International

 Finance  
Bencol:  Raisio’s  Global  Nutriceutical  Case    
 
 
 
 
International  Penetration  
 
 
  The  case  of  Raisio’s  effort  to  penetrate  the  global  market  reveals  that  the  
international  market,  while  rewarding  in  a  lot  of  ways,  is  also  very  complicated.  
Much  of  the  complications  come  from  different  government  regulations  in  each  
country  it  tried  to  penetrate.  While  the  product  itself  has  been  wanted  by  the  
international  market,  as  long  as  the  processes  required  by  the  government  haven’t  
been  fulfilled,  the  product  would  not  be  allowed  to  enter  the  market.  In  this  case,  
time  is  very  crucial.    
  The  company,  Raisio  Oy,  is  a  Finnish  grain  and  chemicals  company.    The  
company  has  been  in  Nutriceutical  business,  where  it  tries  to  create  a  human  
nutrient-­‐based  product.  Researches  after  researches,  along  with  tremendous  
amount  of  expense  invested  in  its  Research  and  Development,  have  been  done  since  
the  early  stage  of  the  company.  It  has  been  the  backbone  of  the  company,  something  
that  they’re  particularly  proud  of.  The  company  has  been  on  the  Helsinki  Stock  
Exchange  since  1989.  The  company  has  been  growing  steadily,  except  the  year  
1994-­‐95  where  it  had  a  drastic  drop  in  growth.  However,  the  real  story  here  began  
when  it  launched  Benecol.  
Benecol  is  the  low-­‐cholesterol  margarine  that  is  invented  by  Raisio  Oy.  The  
breakthrough  in  this  product  is  its  ability  to  compress  the  cholesterol  in  margarine  
without  giving  any  side  effect  to  the  consumer  of  the  product.  It  is  such  an  
innovative  breakthrough  in  its  field/industry.  As  the  result  of  this,  the  company’s  
share  price  rocketed  from  FIM  6.2  in  December  1995  to  FIM  64.7  in  December  1997.  
The  market  have  responded  very  well  to  this  product,  and  so  did  the  investors.    
The  fact  that  Raisio  has  managed  to  reduce  the  cholesterol  level  in  the  
margarine  by  substantial  percentage  (10%  reduction  on  blood  serum  cholesterol  
and  15%  reduction  on  LDL)  without  giving  any  effect  to  the  consumer  has  only  
International  Finance  
Bencol:  Raisio’s  Global  Nutriceutical  Case    
 
 
attracted  its  competitors  to  launch  similar  products.  As  a  matter  of  fact,  the  
competitors  did  launch  similar  products  not  long  after.  One  of  the  prominent  
competitors  is  Unilever.  This  fact  shows  that  Raisio’s  speed  of  penetrating  into  the  
international  market  is  of  a  urgent  importance,  because  if  they  were  tardy  in  
penetrating  the  international  market,  some  other  companies  are  already  in  line  
waiting  for  it.  The  case  states  that  Raisio  has  about  18-­‐24  months  lead  time  ahead  of  
the  other  competitors.  During  that  time,  the  company  was  trying  aggressively  to  
penetrate  the  international  market.  
One  of  the  problems  that  emerged  as  Raisio  was  trying  to  penetrate  the  
market  was  the  licensing  for  each  country.  For  example,  U.S.,  which  potentially  is  its  
largest  market  share,  has  a  requirement  for  every  products  that’s  about  to  be  sold  in  
the  U.S.  market  to  clarify  itself  clearly  under  a  defined  category.  It  turned  out  to  be  a  
complicated  matter.  Raisio  has  a  partner  company  in  U.S.,  Johnson  &  Johnson’s  
McNeil  Consumer  Product  Group,  which  will  eventually  produces  and  distributes  
Benecol  products.  The  complication  happened  when  McNeil  was  trying  to  
categorized  Benecol  as  a  dietary  supplement,  while  FDA  (U.S.  Food  and  Drug  
Administration)  believed  that  Benecol  should  be  regulated  as  a  food  product,  not  a  
dietary  supplement.    
Ensuring  that  Benecol  could  penetrate  the  international  market  with  
minimum  hurdles  is  very  important.  As  stated  in  the  case,  the  key  to  Raisio’s  value  
rested  on  both  the  global  volume  and  value  of  Benecol’s  sales.  This  shows  the  
magnitude  of  importance  of  Benecol  to  the  value  of  Raisio  as  a  company.  The  market  
would  value  Raisio  based  on  its  Benecol’s  performance.  If  complications  happened  
and  it  failed  to  reach  the  targeted  international  market,  chances  are  that  Raisio’s  
value  would  drop  drastically.  In  other  words,  expanding  in  the  international  market  
is  no  longer  a  matter  of  choice;  it  is  now  a  matter  of  survival.  
Some  of  the  possibilities  that  Raisio  might  consider  should  include  a  
partnering  with  the  well-­‐established  company  in  the  foreign  market  it  intends  to  
penetrate.  This  should  be  an  effort  to  build  an  established  distribution  and  strong  
brand.  These  well-­‐established  companies  should  have  a  good  history  with  the  
International  Finance  
Bencol:  Raisio’s  Global  Nutriceutical  Case    
 
 
current  government  regime  in  that  country,  because  hurdles  with  the  government  
could  be  very  lengthy  and  costly.  The  other  option,  as  in  the  case  of  categorizing  
what  product  Benecol  is,  might  be  to  completely  launch  a  new  product  line  that  
would  have  the  same  benefit  or  even  more  focused  benefit  to  reduce  cholesterol.  
Instead  of  worrying  on  how  the  Benecol  will  be  on  top  of  the  market  shares  with  
tremendous  growth  each  year,  Raisio  should  focus  on  its  R&D,  remembering  that  
innovation  is  the  backbone  of  the  company.  Adding  more  product  lines  would  also  
diversify  the  risk  related  to  the  sale  of  only  one  product.  In  1998,  the  Russian  crisis  
hit  the  margarine  division  really  bad.  Such  loss  might  be  minimized  if  the  company  
has  some  other  product  lines  that  are  less  vulnerable  to  economic  crisis.  
The  market  has  demanded  the  product,  Benecol,  ever  since  it  is  out  in  the  
market.  Even  though  the  price  of  Benecol  is  about  7  times  more  expensive  than  the  
similar  product,  the  market  still  responded  very  well.  It  conforms  very  well  with  
Raisio’s  business  strategy  to  sell  Benecol,  which  is  to  have  a  high  margin.  As  the  
demand  of  Benecol  continued  to  grow,  the  firm’s  capacity  to  produce  has  to  be  
stretched  as  well.  Raisio  ended  up  expanding  its  plants  to  France,  Chile,  and  United  
States.  Such  expansion  to  foreign  countries  are  beneficial  to  Raisio.  Some  of  the  
reasons  might  include  cost  reduction  and  economies  of  scale.  By  expanding  itself  
internationally,  Raisio  has  also  anticipated  future  rise  up  from  its  competitors  and  
be  ready  not  to  be  caught  off  guard.  
The  financial  forecasting  for  Raisio  anticipated  the  emerging  of  its  
competitors.  Based  on  the  data  available  with  the  case,  it  could  be  seen  that  the  next  
year’s  growth  in  revenue  (1998-­‐1999)  will  be  exponential;  however,  the  years  after  
that  wouldn’t  have  that  drastic  of  a  growth.  This  is  an  anticipation  of  the  market  
shares  of  Benecol  that  would  be  taken  by  the  competitors.  
Overall,  the  company’s  market  value  is  a  little  bit  optimistic  than  it’s  actual  
book  value,  which  is  understandable  because  Benecol  is  a  new  product  and  the  
market  has  a  high  expectation  on  it.  Raisio  has  to  be  able  to  keep  innovating,  not  just  
relying  only  on  the  sales  of  Benecol.  Sooner  or  later,  the  other  companies  would  be  
able  to  create  similar  products,  and  the  barrier  of  entry  would  be  lowered  as  the  
International  Finance  
Bencol:  Raisio’s  Global  Nutriceutical  Case    
 
 
time  goes  on.  Creating  a  new  product  line  that  would  utilize  Benecol’s  benefits  might  
be  something  that  Raisio  wants  to  seriously  consider.