Around the world, experts frequently recommend that companies expand internationally to diversify their businesses to protect themselves from the ups and downs of their domestic economies. Although competing internationally offers opportunity, it can also bring headaches, especially for small and midsize enterprises (SMEs). “Intuitively, managers can perceive certain weaknesses in their own businesses, and suffer a clear fear about getting into a much broader market. Or they may simply fear they lack the necessary commercial techniques,” notes a study by two marketing professors at Pablo de Olavide University in Seville, Spain.
In "Inés Rosales: The Challenge of Internationalizing a SME Is Possible," Jesús Cambra-Fierro and Rosario Vázquez-Carrasco illustrate a small company’s successful internationalization. The company, Inés Rosales, had to overcome an additional difficulty: marketing an unfamiliar food product – tortas de aceite (olive oil tortas) – which was closely linked to the culture of Andalusia in southern Spain. The professors’ research was published in Universia Business Review in late 2010. To prepare their case study, the authors undertook in-depth interviews with the company’s managing director and export director, and visited its installations several times. They also analyzed management documents including procedural manuals.
Inés Rosales was established in 1910 in Castilleja de la Cuesta, a small town near Seville in southern Spain. The company owes its origins to a pastry chef who marketed her homemade recipe for tortas de aceite. The product is prepared from natural ingredients from a Mediterranean diet, such as wheat flour, virgin olive oil, and sugar. Its success was such that in the late 1920s Inés Rosales sold six million tortas annually in Spain.
The Spanish Civil War, from 1936 to 1939, halted production, but things got back to normal afterward because the product was so affordable. During the difficult post-war period, it became a lifestyle essential. “This sentimental union between the consumer and the product constituted one of the fundamental pillars of the success of the company’s expansion within the country,” the study notes.
Things have changed dramatically since 1985, when Juan Moreno took over the business. Sales have shot up from 12 million units that year to 130 million units now. Today, 140 employees at Inés Rosales – 85% of them women – still make the product by hand. In 2010, the company had revenue of 14 million euros. In a statement to the local press, Moreno forecast that, with expansion to 15 markets, revenue would rise to 28 million euros in 2012. Twenty percent of revenue currently comes from international sales.
The Process of Internationalization
A turning point had come in 1995, when, facing the apparent maturity of its domestic market, the company expanded outside Spain. A key consideration was that the product was strongly linked to the culture of southern Spain, but the habits of consumers elsewhere can be quite different. “That means,” the report notes, “that on some occasions the company has to answer such questions as: ‘Is this a candy, yet it’s made with olive oil? How do you eat it?'"
Additionally, executives didn’t know how to identify and contact appropriate foreign markets, although they recognized they would need to rely on people trained in international marketing. They were also aware of production limitations. “Due to the characteristics of its production process, if the company wants to expand productive capacity, it can only do that by doubling its facilities again and again, because it isn’t possible to expand by incremental percentages,” the authors wrote.
So the company’s leadership attended international fairs to learn about various foreign markets, to analyze perceptions of their product, and to contact distributors. Vázquez notes that the company faced a unique hurdle. They were selling a product unknown outside Spain. “When Juan Moreno went to fairs and saw his product, he wondered, ‘How do I sell this if nobody knows what it is?’”
That obstacle, Vázquez notes, “later became an advantage because tortas were something that many foreign consumers associated with a sort of tourism that they really liked; it was linked to gastronomy, fiestas and culture. That enabled them to evoke their memories of being in Andalusia, and this became its strong point.”
So in 1995, Inés Rosales began to sell in foreign markets sporadically. “Perhaps because of his background in the merchant marine, when Moreno took the reins of the company, he was already predisposed to going abroad,” Vázquez notes. “He personally attended all of the fairs to acquire experience, but without setting up his own booths there, under the umbrella of a delegation from Andalusia or Spain. However, the moment arrived when he realized that he could not be everywhere, and that approach wasn’t efficient.” In 1998, Moreno created an export department and hired a person with international trade experience.
Maintaining the Product’s Image
Inés Rosales also sought markets where importers of Spanish products already had a presence. As Vázquez notes, in Spain, they were sold as a basic foodstuff at an affordable price (a package of six for 1.50 euros). But outside the country, it was marketed as a gourmet product that could only be acquired in certain establishments and for a high price (US$6 or US$7 per package in the United States, for example). The goal was to find “distributors that would endorse the product to consumers while caring for and maintaining its image,” Moreno says.
Export growth was slow from 2000 to 2005. “They didn’t manage to find the right distributors and, in some cases, had to wait up to five years to enter a market,” Vázquez notes. “This problem is common among many companies that want to internationalize.”
Morenocould only remain patient, and use his experience as a learning tool. Over time, Inés Morales decided to preserve its original recipe, but make modifications for different markets. “For the British market,” Vázquez says, “they made the tortas with the flavor of Seville oranges,” the favorite fruit for making marmalade in the United Kingdom.
They also used the lessons of the international market to improve the organization domestically. “The formats for creating six-packs in northern Spain, where there is higher humidity, led to quality problems with the product because the last tortas that people ate did not have the same flavor as the first ones. So we decided to package the tortas in packages of three cakes each for those Spanish markets, and that was a major success,” Moreno notes.
Nowadays, people in the company don’t talk about a domestic market or an international market, only about a “market with customers that can be located anywhere in the world,” Moreno says. Product differentiation matters in
Spain and abroad. At Inés Rosales, “People think that the whole world values the fact that a product is made by hand; and if it is made with olive oil, so much the better,” the authors say.
What’s more, Moreno believes that “the association of this food with Spain and its style of life has benefits for many companies that market products that are related to this sort of food. And many foreign consumers are attracted by the Spanish style of life.” He adds, “Foreigners’ experiences in Spain have been – and we hope will continue to be – an important factor. The tortas bring back their positive experiences, enabling them to relive the lifestyle of southern Spain.”
The company seeks advantage from this intangible resource. In Japan, for example, to which the company has been exporting since mid-2010, consumers traditionally consider Spain a favorite tourist destination. “For us, this constitutes a very important base for reaching those markets and consumers that we must take advantage of.… This is a typical handmade product from Andalusia, and people need to find that out,” Moreno says.
But How Do You Eat It?
Having overcome the distribution barrier, the company needed to adapt the product to various foreign markets. Except for small variations such as the flavoring in the United Kingdom, the tortas are not changed when sold outside Spain. The company even preserves the word torta. It then defines the product, which has no direct translation in a foreign language. “The main problem is explaining exactly what the product is, and how it should be consumed,” Moreno notes. In the United Kingdom, the word “biscuit” was added – making it olive oil biscuit – so consumers would realize that it was sweet.
Meanwhile, in Germany, some consumers didn’t know to eat it with their hands, as people do in Spain. “They tried to put the entire thing in their mouth, which is really difficult,” Moreno notes. In any case, the authors write, you need to “educate” consumers. The company has even produced brochures explaining that the transparent plastic packaging can function as a plate.
The paper inside the packaging is the same that is used in Spain, and uses the Spanish language. However, some changes have been made to the exterior packaging. At first, they designed cardboard packaging that incorporated an image of a coffee cup along with the tortas, to suggest a breakfast food. They eventually rejected that design because it made it hard to see the product. They moved to a transparent package like the one used in Spain. The United Kingdom is the only place where the exterior packaging has changed; it is black, adapting to British consumers’ sophistication.
Other changes relate to legal and communications factors, such as “adding the necessary information for each country,” notes the study. For example, “In the United States, they require nutritional information that is not obligatory in other markets.” In addition, in the United States there is a drawing of olives, and olive oil as an ingredient is highlighted. So is this suggestion: “Serve with cheese, coffee and tea.” U.S. distributors – who are cheese importers – contributed this idea: “American consumers like cheese, and you’ll sell them more olive oil tortas if it is associated more with the consumption of cheese than with cookies,” the authors write.
Elsewhere, the company doesn’t promote an association with cheese, so as not to pigeonhole the product. “As for the question of how you consume this product, the company responds: ‘However you like,’” notes the study. In fact, British consumers categorize it as a “biscuit” while Canadians view it as “a cake that is an accompaniment to whiskey.”
When it came to communications, management worked with intermediaries. Marketing materials maintain a consistent style, changing only the language and some messages specifically for each country. “Since it is an SME, the company does not have sufficient resources to undertake a large-scale advertising campaign. So it tries to convert its distributors into spokesmen for the company by getting them excited about the product and communicating this emotion to potential consumers,” the report says.
More specifically, in its brochure aimed at distributors and shops in Germany to convey the story of the product and its manufacturing style, it uses key expressions that show an understanding of the audience. “These expressions are left to the criteria of each importer, who knows his market better than Inés Rosales does.”
Perceptions of Seville, Andalusia and Spain – and olive oil itself – are paramount. In Germany, Inés Rosales sells olive oil tortas as “a snack for any time of the day, so you can relax the way people do every day in Andalusia.” German consumers understand that in Andalusia, people enjoy life. The company believes that if this is what people perceive, this is what you reinforce.
It is hardly an accident, the study concludes, that “Germany and the U.K. have been important markets.… These are two of the countries that send the most tourists to Spain in general, and to Andalusia in particular.”
