Chupa Chups’ success is an inspiring story and an interesting case study. Many good lessons in International expansion and global strategies emerged.
The case was presented today by a keen and spirited group of the Strategic Management Class of Tasmac. I wish to share the essence of their analysis. We had fun we had learning! So what did Chupa Chups do?
Spain is renowned for its sunshine, beaches and tapas which attract millions of tourists. But depite being Europe’s fifth largest economy it not known for its MNCs. One exception being – S.A. Chupa Chups founded in 1957 in Barcelona, Spain. All activities developed around an empire built on a ‘one product’. Chupa Chups are sold in 170 different countries.
Earlier Enrique Bernat’s was a GM in S.A. Granja Asturias (a company experiencing financial difficulties), a sweets manufacturer in Asturias Spain. Bernat chose the moment to propose a radical change in strategy from concentrating on selling hundreds of sweets products in just one market to concentrating only on producing one product but for several markets. It was necessary to find an innovative product for the Spanish market that would add something new to end customer (the child) and principally to the buyer (the mother). He remembered how children were admonished as they stained their hands, faces and clothes with their sweets. He proposed the idea of a sweet with a stick – what is now known around the world as a lollipop.
The board took a skeptical view of this plan, judging it to be the madness of an ambitious
youngster. Enrique Bernat had faith in his idea, so progressively he bought the shares of the company and in 1957 took over as the sole shareholder. Chupa Chups (pronounced ‘shoopa shoop’ – comes from Spanish verb ‘chupar,’ to lick) introduced its first lollipop in 1958.
Bernat first developed the product Bernat decided to develop company’s own process technology in Spain. The unit was called Confipack. It developed first the machinery to produce spherical sweets , later ‘hole punchers’ to introduce the stick, and last the paper wrapping machines that enabled production capacity to expand from 500 to 4800 units per hour.
Marketing and Distribution
Started advertising very early through radio & TV campaign and intensive use of point of sale publicity. In 1969 Catalan (Politically autonomous area in Spain) artist Salvador Dali designed the brilliant red and yellow wrapper.
Children remained the primary customers, so product packaging innovation was seen as a critical success factor in maintaining customer interest. Enrique himself would sit behind counters in small stores observing and listening to customer reactions to new product.
Given the nature of the product and the vision of Enrique Bernat, to have the brand name Chupa Chups etched in peoples mind, the product had to be displayed on as many shelves as possible.
A TV campaign in Russia was a big hit – genuine footage of Russian cosmonauts sucking on Chupa Chups (Cigarettes were forbidden) while on duty in the Mir Space Station.
In 1960 to 67, Chupa Chups’ followed and expansion plan in Spain, France, Germany and The US, replicating the formula of a single appealing, top quality product distribution by its own sales force.
In 1968 Japan’s manufacturers and distributers were surprised to meet a Spaniard selling sweets on a ‘chop stick’. It took a long time and persistence before the Japanese overcame their initial revulsion to sucking in public to become one of Chupa Chups’ biggest customers.
Export to France (‘70s) by replicating its successful distribution system built in partnership with a French manufacturer.
Visionary leadership with Bold Strategic Intent – Taking on the World
Following success in developed countries they began to target lesser developed countries during 1980s Bernat stated – “In this period we began to attack the world”.
Huge opportunity in China liberalization started in 1979.
Russia allowed foreign investment in 1987 stipulating the need to have a Soviet partner. Commenting on reported Mafia problems in the Russian Market Enrique Bernat stated –
“Problems are everywhere, and the Mafia may be everywhere. But consumers are everywhere, also, and they eat every day”.
Chupa Chups managed to achieve Global Efficiency and National Responsiveness the two conflicting demands simultaneously.
Global efficiency by having a standardized product that was easy to handle and transport
worldwide. Economies of scale by producing Classic Chupa Chups in plants located in different country. But only Spanish plants and the plant in Southern France produced the sophisticated lollipops (Melody Pops, Fantasy Balls, Tattoo Pops, and Wind Bali etc) and shipped to other markets. Centralized purchasing for all items except sugar and glucose.
Changing flavors for different countries.
(A) Japan – Green Tea (B) Mexico – Spicy (C) China – Light colors (D) Finland – Salted (E) Scandinavia a region in northern Europe that includes Denmark, Norway, and Sweden. (F) Japan – Green Tea
Changing wrappers colors as per country. Staff selection was based on multiple nationalities who understood the importance of diversity. Partner selection was important for success in strategic alliances.
People in Chupa Chups take pride in saying – “I am a Chupa Chups boy” This happens with a great leadership .
“I have always taken care of that people feel good about working with us. It is vitally important that they feel happy at work; that they like the job. Enrique Bernat
Thank you folks for your spontaneous participation and cooperation.