Bimbo Factory: Entering the EU Market

Part I: Markets Assessment: Germany, Bulgaria, and Greece

Introduction

Entering a new economic environment is always a challenge. Despite its success in the home market, Bimbo Factory may face severe challenges in the context of the EU environment. Although each of the markets, i.e., the German, the Bulgarian, and the Greek ones, pose unique challenges to the firm, it seems more reasonable to focus on the German one, as it provides ample opportunities for the further growth and expansion.

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Germany

PESTLE

Political Germany is a democratic country;

The state supports free trade.

Economic German takes the 4thposition in the list of the most economically advanced states;

Services sector takes 69% of the GDP (Germany: Share of economic sectors in the gross domestic product (GDP) in 20152016).

Sociocultural Germany is the EU state with the largest population;

The focus of the German culture is on family and traditions.

Technological Germany is a scientifically and technologically progressive state.
Environmental The citizens and state authorities focus on the sustainable use of resources.

The focus on gluten-free products is the current trend.

Legal Germany follows the EU Food Law;

However, recently, the terms “vegan” and “vegetarian” have been defined in Germany, as opposed to other EU states (Rixon 2016).

Market evaluation

Market size. According to a recent report, the total turnover of the German food market made €168,6 bn, which is 2.1% lower than the 2014 index (€172.2 bn) (Federation of German Food and Drink Industries 2016). The baked goods segment makes approximately 8.8% of the industry (Germany Trade and Invest 2016) (see Fig. 1).

Development speed. The progress that the German food and drinks industry is making at present is truly fascinating. The promotion of a competence networks makes it possible for a rapid increase in quality standards and the promotion of the latest technological advances (German Food Clusters 2012).

Food and Beverage Industry in Germany by Segment
Figure 1. Food and Beverage Industry in Germany by Segment (2013)

Economy. A consistent consolidation trend that has become the primary characteristic feature of the German bakery industry has led to a drop in the number of home companies operating in the industry.

Competitors. Although the target market does not swarm with rivals, and the identified niche (i.e., bakery) has already been taken by Kellog, GmbH, Dr August Oetker Nahrungsmittel KG, Cereal Partners Deutschland GmbH & Co oHG, and Peter Kölln KGa (Euromonitor International 2014b) (see Fig. 2). Therefore, the entrepreneurship will have to try very hard to make sure that its competitive advantage is strong enough to give its products staying power.

Bakery Industry: Key Companies
Figure 2. Bakery Industry: Key Companies (Germany) (Euromonitor International 2014b)

Customers

There is a strong propensity among German customers to compare prices and choose the firms that offer large discounts.

Bulgaria

PESTLE

Political The Bulgarian market operates in accordance with the global trade regulations;
Economic The domestic market can be deemed as large;

A recent drop in companies; performance due to a stronger emphasis on environmentalism should be mentioned as the primary characteristic;

Sociocultural The market is dominated largely by artisanal products.
Technological The Bulgarian bakery market can be deemed as technologically developed, though further progress is desirable.
Environmental The recent focus on healthy food is becoming increasingly popular;

However, the focus on artisan products prevents progress from occurring.

Legal No specific legal constraints have been detected (Euromonitor International 2014a).

Market evaluation

Market size. The total bakery production in Bulgaria made 600,000 tons in 2013 (a 1% drop), with the consumption rates being 55 kg/head/year (decreasing).

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Development speed. At present, the market is rather stale.

Economy. The market share of industrial bakeries makes 87%.

Competitors. The target market can be described as very fragmented, with a total of 65 organizations competing in the environment of the Bulgarian bakery market for an increase in their shares. At present, the market is dominated by Nestle Bulgaria, the company taking 54% of the market share. Kellogg’s products take the second spot in the top list of the most influential companies, with only 8% of the shares, though.

Customers. speaking of the Bulgarian people’s buying behaviour, one should mention the fact that they tend to buy artisanal products (International Association of Plant Bakers, 2015).

Greece

PESTLE

Political
  • No political restraints can be identified.
Economic
  • Discounts and promotional activities can be deemed as the primary characteristics of the target market;
Sociocultural
  • Artisanal products make approximately 72% of the total market share;
Technological
  • Gradual technological advancement should be mentioned;
Environmental
  • The recent focus on environmentalism has been noted;
Legal
  • General EU standards are applied.

Market evaluation

Market size. Although the current size of the market is rather small, it is predicted that it is going to grow.

Development speed. With Nestle at the helm, the market is developing at a steady pace.

Economy. The challenging financial situation that the country is facing at present leads to the creation of rather poor conditions for starting a business.

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Competitors. Nestle and Tasty Food have been competing in the target market for years, therefore, leaving other companies little to no chance. Currently, Nestle holds a total of 36% market share, whereas Tasty Foods has only 5%.

Customers. In light of the popularity of the artisanal products, it can be assumed that the customers are driven primarily by the necessity to purchase low-cost products.

Conclusion

Based on the analysis carried out above, one must admit that entering the German market seems to be the most reasonable step to take at present. Seeing that the political and environmental factors are largely the same in each of the three states mentioned above, it will be a sensible step to consider the issue regarding the competition and the opportunities for the further development.

As stressed above, the Bulgarian market has already been dominated by Nestle for years, which might seem like an obvious hint at dismissing it. However, a closer look at the target environment will reveal that the rest of the organizations, apart from Kellogg, which is also not very popular, have not developed the competitive advantage that they need to be introduced in the identified environment and, therefore, become successful. Consequently, Bimbo Factory is likely to take a very comfortable niche as long as it develops a strong and unique competitive advantage.

As far as the options that the company has in Greece are concerned, one must admit that the identified option will not lead to any major economic opportunities. It could be argued, though, that the German market has more options for development, with an evident focus on technological advances that creates premises for consistent progress. However, operating in the German environment is likely to trigger a considerably larger number of costs compared with the Bulgarian one.

While the development speed of the Bulgarian market can be deemed as not quite fast, it, nevertheless, has a potential. The tendencies among the local customers to buy artisan products, however, might hamper the developmental process. Still, with a powerful marketing approach that will point to the benefits of buying high-quality products, as well as a flexible system of prices and discounts, the entrepreneurship will be able to attract an increasingly large number of clients in the realm of the Bulgarian bakery market.

Part II: Setting up a Production and Distribution Facility: Factors to Consider

When considering the factors that should be taken into account when doing business in Europe, in general, and setting up the environment for running a bakery, in particular, one should first review the same factors as on would have to consider when starting a company in any other part of the world.

As stressed above, it is imperative to consider economic, political, environmental, sociocultural, technological, and legal factors when deciding which market to choose in order to set a company in its environment. Speaking of the sociocultural context, the needs and key characteristics of the target audience must be identified and analyzed properly so that a cohesive and adequate marketing strategy could be designed.

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In addition, an array of internal factors, including the experience of the company leaders, the size of the entrepreneurship, its target audience, the company image, its brand product, its marketing approach, etc. must be incorporated in the analysis so that the potential problems could be isolated and addressed in a manner as timely and efficient as possible. In other words, the first steps of setting a business in Europe are basically the same as in any other part of the world.

Diversity and Tolerance

However, as stressed above, the identified environment has a range of unique characteristics that are likely to affect the further development of the entrepreneurship. Among them, the cultural issues must be addressed first. In light of the recent political events, one must consider the rapid increase in the number of immigrants an obvious trend for most European countries.

As a result, to be successful in the context of the European market, in general, and the markets of Germany, Bulgaria, and Greece, in particular, Bimbo Bakery will have to review its current policies and practices to make sure that they do not contain any item or message that could be viewed as inappropriate or at least controversial by any member of the target population. In other words, the issues regarding religion, culture, and social status need to be addressed with great care and caution to make sure that the company’s activities do not hurt anyone’s feelings or violate anyone’s rights.

Rebranding

Furthermore, in light of the fact that the European policies for providing rights to marginalized members of the society are very rigid, the entrepreneurship might consider the idea of rebranding. Seeing that the customers of the markets chosen for the further integration can be deemed as having basic English literacy and skills, they might view the company’s name as inappropriate in the context of a culturally sensitive environment.

Seeing that the term “bimbo” can be rendered as offensive to women, the entrepreneurship might consider a change in its brand so that the target audience could be more comfortable with the names of the products that it will buy. Indeed, a closer look at the history of companies entering the European market will show that rebranding as the means of avoiding hurting customers’ feelings is a rather common phenomenon.

Indeed, a closer look at the title of the company will show that the term might be viewed as offensive to the customers with knowledge of English, especially female ones. Conse4quently, it could be suggested that the entrepreneurship should rebrand its image and products to appeal to the target audience.

Legal Issues

Apart from the cultural aspects of setting a business in a U state, one should bear in mind that there are certain legal requirements that the organization will have to meet in order to establish itself successfully in the designated environment. Particularly, the current EU standards compel the leaders of such companies to make sure that the following demands should be met:

  • The process of setting up should take up to three business days;
  • The procedure should cost the maximum of €100;
  • The key stages should be carried out through a single administrative body;
  • The registration-related formalities should be completed via an online form.

Though seemingly simple, the objectives listed above may turn out to be rather difficult to complete since the range of steps to be taken is extremely large. In other words, the time limits can be viewed as the key restrictions. When choosing between the target markets, one must bear in mind that the German bureaucracy has become notorious; therefore, penetrating the identified market is going to be either rather costly or extremely lengthy.

Technology

When it comes to addressing the technological aspect of legal expanding into the target market, one must give credit to the efficacy of the EU policies as far as the provision of the required data is concerned. According to the official statements made by the German, the Bulgarian, and the Greek representatives, the European network offers extensive opportunities for carrying out essential steps required to succeed in the identified environments (European Union 2016a).

Particularly, the focus on technological opportunities, in general, and the information technology, in particular, needs to be mentioned. As the guides to the services providing options for setting a company in the designated areas show, there is an extensive list of opportunities for learning about the details regarding the legal issues that the leaders of entrepreneurship are likely to meet (European Union 2016b).

It should be noted, though, that some of the elements of the form provided by the EU need further development so that the companies representing the food manufacturing business could also retrieve the necessary data and become active members of the local economic community (European Union 2016c).

In spite of minor differences between the economic principles and rather large ones regarding the legal premises that the manufacturing industry is based on in the U.S. and Europe, there are ample opportunities for Bimbo Bakery to integrate into the EU market successfully. The development of distribution channels and the process of acquiring new customers, as well as creating essential business links and developing the company’s supply chain, are rather basic and require that the entrepreneurship should be aware of the needs of the target customers and the legal constraints that the local environment suggests. As soon as the key economic, technological, cultural, and legal issues are taken into account, the firm is likely to become outstandingly successful in the identified area.

Reference List

European Union (2016a) Points of Contact: Bulgaria.

European Union (2016c) Points of Contact: Germany.

European Union (2016b) Points of Contact: Greece.

Euromonitor International (2014a) Bakery in Greece.

Euromonitor International (2014b) Bakery in Germany.

Germany: Share of Economic Sectors in Gross Domestic Product (GDP) in 2015.

Federation of German Food and Drink Industries (2016) The German Food and Drink Industry: Facts and Figures 2016.

German Food Clusters (2012) The Food & Beverage Industry in Germany.

Germany Trade and Invest (2016) Industry Overview: The Food & Beverage Industry in Germany.

International Association of Plant Bakers (2015) AIBI Bread Market Report 2013.

Rixon, P (2016) ‘Germany Loses Patience with EU, Defines the Terms “Vegan” and “Vegetarian”’. EU Food Law.

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StudyCorgi. "Bimbo Factory: Entering the EU Market." December 4, 2020. https://studycorgi.com/bimbo-factory-entering-the-eu-market/.

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StudyCorgi. 2020. "Bimbo Factory: Entering the EU Market." December 4, 2020. https://studycorgi.com/bimbo-factory-entering-the-eu-market/.

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StudyCorgi. (2020) 'Bimbo Factory: Entering the EU Market'. 4 December.

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