Strategic Overview: VIVARTIA

Table of Contents
Table of Contents.................................................................................................................1
1. Overview of the VIVARTIA Group of companies.........................................................1
1.2 Strategic analysis of Vivartia.........................................................................................5
1.2.1 Porter’s 5 forces analysis........................................................................................5
Bargaining power of customers...................................................................................5
Bargaining power of suppliers.....................................................................................6
The threat of new entrants...........................................................................................6
The threat of substitute products..................................................................................7
The intensity of competitive rivalry............................................................................7
1.2.2 SWOT Analysis......................................................................................................8
1.2.3 The Ansoff Matrix..................................................................................................9
2. The Milk/Dairies Business Unit of VIVARTIA (Delta S.A)........................................11
2.1 An overview of the milk/dairies business unit........................................................11
2.2 The strategy of Vivartia in the sector of milk/dairy products..................................12
2.3 The competitive advantage of Vivartia in the sector of dairy products...................13
3. Vivartia: resources and capabilities...............................................................................14
Bibliography......................................................................................................................15
Websites.........................................................................................................................15

1. Overview of the VIVARTIA Group of companies

Vivartia group of companies was created in 2006 and includes the companies “DELTA
Dairies Industry S.A”, “Delta Holdings S.A”, “Chipita”(snacks industry), “Goody’s”
(Fast-food restaurants) and “Barba-Stathis S.A” (frozen vegetables). Through this joint
business scheme Vivartia constitutes a leading player in the domestic market of dairy
products, foods, frozen products and restaurants/entertainment (VIVARTIA – 2007
corporate presentation).

The overall structure of the group is actually based on the different industries that each
conglomerate company is established to i.e.:

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  Milk and dairy products (represented by “DELTA Dairies Industry S.A”)
 Frozen food and vegetables (represented by “Barba-Stathis”)
 Bakery and snacks (represented by “Chipita S.A”)
 Fast-food restaurants/entertainment (represented by “Goody’s S.A” and “Flocafe
S.A”)
Based on the 2006 figures, the group reserves a leading market share in the sectors of
fresh milk, chocolate milk, frozen products, fresh juices and brand restaurants (franchise),
whereas it comes second in the field of dairy products (yoghurt in particular, with “FAGE
S.A” being the market leader).
With its enormous productive capacity that stems from the 26 owned ultramodern
productive units across the world and with a strong presence in more than 30 countries,
Vivartia sells 2.5 billion products on a daily basis and employs more than 13.000 people
all over the world. More specifically, in the Greek market Vivartia’s brand recognition
reaches almost 99%. Graph 1 below shows the contribution of each business unit of
Vivartia to its total turnover (2005 figures). As it can be seen from this graph the business
units of milk/dairies (DELTA S.A) and snacks (Chipita S.A) are the major contributors to
the group’s total revenue for the year 2005 (VIVARTIA – 2007 corporate presentation).

VIVARTIA - Contribution of each business

unit to total revenue - 2005

8%
17%
41%

34%

Milk and Dairies Snacks

Fast food restaurants Frozen foods & vegetables

Source: Official website of Vivartia available at http://www.vivartia.gr [ 05/05/08]

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Vivartia’s product portfolio includes a lot of famous brands and product lines both in the
Greek and Balkan market. Many of these brands are market leaders in the domestic
market and have a powerful presence abroad. Examples of these include (analysis per
business unit):

A. Sector of Dairy Products (DELTA A.E)

1. White fresh milk DELTA

2. Chocolate milk “MILKO”
3. White pasteurized milk “Mmmmilk!”
4. Low-fat greasy yoghurt with fruits “Vitaline”
5. Full-fat plain yoghurt “Natural”
6. Full-fat plain yoghurt “Complet”
7. A line of fresh fruit juices under the “LIFE” brand
8. Feta cheese DELTA
9. Ice-creams DELTA

B. Sector snacks (Chipita)

1. Croissant “MOLTO”
2. Croissant “7 days” (and mini croissant)
3. Bake rolls
4. Savory snacks EXTRA

C. Sector of frozen foods/vegetables (Barba-Stathis)

1. Product line of frozen vegetables “Barba-Stathis”

2. Product line of frozen vegetables “FROZA”
3. Product line of frozen dough “GOLDEN DOUGH / "Chrisi Zimi”

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D. Sector of services of eponymous focus of/coffee (Goody's and Flocafe)

1. Chain of fast-food restaurants under the “GOODY's” brand (privately-owned

restaurants and franchise restaurants)
2. Chain of branded cafeterias “Flocafe” (privately-owned and franchise)

The mission of Vivartia to produce and deliver healthy, high quality and innovative
products and services to its clients in all the respective industries that it is involved in.
The vision of the company is to maintain its leading position in the domestic Greek
market in every single sector that it focuses on and to expand its presence abroad,
especially Europe, Africa and Middle East (VIVARTIA – 2007 corporate presentation).

As far as the values of “Vivartia” are concerned these could be summarized into the
following:
 Respect for the customer and its health
 Customer satisfaction
 Customers’ well being
 Emphasis on high quality
 Corporate Social Responsibility/ Code of Conduct
 Focus on innovation
 Effective organization and flexibility

Most of these values are apparently incorporated in the company’s brand name itself
since the word “Vivartia” comes from the union of the words “Viva”=life and
“artia”=balance/harmony (Vivartia official website).

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1.2 Strategic analysis of Vivartia

In order to carry out a strategic analysis for Vivartia, some of the most common and
famous strategic tools will be employed such as Porter’s 5 forces analysis, SWOT
analysis, Ansoff matrix etc. Before we proceed however with this analysis, it would be
wise to review Vivartia’s strategic intent and objective for the future. These could be
summarized into the following (Vivartia official website):
 Maintenance of the Group’s leading position in the Greek market over the
next decade
 Strengthening of the Group’s position abroad especially Europe, Africa
and Middle East through greenfield investments or strategic alliances or franchise
 Create synergies and economies of scale across its entire production and
distribution network
 Expand through horizontal integration strategies (i.e. mergers and
acquisitions)
 Become more innovative (i.e. invest in biological agriculture)
 Organic growth (increase of production capacity and expansion of the
distribution network in Greece and abroad)

1.2.1 Porter’s 5 forces analysis

Bargaining power of customers

According to Porter, the bargaining power of customers stems from the buyer volume,
the availability of information to the buyers, the switching costs, the availability of
substitute products or services, the ability of buyers to integrate backwards on the supply
chain, the buyer’s price sensitivity as well as the total price of purchase. In the case of
Vivartia the bargaining power of customers is relatively small due to the extensive
customer basis (more than 1 billion customers worldwide), the relatively small value of

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purchase per customer as well as the low capability of customers to integrate vertically
(Porter and McGahan, 1997).

Bargaining power of suppliers

The bargaining power of suppliers depends on the following factors (Porter and
McGahan, 1997):
 The ratio of supplier to firm concentration
 The suppliers’ switching cost
 The threat of suppliers’ integrating forward on the supply chain (retail)
 The threat of substitution by similar products or services
 The differentiation of inputs
 The cost of inputs in relation to the price of product/service
Vivartia has an extremely wide supply chain for each one of its business units. Especially
in the case of milk/dairy products DELTA has already acquired a significant number of
farms in Northern Greece so as to gain better control over the supply chain of milk and
benefit from increases in the price of milk in the future as well as advanced distribution
and more consistent lead-times. Barba-Stathis has integrated vertically and produces by
own means the vegetables that it freezes and sells to the market. Goody’s has acquired a
large number of its suppliers so as to gain better control over the supply chain and the
prices fluctuations. Flocafe has acquired “Illy” a major coffee retailer. Last but not least,
suppliers have a low capability to integrate vertically towards the retail side of market. As
a result the bargaining power of suppliers is rather very restricted.

The threat of new entrants

The 3rd force out of (5) Porter included in his model is the threat of new entrants in the
industry. This may depend on the entry barriers (i.e. economic, legislative, governmental
and other), the capital requirements necessary for the start-up, the ease of access to the
distribution points, the switching costs as well as the degree of economies of scale that
the industry is offered for (Dawson, 1993; Porter and McGahan, 1997).
This risk varies greatly across the respective fields that Vivartia operates in. For example,
the threat of new entrants is considerably small in the units of milk/dairy products

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because of the massive investment that is required for a new player to enter this market as
well as the quite advanced expertise that is required. The risk is higher in the case of Fast-
food restaurants or branded cafes where these restrictions are less.

The threat of substitute products

The threat related to substitute products is actually dependent on five elements:
(1) The existence of substitutes
(2) The tendency of buyers to look at substitute products and services
(3) The price difference between a given product or service and its substitutes
(4) The switching cost of substitution
(5) The level of customer’s perceived differentiation as regards the given products or
services (Porter and McGahan, 1997)
The basic substitutes for the products that Vivartia sells are the following (VIVARTIA –
2007 corporate presentation):
- Long-duration, pasteurized milk in can instead of fresh milk (Pros: it lasts more /
Cons: it is not fresh, its taste and nutritional elements are poorer)
- Fresh vegetables instead of frozen vegetables (Pros: they are more tasty and their
vitamins/ nutritional elements are well maintained/ Cons: they cannot be
preserved for a long period)
- House food or restaurant food instead of Fast-food restaurants (Pros: The food is
healthier and more nutritional/ Cons: it takes more time to be prepared)

The intensity of competitive rivalry

Finally, the intensity of competitive rivalry must be examined. The factors to be

examined here include the industry’s growth rate, the number of existing competitors, the
volume of the industry’s overcapacity, the asymmetry of information between
competitors and their diversification, the exit barriers, the volume of advertising, the
brand equity and the cost structure of rivals.
The degree of competition differs across the several business units of Vivartia. For
example the milk and dairies market is extremely competitive since it is an oligopoly

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with a few and well-established market players. On the other hand, the frozen foods
market is less competitive due to the lower market growth rates. The snacks market is
also very competitive since the domestic market is almost shared between 3-4 companies
(TASTY Foods S.A is the major competitor) [VIVARTIA – 2007 corporate
presentation].

1.2.2 SWOT Analysis

Table 1: SWOT Analysis for VIVARTIA

(Strengths)
- The group consists of strong
companies with significant experience
in their respective fields
- Popular brands with leading market
shares in the domestic market
- Strong financial position
- Highly skilled personnel
- Flexible organization
- Significant production capacity
- Extensive retail network
- Effective marketing and promotion
- Established presence in 30 countries
- Economies of scale and synergies
(Weaknesses)
- Bureaucratic organization
- Ineffective transit to the new business
scheme of Vivartia (poor change
management)
(Opportunities)
- Expansion of current product lines
- Expansion of its presence in Europe,
Africa and Middle East
- Optimization of the cost structure
through synergies and economies of
scale
- Maintenance of its leading market
shares in the domestic market
- Improvement of the organization
through business re-engineering
- Increase of productivity
(Threats)
- Threat of new entrants in one or more
of the fields that the company is
established
- Increase of unit cost of products due to
poor exploitation of the economies of
scale
- Change to consumer tastes and market
trends

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1.2.3 The Ansoff Matrix
The Ansoff matrix or else the “product/market matrix” is a valuable tool that proposes the
most appropriate strategy based on 4 different combinations of product and market
conditions. Figure 1 below provides a schematic representation of the Ansoff matrix.

Figure 1: The Ansoff Matrix

Existing market New market

Existing Market growth

Penetration strategy
product strategy

New Diversification
Product growth strategy
product strategy

Source: Ansoff, I. (1989), Corporate Strategy, revised edition, Penguin,

Harmondsworth.

In order to evaluate the strategy of Vivartia based on this model, one should ideally
examine the strategies of each of the companies that belong to this Group (VIVARTIA –
2007 corporate presentation).
 Delta Dairies Industry S.A implemented initially a market penetration strategy in
order to gain a significant market share in the oligopoly of milk/dairy products in
the Greek market. Later on the company followed a product growth strategy by
introducing new products and product lines (e.g. milk rich in calcium for pregnant
women etc.). After DELTA has gained a leading market share in the milk
domestic market and a No.2 position in the domestic yoghurt market the company
established its presence in Cyprus (market growth strategy).

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  Chipita S.A also followed a penetration strategy at its early stages in order to
detach a market share from TASTY FOODS S.A, its major competitor in the
Greek market. What followed was a product growth strategy by virtue of which
the company introduced several new products such as MOLTO croissants/ 7 Days
croissants, Bake Rolls etc.)
 Goody’s had a first-mover advantage in the Greek market where it quickly
established a strong presence (through franchised restaurants) by implementing a
penetration strategy. After it did so, the company followed a market growth
strategy and expanded into the Balkans (i.e. Bulgaria)
 Barba-Stathis achieved to gain strong market shares in the domestic market by
following an aggressive penetration strategy. Lately the company has expanded
abroad by means of an export entry mode.
 Flocafe penetrated the Greek market by following a differentiation strategy. It
actually achieved to create a new market segment i.e. that of branded cafeterias
(blue oceans strategy) within the existing domestic market. High-quality products
and premium customer service are considered to be its key competitive
advantages (Kim and Mauborgne, 2005).

Conclusively it could be said that Vivartia implemented a market growth strategy at its
early stages by expanding abroad (i.e. U.S.A, Canada, Russia, Europe etc.). This growth
has been the result of both a successful organic growth model as well as an effective
horizontal integration strategy (i.e. mergers and acquisitions). To establish its presence in
each market the company implemented a diversification strategy since it produced
products that matched the needs and expectations of the domestic markets.
Taking this analysis one step ahead, it could be said that according to Porter’s generic
strategies Vivartia seems to follow a differentiation strategy since it produces high quality
products that it sells in premium prices (even if in oligopolistic markets this is not always
the case due to competitive pressures) (Proctor, 1997; Cooper, 2000).
Vivartia seems determined to implement the same successful model of diversification in
the future through appropriate entry mode strategies in foreign countries (i.e. Greenfield

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investments, exports, franchise, strategic alliances) and through horizontal integration
strategies (mergers and acquisitions) (Lynch, 2003).

2. The Milk/Dairies Business Unit of VIVARTIA (Delta

S.A)

2.1 An overview of the milk/dairies business unit

Milk and dairy products are by far the most dynamic and profitable business unit of
Vivartia since for 1996 alone this unit accounted for 39% of the total revenue and 40% of
the total EBITDA. This business unit is represented by DELTA Dairies Industry S.A and
includes the following product categories (Vivartia-Corporate Presentation 2007):
- Fresh Milk (Contribution 50%)
- Chocolate Milk (Contribution 10%)
- Yoghurt (Contribution 19%)
- Fresh refrigerated juices (Contribution 9%)
- Other dairy products (Contribution 12%)
Vivartia maintains leading market shares for many of the above product categories. Table
2 below shows the 2006 market shares for this business unit of Vivartia in the domestic
market.
Table 2: Vivartia market shares in the milk/dairies market – 2006 data
Product category Domestic market share
Fresh Milk 30.3%
Chocolate milk 57%
Dairy products (yoghurt 19.7%
and cheese)
Fresh refrigerated juices 58%

Source: Vivartia Corporate Presentation 2007 available at

http://www.vivartia.gr [05/05/08]

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Delta S.A has a vertically integrated production system since it is 100% responsible for
each production stage as well as the distribution of the milk and other products to the
market. More specifically Delta carries out the following activities:
- Production of breeding foods for animals
- Cow breeding
- Collection of milk from 8 milk collection units across Greece
- Milk processing in 7 processing units across Greece
- Milk distribution through 4 distribution channels across Greece
- The 26.000 retail points across Greece
Delta co-operates with 1.500 producers from all over Greece and absorbs 35% of the total
milk domestic production.

2.2 The strategy of Vivartia in the sector of milk/dairy products

As outlined above the corporate strategy of Vivartia at this stage is a diversification

strategy. More specifically this strategy is translated into the following strategic
objectives for the milk and dairies business unit (VIVARTIA – 2007 corporate
presentation):
- Maintenance of the leading market shares in the markets of fresh milk, chocolate
milk and fresh juices
- Growth / development of the existing product portfolio in all the respective
product categories (especially the fresh milk category) both in the domestic as
well as the international market (with focus on the Europe, Middle East and
Africa).
- Introduction of new, innovative products in the current product portfolios
worldwide
To meet these goals Vivartia has already expanded its milk product category by
supplying the long lasting pasteurized milk “Vlachas” (in a can package) as well as the
pasteurized milk “Mmmilk”. In the yoghurt product category the company has launched a
new product line under the “Daily” brand name whereas in the dairy/snack category it
currently produces the “Milky” product line. Further to the above, Vivartia has already

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invested in the development of two new product lines, one of dairy products for infants
and one of biological dairy products. These new product lines will be initially launched in
to the Greek market but the plan is that after some time they also move into the
international markets (Proctor, 1997; Lynch, 2003).
As far as the organic growth of this business unit is concerned, Vivartia has already
expanded the distribution channel of “Vlachas” in many European and Balkan countries
by taking advantage of the already settled retail network of Chipita there. Similar
strategies will be implemented in the fresh juice category as well in the future.
Nevertheless, when it comes to the fresh milk category things become more difficult
since these products have a very limited expiration date. This problem can only be
resolved by the local production of milk abroad which however raises other issues such
as financing, milk production capacity by farmers, quality of milk, local competition and
prices etc (Kerin and Peterson, 2004; Hill and Jones, 2007).
As far as the horizontal integration of this business unit is concerned, Vivartia has
acquired the “Vlachas” brand from Nestle and has already developed a new fresh milk
brand under the same brand name, while at the same time it makes movements for the
development of the Cypriot dairies industry “Christies” as well as the Greek “Mevgal”.

2.3 The competitive advantage of Vivartia in the sector of dairy

products

Judging from the leading market position of Vivartia in the Greek market and its
significant market shares it could be said that Vivartia has a strong competitive advantage
that stems from (Vivartia – Corporate Presentation 2007):
 Its great experience in the Greek market
 Its vertical integrated production system
 Its total quality management system (ISO and HACCP)
 Its production capacity (7 milk processing units)
 Its extensive retail network (26.000 retail points across Greece)
 Its highly skilled personnel
 Its popular and strong brand names

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  Its effective and successful management

3. Vivartia: resources and capabilities

Further to the previous analysis, it would be wise to mention that the success and
competitive advantage of Vivartia was not a coincidence but rather the combined
outcome of its successful strategies and resources/capabilities. These resources and
capabilities refer to both tangible and intangible assets of the company and can be
summarized as follows (Thompson and Strickland, 2003; Hill and Jones, 2007):

Resources
 Financial strength and capability
 Great experience in the domestic market
 Highly skilled and experienced personnel
 Strong corporate brand name
 Large retail network
 Massive production rates
 Co-operation with 1.500 Greek farmers

Capabilities
 Effective and flexible organization
 Effective management
 Effective and highly experienced marketing team in the food retail market
 High innovation rates
 Effective internal and external communication
 Effective management of the supply chain
 Capability of successful vertical integration

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Bibliography
Ansoff, I. (1989), Corporate Strategy, revised edition, Penguin, Harmondsworth.

Cooper, L. (2000), “Strategic marketing planning for radically new products”, Journal of
Marketing, Vol. 64 Issue 1, pp.1-15.

Dawson T.(1993), Principles and Practice of Modern Management, Tudor Business

Publishing Ltd. 1993

Hill, W. C & Jones, R. G. (2007), Strategic Management: An Integrated Approach, 7th

ed., Houghton Mifflin Company, Boston: New York.

Kerin R.A., Peterson R. (2004), Strategic marketing problems: cases and comments /,
Upper Saddle River, NJ: Pearson/Prentice Hall,., International ed. 10th ed.

Kim W.C. and Mauborgne R. (2005), Blue Ocean Strategy: How to Create Uncontested
Market Space and Make Competition Irrelevant, Harvard Business School Press

Lynch, R. (2003), Corporate Strategy, 3rd ed., Prentice Hall - Financial Times.

Porter M. A. McGahan (1997), “How Much Does Industry Matter, Really?”, Strategic
Management Journal 18 (July), pp.15-30.

Proctor, T. (1997), “Establishing a strategic direction: a review”, Management Decision,

Vol.35, No. 2.

Thompson, A. A. & Strickland, J. A. (2003), Strategic Management: Concepts and Cases,

Thirteenth ed., McGraw-Hill.

Websites

VIVARTIA official website available from http://www.vivartia.com [5/5/08]

Vivartia Group – Corporate Presentation 27/03/2007 available from:

http://www.vivartia.com

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