RAMP it up!
Myanmar (Burma)
In this project, we propose to explore Cold Stone Creamery's break in into Myanmar erstwhile known as Burma.
Myanmar: "Quite unlike any land you know about" by Rudyard Kipling
Geographic
Nestled between China and India, Myanmar is the largest country in mainland South East Asia. It has the lowest population density in the region. Yangon is the largest city and its former capital. It is also the economic center of Myanmar. Naypyidaw is its capital city.
It is very rich in natural resources with fertile lands and significant untapped agricultural potential. It’s location at the intersection of India and China makes it well positioned to become a regional trading hub.
Macro Analysis
We use the PEST Model to analyse the Macro environment affecting the go to market.
Political
Since gaining independence in the late 1940s, Myanmar has been through a series of harsh challenges.
A nominally civilian government led by President Thein Sein presently governs the country. The government has taken a series of reforms measures to address the challenges confronting the different segments of the country. In response to which, other major economies have completely or partially withdrawn their sanctions against Myanmar.
Aung San Suu Kyi is the leader of the opposition and is held in high regards both within and outside Myanmar. She is a Nobel peace prize winner and has been instrumental in bringing Myanmar back towards the fold of democracy.
Burman (its largest ethnic group) dominance over other ethnic groups such as Karen, Shan, Rakhine, Mon, Rohingya, Chin, Kachin and other minorities has been the source of considerable ethnic tension. A draft ceasefire agreement signed between the government and all 16 rebel groups in March 2015 demonstrated the determination of all involved to end long running conflicts.
The political transformational journey from Burma to Myanmar is captured in the image below.
Economic
Gross domestic product: 53.14 Billion USD
GDP per capita: 1,200 USD
WealthX, a consultancy firm which gathers intelligence on wealth, predicts the number of millionaires in Burma to grow by 687% by 2022. Myanmar has problems with inequality, but foreign investors are flocking the country to take advantage of its immense natural resource and opening up of the economy. Myanmar is expected to grow by 7 to 8 percent a year over the decade and Asia Development Bank estimates its income per capita to triple by 2030[i].
Agriculture accounts for about 60% of Myanmar’s GDP and as much as 65% of its labor force is employed in this sector[ii]. Rice is the most important crop grown and is heavily reliant on the monsoons for its irrigation and water needs.
Its other major area of economic activity is through its natural resources. Myanmar is expected to have huge gas reserves and has invited bids to explore its oil and gas blocks. It is also the world's biggest exporter of Rubies. Their gem stone industry export alone tops about $1 Billion[iii].
Tourism is a growing sector of the economy. In 2013 more than 2 million[iv] people visited Myanmar with most of them coming from other Asian countries.
Source:
[ii] http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Burma-Myanmar-AGRICULTURE.html
[iii] http://en.wikipedia.org/wiki/Economy_of_Burma
[iv] http://www.irrawaddy.org/burma/amid-burma-tourism-boom-calls-govt-aid-development.html
BCG defined the middle and affluent class as those with a monthly per capita income of more than $120. As shown in exhibit 2, about 5.3 million people out of Myanmar’s 60 million currently falls under this category, and BCG predicts the figure to rise to 10.3 million.
BCG predicts Myanmar’s middle and affluent class (MAC) will grow to about 15 percent of the population by 2020. Two-thirds of Myanmar’s middle and affluent class populations live in urban areas, with half living in Yangon, Mandalay and Ayeyarwady regions.
With the region’s consumption expected to reach $32 trillion by 2030, accounting for 43 percent of the global total, Myanmar’s affluent neighbors offer vast new markets for a country with abundant natural assets, agricultural resources and low-cost manufacturing potential.
Myanmar has the second highest percentage increase in net FDI inflows between the years 2010 and 2013 as shown in the figure. Many international firms are now setting up their operations to leverage Myanmar's relatively low labor cost.
Myanmar, thus, seems to be at the right place to enjoy the benefits of growth if only it continues along the path of reforms and economic inclusion. Doing business currently ranks Myanmar at 177 for the relative ease in doing a business.
Social
The official language and primary medium of instruction is Burmese (65%). English is spoken particularly by the educated urban elite and is the secondary language learnt in government schools.
89% of population follow Buddhism
Myanmar sits between the markets of the two most populous countries in the world, China and India. While the workforce in neighbouring Thailand, a manufacturing powerhouse, is ageing and growing more expensive, Myanmar’s population of 54m is both young and cheap.
Consumers in Myanmar are also among the most optimistic in the world – even more optimistic than China, India, Indonesia and other fast-growing emerging markets
Population of ~ 54 million and the 2nd largest country in SEA
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0-14 years: 26.4% (male 7,498,179/female 7,209,588)
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15-24 years: 18.3% (male 5,163,399/female 5,037,117)
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25-54 years: 43.1% (male 11,930,777/female 12,073,741)
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55-64 years: 7% (male 1,836,463/female 2,059,482)
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65 years and over: 5.3% (male 1,277,919/female 1,659,588) (2014 est.)
Urban population is approx. 30% of total population. Low fertility rate of 2.23 though slightly above replacement level is significantly below other countries in the region
Technology
BCG report added that Myanmar consumers continue to rely predominantly on traditional rather than modern formats for shopping – 19 percent of consumers use supermarkets regularly.
Only about one-quarter of consumers go on vacation and fewer than four out of 10 frequent restaurants. Consumers in Myanmar frequently buy entertainment products, however, especially VCRs, before they buy consumer durables.
Industry Analysis
We use Porter's 5 forces to analyse the competitive landscape in Myanmar.
Rivalry amongst competitors
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Haagen-Dazs (the market is still opening up)
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Local & Generic Competitors (Walco Dairy and City Mart)
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Low Cost of switching
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Low switching costs
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Individual customers, grocery stores, convenience stores, and restaurants
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Western product is viewed as superior quality
Bargaining Power of Buyers
Bargaining Power of Suppliers
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Dairy farmers, paper container manufacturers, and suppliers of various flavorings
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Concentration is low
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Ice Cream industry is one of their major customer
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Moderate bargaining power
Substitute Products
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Low switching costs
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Not many options available
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Innovative flavors, high quality, and different taste needed to charge high price
Threat of Potential New Entrants
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Capital Intensive - Specialized mixing facilities, manufacturing plants
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Accessibility to Supply & Distribution Channel
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Competition with big brands
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F&B Regulation imposes strict conditions for entry
While there are other ice cream brands available in Myanmar, there are hardly any in the premium segment. Moreover, western products are viewed as products with superior quality thus providing an added advantage. The market is not saturated and provides space for Cold Stone Creamery to break in.
Industry Trends
Euromonitor International identifies Myanmar as one of the 20 Markets of the Future that will offer the most opportunities for consumer goods companies globally. The country is one of the fastest growing and most promising economies in Asia Pacific; however, market intelligence is extremely limited in this part of the world and the business environment is complicated.
In Myanmar, Ice cream and frozen desert market has two main channels -
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Retail, consisting of sales through grocery, city malls, convenience and discount stores.
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Foodservice, which sells through restaurants, and other concept stores.
Since Myanmar doesn't have a proper developed entertainment business, traditionally most consumers prefer to buy take away ice creams. This is also because most do not want to appear spending and flaunting their money in public.
Haagen daz sells in Myanmar through malls and super markets and costs about USD 20. Other imported brands such as Magnolia, Nestle and Walls cost between 2350 Kyat and 4300 Kyat while the local brands such as KYK, Polar, Hawaii and Happy cost between 3250 Kyat and 3950 Kyat (Source: Livestock research).
In March 2014, leading Thai restaurant company Minor Food Group opened Swensen's, a Canadian ice cream parlor, in Yangon. Although a scoop of ice cream costs as much as 1,600 kyat ($1.66), the small shop of around 10 seats is constantly full, even during the daytime on weekdays.
All these different brands all target the middle and affluent class in Myanmar. Differentiation and brand recognition is the key. Most in Myanmar perceive western brands to be of higher quality.
Local supply chains in Myanmar can be quite complex and it can be difficult to access certain parts of the country. Supply chain, distribution and access to market is a challenge due to poor infrastructure.
According to a survey by Japan's Daiwa Institute of Research, Myanmar's restaurant market for 2011 was worth an estimated $2.8 billion, one-eleventh that of Vietnam and one-eighth that of Thailand. However, the market is expected to expand rapidly, as the country's economy has been growing at a high pace of 6-7% over the last several years under President Thein Sein.