FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES

MANAGEMENT AND MARKETING DEGREE

  

First Report: Integrated Project

COURSE : Global Marketing

SECTION   : S-003

TEACHER : Marco Rios-Pita

GROUP  :1

MEMBERS:

Berrocal Trigoso, Miguel Angel

Gonzales Asmat, Laura Valeria

Mendoza Zamudio, Paola Valeria

Llanos López, Zoe Maya

Quintana Castro, María Mercedes

Zevallos Berrospi, Julio José

Lima-Perú

2022-I 
1. Describe a product or service
a. Business Idea (Justify its potential success, develop its competitive

advantage).

Paprika is a powdered red condiment that has a characteristic flavor and smell that

comes from the drying and grinding process of certain red peppers or paprika that

gives it that peculiar flavor. In addition to its clear culinary use, it has interesting

medicinal benefits; since it is considered a healthy product and good for health if used

in moderation. Paprika powder has a high level of vitamins C, E, A and the B

complex that provides energy from the foods we eat regularly, and which helps the

formation of red blood cells. In turn, vitamins A and C help strengthen the immune

system, according to the National Institutes of Health. (True, 2016)

Some of the great benefits of paprika powder is that it is considered a nutrient that

has great benefits to prevent various diseases in the digestive and reproductive

systems; It is also a good supplement that helps strengthen the immune system and

prevent diseases and infections caused by viruses and bacteria. Therefore, its

consumption is associated with great benefits for sight and is a powerful ally against

premature aging.

Paprika contains a high content of vitamin B2, which is associated with benefits to

increase the production of melatonin, the hormone that regulates the sleep cycle, and

also of serotonin, known as the hormone of happiness, so it is a great stimulant to

combat both stress and anxiety. (Mixtli, s.f.)

A great competitive advantage that we have is that the edaphoclimatic conditions

in Peru are optimal to be able to grow paprika throughout the year, which allows us to

supply the world market in periods when some of the main world producers of this

product stop selling. produce, that is when we take advantage of this advantage. For

the production of paprika, an optimal temperature between 18 to 25 ° is required,

otherwise poor-quality fruits and low yields are produced. The type of soil should

preferably be sandy, the drip irrigation method turns out to be the most efficient and

with which higher productions were achieved. This is why it is important to take care

of the water sources used for this purpose. One of the advantages of this method is

that significant water savings can be achieved by reducing filtration losses, reaching

an efficiency of 95%.

b. Target market. Economic and social support. Statistical data.

According to Economic Alert, between the months of January and November of

the year 2021, Peru exported 5,038.2 MT of paprika powder for an FOB value of US$

10.7 million. These figures are basically similar to the results achieved in the same

period but this time in 2020 when 5,029.5 MT were shipped for US$11.5 million. The

main destination of these shipments in the period corresponding to 2021 was the

United States, where placements of US$7.1 million were achieved, which is

equivalent to 67% of the total. That is why we are going to carry out exports of

paprika powder to the United States; since it is a country where the paprika powder

market is high. In addition, it is pleasing to mention that during the 12 months of

2020, Peruvian exports of paprika powder totaled 5,487.7 MT for US$12.3 million,

according to a report by Agrodata Peru.

Table 1: Exportation of Paprika powder.

 Source: Midagri

Target Market

The target market is made up of Latinos residing in the United States between the

ages of 25 and 55, who have an affinity for spicy food. They are characterized by

using spicy condiments to prepare their food. Since the product is an item that is used

for the preparation of different foods and is in a 56.7 g container, its price will not be

very high, but in the same way the target must belong to the upper-middle class that is

characterized by have a high income and appreciate the added value in their

purchases; since being an exported product, the price rises a bit.

2. Business environment analysis

a. Macro environment (according to Kotler)

i. Cultural – Social environment

As for the socio-cultural environment of the United States, it has a population

of 332,183,000 inhabitants, making it one of the most populated countries in the

world. It is also one of the countries with a significant percentage of Hispanics,

accounting for 18.5% of the country's total population and is expected to grow to

21.8%. This huge group is characterized by maintaining their customs and food

roots, which is why our product "PAPRIKA" would be an important target,

besides being a good option for them. Likewise, there would be no need to adapt

our product, since 70% of the Hispanic population prefers food and beverage

labels to be in Spanish. Although English is the most widely used language in the

United States, Spanish is the second most spoken language, which would allow us

to have an affinity in terms of marketing our product to the Latino community.

However, we could also take advantage of the American market, since it is a

segment that shows a tendency to consume healthy foods, as well as exotic foods.

These preferences vary according to age, since the "Baby Boomers", who are

people who are around 50 years old, prefer to consume healthy foods, because

they are more concerned about taking care of their health through these foods.

Millennials, who are people between 15 and 33 years old, are willing to try new

products. In both age ranges, our product could have an important target, since it

is an organic product that does not harm your health, besides it will always give an

exotic touch to your meals.

Trends and profile of the average U.S. consumer:

● Due to the pandemic, they have developed a taste for cooking at home and

buying more products that take care of their health and well-being.

● It is very important that product labels are clear and contain all the nutritional

value, since the American consumer is giving a lot of importance to reading

labels.

● The U.S. consumer shows a clear preference for less processed foods. In

addition, their taste for spicy food and food seasoned with organic spices is

increasing.

● Due to the diverse cultures that exist in the United States, consumers are willing

to try new products.

● The price of imported products should not greatly exceed that of local

substitutes, since the U.S. consumer is largely price-oriented.

ii. Political – legal environment

The United States is governed under a federal government, which is composed

of three different branches: the legislative branch, the executive branch and the

judicial branch. In addition, the supreme law guiding the operation of the United

States is the Constitution of 1787, which was admitted on September 17, 1787 at

the Constitutional Convention in Philadelphia (Pennsylvania).

For a product to be apt to be exported to the United States, it is necessary that

they are innocuous, that is to say that it is a product that does not cause any

damage either physical or moral. Also, it must be free of contamination, must

have an appropriate label and comply with the rules and administrative procedures

requested. When the product meets all these requirements, the export process to

the U.S. can begin. The first requirement is that the product must have a Federal

Taxpayers Registry. Then, you must know the costs and tariff restrictions, have all

the foreign trade documents as well as the packing list. Also, you must have

transportation documents and documents that guarantee tariff compliance. In the

case of Peru, it signed a Free Trade Agreement with the United States, which

allows Peru to export free of tariffs. This treaty was signed on April 12, 2006.
 Image 1: Requirements to export to the USA.

Compiled from Larrabezua

Another important point is the packaging requirements demanded by the

United States. It is mandatory that the language of the packaging is English,

however other languages can be used if all the information is both in English and

the other chosen language. Also, all products must have an indelible label, which

mentions the country of origin as well as "Made in". In addition, they must list the

product's nutritional information.

iii. Economic environment

Economic environment in Peru

The Peruvian economy will grow by 2.3% in 2022 and 3% in 2023. This

growth is due to the fact that the third wave of contagions had a relatively slight

impact on economic activity. Thanks to the vaccines and the entire vaccination

program, the isolation measures are gradually being reduced. As a result, the

capacity of supermarkets, restaurants, etc. is returning to normal.

 As for fiscal policy, it will remain relatively unchanged this year, according to

a BBVA study, gross public debt will be equivalent to 36% of GDP but will

continue to grow to 39% in 2027. On the other hand, as for inflation, it has an

upward trend due to the conflicts between Russia and Ukraine.

As for the dollar exchange rate, it is estimated that by the end of 2022 the

dollar will close between 3.85 and 3.95 soles, while in 2023 it will close between

4 and 4.10 soles.

Economic environment in EE.UU.:

The U.S. economy unexpectedly shrank by 1.4%. For this is due to the war in

Ukraine. This war has caused energy prices to rise as well as disruptions in supply

chains. Also, the U.S. is expected to suffer inflationary pressures, as it is estimated

to have a growth of 2%. Another major problem that the U.S. is facing is that it

has a very weak labor market and high unemployment. And this is something that

is not expected to diminish, as unemployment will increase by 4.9% in 2024. In

order to address this problem, the U.S. government is developing an asset

purchase program until full employment is achieved and the economy recovers.

As for GDP, during 2022 it is estimated to grow by 3%, while by 2023 it is

expected to decline by 2.4%.

iv. Technological environment

This environment is changing rapidly, creating new market opportunities and

displacing the previous one. In the case of paprika production, good practices have

been developed to prevent mycotoxin contamination, from the cultivation process,

harvesting and post-harvest (drying). All this is due to the demands of the markets
to which it is exported to guarantee the highest possible quality, in this case the

United States.

v. Demographic environment

It is about the generations of the public and how they develop with respect

to education, tastes and trends. The activity rate in the U.S. showed a continuous

upward trend since the mid-1950s, growing from a low of 58.1% in 1954 to a high

of 67.2 in the first quarter of 2000. Thereafter, it began a downward trend that

worsened with the crisis of the Great Recession. Thus, the activity rate fell to

62.4% in 2015. From 2015 to 2020, the activity rate seemed to recover slowly,

reaching 63.3 in February 2020. This recovery was slowed because of the Covid-

19 crisis, falling to 60.8% in May 2020. Thereafter, the activity rate has been

recovering and in 2020 reached 61.5% to 160.5 million people.

vi. Geographic – Natural environment

Concerns about environmental pollution have been increasing in the last

decades, reaching very dangerous levels, this implies the scarcity of raw materials

that marketers should consider as the main trend in this variable, followed by

pollution and government intervention by governments in many countries that are

becoming aware of the need for good management of their natural resources.

Social indicators for the United States are as follows:

 GDP per capita: 63,826 (2021).

 Life expectancy: 80.4 years (2021)

 HDI (numerical value/world order): 0.926 / 17th (2020)

 GINI Coefficient: 0.486 (2018).

  Birth rate: 12.3 (births/1000 inhabitants) (2021)

 Fertility rate: 1.84 (2021)

 Annual population growth rate: 0.7 (2021)

b. Microenvironment

i. Competitors

Our main direct exporter of paprika powder to the United States is S&M

FOODS SAC, which accounts for 89% of exports, according to Veritrade. This

company is the main exporter of the product from Peru. Being the one that exports

more in volume with 467 thousand kilograms approximately from January 2021 to

May 2022. However, Blue Market is the company that has the highest price per

kilogram in the sale of Paprika powder from Peru with a price of 1,895 dollars per

kilogram.

Image 2: Export companies share in Peru.

Compiled from Veritrade.

 On the other hand, we also have indirect competitors that export Paprika, but

in another type of presentation, ground Paprika, according to Veritrade. This

would represent a part of the Paprika export market, being ICH CORP S.A. the

company that exports the most ground Paprika. ICH CORP has 56% of the ground

paprika export market with a volume of approximately 1 million 669 thousand

kilograms from January 2021 to May 2022.

Image 3: Companies that export ground Paprika

Compiled from Veritrade

ii. Suppliers

The product that we are going to export, which is Paprika powder to the

United States, has to meet certain quality standards for sale there. Therefore, it is

important to have suppliers that provide us with quality, but above all at a good

price, since the export plan seeks a long-term relationship with those suppliers that

are part of our value chain. Therefore, we started with our paprika suppliers.

 Raw materials:
 In Peru, there are many provinces that produce chili peppers, paprika, etc. Thus,

we can determine that the bargaining power of raw material suppliers is low, since we

can find different options for acquiring paprika. Arequipa, specifically Majes

province, is the geographical area where paprika is produced the most; however, in

the south of Lima we can also find producers of this product. Therefore, the supplier's

preference would be for producers located in Lima, in the provinces of Cañete,

Barranca, Huaura and Supe which would save us the cost of transporting the product

for paprika processing.

 Packaging Suppliers:

In order to export, the presentation of the product is important to maintain its

quality, image and, above all, to avoid losses. Therefore, it is important to pack in

kraft paper bags with an inner polypropylene cover to keep the product fresh and

avoid humidity, but there are few companies that meet these requirements. One of

them is Tinpac, which has already worked with well-known brands here in Peru like

Gloria, Redondos, La Calera, etc.

iii. Clients

Customers in the U.S. market focus on Latinos, who account for the largest

percentage of chili bell pepper consumption. This group is divided between people

of generation "X" and "Y". In addition, it is expected that by 2050, they will cover

30% of the U.S. population.

U.S. Latino customers are in the habit of buying foods or products that are

used in the preparation of native Latino dishes, most of which have paprika as an
 ingredient. Thus, in a purchasing behavior, it would become a necessity for

Latinos to want to consume this product in their food.

Table 2: growth of the latino population in the United States. (2010-2050)

The growth of the Latino population in the U.S. along with the consumer's

need to try new and authentic flavors.

Latino flavors introduced into the mainstream U.S. market are: chipotle,

cilantro, chili, masa, lime. are: chipotle, cilantro, chili peppers, masa, lime. There

is a greater use of these flavors in non-Latino than in non-Latin dishes. Example:

adding chili to omelets, or chipotle to soups, stews and dips. In this context,

Packaged Facts14 indicates that Americans currently eat 38% more chili peppers

38% more chili peppers than in 1996.

Latino products have also appealed to the health-conscious consumer health-

conscious consumer: beans, peppers, tomatoes, mangos, papayas are considered

very healthy foods, papayas are considered very healthy foods. The popularity of

Latino foods in restaurants is growing in popularity. Not only in restaurants, but

also in school cafeterias and other "food courts'' school cafeterias and other food

services.

iv. Intermediaries

The agro-export companies assume multiple roles, not only as intermediaries

between their clients in the external market and the small producers, but in some
 cases they also act as financiers and providers of technical assistance. Some of

them do it with the aim of benefiting the productive chain and others, simply, with

a very personal interest. (Tagle, 2016)

According to Ramos (2019), the main Peruvian agro-export companies are:

1. Camposol SA

2. Vitapro SA

3. Virú SA

4. Danper Trujillo SAC

5. Complejo Agroindustrial Beta SA

6. Perales Huancaruna SAC

7. Sociedad Agrícola Drokasa SA

8. Leche Gloria SA – Gloria SA

9. Sociedad Agrícola Rapel SAC

10. Gandules INC SAC

Other companies that had an FOB value above US$50 million but still did not

enter this top 10 ranking were El Pedregal SA (US$88 million), Olam Agro Perú

SAC (US$85 million), Agrícola Cerro Prieto SA (US$78 million), Mondelez Perú

SA (US$70 million), Hortifrut-Perú SAC (US$69 million), Ecosac Agrícola SAC

(US$68 million), Hortifrut-Tal SAC (US$58 million), Avocado Packing Company

SAC (US$57 million), Compañía Internacional del Café SAC (US$55 million)

and Green Perú SA (US$54 million).

c. Porter's Five Forces

i. Buyer power
 The main buyers are the United States, Mexico and Spain. The Peruvian

paprika is a very attractive product in the world, due to its high content of color

(ASTA value), which is highly appreciated in the international market.

Additionally, Peru produces paprika throughout the year, while one of its main

competitors worldwide, China, only generates production from October to

December due to the low temperatures recorded in winter. Nevertheless, taking

into consideration that Peru is not the only exporter country, the bargaining power

of the buyers is high, due to the minimal bargaining power of Peruvian producers.

In addition, due to their high bargaining power, the markets of the purchasing

countries are grouped by economic blocs, raising their levels of standards of

quality. (Cáceres et al, 2016)

ii. Industry rivalry

The main competitors are China and the United States. Since China displaced

Peru in 2012, Peru is the second largest exporter of paprika in the world. The

production of the United States has been growing and with that the imports from

Peru have been decreasing, due to their genetic tests with various varieties of

seeds and the lowering of their cost due to mechanized harvesting. On the other

hand, China maintains its competitiveness because it can offer its products at FOB

prices of US$1.89/kg and ensure 200 colored antlers upon arrival in the country of

destination. (Cáceres et al, 2016)

iii. Threat of new entry

In the threat of new entry, we have to consider new competitors from Peru and

new competitors in the world. Regarding Peru, as seen in the following table,

some of the main companies that export Paprika from Peru have been created in

the past five years, so it is expected as Peru keeps consolidating its market share in
 exportation that more companies will enter this market (SIICEX, n.d.).

Furthermore, the Portal Portuario journal published that the export industry grew

generating 27.2% more jobs in 2021, which shows a considerable threat of new

competitors.

Table 3: Main companies that export Paprika.

Company % Market Share Foundation year

S & M Foods S.R.L. 16% 2008

Agroexportadora Sol De Olmos S.A.C. 11% 2002

Agricola Pampa Baja S.A.C. 8% 1998

Adb International S.A.C 7% 2017

Food Inc S.A.C. 7% 2014

Agroindustrial E&C S.A.C 6% 2016

Mentor Service Trade S.A.C. 4% 2013

Peruvian Capsicum Exporters S.A.C. 4% 2016

Gam Spices Internacional S.A.C. 4% 2019

Source: Compilation based on information from SIICEX.

As for countries as new competitors, it is unlikely to occur due to the specific

conditions that the Paprika plant needs to grow correctly. This plant needs a

tropical or subtropical climate to bear fruits that is why its main producers are

from America, Hungry, Southwestern Europe, India and China (INIA, 2009).

Considering that we are exporting to the United States, the growth of their own

production of Paprika can increase the threat of new competitors inside that

country.

iv. Supplier power

The production of Paprika in Peru extends to all the coast, including: Piura,

Lambayeque, La Libertad, Ancash, Lima (Barranca, Huaura, Supe, Cañete), Ica

 (Chincha, Pisco, Ica), Arequipa, and Tacna. As mentioned before in this research,

we are planning to work with Lima as a supplier, but since there are many

possible suppliers, their negotiation or bargaining power decreases. Moreover,

Lima is selected because it offers us a lower cost of transportation, so they can

increase their prices until it is cheaper for us to change the supplier.

Regarding the packaging, we are expecting to work with kraft paper bags with

an inner polypropylene cover and there are only a few companies who can offer

this package to us. One of the companies that can offer this packaging is Tinpac,

and is very solicited because they work with brands like Gloria, San Fernando,

Redondos, etc. So here the supplier power is high and is a factor that must be

considered in the cost structure.

v. Threat of substitution

The threat of substitution is high because China has replaced Peru as the

second largest exporter of Paprika in the world, so it is very likely that their

industries soon start to focus all their efforts in the U.S market. Regarding to the

hispanic population substituting the Paprika is also very high, because according

to the Bloomberg Business Week (2022) the sauce most buyed are from

McCormick which uses Habanean chile and Tabasco chile, so it is very likely that

these hot chili peppers will substitute the Paprika as a sauce.

d. Company's SWOT (Strategy SO, WT, SW, WT)

Strengths Weaknesses
- Qualified, knowledgeable - Lack of experience in the
workforce. industry.
- Sufficient production - Lack of a high level of
capacity to meet demand. technology, compared to
 - High standards of other companies with more
sanitation. time in the market.
- Product that is exported is - Lack of further innovation.
not perishable. - Low investment in
promotional campaigns
abroad.

Opportunities SO strategies WO strategies

- There is a growing - Satisfy this growing - Implement these new
tendency in the Hispanic demand of “Latino foods” technologies in order to
population in the USA. in the USA with our make a higher quality
- The popularity of “Latino sufficient production process.
foods” has been increasing capacity. - Invest more in promotional
throughout the country. - Train our highly qualified campaigns, taking
- The climatic conditions in and knowledgeable advantage of the increasing
Peru allow Paprika to grow workforce in order to use popularity of “Latino
all year. these new technologies foods” in the USA.
- The technology in the effectively.
industry has evolved
making a higher quality
process.

Threats ST strategies WT strategies

- China has overlapped Peru - Our force work could - The lack of high level of
in Paprika exportation. develop strategies to technology and further
- There are many restrictions compete and gradually gain innovation is a
and regulations to enter in market share. disadvantage to compete
the US market. - With our production with the market leader.
- The war between Russia capacity we can increase - The lack of experience can
and Ukraine has affected Peruvian Paprika stops us from entering a
all economies in the world. exportation and recover our market that has economic
- Our main competitor owns global position. recession.
89% of Peruvian exports.
 e. SWOT of two main competitors:

i. Direct

For this case, a SWOT analysis of three main direct competitors will be

carried out, which are S&M foods S.A.C., Blue Market S.A. and PAEXPERU

E.I.R.L. A direct competitor is considered to be a company that operates in the

same market and with the same product as the analyzed company.

Strength: Opportunities:
- They are the main exporters of paprika - The economic recovery allows them to
powder from Peru. S&M foods with generate sales forecasts to the United
around 381 thousand kilograms during States.
2021. - The level of exports is expected to grow
- As there are few competitors, they have a because MINAGRI is encouraging agro-
high degree of price control. exports.
- They are familiar with the U.S. market so - After China, Peru is the main exporter of
they tend to sell on a large scale. Paprika in the world.
- Because China is in absolute confinement,
China's exports to the United States have
entered a freeze stage.
- The growth of the Latino population and
the migration of Latinos increases the
consumer market for chili peppers.

Weakness: Threats
- By having a very distant market in which - There is a possibility of a new outbreak of
S&M Foods has a large market share, it COVID-19 variant that would again limit
weakens the market power of S&M foods. exports.
- The price to an economy of scale limits as - Barriers to market entry such as cost, low
a barrier to entry to new competitors in the prices, suppliers and bureaucratic
market. procedures create limitations for new
competitors.
 ii. Indirect

In this case, a SWOT analysis of the indirect competitor ICH CORP S.A. will

be performed. An indirect competitor is considered to be a company that offers

substitute products to ours.

Strength: Opportunities:
- They have more than 50 years in the - The economic recovery allows them to
Peruvian market, in which they have been generate sales forecasts to the United
dedicated to the production and processing States.
of natural products. - The level of exports is expected to grow
- They have their own processing plant. because MINAGRI is encouraging agro-
- They have several quality certificates such exports.
as: Bureau Veritas, Kiwa BCS Öko - After China, Peru is the main exporter of
Garantie, Kosher, etc. Paprika in the world.
- It is one of the main exporters of paprika. - Because China is in absolute confinement,
China's exports to the United States have
entered a freeze stage.
- The growth of the Latino population and
the migration of Latinos increases the
consumer market for chili peppers.

Weakness: Threats
- Due to the global pandemic, its production - There is a possibility of a new outbreak of
was stopped for a period of time. COVID-19 variant that would again limit
- The high bargaining power of customers. exports.
- Barriers to market entry such as cost, low
prices, suppliers and bureaucratic
procedures create limitations for new
competitors.

3. Strategic Plan

a. Mission, vision, company objectives

 Mission: Develop and transform the export of paprika powder, providing our

customers with quality and a high nutritional content, offering the health benefits of

paprika and the flavor of their meals with this aromatic spice, having as a priority the

well-being of our customers and society in general.

Vision: To be the number one exporter of paprika powder with the greatest presence

in international markets by 2026, preserving the added value of our product and

promoting institutional values outside the country

Company objectives: We are committed to healthy and quality consumption,

therefore our main objective as a company is to develop, produce and export paprika

powder, for this we must:

● Select the best inputs so that the elaboration of our products always have a high quality

and an attractive flavor.

● Offer a product of excellence to our consumers in order to satisfy their needs

● Contribute to the well-being of our clients by providing them with a product that gives

an exquisite flavor to their meals as well as improves the functioning of their organism,

which makes it an extremely healthy condiment.

b. Competitive and operative strategies

The competitive strategy we plan to employ is that of operational excellence,

because the export of paprika from Peru to the United States is well positioned

obtaining a large market share; therefore, we rely on our operational experience to

deal with our customers in that country. We will address the factors most valued by

customers which can be mainly quality, delivery service and price in that order, our

products are highly outstanding and recognized in the country and their consumers in
 the United States know it and have great confidence in us as an exporting country. We

must maintain these close ties to maintain their preference.

This point involves many areas within the company and the movements of these

must be aligned with the mission and vision of the company, we will develop the

competitive advantage of our operations and service process added to the experience

and guarantee proven by our customers. We must measure our current production

capacity to be able to bid smoothly in order to obtain a much more efficient

production.

4. Marketing Plan

a. Product´s Analysis in the targeted market (trade map, etc)

According to the Nera Economic Consultant, the purchasing power of the

Hispanic population in the United States has increased by 30% in five years,

reaching the $1.720M, also, the products launched for the Hispanic community

are considered big opportunities because it is expected that this segment will

continue to grow. Regarding the expenditure, around 12% is destinated for food,

like ingredients, condiments, and others (Abasto, 2020). 

Besides that, according to the CEO of Overseas Products & Spices, there is a

tendency in the North American market to increase the import of paprika due to

the increase of the Latin American population, which doubles the population of

three decades ago (RedAgrícola, 2021). This is confirmed in the database of Trade

map, which shows how the import of paprika has been increasing in the last 5

years, reaching more than $846 M in 2021, and having an annual growth of 31%

between 2020 and 2021 (TradeMap, 2022).

Table 4: Volume of pepper imported by USA in 2021.

 Source: Trademap

b. Market Profile

The target market is the Hispanic population of the United States of America.

According to Data Commons, in the year 2020, this country had a population of

329.825.950 people. In that same year, according to Statista (2022), the Hispanic

population in the United States exceeded 59 million inhabitants, of which

approximately 62% came from Mexico.

c. Customer Profile

1. Geographic Segmentation

The United States, located in North America, with an area of 9,147,593

km2, is considered one of the largest countries in the world. There are two

ways to enter the USA: by sea and by air. Due to the characteristics of our

product and the costs involved, the best shipping option is by sea. The U.S.A.

has more than 300 ports, being the main ones the port of New York and New

Jersey, Virginia, Savannah, Miami, Long Beach, Charleston, Oakland and

Houston. As for airfreight, the U.S. has 15,095 airports that are used as a

means of transportation in case of emergency for faster shipments.

2. Demographic Segmentation

According to the above, the consumer profile we are targeting is

Hispanic Americans living in the United States, which is approximately 59

million inhabitants. The quality of these consumers is the orientation to

consume spicy ingredients in their food. 62% of the Hispanic population is of

Mexican origin, therefore, they are influenced to consume chili peppers.

Mexicans are the second country that consumes more chili peppers in the day,

thus, they are a consumer with great potential to consume paprika. 

This chili can be an added input to the meals of Hispanics since they

have a tendency to consume spicy foods. Moreover, Central American

Hispanics have a habit of making dishes with chili peppers to enjoy with their

families. In addition, most chili bell pepper consumers tend to accompany

their food with chili peppers or even prepare it to have a spicy flavor. In the

United States, immigrants with Hispanic roots tend to create restaurants in

which one of the main ingredients is Paprika. Even for Americans, the

consumption of chili peppers increases every year, due to the Hispanic

influence on them.

3. Psychographic Segmentation

i. Lifestyles

Our consumers have an affinity for spicy food and are also known

for using spicy condiments to prepare their food. They tend to consume

spicy food also due to cultural traditions such as Mexico, which is a

country that consumes a lot of spicy in its different foods.

A study carried out by DSM carried out a study of the food market

at the United States level, in which it turns out that 66% of consumers

prefer to prepare spicy foods at home or that are strongly made with

spices to cook their products, preferably they are men who consume

more this type of spicy food. (The Food Tech, s.f.)

4. Behavioral Segmentation
 The use of paprika is very popular for the preparation of culinary

dishes around the world and especially in Latin America, where it is

commonly used to flavor soups, meats, some sandwiches, among others, in

addition to providing good vitamin properties for the body, helping to

prevent cancerous diseases.

d. Minimum requirement/standards for products in destination markets.

The U.S. market has requirements that are essential to be able to market food

products in this country. These requirements are regulated by different sanitary

entities such as the United States Department of Agriculture (USDA), which is in

charge of ensuring that all agricultural products are safe. There is also the Food

and Drug Administration (FDA) which regulates the identification, labeling and

packaging standards for Canadian consumer products as well as ensuring the

safety of food consumed in the U.S. Finally, there is the U.S. Customs and Border

Protection (CBP) which is responsible for regulating and facilitating international

trade, collecting customs duties and enforcing standards and rules.

1. Product composition

Our product will have the following presentations:

- The presentation of paprika powder will be 85 g in a small plastic

container.

- The presentation of paprika in sauce will be 250 gr in a glass container

The objective of using two packaging materials is for the safety of

product conservation as well as its practicality, since both presentations

would be used to make different types of food and also, the presentation
 would be appreciated by the Latin consumer for what the product is

designed based on the needs and expectations they present.

Both presentations of paprika would have to go through the

supervision of the Food and Drug Administration (FDA), which is an

American agency that is in charge of regulations on food, medicine, etc. and

products that enter the American market for the safety and well-being of its

inhabitants.

2. Ingredientes allowed

Powder:
- Fresh red peppers
- Dried chillies
Sauce:
- Bechamel sauce.
- Paprika
- Milk cream
- Lemon juice.

3. Life Cycle, conservation modes

It could be said that currently the export of paprika to the United States

from Peru is growing because we have the most favorable conditions for

its production and marketing, there is a demand trend in the American

market that no other country can supply. Likewise, in 2020, Peruvian

exports of crushed dry paprika also registered a positive performance,

adding eight million dollars, representing an increase of 48.7% compared

to the 2019 period.

e. Tariff barriers / non-tariff (WTO)

1. International Trade Agreements

The Peru-US Trade Promotion Agreement (TPA) was signed in

Washington D.C. on April 12, 2006 and entered into force on February 1,

2009. The following chapters were negotiated in this agreement: National

Treatment and Market Access, Textiles and Apparel, Rules of Origin,

Customs Administration and Trade Facilitation, Sanitary and

Phytosanitary Measures, Technical Barriers to Trade, Trade Defense,

Government Procurement, Investment, Cross Border Trade in Services,

Financial Services, Competition Policy, Telecommunications, Electronic

Commerce, Intellectual Property Rights, Labor, Environment,

Transparency, Trade Capacity Building, Dispute Settlement.

In addition, since 1991, through the Andean Trade Preferences Act

(ATPA), Peru has had unilateral tariff preferences granted by the U.S. for

the entry of certain goods, which was in force until 2001. In 2002, through

the Andean Trade Promotion and Drug Eradication Act (ATPDEA), the
 United States again granted tariff preferences, which were periodically

renewed and remained in effect until December 2010. 

In this context, in 2004, after studies and coordination among the

sectors involved, it was decided to begin negotiations for a free trade

agreement, in order to provide a comprehensive and permanent trade

liberalization that would provide the stability needed to increase

investment in the export sector.

As of 2009, the TPA in force between Peru and the United States has

already begun to allow us to boost Peru's economic development through

trade, with commercial expectations never before experienced, having

consolidated perennial access to very large markets.

f. Commercial distribution strategies

1. Intermediation levels

To distribute our products, we will start using a short intermediation

channel, with a broker, and in association with some small retail stores

where the Hispanic population normally buys, like traditional retail stores,

if we succeed, then we will start distributing in major retail stores like

Walmart, Stop&Shop, Safeway, Costco, etc. We will export through a

broker because we will need someone who knows the market really well

and can help us contact these small retailers and make profitable deals with

them. We will use small retail stores because is the easiest way to deliver

our product to our target, Latin American people from X and Y generation,
 also because in this way we can reach more consumers that are not Latinos

but like spicy food. 

2. Transportation

The transportation process for our paprika products is based on four

levels: The first consists of transporting the merchandise to the port of

departure to pass the second level of transport, which would be the largest,

transport from the country of origin, which It would be Peru, to the

country of destination, which would be the United States and it would be

done by ship. Finally, we have the transport of the merchandise to the

wholesale importer.

3. Storage

The company's storage will only be domestic in the port of Callao, in

the city of Lima. Mainly due to the fact that the merchandise will wait in

this place for its future deposit in the container that will take it inside the

ship to the United States. The U.S. warehouses will belong to the

distributor that we will hire so that with their experience they can facilitate

the commercialization in the United States.

g. Price strategies

1. Factors at play

- The price level and price strategies that the competitors in this

country use.

- The level of income of the target market in this country and the

price range they’re able to pay for this product.

- The necessary costs to be able to export and sell the product in this

country.
 h. Marketing mix Strategy

1. Adaptation factors

We have to consider the favorite presentations of this type of

condiments in the American market and the appropriate quality and image

standards according to their needs and custom. The components of those

who consume are also important for them; it is essential to publicize the

value attributes of the product as a differentiating component in the

packaging.

2. Legal aspects

In order to commercialize food products in USA, these must have been

approved by the department of Food and Drug Administration (FDA),

which ensures the safety and security not only of food products but also of

medicines, they also verify that everything that is written in the package is

true about the product. Also, as we are exporting Paprika in powder and

sauce, the Environmental Protection Agency (EPA) must ensure that we

are not exceeding the limits permitted of pesticide residues and other

pollutants. Other department that check the labelling and packaging of

products is the Food Safety and Inspection Service (FSIS), and we will

also need their approval to start commercializing our products in the US

market. Besides that, our process plant must be correctly registered in the

FDA database. Other legal aspects we must take into consideration are the

Peruvian labor laws, because we are going to hire people in the plant to

process the Paprika.

5. Operational Planning

a. Costs’ List
 i. Materials

Process Cost (U$$)

Packaging 627

Labelled 520

Storage 1,152

Loading of merchandise 334,4

to the transport unit

TOTAL 2299

ii. Raw materials

Powder:
- Fresh red peppers
- Dried chilies

Sauce:
- Bechamel sauce.
- Paprika
- Milk cream
- Lemon juice.

Raw Material Unit Cost (U$$)

Fresh red peppers 1.2

Dried Chillies 0.60

 Bechamel Sauce 1.5

Paprika 2

Milk Cream 4

Lemon Juice 1.5

iii. Transport

                Dry Container

      Who Charges                (New York)
01 Temporary Deposit 278.87

02 Empty Deposit 130.00

03 Shipping Line 1,400.00

04 Maritime Agent 199.00

05 Customs Agent 45.00

06 State Agencies

Average Total Costs 2052.87

Source: Banco Mundial with SUNAT data

b. Insurance

Cargo Insurance: This insurance covers the cost of damaged or stolen

transported goods. (United World Transportation, n.d.)

Average Cost of Insurance:

 Some things that will affect the insurance costs are: your age, driving

history, the age and condition of your equipment, the types of cargo you

transport, the lanes you drive, and state requirements. An owner operator is

likely to pay $1000 deductible for cargo insurance each year. (United World

Transportation, n.d.)

The finance company will add interest charges to the total cost of the

policy and structure the payment plan. Some financial companies may require

an initial payment between 10-20% of the total cost of the policy, and then 10

equal monthly installments, including interest, while others may divide the

policy plus interest into 12 equal payments. (United World Transportation,

n.d.)

c. Operational Business Scheme

6. Financial Plan

a. Payment method

In order to finance the project until the initial investment is completed,

bank loans will be requested as a form of payment, which will be paid in full

approximately at the end of 2024.

b. Budget

PROCESS COST (U$$)

Packaging 627.00

Labelled 520.00

Storage 1,152.00
Loading of merchandise to the transport unit 334.00

Total cost of processes 2633.00

Raw material Cost (US$)

Fresh red peppers 1,200.00

Dried Chillies 300.00

Bechamel Sauce 105.00

Paprika 2,000.00

Milk Cream 400.00

Lemon Juice 250.00

Total cost of raw materials 4,255.00

Transport Cost

01 Temporary Deposit 278.87

02 Empty Deposit 130.00

03 Shipping Line 1,400.00

04 Maritime Agent 199.00

05 Customs Agent 45.00

Total Cost of 2052.87

transportation

Labor Force  Cost

Salaries 7,000.00

Social benefits 3,500.00

Insurances 1,500.00

Total labor cost 12,000.00

The total budget we will need to operate is 20,940.87 US$, considering all the

costs and the volume we are going to produce and sell.

c. Financial Statement

Net sales 896000

Cost of sales 2299

Gross profit 893701

Selling, general and administrative expenses 21,940.87

Operating income 871760.13

Interest expense 10000

Net Income 861760.13

 d. Projected cash flow (One Year), show profit or losses

When making the projected cash flow we can notice that since the first

month we will have profit and we’d have positive results.

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