Asia MBA Case Studies

[Bob Yoghurt Case]

Case: Re-launch of Bob Yoghurt

May 2009, Purmil (Former Lotte Milk) Product Development Team Director Shin was deep in thought
over whether or not to go ahead with a re-launch of Bob Yoghurt (Note: cooked rice is pronounced bob in
Korean).

After hours of deliberation, Shin and her team had yet to come up with a conclusive decision.

The team was spilt in half over the issue.

Manager Choi: We have already incurred massive losses while the Bob Yoghurt product was on the
market from July 2007 to January 2008. The losses reconfirmed my views that mixing cooked rice
with yoghurt was not the right answer to consumers needs. There was a fundamental flaw in the
products concept. Director, a failed launch of a new product has substantial impact on the entire
company. We should learn from our past failures and not repeat the same mistake again.
Assistant Manager Kim had a different view.
Assistant Manager Kim: I believe our product concept wasnt the problem. Preliminary market
research conducted before product development showed that our product concept had potential to
capture the market amid the wide spread well-being trend.
[Instant Cooked Rice and Yoghurt Market Trends]

(W bn)

Yoghurt

Instant Cooked Rice

Fruit Jelly Products

200

180
168

160

141

148

151

154

158

168

128

127
107

120
93

92

67

80
38
40
10

15

22

59

66
47

45

23

0
1998

1999

2000

2001

2002

2003

2004

23

22

2005

2006 E

Manager Choi: But take a look at domestic yoghurt market trends. The domestic yoghurt market is
clearly a mature market. In my view, generating new demand in a fully mature market was an
impossible mission from the start, particularly with a product that could have trouble gaining broad
acceptance among domestic consumers such as cooked rice mixed in yoghurt.
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Asia MBA Case Studies

[Bob Yoghurt Case]

Assistant Manager Kim: Domestic yoghurt market growth rates have slowed a bit since 2004, but
that does not necessarily mean the market has reached maturity. I believe the market still has ample
potential for further growth. The market at present is dominated by yoghurt mixed with fruits. As a
latecomer into the market, we should uncover and fulfill consumer needs not yet met with
conventional fruit-mixed yoghurt products. Market analysis shows demand growth for both yoghurt
and instant cooked rice products. Our fresh concept of yoghurt mixed with cooked rice still has great
potential; we just need to refine and revise our marketing strategy for the product.
Manager Choi and Assistant Manager Kim both had a point on the issue, making Director Shins
decision increasingly difficult. During a break, Manager Choi brought up another issue to Assistant
Manager Kim.
Manager Choi: Did you forget the nightmare we had to go through because of the Bob Yoghurt
product last year? Our bonuses were cut by 20% because of that! Failed product launches not only
affect our team, but the entire company. Think of the huge investments that went into setting up the
production line and equipment for the new product, and the trouble we had to go through to get rid
of leftover inventory after we pulled the product from the market. I cannot understand why you
would want to go through that ordeal again.

Product History
Purmil (then Lotte Milk) first launched Bob Yoghurt in July 2007. Marketed as the first fusion breakfast
yoghurt with cooked rice, yoghurt mixed with cooked brown rice and yoghurt mixed with cooked
black rice were each placed in one half of a black plastic package shaped into the yin-yang symbol.
The patent-pending product also had Lactobacillus reuteri, a probiotic with multiple health benefits
found in breast milk. Main targets were set as office workers in their 20~30s with a sub-target of
students and children. Consumer prices were set at W1,300 for the 130g portion product, while
discount store prices were set at W2,400 for a two-package bundle of the 130g product.
[Bob Yoghurt Product Concept]

Cooked brown rice

yoghurt

Two-package bundle
Cooked black
rice yoghurt

Two-package bundle

Asia MBA Case Studies

[Bob Yoghurt Case]

Upon market introduction of the product, Purmil launched a four-month marketing campaign
consisting of TV commercials, print ads, online ads, street promotion with buses wrapped in
advertisements, free product trials and promotion events.
[Bob Yoghurt Promotion Expenses]
(Unit: W mn)

Jul '07

Aug '07

Sep '07

Oct '07

Total

198

819

418

1,435

12

50

60

122

Online Ads

62

10

72

Bus Ads

14

10

24

58

78

52

188

16

20

36

268

1,009

570

30

2,074

TV Ads
Print Ads

Taste Trials
Promotion Events
Total

Despite marketing efforts consumer demand failed to catch on. Due to sluggish sales, the company
decided to pull the product from the market in January 2008. Now, May 2009, the product had once
again been called to attention in a product development meeting. After the short break, the three sat
down once again to talk over the issues of re-launching Bob Yoghurt.
[Bob Yoghurt Sales Results]
(W mn)

Sales

250

COGS/Sales

180%

162%

212.7
200

194.1

133%
122%

150

100

123.6
69%

63%

63%

90%

140%

100%

70.8
34.9

50

60%
27.0

18.7

20%
'07.7

'07.8

'07.9

'07.10

'07.11

'07.12

'08.1

Product Analysis
Market Potential
Director Shin: The decision is particularly hard to make since we have already tried and failed with
the product. Why dont we restart our discussion from the very beginning by going over the market
potential of Bob Yoghurt?
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[Bob Yoghurt Case]

Assistant Manager Kim: Health food is at the very core of the current well-being trend. Meanwhile, as
the main staple food in the Korean diet, there will always be demand for rice and cooked rice. By
mixing yoghurt and cooked rice, our product offers a solution to the demand for both convenient
health food and cooked rice. Hence, our product has sufficient potential to tap into a niche market
with needs unmet by existing products.
Manager Choi voiced a different view.
Manager Choi: I agree that Korean consumers exhibit a need for both health food and cooked rice.
But wouldnt health-conscious consumers with a need for cooked rice choose to eat conventional
cooked rice? It doesnt seem natural to seek yoghurt to fulfill that kind of need. Consumers seeking
cooked rice will not be thinking of cooked rice yoghurt in the first place.
Assistant Manager Kim rebutted Manager Chois claims.
Assistant Manager Kim: I remember that Manager Choi was skeptical toward the Bob Yoghurt
product from the start. But there have been numerous cases of a successful re-launch of previous
failures. For instance, Xylitol gum was unsuccessful in its first attempt at penetrating the domestic
gum market. After reassessing its marketing strategy, the product was re-launched and has hence
become one of the largest selling categories in the gum market. As long as we form the right
marketing strategy for the product, we should be able to successfully target consumer demand for
health food and cooked rice. In addition, consumer acceptance toward food products based on nontraditional use of rice has significantly improved with the success of rice drinks such as Woongjins
Morning Rice drink coupled with last winters rice ice-cream fad. The popularity of rice-based
health foods and desserts was mainly based on the well-being trend. The main problem of our
product was not the concept; it was the marketing strategy. Our product pretest on female collage
students resulted in positive reviews on product taste and purchase intent. I once again believe there
is sufficient consumer needs for our product.
[Lotte Confectionary Xylitol Gum Sales and Market Share Trends]
(W bn)
90%
Sales (Wbn)

179.9

Market Share

85%

200

176.0
135.0

160
130.0

120.0
120

100.9
78%

80%

78%

77%

76%
74%

75%

75%

80
40

14.3
70%

0
2000

2001

2002

2003

2004

Source: May 1, 2007 Seoul Shinmun

2005

2006

Asia MBA Case Studies

[Bob Yoghurt Case]

[Sung Shin Womens University Product Pretest Results (Total 127 students)]
[Fair price for Bob Yoghurt]

[Bob Yoghurt Purchase Intention]

[Taste of Bob Yoghurt]

Strong

Good
\1,200

\1,000

49%

61%

(45.7%)

(25.2%)

None

Other
7%
Other
(3.9%)

\1,500
(8.7%)

Other
\1,300
(16.5%)

12%

So So

Bad

23%

4%

12%
So So
32%

Assistant Manager Kim: The domestic yoghurt market at present predominantly targets children and
adolescents. Most yoghurt products are mixed with fruits and some consumers have stated that
existing yoghurt products are excessively sweet. Our product, in contrast, has a simple and clean
taste that would appeal to consumers seeking less sweet yoghurt.
Manager Choi also offered his opinion.
Manager Choi: I am also aware of consumer needs for less sweet yoghurt products. However,
consumers that do not like sweet products would tend to choose from a totally different product
category without even considering yoghurt products even if we offered less sweet yoghurt. In essence,
although there seems to be an apparent gap between consumer needs and current product offerings,
and even if the product we intend to offer seems to provide a solution to the gap, I do not think
consumers feel the need to actually bridge that gap. Another substantial obstacle is the negative
consumer perception toward mixing cooked rice with yoghurt. There even was a popular online video
of most disgusting foods that included mixing cooked rice with yoghurt in their top ten. Even though
it was pure coincidence that the timing of our product launch matched the release of that video, it
shows that the concept of mixing cooked rice with yoghurt faces natural resistance. The video
depicted increasing levels of disgust as the test eater switched from mixing cooked rice with yoghurt
drinks to Biyote, a yoghurt similar to our product originally offered with chocolate coated cereal.
Some would even consider the very concept of eating cooked rice with yoghurt revolting.
Discussions were now shifting from the analysis of market potential to the product concept of Bob
Yoghurt.

Asia MBA Case Studies

[Bob Yoghurt Case]

Product Analysis
Assistant Manager Kim: As shown earlier, female collage students who tried our product offered
positive reviews on taste. Although the main concept of mixing cooked rice with yoghurt could face
initial resistance, I believe we could dissipate that negative image through an effective promotion
strategy. I personally cannot understand why the concept of mixing cooked rice with yoghurt
conjures negative images.
Manager Choi: In my mind the first image of cooked rice is its white color. White cooked rice is
usually eaten with colorful side dishes. Yoghurt, on the other hand, is also mainly white, a color not
seen that much in side dishes usually consumed with rice. In addition, the soft but sticky texture of
cooked rice does not go well with the thick and creamy texture of yoghurt. Further, cooked rice is
eaten with side dishes, just as yoghurt is normally eaten with fruits. Mixing cooked rice with yoghurt
feels like eating only the main food without complementary side dishes.
Assistant Manager Kim: Could there be any more reasons besides the color and texture?
Manager Choi: There could be some cultural resistance. Yoghurt could be seen as western food while
cooked rice is no doubt a Korean food. Mixing the two could be considered a clash of cultures. Oh,
and the rice drinks and rice ice-cream you mentioned earlier, those were made of raw uncooked rice
ground into powder, not cooked rice. I feel that rice becomes an oriental food the moment it becomes
cooked rice.
Assistant Manager Kim: Then, do you think our product would have fared better in the market were
it named Rice or Cereal Yoghurt instead of Bob (cooked rice) Yoghurt? And if you think mixing western
and oriental food is a clash of cultures, what do you think of fusion food?
Manager Choi: Can you think of any fusion food restaurant that has survived in the long-run? Those
that are popular at the least for a short-time usually position themselves on one side of the two,
either oriental or western, and adapt a limited number of aspects from the other side to enhance
their original position.
Assistant Manager Kim: Then do you think our problem was in the weighting of the two sides? The
name Bob Yoghurt could have caused confusion to consumers on the portion of cooked rice vs.
yoghurt in the product. Without trying the product I would wonder if the name meant that the
product was cooked rice with yoghurt, or yoghurt with cooked rice. But with curry rice and bibimbab
both widely popular in Korea, I do not think the resistance comes from the fact that two foods are
mixed into one. If the unusual texture mixture of cooked rice and yoghurt is the problem, we could
offer free trials to consumers to create familiarity. People that have tried our product told us that the
texture and taste was much better than they expected, with the chewy but non-sticky cooked rice
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[Bob Yoghurt Case]

going well with the creamy texture of the yoghurt.

Manager Choi: But that comment mostly came from people who had positively responded to the
product. Some opposing people even said that the product had a strong resemblance to vomit. The
thought alone is repulsive.
Assistant Manager Kim: If the visual aspects are the problem we could put the cooked rice in the
bottom of the cup and allow consumers to mix it after opening, just like the yoghurt products that
have the fruit portion in the bottom of the cup. Or we could make the product into a drink and
package it in a non-transparent bottle. We have the traditional rice drink Sikhye which is served
with grains of cooked rice at the bottom of the drink, as well as several popular fruit drinks such as
Sac Sac, which contains pulp "sac" of oranges in the drink, and Bong Bong, which contains whole
grape flesh in the drink. I can see that the problem of Bob Yoghurt could have been the packaging of
the product.
Assistant Manager Kim then went on to re-consider the whole packing of the original Bob Yoghurt
product. The company had originally marketed the product in a black, yin-yang shaped plastic bowl
to emphasize the image of rice cooked in traditional black cast iron pots.
[Bob Yoghurt in Original Packaging Open View]

Assistant Manager Kim: Consumers contemplating a purchase of an unknown new product would
feel both curiosity and apprehension. We should have enhanced that curiosity and lowered
apprehension by allowing consumers see the actual product content instead of packaging it in a
black plastic bowl, or at least provide a clear visual image of the product.
Manager Choi: So, do you think the product would have generated better sales if we had let
consumers see or get a clearer image of the contents of the product before purchase?
Assistant Manager Kim: One more thing. I cannot see why we have to continue packaging both the
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Asia MBA Case Studies

[Bob Yoghurt Case]

brown rice yoghurt and the black rice yoghurt in one container. Consumers could have different
preferences toward the two. I think we should consider selling the two as separate products.
Manager Choi: Our product was marketed as cast iron pot-cooked rice yoghurt. The black container
was designed to create the image of a cast iron pot. Made into a different color, consumers may not
readily make the connection between cast iron pot-cooked rice and the cooked rice in the product. I
do not think the packaging was the problem. The reason we chose to offer the two tastes together in
one package was to offer a wider variety of taste even if it increased total production costs. But I am
now curious as to why you continue to insist on the re-launch of Bob Yoghurt.
Assistant Manager Kim: Well, I believe in the potential of the product. Our company is a latecomer to
the yoghurt market. We will never become a market leader by competing with fruit-based yoghurt. If
we could somehow create a market for rice-based yoghurt, we could secure a leading position early
on. Plus the investments that went into the product is to substantial to just give up after one failure.
We already have the equipment and have put massive funds into advertisements and promotion.
Manager Choi: Sunk costs should not be considered in making management decisions. Equipment
and marketing costs are already sunk costs in the project. We should not take those into
consideration in our decision making process.
[Total Production Line Investments for Bob Yoghurt]
Category
Equipment
Capital
Expenditure

Construction
Total

Contents
Cup Filler, Fruit Injection System, etc
CIP equipment, electrics, plumbing, etc
(Depreciation: W36.3bn per year)

Amount (W mn)
1,437
592
2,029

Assistant Manager Kim: I fully agree on your point but I still believe an effective marketing strategy
would prevent another failure if we re-launch the product. We were too hasty in pulling the product
from the market after weak initial sales response.
Manager Choi: How could we have continued to invest in the product after seeing that lackluster
response from the market? We need to be reasonable in selecting which products to continue
investing in and which to discontinue before incurring further losses. Daily sales results show that
there were virtually no sales apart from the time we launched the 2+1 sales promotion and free trial
campaign. You and I both know that a new product that fails to receive market attention at initial
stages almost never succeeds in turning profit in the long-term.

Asia MBA Case Studies

[Bob Yoghurt Case]

Price
Assistant Manager Kim: I think that weak sales showed that we had not set the product price at an
appropriate level, not that our product concept was wrong. The data still shows stronger demand
during our 2+1 sales promotion period.
Manager Choi: That would be a common reaction to a sales promotion. The problem was that sales
after the promotion period failed to take off. That indicates almost no repurchase demand for the
product.
Assistant Manager Kim: I see the results a little differently. I believe the price was just too high to
generate repurchase demand. Bob Yoghurt was sold at W1,300 in convenient stores and at W2,400
for the two-package bundle at supermarkets, which are both nearly 1.5~2 times the price of
conventional yoghurt products. Stronger demand during the sales promotion period indicates that
consumers had purchase intention for our product when it was priced at W800 levels. While
consumers were prepared to pay up to W800 for our product, we were selling the product at original
prices of W1,200~1,300. If we adjusted our prices to met consumer expectation levels our product
could generate sufficient market demand.
Manager Choi: Prices were set after careful deliberation in 2007. Pre-launch retail surveys indicated
possible prices levels as high as W1,500. The collage student pretest of the product also showed that
participants considered appropriate price levels near W1,200. The resulting product price strategy
reflected both our cost and margin levels as well as consumer input.
[Cost Structure Analysis]
Amount (W)

Raw Materials

135.4

23.3%

Packaging

111.7

19.3%

Labor

22.0

3.8%

SG&A

71.0

12.2%

Total

340.1

58.6%

Product Price & Margin

580.0

41.4%

(Per package)

Assistant Manager Kim: But still our prices could be considered too high against competitor
products sold at W1,400~1,500 for three-package bundles. Prices were initially set too high in order
to recover fixed costs.
Manager Choi: What price level would you newly recommend?

Asia MBA Case Studies

[Bob Yoghurt Case]

Assistant Manager Kim: Although it would take some time to revise the pricing strategy, I think it
should be lower than W1,200~W1,300. We should aim at lowering product prices and raising sales
volume to recover fixed costs. We should carefully revise our pricing strategy for the product taking
into consideration the cost structure, sales trends and competitor prices.

Promotion
Manager Choi: Do you think the product has market potential given a revised pricing strategy?
Assistant Manager Kim: Resetting the product price would not automatically generate stronger sales.
We would need to rethink the entire promotion strategy as well.
Manager Choi: We have already incurred massive promotion and advertisement expenses in 2007 for
the product. Do you honestly believe that was not enough?
Assistant Manager Kim: My point is not the total investment we put into the marketing strategy. I
believe we failed to reach out to the appropriate target market with our initial promotion plan. At the
launch of a new product, the main focus of a promotion plan should be to generate sufficient
consumer attention to the product. However, our promotion campaign involved mailing in the
product cover for a chance to win a scholarship. The main target of a promotion campaign like that
would be consumers that have already tried the product and would go through the trouble of saving
the package cover, cleaning it and mailing it in. That would not be an appropriate method to
generate initial demand for a new product. We could have effectively reached our target market had
we tried different methods to promote initial trials, such as sponsoring collage events and offering
free product trials to target consumer groups.
Manager Choi: I agree with you on the point that our promotion strategy was not that appropriate for
Bob Yoghurt.
Purmils promotion event for Bob Yoghurt offered a W2 million scholarship to ten students mailing
in the product package cover along with their comments on the product between a one-month period
from August 27 to September 30, 2007. The event did not generate enough consumer response and
results did not show any visible increases in brand recognition or sales from the event.
Manager Choi: But our other promotion strategies were quite a success. The television ad helped to
increase consumer curiosity for our product. The ad itself was seen to adequately target healthconscious, trendy young females while effectively communicating the unique characteristics of our
product. Banner ads placed on Naver, Cyworld and Hangame were also effective in reaching out to
our target of young consumers in their 20s.
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[Bob Yoghurt Case]

The advertising agency selected by Purmil had created the television ad with an aim to raise
consumer curiosity for the product, using a comical story line about rice having an affair with
yoghurt. In addition to the television ad, Purmil ran ads in newspapers and placed banner ads in
popular websites, sent out buses wrapped in ads and offered prizes for consumer comment
submissions.
Assistant Manager Kim: I also agree that our ads were fresh and interesting. Online banner ads also
proved effective in reaching out to our target group. But our strategies failed to generate sufficient
word of mouth. Although our television ad prompted a stream of parody online videos from the
younger generation attracted by the fresh concept of our ads, we failed to channel that attention
toward generating actual sales for the product. If we had been more aggressive on promotion, we
would have been able to generate sufficient demand for the product. However, I believe we made a
small but crucial mistake in our television ad concept. By depicting the meeting of cooked rice with
yoghurt as an affair, we actually admitted that mixing the two is not normally allowed, making
the product concept feel wrong from the start.

Place
Manager Choi: Did you find any problems in our initial placing strategy?
Assistant Manager Kim: I did have one suggestion. Considering that our company develops highly
experimental products, it could be effective to set up an antenna shop, although that would require
high set up costs.
<Antenna Shops>
Retail outlets managed directly by product manufacturers, focusing more on gathering
market information, feedback on prototypes or new releases and test-marketing than
the actual selling of products.

Now that both have presented their sides, it was up to Director Shin to make the final call. Given the
same options, would you try re-launching the product? Or do you believe the product would fail once
again?

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Asia MBA Case Studies

[Bob Yoghurt Case]

Case Questions
1) Decide whether or not to re-launch Bob Yoghurt.
2) Assume that Purmil decides to re-launch the product.
2-1) Does the product need a new name?
2-2) Devise a product and package concept for the product.
2-3) Set a reasonable pricing strategy for the product.

Optional question
2-4) Assume that Purmil decides to set up antenna shops. Define appropriate locations for the
antenna shops. What would be the desired characteristics of the location?
2-5) Develop 1~2 promotion events for the re-launch of Bob Yoghurt.

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