Arla: Health Food Drinks Marketing Strategy in Bangladesh

Abstract

This report deals with the health food drinks marketing strategy in Bangladesh and provide a
brief analysis on health food drinks industry. There is a mild competition in this industry but
Horlicks hold the leading position. It provides healthy and nutritious malted milk to all ages of
people. The company attract the target customers through various reality show, television
advertisement, quiz contest etc. Horlicks attracts all ages of people but keep in mind that
mothers and babies are the most prioritize person in a family. Therefore, Horlicks provide the
major portion of their products by focusing on mother and baby. To hold the consistent market
leading position Horlicks had to gone through various challenges and continuous development.

Introduction
Internalization has been of great interest to nearly every company. There is no single and
universally accepted definition of internationalization but from an economics point of view, it is
defined as the process where business gets more involved in the international markets. In the
contemporary world, businesses begin their operations domestically but must draw up a long-
term plan on how the business will be going international. Internationalization phenomenon has
significantly changed the landscape for most business resulting to a very dynamic market
situation with severe competition for the companies. The reason behind going for international
market varies from one company to another. However, most firms pursue internationalization
because domestic market has become inadequate because of the economies of scale and multiple
opportunities that are available in the foreign markets [1]. Most successful executives will
always want to try another market after any successful one.
Internationalization has been one of the strategies being used by most executives to
reduce the cost of operations [2]. Businesses with overhead costs can have the excess cost cut
down in countries that have relatively deflated currencies as well as low cost of living. Most
business in the United States finds it relatively cheaper operating in countries that have free trade
arrangement with U.S. One way in which internationalization help companies reduce the cost of
doing is business is through reduced labor costs. Companies that are interested in going
international usually look for those markets that have a low cost of leaving as that makes it
cheaper hiring employees in such countries. There are those companies that consider going

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international when in the financial crisis. Executives of companies that are experiencing a
financial crisis in the domestic market will formulate the budget and go for the foreign markets.
Institutions are commonly defined as humanly made constraints the give economic, social
interactions and political shape. The institution can also be looked at as a wide range of
structures that widely affect contract enforcement, protection of investors, economic outcome,
property rights, and even political system.
Institutions play a very crucial role in the market economy. The main aim of institutions
is to ensure that there is effective functioning of the market mechanism. This sees to it that those
firms that take part in the market can carry out their transactions without suffering undue loss or
being exposed to risk. Some of the reason behind the popularity of internationalization among
current companies include opening up of trade borders by most countries across the world,
elimination of trade barriers among many others. Companies are no longer secure staying in the
domestic market and therefore most companies tend to go for internationalization to be able to
spread their risks. Internationalization has become much easier due to the communication and
technological advancement. Communication and technological advancement are vital in ensuring
that foreign businesses are properly and timely operated without experiencing problems.
Internationalization is achieved through very different ways [2]. There are those companies that
take part through exporting their products to foreign countries and continue to strengthen their
home market. Some adopt a highly aggressive approach which includes acquiring firms, coming
up with alliances, embrace joint venture or just establish their subsidiary. All these entry
strategies differ in regards to the risk associated with each, control, level of resource commitment
and return on investment that internationalization promises.
There are many entry modes that companies can use to join foreign markets but all these
modes can be categorized in two broad modes. The first mode is the non-equity mode, which
comprises of export and contractual agreements. The second mode is referred to equity mode of
entry, which is known to include wholly owned subsidies and joint ventures. From all the
available market entry, the one that offers the lowest risk level and the lowest market control is
the export and import [3]. The one with the highest risk level but highest market control is
considered to be expected return on investment. The expected return on investment is majorly
connected with a direct investment such as acquisition as well as Greenfield investments. Export
and importing is the most common strategy that most firms use to pursue internationalization.

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Export is known as the process of selling services and goods to countries other than the domestic
one [1]. The company can directly be involved in the export or use an agent.
The other strategy that is equally popular is licensing. International licensing firms are
known to give out licensee patent rights, copyrights, trademark rights, or even know-how on
processes and products. Licensee does a production of licensor’s products, marketing it within
the assigned territory and payment of licensor’s fee together with sales-related royalties in return
[4]. This strategy is mostly welcome by foreign public authorities as it is the way through which
technology is leaked into the country.
Another strategy which is more like licensing is franchising. The only difference between
licensing and franchising is the fact that franchising is more directly involved in development as
well as control of the activities that take place in the market [5]. The strategy is defined as the
system where semi-independent business owners, commonly known as franchisees, pay a small
fee and royalties to their parent company, referred to as (franchiser). This is done because of the
right offered of being identified with the trademark. With the trademark, a firm is allowed to sell
products and services besides being able to use the business format and system. This mode of
entry offers numerous rights and resources. It has both advantages and disadvantages that
companies intended to pursue internationalization need to analyze first. There is the other
strategy that companies use to enter foreign markets and that is joint ventures. Unlike licensing
strategy, the foreign joint venture has equity position as well as management of the business in
the international firm [4]. What takes place in the joint venture is the formation of a partnership
between home country and the host company, which always results in the development of the
third firm. In most cases international firm gets much better control over operations as well as
access to the local market knowledge, which is not possible with companies that have gone for
licensing strategy. Strategic alliance mode of entry is more of cooperative agreements that are
done by different firms [5]. Most of the companies that consider strategic alliance as the best
mode of entry are companies that deal in Technology innovation. The primary objective of the
strategic alliance is to exchange technology.
Finally, there is the direct investment. This is an arrangement that involves 100 percent
ownership. This can be achieved through the direct acquisition of the host market. It can also be
realized through owning facilities, and this is known as Greenfield investment. This research

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provides extensive analysis of internationalization, entry strategies, factors affecting the choice
of strategy and Arla Food’s entry strategy to Nepal.

General information

Formed in 2000 through the merge of Danish MD Foods and Swedish Arla,1 Arla Foods is a
global dairy company and cooperative owned by over 7,000 Danish and Swedish dairy farmers.
Arla’s headquarters are based in Århus, Denmark and its products are sold under well‐known
brands in more than 100 countries. Its core markets are Sweden, Denmark, Finland, the UK,
Germany and the Netherlands. Arla Foods is also the world’s largest producer of organic dairy
products. Arla Foods is ranked seventh by both milk intake and turnover among dairy companies
worldwide in 2010. 2 3 The chronology below summarises the history of Arla Foods:

1881: The first co‐operative dairy is established at Stora Arla Gård in Västmanland under the
name of Arla Mejeriförening.
1882: The first co‐operative in Denmark is established in Hjedding.
1915: Arla’s history begins when Landtmännens Mjölkförsäljningsförening is formed. The name
is later changed to Mjölkcentralen (Sweden)
1970: Mejeriselskabet Danmark (MD) is established by four dairy companies and three
individual dairies (Denmark)
1974: Registration of the name Mjölkcentralen Arla (Sweden)
1975: Mjölkcentralen changes name to Arla (Sweden)
1988: Mejeriselskabet Danmark (MD) changes name to international MD Foods (Denmark)
2000: Danish MD Foods and Swedish Arla ekonomisk förening merged to become Arla Foods
2006: Arla Foods purchases the privately‐owned dairy Tholstrup Cheese, which in turn
strengthens Arla’s international brands
2007: Arla Foods merges with Express Dairies in the UK, and thus creating the UK’s leading
supplier of dairy products under the name of Arla Foods UK plc.
2009: Arla Foods acquires Fonterra’s stake in joint venture.
2010: Arla Foods Ingredients won international recognition from the global research
organisation Frost & Sullivan for excellent customer service and innovative products.

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2013: Signed Joint Venture (JV) to operate in Bangladesh market as Arla Foods Bangladesh Ltd.

An Overview of Arla Foods

Arla Foods is a Danish-Swedish cooperative, owned by approximately 10,600 milk

producers in Denmark and Sweden. A merger between Danish MD Foods and Swedish
cooperative Arla on the 17th of April 2000 preceded the foundation of Arla Foods. Arla’s
headquarters can be found in Aarhus, Denmark. They are the largest producer of dairy products
in Scandinavia, and also have major interests in the Middle East, among other regions. Since
Arla Foods bought 50% of the shares in English Express Dairies, one of UK’s biggest dairies, it
will have three domestic markets. In 2002 the number of employees was 17 866 (Nilsson &
Björklund 2003).
The Middle East is an important market for Arla. Sales Offices are, among others, located
in Sharjah (U.A.E.), Riyadh (Saudi Arabia), Beirut (Lebanon) and Safat (Kuwait). Moreover,
Arla has sales offices in other Muslim countries, such as Malaysia and Algeria. Based on the
experience from Saudi Arabia, Arla Foods is committed to becoming the regional market leader
in cheese, cream and butter in the Middle East. The Middle East is a promising market, with the
population of the entire Middle East being estimated to be over 197 million people, spread over
25 countries. Major economic and financial centers are Dubai, Abu Dhabi, Cairo and Rihadh.
The often referred to term ‘Middle East’ itself first came into existence in the early 20th century,
and encompasses countries in West Asia and North Africa. The three main religions of this world
(Christianity, Judaism and Islam) are thought to have originated here. Islam, however, in many
forms, is the main religion.

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Vision
Creating the future of dairy to bring health and inspiration to the world, naturally.
At Arla Foods, we envision a future in which the full potential of dairy is realized. Where
natural dairy products outcompete less healthy alternatives. Where the taste of natural dairy
product is celebrated in homes and professional kitchens around the world. Where food
manufactures turn to high quality dairy-based ingredients to improve their products. It is a future
in which safe dairy nutrition is affordable and accessible to everyone.
It is our believe in this future of dairy that drives us. We’ve all been working hard to
create it, making tough choices, significant investments and doing things differently than others.
Yet, to have a real impact in the world we need to bring health and inspiration to.

Arla Foods Corporate Strategy

Arla's business strategy rests on a solid foundation - our mission, identity and vision. It
serves as an operational guide to how we, as a business, aim to create value for our farmer
owners towards 2020.

GOOD GROWTH 2020

We want to develop our role as a global food company that adds value to people’s lives
through natural nutrition and responsible operations. In order to succeed, we will: (i) Excel in
eight dairy categories (ii) Focus on six geographical regions and (iii) Win as one united and
efficient Arla.

Excel in eight dairy categories

We have matched our own strengths in the dairy categories to the consumer needs we see
globally. This has led us to identify growth opportunities on a global or regional scale in eight
categories. In these, we want to excel with innovative products, a world class supply chain,
compelling marketing and strong partnerships with our customers. The prioritised categories and
our ambitions for them are:

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 Milk and powder: We want to lead and shape the market with nutritious value-added
products.
Milk-based beverages: We want to shape the market for on-the-go products that are
made from natural ingredients.
Spreadable cheese: We want to be a leader with both cream cheese that is made from
natural ingredients and high quality processed cream cheese.
Yogurt: We want to build a strong position that is based on health benefits and natural
ingredients.
Butter and spreads: We want to be a global leader with world class products made from
natural ingredients.
Speciality cheese: We want to be a leading player with creatively crafted products and
concepts.
Mozzarella: We want to create a global foodservice position with high quality
mozzarella.
Ingredients: We want to be the global leader in value-added whey.
We will grow the categories through our three global brands: Arla®, Lurpak® and Castello®.

Focus on six regions

We will focus on six regions in which we believe Arla has the greatest potential to grow a
long-term profitable business for our farmer-owners.

Over the years Arla has built a strong position in Northern Europe where we are the
preferred dairy company for consumers, and the Middle East where our brands are among
the strongest in the food industry. We will continue to build on these market positions as
we also develop our business in four other regions and China, Nigeria, USA and Russia
as our main focus markets.

Towards 2020, we expect 50 per cent of our growth to come from Europe. The other 50
per cent will come from the regions outside Europe.

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Win as one Arla

Over the past years Arla has grown significantly in Europe with no less than six mergers
in Central Europe, the UK and Sweden. We have been aligning the different companies
into one and harvesting the synergies that the mergers created. We will now take this
unity to the next level.

We will strengthen our global category and brand building, our innovation across borders
and our commercial excellence. Our marketing will become more global, improving the
spend effectiveness, and we will drive more radical innovation across our six regions.

Our entire supply chain will be even more efficient as we will establish one European
milk pool to ensure a more holistic use of our milk across the Arla group. Overall, we
have set a new ambitious cost improvement target of EUR 400 million to be reached by
the end of 2019.

FOR OUR CONSUMERS

We believe our products, activities and growth should improve the lives of people.
Across the world, food unites people. Everyone needs it to keep going throughout the
day. It’s become more important that food is healthy and produced responsibly. People
are looking for less processed food products made from natural ingredients. That’s where
Arla’s dairy products have an important part to play. For us, Good Growth is about
growing our business by adding value to people’s lives.

With the Arla® brand we aim to bring health and natural goodness to people through
dairy products that they use throughout their day – and their lives. We will lead and shape
the market with innovative nutritious value-added products made from natural
ingredients, produced in a responsible way. We will remind people that milk is a

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wonderful, nutritious product and that our Arla milk comes from our passionate farmer
owners who deliver high quality milk.

We will not only provide naturally nutritious food that fuels your body, we also want to
add quality to your life. We will inspire people to explore good food through our
Lurpak® and Castello® brands. We will ensure that we are a global leader in natural
quality butter and spreads and we aim to be a leading player in creatively crafted
speciality cheeses.

FOR OUR CUSTOMERS

We want to be the best partner for our customers - in terms of the development of both
our own and their brands.
Across the world, food unites people. Everyone needs it to keep going throughout the
day. It’s become more important that food is healthy and produced responsibly. People
are looking for less processed food products made from natural ingredients. That’s where
Arla’s dairy products have an important part to play. For us, Good Growth is about
growing our business by adding value to people’s lives.

With the Arla® brand we aim to bring health and natural goodness to people through
dairy products that they use throughout their day – and their lives. We will lead and shape
the market with innovative nutritious value-added products made from natural
ingredients, produced in a responsible way. We will remind people that milk is a
wonderful, nutritious product and that our Arla milk comes from our passionate farmer
owners who deliver high quality milk.

We will not only provide naturally nutritious food that fuels your body, we also want to
add quality to your life. We will inspire people to explore good food through our
Lurpak® and Castello® brands. We will ensure that we are a global leader in natural
quality butter and spreads and we aim to be a leading player in creatively crafted
speciality cheeses.

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FOR OUR FARMER OWNERS
Arla is a cooperative owned by dairy farmers and we are committed to creating the
highest value for their milk.
We are currently the world’s fifth largest dairy company in terms of milk intake. Our
farmer owners are expected to increase their milk production from approx. 14 billion kg
in 2015 to 16 billion kg in 2020. Our strategy focuses on growing the value of their milk.

In the past years, we have worked to build a more solid position in a dairy industry that
has become much more competitive and global. We will continue to strengthen our
position by providing dairy products that inspire and fulfil the needs of people around the
world.

Towards 2020, we expect 50 per cent of our growth to come from Europe, which is one
of six focus regions in our strategy. Particularly in the UK, Denmark and Sweden, where
we want to be the dairy champion that leads and develops the market for dairy products.

The other 50 per cent of our growth will come from markets outside Europe. We are
going to focus on five market regions in which we set out to grow a long-term profitable
business for our farmer owners.

Middle East is a well-established region for us with strong markets and leading positions
which we will continue to develop.

We have a clear ambition to achieve strong positions in selected dairy categories in

China, United States and Nigeria. We also remain hopeful that Russia will re-open for
business, at which point it will still be a very attractive market for Arla.

FOR THE PLANET

We know that long-term success is only achieved if we are able to add value to your life
while acting responsibly towards the environment and the communities we’re a part of.

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In 2050, there will be nine billion people on this planet. In Arla, we recognise we have a
responsibility, as one of the world’s leading dairy producers, to develop new solutions
that reduce our impact on climate and the environment.

To us, sustainability means offering foods with the highest possible nutritional value, to
as many people as possible, using as few of nature’s resources as possible. Our milk and
dairy products can contribute to nutrition, health and food security for millions.

Made in an efficient way using best management practices, our products can form an
important part of a sustainable diet, as defined by the Food and Agriculture Organisation
of the United Nations (FAO). We intend to play an active role in fulfilling UN’s
Sustainable Development Goals through our Code of Conduct, our Human Rights Policy,
Health Strategy and Environmental Strategy, including our Sustainable Dairy Farming
Strategy and sourcing policies for palm oil, soy and cocoa.

ENVIRONMENTAL STRATEGY 2020

Arla has worked with environmental strategies for decades with emphasis on different
environmental aspects. In our 2020 strategy we have taken a 'lifecycle management'
perspective - from cow to consumer. Our environmental strategy 2020 focuses on:

Sustainable Farming
We want to source milk and other agricultural material which have been farmed in a
sustainable manner

Climate
We want to reduce greenhouse gas emissions throughout our entire supply chain - from
cow to consumer

Water and energy

We have respect for resources by reducing consumption and changing from fossil to
renewable energy sources

Zero waste
We want to avoid waste however when this is not possible we treat waste as a resource to
be reused or recycled - we call this zero waste

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HEALTH STRATEGY
We deliver the natural power of milk in exciting ways that make it easier for you to live a
healthy life.

WE MAKE MILK EVEN BETTER

Milk naturally contains one of the richest combinations of nutrients that you can find in a
single food source. We make milk’s nutrient available in a variety of tasty products that
make it easier for you to live a healthy life. For people’s specific health needs, we add
ingredients from nature to lend a helping hand.

Why we do this
Modern life is busy and demanding. Cheap foods and beverages are available
everywhere, but often they don’t contain the nutrients that your body needs every day.
This is a main reason why on a global scale we face problems with under-nutrition and
lifestyle diseases.

Milk contains one of the richest combinations of nutrients that we can find in a single
food source. It provides us with calcium, high quality protein and many other minerals
and vitamins that children need to grow and that we all need daily to meet the challenges
of modern life.

Our aspiration
Milk is nutritious by nature. We process our milk gently to maintain the broad range of
vitamins, minerals and bioactive components that are naturally present in the milk. We
maintain the natural goodness of the product by using natural aromas and carefully
selected ingredients and additives.

People’s health needs vary throughout life. To match specific needs, we lend nature a
helping hand and make our milk even better. It could be by adding protein, probiotics,
vitamins or fibres or reducing lactose. This way, we make it easier for people to live
healthy lives.

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WE INSPIRE GOOD FOOD HABITS
If you know how to cook and know which foods are naturally rich in nutrients, you have
a better foundation for a healthy life. We want to inspire good food habits that make it
easier for people to live a healthy life.

Why we do this
Healthy eating is important for all of us to live longer, balance weight and reduce the risk
of lifestyle diseases. However, wholesome meals are increasingly replaced by highly
processed foods that are low in nutrients and high in sugar, fat and salt and do not meet
dietary recommendations. This has huge consequence for public health.

The more we know about nutrition, food, cooking and how to balance our diets, the better
we’re able to make healthy choices for ourselves and our families.

Our Aspiration
We want to champion good food habits and inspire a healthy life. A healthy daily diet
leaves room for the occasional indulgence, which is also part of a good life.

Through our wide collection of online recipes, on-pack information, collaboration with
retail customers, inspirational events and educational programmes, we share our
knowledge of what is good to eat and how to prepare a healthy breakfast, lunch, snack or
dinner.

Some of our activities

a) Campaigns emphasising the importance of wholesome breakfast for better
performance through the day.
b) Online recipes with nutritional information and weekly healthy menu planning
c) Better snacking through the day – healthy snacking products available in places
such as schools, gyms, hospitals and amusements parks.

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 d) Partnering programme in Bangladesh and Dominican Republic (SOS Children
Villages) to provide a daily glass of milk to less fortunate children to help
improve their learning abilities.
e) Partnering the daily Swedish TV4 show and website “Vardagspuls”, which
inspires people to live a healthier lifestyle.
f) Arla Foundation Food Camps to improve cooking skills and food knowledge
among school children in Denmark.
g) Agenda-setting project for eliminating malnutrition among elderly and patients in
hospital (Denmark).
h) On-line Arla dieticians inspire and advice people to a healthier lifestyle,
especially related to good food habits (Sweden).
i) Partner for the Swedish Olympic Committee to promote milk as Nature’s Own
Sportsdrink, including Olympic Days event, where children meet Olympic
athletes and try different sports, and other partnership with various sports events
(Sweden).

WE PARTNER TO SPREAD KNOWLEDGE ABOUT MILK & HEALTH

We build partnerships with our retail customers to promote healthy products and
collaborate with scientists to learn more about the health benefits of milk and natural
ingredients. We explore how we can help people live healthier lives and contribute to the
fight against global lifestyle diseases and undernutrition.

Why we do this
Across the world, milk products are a recommend part of the daily diet from childhood to
old age. A growing number of people are able to afford milk products on a regular basis.

However, there is also a growing uncertainty about which foods are healthy and some
people have become milk sceptics. The need for knowledge and credible research on milk
nutrition and its role in addressing global health challenges is stronger than ever.

Our Aspiration

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We invest in research into the health benefits of milk and how milk products with added
natural ingredients can make it easier for people to live healthy lives. We collaborate with
experts and openly share our findings to increase the knowledge among people of the
scientifically documented facts.

We build partnerships with our retail customers to strengthen their health profile and to
make healthy products more available. To bring the benefits to more people across the
world, we also work to improve affordability and shelf life of our products.

Some of our activities

Arla Foods Executive Advisory Committee
Our scientists work together with academics from international research institutions to
assess new scientific findings and to align our research and product development to
match the global health needs.

Arla Research Center for Dairy Health & Nutrition

A collaboration with Aarhus University and University of Copenhagen with a reach to a
network of international researchers. The aim is to strengthen research into health and
dairy-based nutrition

Preventing age-related loss of skeletal muscle mass

We fund and participate in a research project on how changes in diets and exercise can
reduce age-related loss of skeletal muscle mass. The publicly funded project is a
collaboration between Arla Foods Ingredients, three faculties at University of
Copenhagen and a range of public and private partners. It covers health care practices,
clinical studies and product development.

Why milk is so efficient in delivering vitamin B12

We investigate why milk is so efficient in delivering vitamin B12. The project is funded
by the Danish Strategic Research Council and is a collaboration between Aarhus
University, Aarhus University Hospital and Arla Foods Ingredients.

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 Sustainable, healthy and affordable products for African markets
Arla is parts of a project that aims to develop of sustainable, healthy and affordable
products for African markets based on a combination of protein from milk and plants. It
involves the University of Copenhagen, Aarhus University, University of London, Fan
Milk International and Triple A. The research project is funded by the Danish Council for
Strategic Research.

Optimal diet and gut microbiota in early life

Arla is part of the Neomune Centre which is a collaboration between University of
Copenhagen, University of Aarhus, University of Giessen, Technical University of
Denmark and Sun Yat-sen University Guangzhou. The objective is to develop the
optimal diet and gut microbiota in early life to obtain better immune, gut and brain
functions throughout life.

Increase health equality in Denmark

There is a growing social inequality in Denmark when it comes to health. People with
limited educational background are at greater risk of lifestyle diseases due to poor diets,
smoking and no exercise. Arla is participating in two projects with The Danish Hart
Foundation, the Lung Foundation and other partners to improve the lifestyle habits for
two groups: young people in trade schools and male workers. Male colleagues at four
Arla production sites are participating in the research and are offered a daily breakfast to
evaluate the impact of a good start of the day. The project is publicly funded by the
Danish Ministry of Health.

Arla, An international company

Arla Foods is second biggest producer of dairies in Europe and the 7th largest worldwide.
Besides Denmark, Arla Foods owns companies in many European countries and sales and rep.
offices in even more countries; amongst others in the Middle East. Today the world is becoming
more and more global, forcing companies into a harder competitive situation where flexibility,

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production location strategy, and alignment of competencies are a necessity and where the
companies have to acknowledge the entire world as their sphere of interest (Slywotsky et al.
2006). Formerly most companies have been operated on a market limited by regions or even
sometimes national borders. Due to declining trade barriers, such as NAFTA, EU etc.
establishment of more and more comprehensive trade agreements, easier and easier transfer of
capital between countries, increased focus at the development of technology dealing with
transportation and communication, emerging of new markets and production opportunities,
today’s companies finds themselves forced onto competing on a global market (Morrison, 2002).
However entering a new market place can bring forth new issues, which the company has never
dealt with on its home markets (Morrison, 2002.) when operating in new countries , cultures is
necessary for a company to develop different approaches to where cross-cultural issues arise.
Different nations are distinguishable from each other by language, religion, ethnic or racial
identity, and above all, a shared history. All of these factors blend into a national culture
(Morrison, 2002.) important behavior within a national culture can be better understood by
references to shared cultural symbols. Cultural symbols can be explained as “objects that
represent beliefs and values” (Arnould et al, 2004, page 91). In order to relate this to social
constructivism, national culture can be viewed as a common shared construction between many
people. E.g. that many people in the Middle East share the meaning that pork is not clean and
should not be eaten. This does not mean that this is a meaning shared by everyone in the Middle
East, however it is a belief shared by many and is constructed from the cultural material at hand.
So when Arla Foods started operating on markets in the Middle East, they entered a different
national culture where many people share constructed cultural symbols that are different to those
on their home markets. Arla Foods has many activities in the Middle East. Besides exporting
from Denmark, the company also has factories in Saudi Arabia, Qatar, Kuwait, Bahrain and
Lebanon. The Middle East works as one market with 100 million consumers and it has the same
tariffs and language. Before the Muhammad Crisis broke out, Arla Foods had ambitious goals in
the Middle East. They wanted to triple their production within the next five years, and Lebanon
was to be used as a test market to see if the consumers want their newly developed products.

Analysis –Arla marketing strategies.

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 The analysis shall combine the empirical data, crisis management theory by (Coombs,
2008), (Geertz Clifford, 1973) cultural theory of “webs of significance” to generate meaning on
the marketing strategies Arla implemented to combat the cartoon crisis. The analysis of the thesis
will be with regards to the following topics: Maintaining dialogue, marketing campaign, Aids to
the needy and disable and finally Arla’s annual report indicating the sales exports to the Middle
East before ,during and after the cartoon crisis. Below is a diagrammatical representation of the
main themes of the marketing strategies initiated by Arla food.
Arla Foods Marketing communication strategies to stop the boycott.
Arla food has been a well-established company on the Middle Eastern market, for 40
years. It was a very unusual and complex situation that Arla was put in, seen from an
intercultural point of view, during the cartoon crisis. After failing to convince both the Danish
government and “Jyllands-Posten” that it was necessary to take a stand on the cartoon, the
company took the situation in their own hands, as the essential focus point in this case is that
Arla’s reputation gets damaged in connection with the intercultural encoding. I am going to
focus here on the explanation of the marketing communication strategies to answer the main
research question.
In the beginning of March 2006, Arla’s loss was estimated to DKK 400 million after
implementing all the steps in their CMP. The management team tried to mediate between the
parties involved in order to end the boycott. They could no longer afford to wait and therefore
choose to take the situation in their own hands. They simply wanted to regain the Middle East
consumer’s confidence in order to reposition themselves in the Middle East market. Arla had
now reached the stage that Andreas Lundby, referred to in the fax to Per Gæmelke, and to the
Danish Prime Minister, stating:” I’m convinced, that nothing will happen, until someone steps
forward with a more exact apology. In worst case, we at Arla will be compelled to go a step
further with dissociation. That, we do not prefer”. According to Mitroff & Pearson in Coombs,
once a crisis hits, the crisis team must work to prevent it from spreading to unaffected areas of
the organization or the environment and limit its duration. For this reason Arla Foods has to do
something to prevent the crisis from spreading. Arla, initiated an offensive marketing
communication strategy to bring the boycott to an end. The company put pressure on Prime
Minister Fogh Rasmussen a fax was sent to Fogh Rasmussen, presenting Arla’s serious situation
in the Middle East. Moreover, the fax argued, Arla was not the only Danish company being

18
boycotted. Many other Danish companies faced the same, and therefore this could result in a
serious blow to the Danish economy. Both Arla and the Danish Government have common
interests, Arla argued, Arla director Peder Tuborgh, therefore requested active government
participation in the conflict, in order to start a dialogue between the involved parties and find a
solution. The Danish prime minister kept a low profile until when he had this pressure from Arla.
This was a type of communication, attempting to influence the government official into desired
action. The Saudi Arabia did not carry out the government message in their press. Arla was
unhappy for Saudi press not carrying this message and consequently published the advertisement
in Saudi Arabia’s leading newspapers were the government position was reiterated. This act
brought forcefully the Danish government into exposure. This move by Arla was aimed at
preventing a further increase of the boycott of Danish products following rising criticism of
Jyllands-Posten actions in the Saudi Arabia. Arla may be thought with this strategy the
population will understand they are not part of the cartoons. Forgetting that, it is not what they
think or they communicate to the public that the public will want to hear. The contrasting
marketing strategy indirectly moves Arla into an issue of debate on the cartoons.
Arla,s website was the major tool of communication with the stakeholders during the
crisis. Arla was communicating directly with the boycotting consumer since the end of January.
Arla initiated an internet marketing strategy where they create a blogs on their website where
they frequently reported the current situation on their website both in Danish and in English.
Articles appeared with the title ‘Status report Friday afternoon’ or ‘Status on the boycott
Tuesday’. In virtue of, the company followed Coombs’ emphasize on open and quick
communication throughout the crisis. The rationale behind being quick according to Coombs is
the need for the organization to tell its side of the story. Arla Foods was in control of the news
reported; instead of letting third party groups to inform the stakeholders, with potentially
misinformed parties becoming unofficial spokespersons.
It was then time for Arla to go a step further with dissociation. The 18th of March 2006,
in a direct appeal to Al Qaradawis conference in Bahrain, Arla choose to public a full-page
advertisement in 25 Arabic newspapers (view Appendix B, page,55- 58). The advertisement,
gave the background information of the Arla, which states, that,Arla has been in the Middle
East Market for 40 years. Moreover, the company repeats its distancing from the cartoons, from
the Gulf-food trade fair in Dubai a month ago. In addition, Arla stresses that through its 40 years

19
in the Middle East, they have learned that justice and tolerance are fundamental values of Islam,
and also that, Arla was not affected by a boycott because of their own action, with regards to
that, the consumers were asked to reconsider their stance towards Arla. Chief of overseas
divisions, Finn Hansen, expressed the same day that the company hoped that the Arabic
consumers would consider if it was fair to boycott a dairy company which had nothing to do with
the cartoons .when they put a page –long of advertisement in 25 major newspapers in Middle
East. Arla choose a Sunday to capture so many readers as possible. The advertisement more
closely resembled a company statement, consisted of one full newspaper page, with the title:
“Arla foods distance itself from the cartoons”. At this time Arla was feeling the pain of the
boycott in full, started speaking directly to the boycott consumers using soft words such as
“Honoured citizens” and “Our presence in the region has given us knowledge on your culture,
values and your religion, the Islam”. Here Arla started showing concern to the victim express
concern/sympathy for any victims of the crisis. Expressions of concern according to Coombs
help to lessen reputational damage and to reduce financial losses. Experimental studies by
(Coombs and Holladay, 1996) and by (Dean, 2004) found that organizations did experience less
reputational damage when an expression of concern is offered verses a response lacking an
expression of concern. (Coombs, 2008). Arla continued to show understanding , concern,
pointing out their own large number of activities in Middle East, they talked about the fact that
they have employed a large number of Muslim working in Middle East and Europe, make us part
of Middle East society and is ready to identify with the insulted stakeholders. In the Middle East
Arla was saying all these reason being to denounce itself from the cartoons. Arla did not end
here, it continue to reintroduce itself. Before the cartoon all what the consumers in that region
knew of Arla is that, Arla was a Danish company. Thereafter, Arla carefully described itself as
half Danish and half Swedish there by stepping down the links with Denmark, and indirectly
dissociating itself from the cartoon. This was one of the major reasons for Middle East
consumers to pick up Arla as a target. According to the claims of the advertisement Arla shared
the feelings of the boycotting consumers. Although Arla belatedly made efforts to distance itself
from the rest of the Danish community, in particular from Jyllands-Posten, Islamic consumers
still held the perception that they were from one social group and sharing one common identity
‘‘Danish’’. In its most extreme manifestation, this resulted in a boycott of the Kuwaiti-Danish
Dairy Co., a Kuwaiti-based and Muslim-owned company that had had no formal connection with

20
any Danish partners for more than 20 years. This company saw its sales drop 95 per cent in
Middle East markets outside Kuwait (New York Times, February 27 2006). This suggests that no
matter what Arla did, only time would heal the wound; perhaps the less it said publicly the
sooner things would have healed. Arla came to understand that the boycott was a legitimate way
of showing disapproval, and “merely hope the reader will reconsider their attitude towards the
company”. Arla knowing the Muslim anger over the cartoon, they do not wish to tell them how
to think, the final decision is theirs. There was a very mix reception in Denmark and Middle East
about the statement of Arla. Beforehand the response in the Middle East is mild and not really
observation but with the boycott continuing. Hereby public observation on Arla did soften. By
showing great understanding for the feelings and reaction on the cartoons posted by Jyllands-
Posten, Arla reaffirmed the general Muslim feeling of being disrespected. As Pernille Bramming
argues: “There is a whole working ideas that, Muslims are persecuted”. That they are victims of
disrespect.” Arla not only said to understand these feelings, they also posted their own record of
Muslim employees, who according to the company share the common feeling of being insulted
by the Muhammad cartoons. Here Arla Foods also was indicating how they were also affected
by the cartoon, as they also had Muslim employees. Culture, as a shared programming of the
mind of a group of people, influences the frame of mind and the attitudes of this group to certain
events. In the case of the cartoons, this meant that the event was judged as part of a larger
problem; the lack of respect of the Islam religion. The sole printing of the cartoons in Denmark
would not have been able to cause this reaction – the printing of the cartoons after a continued
sense of persecution could. However, this cultural element only partly caused the boycott.

Business strategy theory

The business strategy method is established on the philosophies of pragmatism. The
Business strategy theory states that organizations make tradeoffs between some variables in their
decision to internationalize and the methods they adopt to do so [7]. Reid further argues that
international expansion is contingency based and takes place by making a choice between
competing expansion strategies that are directed by the nature of the market opportunity,
organizational resources, and managerial philosophy. According to Turnbull and Ellwood [13],
the factors that need to be evaluated while using the business strategy approach are market
attractiveness, psychic distance, accessibility, and informal barriers [2]. The selection of the

21
organizational structure to serve the market is dependent on market characteristics and company
specific factors like international trading history of the company, company size, export
orientation and commitment. Business strategy theory is important for the present study as it
helps in the understanding crucial variables that need to be traded off when making important
decision as regard to internationalization. Through the theory, the attractiveness of Arla Food, its
accessibility, and possible informal barriers can be identified prior to the implementation of the
internationalization plan (Figure 1) [18].

Competitor Analysis of Health Food Drinks

Milo is a milk beverage with chocolate and malt, produced by Nestlé and originating
from Australia. Milo provides children with 50 percent of their daily iron, calcium, vitamin C
and vitamin B1 (according to outer package information of Milo), and has a good brand value
and recognition in Bangladesh. On the other hand Horlicks which is loved by everyone in
Bangladesh, capture the lion share of the health food drinks market from the very beginning of
their inception. Horlicks offer variety of flavor that is why Milo did not impact as much as
expected.

Although both the health drinks belong to GlaxoSmithKline and they have a good
competition in the market. When the cricket legend Sachin Tendulker became the brand
ambassador of Boost and launched their television advertisement with tagline “Boost is the
secret of my energy”, in that time it impacts very positively on sales volume of Boost. At the
same time, it lefts an adverse impact on Horlicks. The television advertisement was first
launched in the India but it works globally and also impact on the Bangladesh. Bangladeshi
children’s became fascinated towards Boost previously who used to drink Horlicks. Both
Horlicks and Boost is categorized for the people having high level of income. Horlicks is clearly
segmented as a malt flavored health drink.

Children always look out for the tastiest option, to make their daily dose of milk more
enjoyable Cadbury Bournvita offers two options with its popular chocolate taste and Cadbury
Bournvita. New Bournvita++ offers the children the best of both worlds - nature and science. It's
a well-balanced combination of natural, wholesome ingredients and essential nutrients. So, better
taste was the only way to make Horlicks the preferred choice among children. The focus was on

22
“Pleasurable Nourishment” and this paved the way for the introduction of new variants chocolate
flavor.

Marketing Mix of Horlicks

Horlicks is one of the leading brands of Bangladesh that deals in food drinks from malted
milk. Horlicks was relaunched in 2007 with a clinically proven claim “Horlicks makes kids
Taller, Stronger and Sharper”. The company alone has captured seventy six percent of the
Bangladesh market in terms of health drinks. Although the brand Horlicks has been in the market
since 1962 (According to the website of Mutual Food Products Limited), it still faces a mild
competition from other competitors. The Marketing mix (Product, Place, Price and Promotion)
of Horlicks is briefly explained in the following points:

Product
In order to fulfill the nutritional needs of the consumers the company has taken special
steps to develop the drink scientifically. Until the 1960s, Horlicks was positioned as an adult
restorative drink that gave extra energy, especially during convalescence but later in the 1970s it
was launched as having nutritional values, good taste and a drink that provided immunity to the
body (According to the website of Super Brand’s Bangladesh). The company has decided to
cater to each section of society by including women and children of every age group. In the year
2003, Horlicks re-launched itself to maintain its loyal customers as well as to attract a new breed
of health conscious consumers.
Horlicks is made from malted barley, wheat and milk. Earlier it was available in only one
flavor of Regular Malt but now Horlicks is also available in Chocolate flavor, which combines
the benefits of Horlicks nourishment and a wonderful new taste. To enjoy a different taste add
ice cubes, cold milk or water to reconstituted Horlicks and it turns into a delicious, thirst
quenching chocolate drink on a hot afternoon. That is why Horlicks is considered to be ‘the great
nourisher’ for the entire family.
Such has been the success of Horlicks that today the brand has been extended to an
enormously popular formulation for younger children as well as one for mothers. Horlicks
extensions also include ‘Junior Horlicks’ for preschoolers, ‘Horlicks Lite’ for health conscious
adults, and ‘Mother’s Horlicks’ specially formulated for expectant and breastfeeding mothers.

23
Place
It is quite often that a jar of Horlicks occupies a visible position in a Bangladeshi
household. Older generations of the country over the past half century have consumed it and
become totally confirmed believers in Horlicks. The company maintains a strong distribution
channel to make the product available to the customers at their own convenience. Horlicks
controls a network that includes factory, wholesalers, channels for distribution and retailers. The
factory located in Konabari, Gazipur for its production and the packaging and central depot –
Sweden Tower for distribution is also located in the Gazipur. The products are available at every
grocery stores, retail outlets and big showrooms.

Price
Horlicks has always been a brand that stands for good health and nourishment through a
wholesome, natural product. Though the company’s objective is to maximize their profit but they
have kept the prices reasonable. The pricing strategy involves competitive pricing where the
consumers do not have to spend huge amount to get the product. For instance, a Standard
Horlicks 1050gm costs only 695 taka previously it was offered in 900gm. So, consumer can
enjoy 150gm extra with the same cost. The prices of all the products are printed and displayed on
the labels of every product to avoid any confusion.

Promotion
Horlicks has a deep and strong understanding of the needs and wants of its consumers.
Horlicks communication has always connected with its consumers. According to the website of
Horlicks - during 2004, Horlicks created one of the most popular TV campaigns with its
‘Pranchanchal Kids’ commercial. It was one of the early instances of slice-of-life advertising
that showcased the wide acceptance of the brand among people from different walks of life.
During 2003-2007 Horlicks run a nationwide quiz contest competition named ‘Horlicks Genius
Bangladesh’. The quiz contest was held among various groups of students from various schools.
During 2005-2007 Horlicks run another nationwide family quiz contest competition named
‘Horlicks Genius Poribar’. It was also a quiz contest but the group were from families. In 2009,
to change the platform Horlicks launched the first ever reality show named ‘Horlicks Future

24
Force’ in the country. The core of the program was to find out the Taller, Stronger and Sharper
kids of Bangladesh and give them a platform to prove themselves as the future kids of the nation
who will grow with physical and mental competence.

Recent Stages of Development

The new century has been the Horlicks brand successfully battle the quirk of a fickle
market. The brand’s evolving process over the year has invigorated and reinforced all the
traditional virtues while it confidently looks to its future. The initial years of the new millennium
were turbulent for Horlicks. While the brand stayed ahead of its rivals and retained market
leadership.
In 2003, Glaxo SmithKline (GSK) was relaunched its Horlicks brand in three new
variants vanilla, honey and chocolate apart from the regular malt. The re-launch also includes a
new look for the brand in terms of packaging as well as new positioning which addresses
children instead of mothers. In 2005, GlaxoSmithKline (GSK) was launched 'Horlicks Lite'
which was for health conscious adults in 2005. In 2007, Horlicks was relaunched with a
clinically proven claim ‘Horlicks Makes Kids Taller, Stronger, Sharper – Now proven’. In 2008,
Healthcare products maker GlaxoSmithKline Consumer launched a new supplement for women
buyers Women's Horlicks to strengthen its product portfolio in the health drink segment.

Acknowledgements

Thanks to all management staffs of Mutual Food Products Limited and special thanks to
Mr. A B M Golam Kibria Bhuiyan (Head of Human Resource), Mr. Chinmoy Kumar (Assistant
Manager and Head of QA), Mr. Kamrul Islam Bhuiyan (Sr. Executive, QA), Mr. Md. Ahsan
Habib (Head of Warehouse and Logistics), Mr. Zubair Chowdhury (Head of Production) and Mr.
Khondokar Nazmul Islam (Head of Finance) for their kind cooperation and valuable thought
sharing to complete this report.

Conclusion
Health Food Drinks market in Bangladesh is less saturated, and the brand Horlicks is the
market leader. But this is not necessary that the market will be competition free as consumer
taste and preference is highly evolving in FMCG (Fast Moving Consumer Goods). Each and
every move by competitors needs to be considered. So it’s crucial for any health food drinks

25
brand to be strategically sound regarding all marketing controllable aspects to penetrate more
into the market or to hold the existing market share.

26
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