This paper examines the strategic rationale behind Kudler Fine Foods' decision to expand its Italian cheesemaking operations into France as its first international market. The analysis covers key factors including France's high per capita cheese consumption, favorable EU regulatory environment, elimination of currency exchange risk, and the country's economic stability relative to Italy. The paper also considers the advantages of entering through Paris as a media and distribution hub, the easing of EU milk production restrictions, and the potential for improved margins through economies of scale. Together, these factors present France as a logical and low-risk first step in Kudler's international growth strategy.
Kudler Fine Foods is an Italian cheesemaker seeking to expand into France. There are a few reasons for this choice of country. The first is that France is also in the European Union, so there are no legal differences in trade between the two countries. The second reason is that France is a strong market for cheese. With a consumption rate of 25 kg of cheese per capita annually, France's consumption is slightly higher than that of Italy (No author, 2011). Like Italy, the French market is mature and sophisticated, but it also has a higher percentage of cheese used as an industrial ingredient, which could help Kudler capture volume if the company is able to produce enough cheese to enter this segment of the French market.
The French market is also large in terms of population, with 65 million people. The market is centered on Paris, which gives Kudler the opportunity to focus its distribution on that region initially. Given that Paris is also a major media center, it is a natural place to begin market entry into France. There are many trade shows dedicated to cheese in France, which will help Kudler establish its name and then build out distribution networks across the country.
The French economy is stronger than that of Italy as well, making it an attractive market to enter. France's GDP is $2.145 trillion, slightly ahead of Italy's, and the per capita GDP is $33,100, again slightly better than Italy's (CIA World Factbook, 2012). France's GDP is growing at a slow rate, but the country is in better financial shape than Italy, which faces the risk of higher interest rates on its sovereign debt and an austerity program that could choke off the economy. Entering the French market is therefore also a means of hedging against a potential slowdown in the Italian market.
"No currency risk, fewer legal barriers for Kudler"
"Easing milk quotas lowers costs and aids expansion"
There are a number of compelling reasons why France is a good destination for Kudler's first international expansion. The legal environment is familiar and there are no currency exchange rate risks. The market is large and sophisticated — the French eat a great deal of cheese and know their cheese well. There are strong distribution channels available for quality products, and while French cheesemongers typically sell French cheese, they have demonstrated a willingness to carry high-end cheeses from elsewhere in Europe as well. The size of the French market is attractive because, when combined with lower future milk prices, Kudler should be able to reduce its cost of production while maintaining higher prices, thus improving its margins. There are few if any downsides to entering the French market at this time, and many positives.
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