Reference no: EM131288354

Jarlsberg: the king of Norwegian cheeses is deciding about entry modes in new markets
Jarlsberg cheese (www.jarlsberg.com) has been well received in the US market. Nearly 50 years after entering the United States it is now the imported cheese with the biggest market share of its category in the competitive US supermarkets. However, following the quota which the WTO has set up between Norway and the United States, Jarlsberg can only sell a limited amount of cheese from Norway to the US. The quota on Jarlsberg to the US is approximately 7,000 tons.

To increase sales, a licenced production was set up in Ohio in 2000, with an annual production of approximately 5,000 tons. Quality control is maintained by using a cheese culture produced in Norway (based on a secret recipe from 1956), premium quality milk only, tailor-made production lines and key people educated within dairy technology/science. The total export of Norwegian cheese to the United States in 2008 was approximately 8,000 tonnes, of which the majority was Jarlsberg. This means that the quota which the WTO set up between Norway and the United States was full: Jarlsberg had to find other ways of selling cheese in the United States.

The story Professor Ole M. Ystgaard and his employees at the Norwegian Agricultural School developed Jarlsberg in the 1950s. The cheese is based on traditions from Swiss cheese makers, who developed cheese with holes in the 1830s. Jarlsberg cheese arrived in the United States in 1963. In the beginning, the Jarlsberg management team travelled around the country to demonstrate how the cheese could be used for everyday meals and at parties. After just two years Jarlsberg had a sales volume of 450,000 kg in the market, and the managers understood they had a ‘hot' product. Jarlsberg has become a high-status product, served by celebrities at high-society parties.

Norseland Inc. Norseland Inc. was founded in 1978. The purpose of the company was to market and distribute Jarlsberg and other Norwegian cheese in the United States. The company is a wholly owned subsidiary of TINE Norwegian Dairies, which has the main responsibility for the production and marketing of Jarlsberg cheese. In 2002 Norseland had net sales of US$130 million, about half of this derived from imported Norwegian Jarlsberg, 25 per cent from Jarlsberg produced in Ohio and the remainder from sales of products from other companies, among them French Unilever Boursin. Norseland's strategy is to sell exclusive cheeses only, and the company commands respect in the US retail trade where a 90 per cent distribution coverage has been achieved. Norseland has a regional office in Montreal, Canada, where an additional 1,350 tonnes of Jarlsberg were sold in 2008.

The US cheese market The total US market for hard cheese is approximately 400,000 tons, but the market also consumes a lot of soft cheese. Though Jarlsberg only has a small market share in the total hard cheese market (in 2008 Jarlsberg sold 12,600 tons to the US market) this represents the largest market share in the Swisslike cheese category. The largest producer of cheese for the US market is Philip Morris, including the company Nabisco which Philip Morris bought in December 2000. The most well-known brands from Philip Morris come from Kraft, which markets the popular soft cheese.

Philadelphia. The second-largest cheese producer for the US market is ConAgra Foods, which had total sales of US$13 billion in 2008. In general, the tendency to consume cheese is higher in the eastern part of the United States, whereas ‘healthy' food products are focused on more in the western part of the country. There is a tendency to eat more imported cheese as personal income increases. Jarlsberg's customers and marketing Jarlsberg cheese has some snob appeal. Customers want to show they have good taste and they accept the higher price of Jarlsberg compared to other competitive products without complaining.

The mild and creamy taste appeals to Americans, and many think that the taste of the traditional Swiss cheese, Emmenthal, is too sharp. Characteristics of the typical Jarlsberg buyer are: female earning more than US$90,000 per year over 40 years old. It is important to buyers that it is an imported cheese. The fact that it is a Norwegian cheese plays a minor role and Norseland does not use this in its marketing. Norseland's objective is to attract new and younger consumers for its Jarlsberg cheese.

To achieve this objective it wants to make contracts and deals with retail chains like 7-Eleven, which also sells sandwiches, etc. Besides its own sales force of about 25 sales people, Norseland uses nearly 500 ‘cheese brokers' (distributors), who sell all over the United States. These are external sales representatives who visit shops, retail chains and restaurants in order to sell and market products, among them Jarlsberg. Five years from now Jarlsberg aims to be present in at least five new countries, either sourced through the existing production units (e.g. in USA or Ireland) or supplied from Norway.

QUESTIONS
1. Which kind of market entry mode would you generally suggest for Jarlsberg
(a) in Scandinavia?
(b) in Asia?

2. What are the general motives for choosing a hierarchical mode (own subsidiary) in the United States?