Raision Group (established in 1939) manufactures foodstuff, animal feed and paper chemicals. Raisio Group have production in 13 countries (mostly chemical business). Raisio employ 2600 personnel. The company has a strong domestic Finnish market position. The firm hope to internationalize further with the Benecol product. In 1996 the foreigners owned only 10% of Raisio Group shares, in 1997 the foreign ownership stood at 53%. In a one year period the Raisio share price on the Helsinki Stock Exchange grew from 70 FIM a share to 470 FIM a share (due to the success of Benecol).
In 1996 Finnish sales represented some 60% of group turnover (group
turnover is 3.9 Bn FIM and profit of 180 M FIM). European turnover is 30%
(mostly Russian and Baltic exports). The Foodstuff Division represents
47% of sales (oils and fats, margarine, cereal products, malt, potato products
and ready made foods), Chemicals 34% and Animal feeds 19%. In the Foodstuff
Division 39% of sales are margarine, grains 31% and other products 30%.
The group has a 62% market share in Finland for edible oils and margarine
products. In 1996 Raisio Group acquired the Swedish Carlshamn Mejeri (margarine
manufacturer) company. Raisio invested 87M FIM in R&D (2.2% of turnover).
In 1996/7 Raisio Group also invested in a sterol ester extraction factory
(a joint venture with UPM-KYMMENE Paper Company).
Benecol is a cholesterol reducing margarine. The main cholesterol reducing ingredient is sterol ester. Two grams daily consumption of this product is required to reduce cholesterol. At present the capacity of sterol ester production (in Raision Group) is only good for 2.7 million people’s consumption.
Raisio Group have estimated that the potential market is 100M+ customers. Today Benecol has a 2.6% market share on the Finnish margarine market. Benecol is 7 times more expensive than normal margarine. Market research in 9 countries has indcated that the demand for Benecol (cholesterol reduction margarine) could be very large. 50% of people in USA are concerned with levels of cholesterol (45% UK, 40% Italy, 33% Holland, 20% Japan, 10% Germany). Some 80% of respondents to the survey were very interested in Benecol.
The company faces many challenges in exploiting the technology. Raisio
are too small on their own to be a success on the international market.
The availability of the active ingredient is a challenge (sterol). Large
ammounts of raw materials are needed (paper pulp process, vegetable oil
industry, rice industry etc.) to extract a small amount of sterol. 5 pounds
of plant sterol can be extracted from a 30 tonne pulp production plant.
Raisio Group must decide if they should concentrate on the active ingredient production (sterol) or also enter the international market for final products (margarine etc.). The margarine market of the world is dominated by Uniliver and other multinationals. The USA is the most attractive market but Raisio have limited interest in food stuff on that market (although they do have the chemical business). Raisio Group have challenges to face with licensing, clinical trials, considering partners, developing new products, patenting the product, developing new markets, and overall strategy etc.
The Finnish Foodstuff Cluster (food companies) is one of the smallest and most uncertain industries in Finland. Prior to EU membership this cluster was heavily subsidized. Exports prior to EU membership were only possible through government subsidies. Few companies manufacture machinery for the food sector. Huhtamaki Oy (10th largest confectionary firms in world) and Cultor Oy (animal feeds, sweeteners-Xylitol) are the only international companies in the cluster. Firms in the cluster have been unable to support one another. Increasing competition from European and other firms can be seen. Some activity has also been seen in the merger of Swedish and Finnish companies.
As a summary it could be said that government protection is decreasing and monopolies ending. The opening of USSR has helped the Finnish industry. The small Finnish home market has not helped companies. Branding capability has been undeveloped in the Finnish companies. Companies have been too small to compete. Raw materials have been expensive to source for local manufacturers. The Raisio Benecol concept may be difficult to make a international success due to the Finnish business environment. Raisio must also consider how to improve the prospects of the food cluster overall.
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