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Strategic Analysis of Alfa Pastry SA Page. 1
M.Sc in Marketing Management
Strategy & Leadership in Marketing
Stategic Analysis of Alfa Pastries S.A
SPYROS LANGKOS
ID: 100285557
Tutor: Mr. Nikolaos Kitonakis
Athens, May 2014
Strategic Analysis of Alfa Pastry SA Page. 2
“Pastry is different from cooking because you have to
consider the chemistry, beauty and flavor. It's not just sugar
and eggs thrown together.
I tell my pastry chefs to be in tune for all of this. You have to
be challenged by using secret or unusual ingredients.”
Ron Ben-Israel
Famous Israeli pastry chef
Strategic Analysis of Alfa Pastry SA Page. 3
TABLE OF CONTENTS
1] INTRODUCTION ....................................................... 4
2] COMPANY PROFILE................................................... 5
3] EXTERNAL ENVIRONMENT ANALYSIS.............................. 6
4] PORTER’S 5 FORCES ANALYSIS .................................... 9
5] COMPETITION ........................................................11
6] MARKET ANALYSIS...................................................12
7] INTERNAL ENVIRONMENT ANALYSIS .............................13
8] FUTURE GROWTH RECOMMENDATIONS .........................16
9] REFERENCES..........................................................19
10] APPENDICES.........................................................20
Strategic Analysis of Alfa Pastry SA Page. 4
1. INTRODUCTION
This report aims at providing a strategic management analysis of Alfa Pastry
S. A., one of the most important players, operating in the Greek frozen
processed food industry. As it happens with most of Greek companies, Alfa
operates in a turbulent economic and political environment. At the same
time, Greek consumers emphasize on low prices and high quality of food
products. Thanks to its quality and innovativeness, Alfa has managed to
significantly improve its growth sales since 1998.
However, its uncompetitive position in the associated industry ranking, as
well as the threats it has to face, imply that the company needs to make
steps towards improving its current position. Market development, effective
promotion, development of online sales, product differentiation, and
excessive internal financial control are only some of the ways in which Alfa
could enhance and maintain its future growth and competitiveness.
Strategic Analysis of Alfa Pastry SA Page. 5
2. COMPANY PROFILE
The aim of this project is to provide a detailed report regarding Alfa Pastry
from a strategic management and marketing’s perspective.
This case study starts by briefly presenting the company profile of Alfa
Pastry. Then, an analysis of the external and internal environment
surrounding the company’s business takes place, paying particular attention
to the company’s sources of competitive advantage, its strengths and
weaknesses, as well as the dynamics of its external environment that have
an impact on Alfa’s strategy. After the analysis, the project summarizes the
key points and recommends ways in which the company could confront
competition and ensure its future growth.
Alfa Pastry
Alfa is one of the most important producers of pastry-related products in
Greece. The company was founded in 1965 in Kozani in Northern Greece by
Mr. Athanasios Koukoutaris. It offers a wide range of retail and catering
products, namely traditional pies, various types of pastry sheets, pizzas, and
a wide variety of bakery products, such as traditional Greek bougatsa,
brioche, and croissants. Specifically, Alfa operates in three sectors, namely
retail (92 different products), food service (135 different products), and
both retail and food service sectors in foreign markets, reporting significant
sales growth since 1998). Nowadays, Alfa operates four production plants in
Greece, Romania, Serbia, and the United States, while its sales network
consists of 50 distributors and around 11.000 points of sales across the world
(Alfa Pastry, 2013).
Strategic Analysis of Alfa Pastry SA Page. 6
3. EXTERNAL ENVIRONMENT ANALYSIS
PEST Analysis
Political conditions
The political conditions of Greece are mainly characterized by the
implementation of the two packages of austerity measures by the Greek
governments after 2009. These measures implied the cut in wages and
pensions, as well as cutting several employment rights and benefits of
Greeks, thereby causing an overall political instability over the last three
years. As far as the food industry as a whole is concerned, very strict
legislation rules Greek food manufacturers, not only in terms of their
products and packaging, but also in terms of their production processes,
especially as far as environmental protection issues are concerned. EFET is
the main governmental authority occupied with regulating food
manufacturers, and those that are not certified with ISO:2001 quality
certification are subject to serious financial penalties and even closure
(Euromonitor International, 2014).
Economic conditions
The Greek economy is expected to suffer the seventh year of recession,
with the country’s GDP being expected to decline by 0.8% in the end of
2014. It is estimated that, in order for the country’s debt to become
affordable, Greece needs to report an average growth of 3% from 2014 to
2021. As far as unemployment is concerned, this is expected to reach 27.1
in the end of 2014, slightly improved than the 27.4% of 2013. As a result of
the turbulent economic conditions in Greece over the last three years,
Greek consumers have seen their disposable incomes diminishing by 35%,
while the country ranked last in the World Bank’s Ease of Doing Business
2013 report (Euromonitor International, 2014).
Strategic Analysis of Alfa Pastry SA Page. 7
This has been a very important indicator of the difficult and risky business
environment that Greece has formed due to the economic crisis it faces, as
well as lack of competitiveness and corruption (Euromonitor International,
2013).
Social conditions
The numerous consecutive years of crisis have led Greek consumers
becoming very price-sensitive, as well as cutting down on their spending,
making their household budgets even tighter, and seeking for offers and
discounts. As far as food products are concerned, Greeks are highly sensitive
in health issues, their preference for fresh and qualitative food being at the
forefront, especially when it comes to purchase food products for their
children. Despite the fact that private label products are still perceived as
of inferior quality to branded ones, a switch towards private-label food
products has been observed in Greece, mainly due to their lower price.
At the same time, Greek consumers have become very sensitive with the
origin of the food products they purchase. They have switched towards
purchasing products made by Greek food manufacturers, as a means of
supporting Greek economy and Greek employment (Euromonitor
International, 2014).
Strategic Analysis of Alfa Pastry SA Page. 8
Technological conditions
The information and communications technology in Greece is quite
developed. The Greek government has employed its Digital Strategy 2006-
2013, aiming at giving the incentives to Greek enterprises to develop ICT
infrastructure, in order to meet European standards. Mobile phone
processions and Internet connectivity have also been improved in Greece
households, compared with 2007, but there are still below the European
averages, major reasons for that being the lack of Internet connections in
many Greek islands, as well as lack of computer skills from an important
part of the Greek population.
As it is clear, the development of the Internet has been the most important
technological development in Greece during the last decade, which has
given companies the opportunity to create new online sales and marketing
platforms. At the same time, the Internet has given Greek consumers the
ability to quickly identify what is offered in international markets, thereby
having become more demanding. (Euromonitor International, 2013)
Strategic Analysis of Alfa Pastry SA Page. 9
4. PORTER’S 5 FORCES ANALYSIS
Bargaining power of buyers
The bargaining power of buyers is high in the Greek frozen processed food
industry. Indeed, consumers have the opportunity to select the particular
food products from a number of different manufacturers, and switch to
alternative ones, if they are satisfied with their current suppliers for any
reason.
Bargaining power of suppliers
The bargaining power of suppliers is low in the particular sector.
Thanks to globalization and the diminishing trade barriers, food
manufacturers have the option to select the suppliers of their raw materials
and ingredients from any part of the world. Domestic suppliers have higher
negotiating power, due to the manufacturers’ emphasis on selecting
ingredients that are locally produced, in order to keep up with the
associated consumer trend.
Threat of substitutes
The threat of substitutes is really high in the frozen processed food industry
in Greece. The most important and direct substitute is identical, though
fresh, food, which consumers can purchase on a regular basis, but just
cannot store in big quantities and for long time periods. Except for that, any
other food product could be considered as an indirect substitute of pasty
and other forms of frozen foods. Last but not least, eating out or ordering
food could also be perceived as indirect substitutes, in cases whereby Greek
consumers decide not to cook at home.
Strategic Analysis of Alfa Pastry SA Page. 10
Threat of new entrants
The threat of new entrants in the market is moderate. One on the one hand,
the increasing interest of Greek consumers towards frozen processed food,
as well as their increasing preference in private label products, have
constituted the Greek frozen processed food industry as rather attractive
for new companies to invest in. However, the large investments required for
establishing such a business, together with strict legislation and the already
established brand awareness and loyalty of existing brands form some
important entry barriers that may prevent new players from entering the
market.
Strategic Analysis of Alfa Pastry SA Page. 11
5. COMPETITION
Barba Stathis S.A. is the leader in the Greek frozen processed food industry,
holding a market share of approximately 30% in 2013, with its growth mainly
been driven by its two flagship brands, Uncle Stathis and Chrisi Zimi, the
latter referring to frozen bakery products similar to those offered by Alfa.
Lidl Hellas holds the second place in the sector with its private-label
products and a market share of 10.4%, followed by Kallimanis S. A. and its
market share of approximately 9% in the same year (Euromonitor
International, 2014).
Marketing and overall promotional activities that emphasize on price
benefits form a very critical success factor in the Greek frozen processed
food industry, with companies operating in the sector striving to switch
consumers’ attention from the more expensive fresh foods. Those
companies that have used celebrities to promote their products have
identified the most significant sales volume increases. New product
development and innovation are also important success factors in the
particular industry, together with price offers and discounts, in order to
attract sales from the very price-sensitive Greek consumers. Within the
context of frozen bakery products, latest innovation trends have been
mainly driven by Evoiki Zymi SA and its traditional country style fyllo, as
well as Alfa and its soft fyllo sold under the Afrata brand. Together with the
above, emphasis on the Greek origin of products, as well as offering small
packaging and higher product diversity are expected to play a very crucial
role in the years to come (Euromonitor International, 2014).
Strategic Analysis of Alfa Pastry SA Page. 12
6. MARKET ANALYSIS
The market
Sales in the sector dropped by 55% within 2013, reaching €281 million.
Frozen vegetables and bakery products were the best performers in the
market, reporting growth rate of 1% in the end of the same year. Unit prices
in the sector as a whole dropped, mainly driven by Greek consumers’
demand for cheaper products. As far as private label products are
concerned, they share was increased to 33% in 2013, indicating the high
importance of price for Greek consumers.
Supermarkets form the most important distribution channel for frozen food
products, mainly because of the rich presentation they offer for this product
category and in contrast to small retailers, which, being unable to invest in
big freezer areas, try to compete using special offers and discounts. As a
whole, the industry is expected to meet a report a downturn in sales of
about 1% until 2018, while value will be negatively affected by the
continuous manufacturers’ emphasis on discounts (Euromonitor
International, 2014).
The consumers
Greek consumers have gradually improved their perceptions towards frozen
processed foods’ quality, mainly driven by their low price compared with
fresh ones, as well as marketing campaigns mentioning that frozen food
keeps the same nutritional characteristics as when the same food is fresh.
At the same time, Greek consumers have become increasingly keen on
cooking at home rather than going out or ordering food, and this has been
another main reason for the growth in frozen vegetables and bakery
products (Euromonitor International, 2014).
Strategic Analysis of Alfa Pastry SA Page. 13
7. INTERNAL ENVIRONMENT ANALYSIS
Vision and mission
The vision of Alfa is to offer the best piece of Greece. Under this vision
statement, the company highlights its mission, which is to take advantage of
Greek gastronomic characteristics and together with the astonishing taste
and quality of its products to offer the best pies Greek consumers have ever
tasted (Alfa Pastry, 2013).
Competitive advantage
The business success and the competitive advantage that Alfa pastry has
gained in the markets in which it operates form the outcome of a number of
core competencies and capabilities that the company has developed since
the beginning of its operation. To start with, innovation is at the heart of
Alfa’s business. More specifically, Alfa was the first company in the Greek
market to introduce the authentic fyllo, the so-called “kihi” pies, which are
strongly related with the history of Kozani, as well as paper baking tray for
pies to be directly placed in ovens, in contrast to competitors’ aluminum
trays.
Strategic Analysis of Alfa Pastry SA Page. 14
Moreover, Alfa places high emphasis on quality, looking for ingredients and
making food products of superior quality, which is acknowledged by 98.5% of
its customers. Indeed, the company operates under the strict European IFS
and BRC quality standards, while also testing every single food product it
makes in the company’s certified internal laboratory. Further, Alfa is highly
customer-oriented, basing its product development on the Mediterranean
dietary habits and traditions. Furthermore, Alfa’s business is based on four
core values that also enhance their competitive advantage, namely taste,
ethos, quality, and creativity.
Additionally, the company’s workforce forms another important source of
competitive advantage, mainly reflected in organizational members’ passion
for what they do and emphasis on business excellence at all levels. Under no
doubt, strict quality controls have also contributed to the very high quality
of Alfa’s products, together with the very wide variety of pastry and bakery
products the company offers. Alfa’s expansion to foreign markets has also
significantly contributed to Alfa’s sales growth over the last decade, while
at the same time giving it the financial capacity to further invest in the
innovation and overall development of its business.
Marketing and promotional activities are also at the forefront of Alfa’s
operations, with the company advertising its products through various
media, the Internet also been included, both in the domestic market and
abroad. Last but not least, Alfa has established a very sophisticated
information system, giving the company the ability to enhance and maintain
its operating efficiency (Alfa Pastry, 2013).
Strategic Analysis of Alfa Pastry SA Page. 15
SWOT Analysis
Strengths
 Wide range of retail and catering products
 Sales network of 50 distributors & 11.000 PoS across the world
 Significant sales growth
 Innovativeness
 High product quality
 Committed employees
 Intense quality controls
 Greek origin of products
 String marketing and promotional activities
 Sophisticated information system
Weaknesses
 Low competitiveness in the Greek market
 Operation in the frozen bakery segment only, compared with
competition
Opportunities
 Greek consumers have switched towards purchasing products made by
Greek food manufacturers
 Information and communications technology in Greece quite
developed
 Low bargaining power of suppliers
 Frozen bakery products’ sales expected to grow in the next 5 years
 Improved their perceptions towards frozen processed foods’ qualit
Threats
 Overall political instability in Greece
 Very strict legislation for Greek food manufacturers
 Diminishing Greek consumers’ income
 High bargaining power of buyers
 High threat of substitutes
 Intense competition
 Increasing private label products penetration
Strategic Analysis of Alfa Pastry SA Page. 16
8. FUTURE GROWTH RECOMMENDATIONS
In order for Alfa to ensure its growth for the next years, it needs to take
into consideration the analysis so far, as this was summarized in the SWOT
analysis presented in the previous section.
In other words, the company needs to take advantage of its strengths, in
order to deal with its internal weaknesses, explore external opportunities,
and avoid external threats.
One way in which Alfa could enhance its future growth would be to explore
new market segments, and mainly the frozen beans market, which is also
another promising segment in the Greek frozen processed food industry.
Doing so will help the company in further increasing its sales volumes, as
well as acquiring market shares in other segments as well, thereby further
diversifying its product portfolio, which is already a critical success factor in
the market.
Opening new markets is also consistent with the above. Alfa shall follow the
strategy of market diversification, according to which companies explore
new markets with new products (Farris et al., 2010). Developing countries,
which are expected to drive global economic growth in the years to come,
provide excellent business opportunities.
Promotion is another means of Alfa’s enhancement of future growth.
Advertising and promotional activities shall heavily emphasize on the Greek
origin of Alfa’s products, while at the same time highlighting the nutritional
benefits of frozen bakery products the company offers and the fact that
frozen foods maintain the beneficial nutritional characteristics that fresh
foods also have.
Strategic Analysis of Alfa Pastry SA Page. 17
At the same time, Alfa could also offer smaller packages of its products in
the Greek market. As such, instead of lowering its prices and being involved
in a price war, Alfa should offer smaller, thus more economic, packages, so
that Greek consumers experiencing financial difficulties prefer to purchase
smaller quantities of a branded and trusted product offered by Alfa, rather
than purchasing a private label one.
Taking into consideration the high levels of its innovativeness, it will not be
difficult for Alfa to also invent new pie tastes, so as to further differentiate
itself from competition. In short, the company shall follow the strategy of
differentiation, offering products or product features that are perceived as
unique in the market (Kiechel, 2010).
Given that the business and overall economic conditions are rather
turbulent in Greece and the future is unknown, Alfa must be very careful
regarding its financial performance and the management of its financial
resources. For this reason, tight internal financial control shall take place on
a regular basis, so that the company constantly monitors its financial
condition and take measure before certain financial issues cause severe
problems to its business. Of course, it is also important that all other
departments need to go in line with the financial strategy of the company as
well. It follows that internal control shall not concentrate on product
quality only, but also on overall operating efficiency.
Strategic Analysis of Alfa Pastry SA Page. 18
It is important for Alfa to create an online sales platform for wholesalers.
First of all, this will help the company in being consistent with the Internet
development characterizing Greece and the global market as a whole.
Next to that, operating an online sales platform will help the company in
reducing its operating costs by occupying less employees in customer service
schemes.
As a last point, it may be very beneficial for the company to pursue a
vertical integration strategy.
According to this strategy, a company is actively involved in and owns many
parts of its supply chain, either backward (suppliers) or forward (distributors
and buyers). By following such a strategy, a company controls its supply
chain in a more efficient way, thereby enhancing and maintaining the
quality and control of its products and overall supply chain processes (Hill &
Jones, 2012).
In the case of Alfa, except for maintaining the above, the company would
also have the opportunity to control its supply chain costs as well, thereby
being able to offer lower prices to end buyers and complying with the
diminishing incomes of Greek consumers. Vertical integration shall also be
accompanied with an intensive distribution strategy, based on which Alfa
shall strive to distribute its products through the maximum points of sales
available in the market.
Strategic Analysis of Alfa Pastry SA Page. 19
9. REFERENCES
Alfa Pastry (2013), “The company”, available at
<http://www.alfapastry.com/el>, accessed on 03-05-2014.
Euromonitor International (2013), “Business environment: Greece”,
available at <www.portal.euromonitor.com>, accessed on 05-05-2014.
Euromonitor International (2014), “Frozen processed food in Greece”,
available at <www.portal.euromonitor.com>, accessed on 05-05-2014.
Euromonitor International (2014), “Greece: Country factfile”, available at
<www.portal.euromonitor.com>, accessed on 04-05-2014.
Farris, P., W., Bendle, N. T., Pfeifer, P., & Reibstein, D. J. (2010),
Marketing Metrics: The Definitive Guide to Measuring Marketing
Performance, Upper Saddle River, New Jersey: Pearson Education Ltd.
Hill, C. W. L., & Jones, G. R. (2012), Strategic Management Theory:
An Integrated Approach, 10th
edition, Cengage Learning.
Kiechel, W. (2010), The Lords of Strategy, Harvard Business Press.
Strategic Analysis of Alfa Pastry SA Page. 20
10. APPENDICES
A] Greece- Country and business profile
Business indicators in Greece
(Euromonitor International, 2014)
Strategic Analysis of Alfa Pastry SA Page. 21
Disposable income in Greece
(Euromonitor International, 2014)
R&D spending in Greece
(Euromonitor International, 2013)
Strategic Analysis of Alfa Pastry SA Page. 22
B] The Greek frozen processed industry
Sales in the Greek frozen processed food industry
(Euromonitor International, 2014)
Competition by company
(Euromonitor International, 2014)
Strategic Analysis of Alfa Pastry SA Page. 23
Major distribution channels
(Euromonitor International, 2014)
Sales forecast
(Euromonitor International, 2014)

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Marketing Strategic Analysis: Alfa Pastry SA case study

  • 1. Strategic Analysis of Alfa Pastry SA Page. 1 M.Sc in Marketing Management Strategy & Leadership in Marketing Stategic Analysis of Alfa Pastries S.A SPYROS LANGKOS ID: 100285557 Tutor: Mr. Nikolaos Kitonakis Athens, May 2014
  • 2. Strategic Analysis of Alfa Pastry SA Page. 2 “Pastry is different from cooking because you have to consider the chemistry, beauty and flavor. It's not just sugar and eggs thrown together. I tell my pastry chefs to be in tune for all of this. You have to be challenged by using secret or unusual ingredients.” Ron Ben-Israel Famous Israeli pastry chef
  • 3. Strategic Analysis of Alfa Pastry SA Page. 3 TABLE OF CONTENTS 1] INTRODUCTION ....................................................... 4 2] COMPANY PROFILE................................................... 5 3] EXTERNAL ENVIRONMENT ANALYSIS.............................. 6 4] PORTER’S 5 FORCES ANALYSIS .................................... 9 5] COMPETITION ........................................................11 6] MARKET ANALYSIS...................................................12 7] INTERNAL ENVIRONMENT ANALYSIS .............................13 8] FUTURE GROWTH RECOMMENDATIONS .........................16 9] REFERENCES..........................................................19 10] APPENDICES.........................................................20
  • 4. Strategic Analysis of Alfa Pastry SA Page. 4 1. INTRODUCTION This report aims at providing a strategic management analysis of Alfa Pastry S. A., one of the most important players, operating in the Greek frozen processed food industry. As it happens with most of Greek companies, Alfa operates in a turbulent economic and political environment. At the same time, Greek consumers emphasize on low prices and high quality of food products. Thanks to its quality and innovativeness, Alfa has managed to significantly improve its growth sales since 1998. However, its uncompetitive position in the associated industry ranking, as well as the threats it has to face, imply that the company needs to make steps towards improving its current position. Market development, effective promotion, development of online sales, product differentiation, and excessive internal financial control are only some of the ways in which Alfa could enhance and maintain its future growth and competitiveness.
  • 5. Strategic Analysis of Alfa Pastry SA Page. 5 2. COMPANY PROFILE The aim of this project is to provide a detailed report regarding Alfa Pastry from a strategic management and marketing’s perspective. This case study starts by briefly presenting the company profile of Alfa Pastry. Then, an analysis of the external and internal environment surrounding the company’s business takes place, paying particular attention to the company’s sources of competitive advantage, its strengths and weaknesses, as well as the dynamics of its external environment that have an impact on Alfa’s strategy. After the analysis, the project summarizes the key points and recommends ways in which the company could confront competition and ensure its future growth. Alfa Pastry Alfa is one of the most important producers of pastry-related products in Greece. The company was founded in 1965 in Kozani in Northern Greece by Mr. Athanasios Koukoutaris. It offers a wide range of retail and catering products, namely traditional pies, various types of pastry sheets, pizzas, and a wide variety of bakery products, such as traditional Greek bougatsa, brioche, and croissants. Specifically, Alfa operates in three sectors, namely retail (92 different products), food service (135 different products), and both retail and food service sectors in foreign markets, reporting significant sales growth since 1998). Nowadays, Alfa operates four production plants in Greece, Romania, Serbia, and the United States, while its sales network consists of 50 distributors and around 11.000 points of sales across the world (Alfa Pastry, 2013).
  • 6. Strategic Analysis of Alfa Pastry SA Page. 6 3. EXTERNAL ENVIRONMENT ANALYSIS PEST Analysis Political conditions The political conditions of Greece are mainly characterized by the implementation of the two packages of austerity measures by the Greek governments after 2009. These measures implied the cut in wages and pensions, as well as cutting several employment rights and benefits of Greeks, thereby causing an overall political instability over the last three years. As far as the food industry as a whole is concerned, very strict legislation rules Greek food manufacturers, not only in terms of their products and packaging, but also in terms of their production processes, especially as far as environmental protection issues are concerned. EFET is the main governmental authority occupied with regulating food manufacturers, and those that are not certified with ISO:2001 quality certification are subject to serious financial penalties and even closure (Euromonitor International, 2014). Economic conditions The Greek economy is expected to suffer the seventh year of recession, with the country’s GDP being expected to decline by 0.8% in the end of 2014. It is estimated that, in order for the country’s debt to become affordable, Greece needs to report an average growth of 3% from 2014 to 2021. As far as unemployment is concerned, this is expected to reach 27.1 in the end of 2014, slightly improved than the 27.4% of 2013. As a result of the turbulent economic conditions in Greece over the last three years, Greek consumers have seen their disposable incomes diminishing by 35%, while the country ranked last in the World Bank’s Ease of Doing Business 2013 report (Euromonitor International, 2014).
  • 7. Strategic Analysis of Alfa Pastry SA Page. 7 This has been a very important indicator of the difficult and risky business environment that Greece has formed due to the economic crisis it faces, as well as lack of competitiveness and corruption (Euromonitor International, 2013). Social conditions The numerous consecutive years of crisis have led Greek consumers becoming very price-sensitive, as well as cutting down on their spending, making their household budgets even tighter, and seeking for offers and discounts. As far as food products are concerned, Greeks are highly sensitive in health issues, their preference for fresh and qualitative food being at the forefront, especially when it comes to purchase food products for their children. Despite the fact that private label products are still perceived as of inferior quality to branded ones, a switch towards private-label food products has been observed in Greece, mainly due to their lower price. At the same time, Greek consumers have become very sensitive with the origin of the food products they purchase. They have switched towards purchasing products made by Greek food manufacturers, as a means of supporting Greek economy and Greek employment (Euromonitor International, 2014).
  • 8. Strategic Analysis of Alfa Pastry SA Page. 8 Technological conditions The information and communications technology in Greece is quite developed. The Greek government has employed its Digital Strategy 2006- 2013, aiming at giving the incentives to Greek enterprises to develop ICT infrastructure, in order to meet European standards. Mobile phone processions and Internet connectivity have also been improved in Greece households, compared with 2007, but there are still below the European averages, major reasons for that being the lack of Internet connections in many Greek islands, as well as lack of computer skills from an important part of the Greek population. As it is clear, the development of the Internet has been the most important technological development in Greece during the last decade, which has given companies the opportunity to create new online sales and marketing platforms. At the same time, the Internet has given Greek consumers the ability to quickly identify what is offered in international markets, thereby having become more demanding. (Euromonitor International, 2013)
  • 9. Strategic Analysis of Alfa Pastry SA Page. 9 4. PORTER’S 5 FORCES ANALYSIS Bargaining power of buyers The bargaining power of buyers is high in the Greek frozen processed food industry. Indeed, consumers have the opportunity to select the particular food products from a number of different manufacturers, and switch to alternative ones, if they are satisfied with their current suppliers for any reason. Bargaining power of suppliers The bargaining power of suppliers is low in the particular sector. Thanks to globalization and the diminishing trade barriers, food manufacturers have the option to select the suppliers of their raw materials and ingredients from any part of the world. Domestic suppliers have higher negotiating power, due to the manufacturers’ emphasis on selecting ingredients that are locally produced, in order to keep up with the associated consumer trend. Threat of substitutes The threat of substitutes is really high in the frozen processed food industry in Greece. The most important and direct substitute is identical, though fresh, food, which consumers can purchase on a regular basis, but just cannot store in big quantities and for long time periods. Except for that, any other food product could be considered as an indirect substitute of pasty and other forms of frozen foods. Last but not least, eating out or ordering food could also be perceived as indirect substitutes, in cases whereby Greek consumers decide not to cook at home.
  • 10. Strategic Analysis of Alfa Pastry SA Page. 10 Threat of new entrants The threat of new entrants in the market is moderate. One on the one hand, the increasing interest of Greek consumers towards frozen processed food, as well as their increasing preference in private label products, have constituted the Greek frozen processed food industry as rather attractive for new companies to invest in. However, the large investments required for establishing such a business, together with strict legislation and the already established brand awareness and loyalty of existing brands form some important entry barriers that may prevent new players from entering the market.
  • 11. Strategic Analysis of Alfa Pastry SA Page. 11 5. COMPETITION Barba Stathis S.A. is the leader in the Greek frozen processed food industry, holding a market share of approximately 30% in 2013, with its growth mainly been driven by its two flagship brands, Uncle Stathis and Chrisi Zimi, the latter referring to frozen bakery products similar to those offered by Alfa. Lidl Hellas holds the second place in the sector with its private-label products and a market share of 10.4%, followed by Kallimanis S. A. and its market share of approximately 9% in the same year (Euromonitor International, 2014). Marketing and overall promotional activities that emphasize on price benefits form a very critical success factor in the Greek frozen processed food industry, with companies operating in the sector striving to switch consumers’ attention from the more expensive fresh foods. Those companies that have used celebrities to promote their products have identified the most significant sales volume increases. New product development and innovation are also important success factors in the particular industry, together with price offers and discounts, in order to attract sales from the very price-sensitive Greek consumers. Within the context of frozen bakery products, latest innovation trends have been mainly driven by Evoiki Zymi SA and its traditional country style fyllo, as well as Alfa and its soft fyllo sold under the Afrata brand. Together with the above, emphasis on the Greek origin of products, as well as offering small packaging and higher product diversity are expected to play a very crucial role in the years to come (Euromonitor International, 2014).
  • 12. Strategic Analysis of Alfa Pastry SA Page. 12 6. MARKET ANALYSIS The market Sales in the sector dropped by 55% within 2013, reaching €281 million. Frozen vegetables and bakery products were the best performers in the market, reporting growth rate of 1% in the end of the same year. Unit prices in the sector as a whole dropped, mainly driven by Greek consumers’ demand for cheaper products. As far as private label products are concerned, they share was increased to 33% in 2013, indicating the high importance of price for Greek consumers. Supermarkets form the most important distribution channel for frozen food products, mainly because of the rich presentation they offer for this product category and in contrast to small retailers, which, being unable to invest in big freezer areas, try to compete using special offers and discounts. As a whole, the industry is expected to meet a report a downturn in sales of about 1% until 2018, while value will be negatively affected by the continuous manufacturers’ emphasis on discounts (Euromonitor International, 2014). The consumers Greek consumers have gradually improved their perceptions towards frozen processed foods’ quality, mainly driven by their low price compared with fresh ones, as well as marketing campaigns mentioning that frozen food keeps the same nutritional characteristics as when the same food is fresh. At the same time, Greek consumers have become increasingly keen on cooking at home rather than going out or ordering food, and this has been another main reason for the growth in frozen vegetables and bakery products (Euromonitor International, 2014).
  • 13. Strategic Analysis of Alfa Pastry SA Page. 13 7. INTERNAL ENVIRONMENT ANALYSIS Vision and mission The vision of Alfa is to offer the best piece of Greece. Under this vision statement, the company highlights its mission, which is to take advantage of Greek gastronomic characteristics and together with the astonishing taste and quality of its products to offer the best pies Greek consumers have ever tasted (Alfa Pastry, 2013). Competitive advantage The business success and the competitive advantage that Alfa pastry has gained in the markets in which it operates form the outcome of a number of core competencies and capabilities that the company has developed since the beginning of its operation. To start with, innovation is at the heart of Alfa’s business. More specifically, Alfa was the first company in the Greek market to introduce the authentic fyllo, the so-called “kihi” pies, which are strongly related with the history of Kozani, as well as paper baking tray for pies to be directly placed in ovens, in contrast to competitors’ aluminum trays.
  • 14. Strategic Analysis of Alfa Pastry SA Page. 14 Moreover, Alfa places high emphasis on quality, looking for ingredients and making food products of superior quality, which is acknowledged by 98.5% of its customers. Indeed, the company operates under the strict European IFS and BRC quality standards, while also testing every single food product it makes in the company’s certified internal laboratory. Further, Alfa is highly customer-oriented, basing its product development on the Mediterranean dietary habits and traditions. Furthermore, Alfa’s business is based on four core values that also enhance their competitive advantage, namely taste, ethos, quality, and creativity. Additionally, the company’s workforce forms another important source of competitive advantage, mainly reflected in organizational members’ passion for what they do and emphasis on business excellence at all levels. Under no doubt, strict quality controls have also contributed to the very high quality of Alfa’s products, together with the very wide variety of pastry and bakery products the company offers. Alfa’s expansion to foreign markets has also significantly contributed to Alfa’s sales growth over the last decade, while at the same time giving it the financial capacity to further invest in the innovation and overall development of its business. Marketing and promotional activities are also at the forefront of Alfa’s operations, with the company advertising its products through various media, the Internet also been included, both in the domestic market and abroad. Last but not least, Alfa has established a very sophisticated information system, giving the company the ability to enhance and maintain its operating efficiency (Alfa Pastry, 2013).
  • 15. Strategic Analysis of Alfa Pastry SA Page. 15 SWOT Analysis Strengths  Wide range of retail and catering products  Sales network of 50 distributors & 11.000 PoS across the world  Significant sales growth  Innovativeness  High product quality  Committed employees  Intense quality controls  Greek origin of products  String marketing and promotional activities  Sophisticated information system Weaknesses  Low competitiveness in the Greek market  Operation in the frozen bakery segment only, compared with competition Opportunities  Greek consumers have switched towards purchasing products made by Greek food manufacturers  Information and communications technology in Greece quite developed  Low bargaining power of suppliers  Frozen bakery products’ sales expected to grow in the next 5 years  Improved their perceptions towards frozen processed foods’ qualit Threats  Overall political instability in Greece  Very strict legislation for Greek food manufacturers  Diminishing Greek consumers’ income  High bargaining power of buyers  High threat of substitutes  Intense competition  Increasing private label products penetration
  • 16. Strategic Analysis of Alfa Pastry SA Page. 16 8. FUTURE GROWTH RECOMMENDATIONS In order for Alfa to ensure its growth for the next years, it needs to take into consideration the analysis so far, as this was summarized in the SWOT analysis presented in the previous section. In other words, the company needs to take advantage of its strengths, in order to deal with its internal weaknesses, explore external opportunities, and avoid external threats. One way in which Alfa could enhance its future growth would be to explore new market segments, and mainly the frozen beans market, which is also another promising segment in the Greek frozen processed food industry. Doing so will help the company in further increasing its sales volumes, as well as acquiring market shares in other segments as well, thereby further diversifying its product portfolio, which is already a critical success factor in the market. Opening new markets is also consistent with the above. Alfa shall follow the strategy of market diversification, according to which companies explore new markets with new products (Farris et al., 2010). Developing countries, which are expected to drive global economic growth in the years to come, provide excellent business opportunities. Promotion is another means of Alfa’s enhancement of future growth. Advertising and promotional activities shall heavily emphasize on the Greek origin of Alfa’s products, while at the same time highlighting the nutritional benefits of frozen bakery products the company offers and the fact that frozen foods maintain the beneficial nutritional characteristics that fresh foods also have.
  • 17. Strategic Analysis of Alfa Pastry SA Page. 17 At the same time, Alfa could also offer smaller packages of its products in the Greek market. As such, instead of lowering its prices and being involved in a price war, Alfa should offer smaller, thus more economic, packages, so that Greek consumers experiencing financial difficulties prefer to purchase smaller quantities of a branded and trusted product offered by Alfa, rather than purchasing a private label one. Taking into consideration the high levels of its innovativeness, it will not be difficult for Alfa to also invent new pie tastes, so as to further differentiate itself from competition. In short, the company shall follow the strategy of differentiation, offering products or product features that are perceived as unique in the market (Kiechel, 2010). Given that the business and overall economic conditions are rather turbulent in Greece and the future is unknown, Alfa must be very careful regarding its financial performance and the management of its financial resources. For this reason, tight internal financial control shall take place on a regular basis, so that the company constantly monitors its financial condition and take measure before certain financial issues cause severe problems to its business. Of course, it is also important that all other departments need to go in line with the financial strategy of the company as well. It follows that internal control shall not concentrate on product quality only, but also on overall operating efficiency.
  • 18. Strategic Analysis of Alfa Pastry SA Page. 18 It is important for Alfa to create an online sales platform for wholesalers. First of all, this will help the company in being consistent with the Internet development characterizing Greece and the global market as a whole. Next to that, operating an online sales platform will help the company in reducing its operating costs by occupying less employees in customer service schemes. As a last point, it may be very beneficial for the company to pursue a vertical integration strategy. According to this strategy, a company is actively involved in and owns many parts of its supply chain, either backward (suppliers) or forward (distributors and buyers). By following such a strategy, a company controls its supply chain in a more efficient way, thereby enhancing and maintaining the quality and control of its products and overall supply chain processes (Hill & Jones, 2012). In the case of Alfa, except for maintaining the above, the company would also have the opportunity to control its supply chain costs as well, thereby being able to offer lower prices to end buyers and complying with the diminishing incomes of Greek consumers. Vertical integration shall also be accompanied with an intensive distribution strategy, based on which Alfa shall strive to distribute its products through the maximum points of sales available in the market.
  • 19. Strategic Analysis of Alfa Pastry SA Page. 19 9. REFERENCES Alfa Pastry (2013), “The company”, available at <http://www.alfapastry.com/el>, accessed on 03-05-2014. Euromonitor International (2013), “Business environment: Greece”, available at <www.portal.euromonitor.com>, accessed on 05-05-2014. Euromonitor International (2014), “Frozen processed food in Greece”, available at <www.portal.euromonitor.com>, accessed on 05-05-2014. Euromonitor International (2014), “Greece: Country factfile”, available at <www.portal.euromonitor.com>, accessed on 04-05-2014. Farris, P., W., Bendle, N. T., Pfeifer, P., & Reibstein, D. J. (2010), Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, Upper Saddle River, New Jersey: Pearson Education Ltd. Hill, C. W. L., & Jones, G. R. (2012), Strategic Management Theory: An Integrated Approach, 10th edition, Cengage Learning. Kiechel, W. (2010), The Lords of Strategy, Harvard Business Press.
  • 20. Strategic Analysis of Alfa Pastry SA Page. 20 10. APPENDICES A] Greece- Country and business profile Business indicators in Greece (Euromonitor International, 2014)
  • 21. Strategic Analysis of Alfa Pastry SA Page. 21 Disposable income in Greece (Euromonitor International, 2014) R&D spending in Greece (Euromonitor International, 2013)
  • 22. Strategic Analysis of Alfa Pastry SA Page. 22 B] The Greek frozen processed industry Sales in the Greek frozen processed food industry (Euromonitor International, 2014) Competition by company (Euromonitor International, 2014)
  • 23. Strategic Analysis of Alfa Pastry SA Page. 23 Major distribution channels (Euromonitor International, 2014) Sales forecast (Euromonitor International, 2014)