.386,69 5.386,69 5.386,69
VAT
Total expenditures: 74.848,14 74.848,14 74.848,14 74.848,14
Net-revenu 7.001,28 7.001,28 7.001,28 7.001,28
Liquidity forcast expected


41



Profit & loss expected year 1




Turnover


Account


327.397,67




Costs



Costs of
manufacturing 277.845,80
Sales on account



Costs of sales

21.546,75



299.392,55




Profit/loss 28.005,12









Turnover
Account 218.265,11
Costs
Costs of manufacturing 185.230,53
Sales on account
Costs of sales 14.364,50
199.595,03
Profit/loss 18.670,08
Profit & loss account minimum
1st quarter 2nd quarter 3rd quarter 4th quarter
Income:
Sales on account 54.566,28 54.566,28 54.566,28 54.566,28
VAT
Total: 54.566,28 54.566,28 54.566,28 54.566,28
Expenditures:
Costs of purchasing 46.307,63 46.307,63 46.307,63 46.307,63
Costs of sales 3.591,13 3.591,13 3.591,13 3.591,13
VAT
Total amount of expenditures: 49.898,76 49.898,76 49.898,76 49.898,76
Net-revenu 4.667,52 4.667,52 4.667,52 4.667,52
Liquidity forcast minimum


42
Profit & loss expected year 2




Turnover


Account


491.096,50




Costs



Costs of
manufacturing 416.768,70
Sales on account



Costs of sales

32.320,13



449.088,82




Profit/loss 42.007,68


Profit & loss expected year 3




Turnover


Account


654.795,34




Costs



Costs of
manufacturing 555.691,59
Sales on account



Costs of sales

43.093,50



598.785,10




Profit/loss 56.010,24