Marketing of GM Canola in Australia - Coursework Example

A Market Plan for GM (Genetically Modified) Canola in Australia Executive Summary Canola oil is one of the oilseed products that are used in both human and animal consumption. In Australia, canola has raised controversies and this is in relation the use of genetically modified (GM) canola products. GM canola was banned by all states; however, Western Australia lifted the ban and allowed the use of GM canola products. It is stated that the reintroduction of GM canola can lead impact severely the Australian market. It is important for this company to take into consideration the issue of GM canola before it ventures into selling the product in Australia. The Challenge Canola plant was created in the early 1970s by traditional plant breeding methods by the Canadian plant breeders. The aim was to eliminate the anti-nutritional elements such as glucosinolates and erucic acid from the rapeseed in order to assure its safety for animal and human consumption. The plant also produced seeds that had very low levels of saturated fats (7% or below). Strictly speaking, canola is not a rapeseed. Internationally, it is defined based on its erucic acid and glucosinolates; canola has less than 2% erucic acid and less than 30µmoles of glucosinolates; this differentiates it from rapeseed. An oilseed product cannot use the trademark canola if it does not meet the required standards mentioned above (soyatech 2011, par. 2). Innovations in canola such as the launch of herbicide tolerance have decreased the farmer’s costs and the utilization of natural resources in the production process. There are three main groups of canola (herbicide resistant): Liberty Link and Roundup Ready varieties produced through genetic modification and Clearfield variety produced through traditional plant breeding method called mutagenesis. Of great importance, will be the Liberty Link and Roundup Ready varieties. The transgenic gene is introduced into the canola plant to generate Liberty Link and Roundup Ready herbicide resistance; the gene is a protein. However, during canola oil processing, protein is removed and thus, canola oil does not contain any GM material. The canola oil after processing is the same as the canola oil produced from a non-GM canola plant (soyatech 2011, par. 4). Cottonseed and canola are the major oilseed crops in Australia and they account for close to 90 percent of the local production. Australia’s oilseed exports are major and they supply approximately 1 million tonnes of canola seed (this accounts for 15-20 percent of the global canola trade) to main international markets annually. These markets include Europe, Pakistan, China, and Japan (Australian Oilseeds Federation [AOF] 2006, p1). In the year 1990, Australia became the major exporter of canola seed with exports going beyond 2 million tonnes in the period 1999/2000. Its annual exports have stabilized at 1 to 1.5 million tonnes per year and the main export markets include China, Europe, Pakistan, and Bangladesh (AOF 2006, p4). According to the statistics given above, the company targets to sell close to 400 million tonnes of canola. It is important to note that Australia utilizes more than 600, 000 tonnes of fats and oils yearly, and majority of it used in edible applications. Canola is soft oil and it accounts for close to 45 percent of the total soft oil usage (AOF 2006, p3). The company expects to generate sales that amount to 500 million U.S. dollars annually. It is worth to note that the oilseed industry in Australia is valued at 2.5 billion U.S. dollars (AOF 2006, p4). Situation Analysis Company Analysis Goals The goal of the company is to become the best oilseed producer and distributor internationally. Focus The focus of the company is to create safer methods that can be used to process oilseed. Genetic modification has offered means to produce organisms that grow quickly, resistant to diseases and the ability to reproduce at a rapid rate. Thus, the focus of the company is to create processes that alter the negative elements of genetic modified oilseed such as canola. Thus, canola products will be safe for animal and human consumption. Strengths The customer base for the company is large and it has several branches of oilseed companies around the world. Its products and services are good and thus, penetrating the Australia market will present a new challenge to the kind of products and services offered. Weaknesses The mode of promotion is poor and thus, the company has been unable to succeed in regions that extensive use of promotional mixes. Market Share The company’s market share is big especially in regions that require less extensive use of promotional mixes. Customer Analysis Australia population is approximately 22 million and the company targets close to 6 million oilseed consumers. As stated earlier, Australia utilizes close to 600, 000 tonnes of fats and oils each year; majority of the oil used in edible applications. Australia’s consumption of oil indicates a growing preference for products that are healthier such as high oleic and canola oils. It is important to note, “Soft (or seed) oils are strengthening their share of the total fats and oils market, and now account for over half of all usage” (AOF 2006, p3). The most sought after, preferred soft oil is canola, and it represents close to 45 percent of Australia’s total soft oil usage (AOF 2006, p3). Thus, the company will be targeting customers who prefer to use soft oils and in particular, canola oil. Political and Legal Environment Majority of the Australia’s economic activity and population is concentrated along the eastern coast of the country. The legal system is very stable and strong characterized by minimal corruption. The World Bank states that the business environment in Australia is among the best in the world since one can easily do business (A.M. Best Company, Inc 2011, p3). The political and legal risk (or the likelihood of things such as bureaucratic or government inefficiencies) is very low. Economic Environment The services sector dominates the Australian economy and that accounts for 70 percent of GDP. Finance, business, and property services make up a large proportion. Its GDP grew by 2.8 percent in 2010 and it is growing by approximately 3 percent in 2011 (A.M. Best Company, Inc 2011, p2). The Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (ARPA) are the main insurance industry regulatory authorities in Australia. ARPA regulate the whole of the financial services sector. It is important to note that the banking sector performed relatively well during the global financial crisis (A.M. Best Company, Inc 2011, p3). The risk of weaknesses in the country’s economy is very low; a weak economy system can cause undesirable developments for the insurer. Consumer Concerns about Health (Ethical Production and Food Safety) Of Canola in Australia In the recent years, numerous campaigns have been made against genetically modified (GM) foods and crops. The Commonwealth Office of Gene Technology Regulator provided Monsanto and Bayer licenses in 2002 to sell commercial GM canola seeds in Australia. The varieties licensed were herbicide tolerant; this means that the crop had to be sprayed regularly with toxic weed killer and at very high doses. The varieties also possessed foreign proteins and genes that were never in the food supply. “State governments agreed with widespread warnings that GM canola would adversely impact markets and trade in Australian food products. They used their reserve powers under national laws to protect the economy by banning commercial GM canola for five years and keeping their states GM-free” (Gene Ethics 2011, par. 1). However, GM canola state bans are being reviewed; the US government, Monsanto, and Bayer created an agribusiness collaboration to turn over the bans (Gene Ethics 2011, par. 1). People across Europe and in Australia are resisting genetically modified organisms (GMOs) in the food supply. Recent reports from the Gene Ethics Media (GEM) indicate that two of the Australia’s largest grain traders have refused to deal with genetically modified canola. The report has also indicated that there is extreme and increasing opposition to the GM grains (Benson 2011, par. 1). Majority of the Australian states have banned GM canola expect Western Australia (WA). The Agriculture raised the ban on GM canola; he has done so despite the fact that almost all shoppers and farmers reject the crop. The minister also attempted to “dilute organic standards in Australia after it was found that a GM canola crop field had contaminated an organic crop field, which caused the organic farmer to lose his organic certification status” (Benson 2011, par. 4). It is important for the company to consider the consumer concerns of GM canola. There is widespread resistance of genetically modified canola. The success of introducing such a product in the Australian market is very low since majority of the consumers do not want any products associated with GMOs. There are ethical and social concerns surrounding genetic modification and they include: (a) The probability of monopolization by the world food market through large multinational companies has control over the distribution of GM seeds. (b) Utilization of genes from animals in plant foods may cause philosophical, religious, or ethical problems. (c) New genetically modified organisms can be patented and this way life itself can become commercial property by patenting (Better Health Channel 2011, p3). Thus, not taking care of the social and ethical concerns arising from the genetically modified organisms and in particular canola, can lead to poor business performance. Market Segmentation In the creation of the market segment, three market segments have been characterized in terms of market penetration strategies. The characterization will be based on packaging; the segments include higher-end, middle-end, and lower-end segment. Smaller packages will target the lower-end segment of the market. The product will be packaged in small quantities beginning from 100ml to 5,000 litres packages. The price for the product will be set lower in order to capture majority of the lower-end market segment. The material to be used for packaging is plastic containers. The target sales for this section of the market are 41 percent. The lower-end segment represents the largest consumers of canola oil. The middle-end market will be targeted by relatively smaller packages. The product will be packaged in quantities ranging from 1,000ml to 20,000ml. Majority of these consumers are found in hotels, restaurants, and small baking industries. Strong plastic materials will be used to package the product and its pricing will be based on the capabilities of these middle-end consumers. Target sales for this segment are 34 percent of the total canola oil sales. The higher-end market segment will be composed of large-scale industries such as large baking industries and other canola oil consumers and distributors. The industries ought to be heavy consumers of canola oil products. In this category, the product will be packaged in drums (200 litres) and other big containers that can hold up to 10,000 litres of canola oil. High-density plastic material and stainless steel containers will be used. This will facilitate easy transportation and distribution of the product. Target sales for this segment are 25 percent of the total canola oil sales. Promotion and Projections The promotional program for this program will entail the promotional mix. The product will be advertised through the print media such as newspapers, television, and radio. Internet and specifically the use of social media networks will also be used. Sales promotion, personal selling, exhibitions, and public relations will be entailed in the promotional mix; public relations will be given more emphasis. The product is expected to reach 75 percent of the target market in six months. Conclusion GM canola oil does not have a suitable thriving ground in Australia. The current market conditions have made it difficult to venture into selling GM canola oil. Majority of the Australian population are against the use of GM canola oil. However, in Western Australia, the business environment seems suitable since the state lifted its ban on GM canola products use. Thus, penetrating the Western Australia market will be easier than penetrating the rest of the markets in Australia. References A.M. Best Company, Inc. (2011) AMB Country Risk Report [online], A.M. Best Company, Inc. Available from [accessed on 18 Oct. 2011]. Australian Oilseeds Federation. (2006) The Australian oilseed industry, Royal Exchange, NSW: Australian Oilseeds Federation. Benson, J. (2011) Australia shuns GM canola in response to consumer demand for non-GMO products [online], naturalnews.com. Available from [accessed on 17 Oct. 2011]. Better Health Channel. (2011) Genetically modified foods [online], Better Health Channel. Available from [accessed on 17 Oct. 2011]. Gene Ethics. (2011) Keep Australia safe [online], Gene Ethics. Available from [accessed on 17 Oct. 2011]. Soyatech. (2011) Canola facts [online], soyatech. 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