Export of Ledo Zagorski Štrukli to Argentina: Operational Plan

Leon Brdar, Karla Kovač, Ines Perčić, Marija Tadić

 Rochester Institute of Technology, Zagreb, Croatia

MKTG.330: Global Marketing

Dr. Nikola Drašković

Spring Semester

April 16, 2023

Product

Branding and the brand name

Since our product will be exported to Argentina, we must consider the use of a localized brand
name and packaging design to appeal to the Argentine market. The name Ledo štrukli would
need to be altered to fit the native language and culture. This is the first and most obvious
change that would need to be made. This can involve choosing a name that Argentine
consumers can easily pronounce and remember. The name of our product could be something
like "Sabor de Croacia" (Taste of Croatia). It’s an easy name to remember for our consumers,
and the most important thing is that we are still highlighting the Croatian heritage, which will
definitely differentiate it on the market from similar products.

Country of origin effect

While štrukli is not widely known in Argentina, we might benefit from the fact that Croatian
cuisine is regarded as being very tasty and rich. Positive consumer perception of our food in
Argentina is crucial to us because it will definitely increase the appeal of our product. It will be
necessary for us to set our product apart from similar competing products on the market, we will
have to emphasize its distinctive features and background.

Packaging and labeling

The Argentine government introduced a new rule in 2022 that demands the labeling of
processed foods and non-alcoholic beverages that are considered to have excessive amounts
of fat, salt, and sugar. Our  packaging and labeling must comply to Argentina's regulatory
standards and provide the necessary nutritional information. We will translate the packaging and
labeling into Spanish because we are exporting our product to Argentina, where the primary
language is Spanish, but the packaging design will remain the same. We'll stick with the same
colors, which stand for joy and happiness.

 
Need for design change

As previously mentioned, the only design change needed for the time being would be us
adapting our name to Argentine consumers and translating our packaging and labeling into
Spanish. In the future, we might think about customizing our product even more to our
consumers' needs and decide to experiment with various ingredients, such as cheese from
Argentina.

Price

Cost-Plus Pricing Strategy

We have decided to use a cost-plus pricing strategy because it is a straightforward and effective
method of setting a price that covers our costs and provides a reasonable profit margin. For an
inexperienced company entering a new and still unfamiliar market, this strategy is easy to
implement and understand, as well as reducing uncertainty, and providing a competitive
advantage. By utilizing the cost-plus pricing strategy, we aim to establish a profitable presence
in the market and build our brand, while retaining competitiveness. Our total cost per unit of
štrukli pastry is $3.75, and we have applied a markup of 30%, resulting in a wholesale price of
$4.88 per unit. When determining the final retail price, we also took the margins of the
distributors and retailers into account. The distributors' profit margin is 25%, thus they will raise
the wholesale price by 25% to charge the retailer $6.10 per unit. The final retail price will be
$7.92 per unit once the retailer includes a 30% markup.

Figure 1: Cost-Plus Pricing

Strategy
Since štrukli is a different kind of pastry with its own distinct flavor and texture, Ledo is not in
direct competition with empanada producers in Argentina. However, Ledo is free to set its own
prices using Argentina's retail prices for empanadas as a guide. Argentina has a sizable
empanada industry with numerous makers and variants of the well-known pastry. La
Americana, La Rey, La Casa del Empanada, and El Noble are a few of Argentina's largest
empanada manufacturers. These businesses are widespread throughout Argentina's provinces
and provide a wide variety of empanada flavors.

Argentina has different retail costs for empanadas, depending on the region and the company
selling them. A single empanada typically costs between 30 and 50 Argentine pesos at retail (or
roughly 0.13€ to 0.21€). However, some high-end empanadas can cost as much as 80
Argentine pesos (or around 0.34€). The empanadas are usually packaged in boxes containing
12 pieces and the price of one box is usually between 10€ and 12€. Ledo’s štrukli are packaged
in boxes containing 6 pieces and the retail price of one box is $7.92, or 1687.75 Argentine
pesos. therefore, two boxes of štrukli, or 12 pieces, would be significantly more expensive than
a box of empanadas (around 15€).

Cost of Goods Sold

When it comes to calculating our cost of goods sold, we have estimated our inventory quantities
considering the quantity produced in a day, as well as the quantity we plan to export to
Argentina. After summarizing the beginning inventory and purchases made during the period
and subtracting the ending inventory, we come to the COGS of 197,700€ (Figure 2). 
Figure 2: Cost of Goods Sold

Freight Cost

We have decided to ship our goods in a 40ft refrigerated container with the Maersk company.
Our goods will be transferred with trucks from the production facility in Zagreb, Croatia, to the
port of Antwerp in Belgium, from where they will be shipped directly to the port of Buenos Aires,
Argentina. The route will take around 1 month and 3 days for the goods to arrive in Buenos
Aires. This 40ft container can carry a maximum weight of 99,000 kg. Since the shipping process
lasts more than a month, the costs are high, and we are exporting for the first time to Argentina,
we decided to use only one container. It can fit 149,988 units, each weighing 0.6 kg. When we
consider the freight rate per kg that Maersk requires, 3.50€, we get to the total freight cost of
314,974.80€ (Figure 3). The total value of our shipment will be 1,187,904.96€.
Figure 3: Total Freight Cost

The Break-Even Analysis

To calculate the break-even quantity, we have considered all of the costs that arise from the
production of goods, exporting, and marketing and advertising. The export costs summarize all
costs related to freight and transportation, customs fees and tariffs, insurance, permits and
licenses, translation and localization, and export documentation. The customs fees that apply to
štrukli are under Harmonized System Code- “Other bread, pastry, cakes, biscuits, and other
bakers’ wares” and it is calculated as 17% of the total shipment value. Moreover, 21% Value
Added Tax (VAT) is applied to our štrukli. To calculate the break-even quantity, we used the
formula that equalizes the revenues and costs to amount to zero profit and we divided the
amount by the selling price per unit. All considered we get the break-even quantity of 81,981.05
units, as shown in Figure 4. 

Figure 4: The Break-Even Analysis

The Financial Plan

A key component of the financial strategy is sales forecasting. Our estimations of the quantity
and price of the units we plan on selling help us determine how much income we could
generate. In this case, we expect that we can generate a total income of 1,109,062.50 €
(262,426,322.17 ARS) by selling roughly 140,000 units of our product for 7.92 € (1874.03 ARS)
each.
In this case, we expect our COGS to be €197,700. This covers the price of labor, raw materials,
along with manufacturing overhead. The gross profit, which in this scenario is 911,362.50 euros,
is obtained by deducting the cost of goods sold from the revenue we generated.
The costs incurred in managing the business that is not accounted for in COGS are termed
operating expenses. Salary, rent, utilities, marketing, and administrative charges are just a few
examples of these costs. We estimate that our running costs will amount to €100,000.
Operating costs are subtracted from the gross profit to determine the net profit. Our net profit in
this instance is 811,362.50€ or 191,984,560.67 Argentine pesos.
Through the break-even analysis, we determined the minimum quantity of units that we need to
sell to break even. It is 81,981.05 units.
Finally, the cash flow statement summarizes the cash inflows and outflows over a certain
period. In this instance, we expect to see inflows of 1,109,062.50 € from revenues and outflows
of 649,443.64 € from total costs, leaving us with a net cash flow of 459,618.86 €. This amount
we have available to reinvest in the company or use to repay the loans. It is all summarized in
the table below (Figure 5).

  Figure 5: The Financial Plan

Place (Distribution)

For importing Štrukli in Argentina, we are going to use direct strategy. We are going to sell via
our retailer, Hipermercados Coto. Hipermercados Coto is one of the biggest grocery stores in
Argentina. It has over 100 stores in Argentina. It was founded in 1970, by Alfredo Coto. The
Coto group runs 95 supermarkets, 16 hypermarkets, 5 shopping centers, 3 slaughterhouses, a
distribution center, a digital specialized division, and a logistics unit with 183 trucks, with a 17%
market share countrywide (reaching 28% in the metro Buenos Aires area). So we think this
retailer is going to be perfect for us and our project for importing Ledo Štrukli. 

For marketing strategy, we chose an exclusive marketing strategy. We want to focus on a

specific target group of people who are willing to pay a higher price for a better product. This
means importing our unique product Štrukli that cannot be easily replicated or imitated by
competitors. It can help build loyalty between us and our customers.

Tariffs and taxes that we are going to pay for importing food in Argentina are VAT and CIF.
Value added tax of 21% and Cost, Insurance and Freight of 17%. Our freight cost per unit is
going to be 3.50 euros.

Promotion 

Being led by high expertise, we want to establish ourselves as the family brand and build a
sense of family affection and presence. To achieve that, we need to think about the most
suitable way to promote and advertise our product. Attracting family-oriented customers, those
who enjoy having a snack to go, ones who cannot devote time to cooking, those who are
missing Croatian cuisine, and ones who want to try something new is our goal. Ledo’s
expansion is gradual and slow. Many European and international markets have not yet been
reached, and brand awareness is very low. Because of that, the message strategy needs to be
clear and concise. Before putting a plan in motion, an account need to be taken of the
challenges when advertising unknown and foreign products in the international market. Such as
language, economic differences, sociocultural differences, legal and regulatory differences, and
competitive differences. When it comes to language barriers, according to Simpson (2022), only
6% of the Argentinian population speaks English, as a matter of affect it is the third most used
language, after Spanish and Italian which are the official languages. Because of this interpreting
and translating costs will occur. To win the market, the costly but safest method would be to hire
an international advertising agency such as BullMetrix or any other that can provide us with
access to copywriters, translators, photographers, film-makers, and media planners who are
skilled and experienced in the international field. Someone who is an expert especially
understands systems, and regulations, and works in the accordance with the Argentinian Food
Insititute is highly important because of regulatory and legal differences. The composition,
ingredients, usage, and other important information need to be approved and in alliance with the
MERCOSUR regulations and Argentinian Food Institute. The disadvantage of having the
agency is that they might advertise competing products or advertise at a large scale, and not
dedicate time and resources to our product. To avoid that, agreeing on terms and setting
objectives ahead would be necessary. Also, it is important to track their performance and do
regular check-ups. For example, to check if the description, labeling, and composition are
translated and explained correctly. Any misunderstandings and misshapes need to be avoided
on time not to have unnecessary costs. When it comes to the communication channel, for
advertising, television would be the most suitable. According to Statista (2022), household
ownership of television sets in the country is 99%, with the majority of households usually
having two sets, and cable television has become the most used type of delivery, with 73.2% of
households having a cable provider. This goes to our advantage because mass media can be
used as one way of communication to reach wider audiences and obtain new customers by
increasing consumer awareness of the firm’s products and improving the relationship with
already existing ones. Since we are doing direct export mode, meaning that we are exporting
directly to our retailers through distribution channels, we would use sales promotions such as
catalogs, brochures, and price discounts. Catalogs would include all the necessary information,
from prices, sizes, colors, and quantities. Using retailers’ already existing promotions instead of
building completely new ones for a single product, would save time, money, and resources. In
addition to that, since štrukli are perishable goods, to avoid dumping and to increase sales,
offering monthly discounts and coupons is highly inevitable. In that regard, we can be more
affordable, and attractive and decrease the possibility of having returns or expired products.
Lastly, tasting as a two-way communication would be one more alternative way to reach and
attract customers. It can give the potential foreign buyer an idea of the quality that cannot be
attained by commercials, catalogs, and price discounts. It may prevent misunderstandings over
taste, smell, texture, and composition. In that way, we can get feedback, and consider
introducing variations and making alterations to the existing version. Not just that, customers
can taste our products, and retail partners can see how our products perform and track sales,
responses, and buying behavior of customers. Certainly, with this approach, we can obtain
more necessary and crucial information for improvement. To be more attractive to our
customers we would try to find the Argentinian name for štrukli and present them as something
not so foreign with the right description in Spanish. When it comes to budgeting, a few
approaches and obstacles need to be taken into account. Entering a foreign market means that
changes and modifications such as putting different types of cheese to be more locally
accepted, and not to stand out so much need to be considered. It is important to be eye-
catching and pleasing, orange is the color that represents happiness, joy, and energy, so we
would keep the color theme. Packing is suitable for families or even for the ones who want to be
more practical. Covering costs of advertising and marketing would be based on our sales. In the
early stage financing would be coming from domestic sales, and later from foreign if the
response would be successful and good enough to take advantage of it. Based on our sales
and performance budget would be allocated, taking into account translation and labeling costs,
exposure on the television, and using retailers' catalogs, brochures, and promotions. The costs
of being advertised by retailers depend on the type of retail business. Its size, location,
recognition, how well customers will respond and how much we are willing to pay for the
exposure in their catalog, and how much are they willing to gives us an advantage over
competitors. Ledo has not established itself as a global or international firm, offering traditional
products such as štrukli, leaving us in a very unfavorable position, requiring us to invest time,
effort, resources, and development if we want to be present for a longer period.
 References

Maersk. (2023). Global Logistics and Container Shipping Rates | Maersk. Www.maersk.com.

https://www.maersk.com/prices-and-quotes

Simpson, S. (2022, November 8). Do People Speak English In Argentina? – 7 Lingual Facts| Simpson.

Higherlanguage.com.

https://higherlanguage.com/do-people-speak-english-in-argentina/#:~:text=According%20to

%20that%20study%2C%20English,around%206%25%20of%20the%20population

Guttmann, A. (2023, Jan 3). Topic: Pay TV in Argentina. (2022). Statista; Statista.  

https://www.statista.com/topics/8961/pay-tv-in-argentina/#topicOverview

Argentina: Food and Agricultural Import Regulations and Standards Country Report. (2022, January

10). USDA Foreign Agricultural Service. https://www.fas.usda.gov/data/argentina-food-and-

agricultural-import-regulations-and-standards-country-report

Wikipedia contributors. (2021). Coto

Supermarkets. Wikipedia. https://en.wikipedia.org/wiki/Coto_Supermarkets

Argentina’s new labeling requirements in the food and beverage sector. (2022, April 13). IP

Helpdesk. https://intellectual-property-helpdesk.ec.europa.eu/news-events/news/

argentinas-new-labeling-requirements-food-and-beverage-sector-2022-04-13_en