The Challenge of Intimacy with a Key Customer
How viable were Fortina’s ‘enriched milk’ solutions? Within the Italian milk market, Fortina’s advice is sound. In the Italian milk market, prices for full fat milk are decreasing along with the consumption of full fat milk.
Pontero has already tried to counter this trend by expanding into the semi skimmed and skimmed milk products. It would make sense to also expand into the ‘enriched milk’ market which while still a small portion of the market, the market share is increasing (8% over four years). The ‘enriched milk’ market can also command higher prices and higher margins so would help Pontero with a more profitable product.
Pontero has also been losing shelf space in store to their competitors. Increasing the number of products Pontero produces would help increase the shelf space occupied by Pontero and hence lead to an increase in sales. Why did Pontero reject them?
The reason that Pontero rejected Fortina’s solution however is not due to the logic of such an entry into a growth area of the market, but because of the branding behind Pontero. Pontero has increasing brand recognition in Italy despite its declining sales.
They had been investing in advertising, in particular targeted at dismissing ‘enriched milk’ products. To do a backflip, would go against this theme and would seem hypocritical to consumers and damage their brand.
Roberto Pontero is undoubtedly proud of his company that he has run and grown over 20 years and to ignore the core beliefs of the company to be ‘natural’ showed a lack of insight on the part of Tetra Pak to a key client for whom they should have a better understanding. 2.What should Tetra Pak do now to stay close to Pontero?
To stay close to Pontero, Tetra Pak would need to focus more on Pontero wishes to stay ‘natural’ Instead of trying to change this philosophy, Tetra Pak should focus on other ways to increase Pontero’s sales. Instead of focusing on one part of the market, despite its growth, Tetra Pak should steer Pontero towards addressing another growth area such as the families with children group.
Tetra Pak should also foster Pontero in growing the semi skimmed and skimmed milk products or their other non-milk products.