Internationalising Green & Black
Green & Black
Green & Black is a British chocolate company established in 1991. The company is shaped
around a passion for organic food and a strong commitment to organic and ethical trading.
The brand name ‘Green & Black’ reflects this commitment, Green symbolise their strict
organic principles and Black represents the intensity of the chocolate (Greenandblacks,
2013).
G&B get their cocoa from the Dominican Republic and Belize, where they have build
strong relationships with organic cocoa farmers. By buying cocoa beans from the cocoa
farms G&B is helping to develop the local communities. Today its product range consists
of chocolate bars, gifts, hot drinks, baking products and ice creams, which are all premium
priced. The products are available through food retailers in the UK, Germany, North
America, Australia, and New Zealand, as well as on their website (Ibid, 2013). In 2005
G&B was taken over by Cadbury, subsequently in 2010 Cadbury was taken over by Kraft
Foods (Ibid, 2013). Both companies decided to run G&B as a separate business.
World chocolate market
The chocolate industry has experienced a global recession with falling disposable incomes,
volatile commodity prices and increasing competition (Kpmg, 2012). Despite this revenue
of companies has remained resilient (Ibid, 2013). One reason this could be the ‘lipstick
effect’, when facing an economic crisis consumers are more willing to buy less costly
luxury goods such as cosmetics and chocolate and spend less on big ticket items like
vacations (Ibid, 2013). Thus consumers refuse to give up the little ways they spoil
themselves, and are therefore likely to purchase ‘affordable luxury’ like premium
chocolate.
Western European and North America dominate the global chocolate market, but those
markets are also saturated and manufactures have to be extremely innovative to meet the
changing consumers needs (Ibid, 2013). According to a report conducted by the consulting
company KPMG (2012) the emerging markets clearly represent the future for the
chocolate industry. The BRIC countries are said to be particularly interesting, as they
accounted for 55% growth of global confectionery retail in 2011 (Ibid, 2013).
BRIC Nations PEST Analysis
BRIC is an acronym first used by Jim O’Neil of Goldman and Sachs to group Brazil,
Russia, India and China. Identified as rapidly growing economies, these countries are
predicted to become major economic powers over the next few decades. From 2010 to
2011 the BRICs exhibited an annual GDP growth of 5.22 per cent, over the same period
the US had growth of 2.0 per cent and the Eurozone growth of negative 0.6 per cent
(Hollenson, 2013: 228). Unemployment levels are also also generally lower the BRIC
nations than in the U.S and Eurozone. GDP growth and low unemployment indicate a
healthy and expanding economy which is usually viewed positively, especially from a
business perspective. Common benefits include a reduction in poverty, increases in
consumer spending and spending habits shifting towards more luxury goods. Economic
growth can have draw backs such as resource depletion and and increases in damage to the
environment.
The economic climate of a potential new market is a key factor when considering
international expansion; for a company such as Green & Blacks selling high end products
a healthy, growing economy is highly suitable. In addition to the BRIC nations Jim O’Neil
identified eleven other nations as having high potential for future economic prosperity,
these nations are referred to as the N11. Four nations make up 73% of the entire N11’s
collective GDP, these four nations are referred to as MIST; Mexico, Indonesia, South
Korea and Turkey. Although these nations are showing signs of growth to rival the BRIC’s,
their current state of development and market sizes meant hey are not yet competitive.
Total GDP for the MIST nations was $3.9 trillion last year, less than one third of the $13.5
trillion BRIC economies. In population, the MIST nations have fewer than 500 million
people, compared with about 2.9 billion in the BRIC nations (Martin, 2012).
Green & Black’s are marketing a superior product, an increase in income of potential
consumers will see a greater proportional increase in demand giving the product a high
income elasticity of demand. For this reason a flourishing economy has been identified as
the most suitable market for Green & Blacks international expansion. Having identified the
BRIC nations as the four most promising markets a PEST analysis of each of them will be
conducted to identify the most suitable country.
Brazil
Political
• Brazil’s current president is Dilma Rousseff, a member of the The Workers’ Party which
sits moderately left on the political spectrum. Although the workers party was subject to
some political scandal in 2005/2006 the government is considered stable.
• The corporate income tax (IRPJ) rate is 25%. The rate is a combination of a 15% basic
rate and a 10% surtax on income that exceeds BRL 240,000 per year. In addition, Brazilian
tax legislation imposes a social contribution on net profits (CSLL) at a rate of 9%. Thus,
corporate income taxation should be charged at a combined rate of 34% (IRPJ and CSLL).
The standard VAT rate is 18 percent (KPMG, 2013).
Economic
• The Brazilian currency is the Real, worth $0.44 (XE, 2013). In 2012 GDP was $2.253
trillion. Growth has slowed in recent years from 7.5% in 2010 to 0.7% in 2012
(Worldbank, 2013). This slow down has been attributed partly to a global slow down but
also to infrastructure problems affecting industry (Globalpost, 2013).
Social
• Population growth has been steady at 0.9% over the last few years with total population
198.7 million in 2012 (Worldbank, 2013). Median age is 29.6 years (Iidexmundi, 2013).
• In 2012 average chocolate consumption per capita was 2.5kg (Confectionerynews, 2013).
• Brazil is a predominately Christian country and Easter is a popular holiday with over
100million Easter eggs bought every year. However, childhood obesity presents a curb on
growth, with more than 35% of children overweight. As a result child-focused product
launches have been driven down by 62% (KPMG, 2012). “Premium Chocolate is rapidly
growing in popularity in the emerging Brazilian market according to domestic trade body
ABICAB” (Brazilian Association of Chocolate. Cocoa, Peanut, Candy and Derivatives)
(ABICAB, 2013).
• The literacy rate in people aged 15 and over is 90.4% (CIA, 2013). In 2006 Brazil
invested 5% of its GDP in education (Worldbank, 2013).
Technological
• In 2002 Brazil were the first nation to have a 100% electronic election (BBC, 2008).
Brazil has been steadily increasing its investment in research and development, in 2012
$29.5 billions was invested, over 1.15% of the countries GDP (Grueber & Studt, 2012).
Automation technology and the skilled workforce required to use it are available,
Mercedes-Benz, BMW and Audi are planning to invest a combined $725m in separate
projects to establish factories in Brazil (Tschampa, 2013). The transportation infrastructure
within Brazil is poor, the railway system is largely undeveloped and only just over 13% of
roads are paved (Worldband, 2013).
Russia
Political
• Russia’s constitution states the President is head of state. Executive power belongs to the
government directed by a Presidentially selected Prime Minister. Legislative power rests
with the Federal Assembly of the Russian Federation (Gazeta, 2011). Vladimir Putin is
current president of Russia. Although elected as a democratic ruler in a multi party system
Putin’s regime has been criticised, cited as “Putinism”, a term characterizing a dictator
giving pretence as a democratic leader (Tisdal, 2007).
• Corporate tax rate is 20%. Tax payments are split into federal part (2%) and regional part
(18%). The standard rate of VAT is 18% (KPMG, 2013).
Economic
• The Russian currency is the Ruble, worth $0.03 (XE, 2013). In 2012 GDP was $2.015
trillion, growth has slowed in recent years from 8.5% in 2007 to 3.4% in 2012 (Worldbank,
2013). Russia’s economic growth under Putin has been called into question, with reports
suggesting an over reliance on the export of raw materials such as oil and gas providing a
unsustainable and vulnerable means of growth (Marson & Kolyandr, 2013).
Social
• In 2011 and 2012 population growth was at 0.4%, total population is 143.5 million
(Worldbank, 2013). Median age is 38.8 years (Iidexmundi, 2013). In 2012 average
chocolate consumption per capita was 5.9kg (Confectionerynews, 2013).
• Middle market chocolate products such as Mars and Nestle are currently gaining
popularity (Nieburg, 2013). The literacy rate in people aged 15 plus is 99.7% (CIA, 2013).
In 2006 Russia invested 3.9% of it GDP in education (Worldbank, 2013).
Technological
• Under the 1985 National Computer Literacy Program, Computer Science was included in
the school curricula as a compulsory subject. The ‘Internet for Every School’ (2006-2008)
program further improved access to Information Technology across all of Russia, and
today every school in the country has access to ICT devices and the Internet (Edutech
associates, 2011).
• Public spending on research and development has fluctuated over recent years, in 2010 it
was at just over 1% of GPD, however, this was lower than 2009 (Worldbank, 2013).
• Russia’s railway system is among the largest and most used in the world. At present
around 79% of Russia roads are paved, however, In 2008, there were nearly 30,000 road
traffic deaths five times higher than in countries with the best road safety records
(Worldbank, 2013).
• Manufacture in Russia is stagnating, “future growth will require investment in new
