Evolution Of The Sale Of Farggi Products In Supermarkets And Other Types Of Nonexclusive Shop For Home Consumption

The first Farggi products for consumption at home had been the "Pastimus" and "Cheesecake" cakes, which were distributed and sold frozen, but were to be eaten after thawing. They had been introduced in early 1992 by installing about 800 freezer cabinets in supermarkets and other types of retailers.

Even back then, Farggi's management team had guessed that this range of cakes would eventually be complemented with another range of ice creams to be eaten at home, possibly taken from or based on the range of Farggi ice creams sold to restaurants.

Unfortunately, sales of this range of frozen cakes were growing at a much slower rate than expected. Margarita Farga attributed this slowness to the need to induce and allow time for a double change in the end customers' purchasing and eating habits, since, in Spain, it was not the custom for people to buy frozen cakes in the supermarket. Normally, people either ate fresh cakes bought in a traditional cake shop, or ice cream bars and frozen cakes bought in supermarkets and eaten while still frozen.

In spite of this difficulty, Farggi had never advertised its frozen mousse cakes in the mass media.

As a result of all this, sales of the Pastimus and Cheesecake range in some of the freezers were just above 100,000 pesetas per freezer per year, at Farggi's selling prices to the retailer. Although this was a minimum figure, the company's managers admitted that the project would only have been profitable in the long term. There were even cases where some freezers had to be relocated, installing them in restaurants and cafeterias.

Throughout 1992, these freezers were installed in various kinds of sales outlets. From November 1992 onwards, the attention of Farggi's management team was concentrated on preparing the launch of "Farggi Tub's & Ice Cream," so little attention was paid to the Pastimus and Cheesecake range during that period.

Of course, these cakes were included in the range of products to be sold in the Farggi ice cream parlours.

However, once the first Farggi parlour had been opened in Paseo de Gracia, modifications were made to the freezers' shelving to be able to display the ice cream "Tub's" in them, starting with the freezers installed in Barcelona. At the same time, Farggi's sales teams reopened negotiations with some supermarket chains with a view to relaunching the installation of new freezer cabinets which would sell the ice cream "Tub's" and the Farggi frozen mousse cakes right from the start.

Like Haagen Dazs, Farggi's policy was first to open an exclusive Farggi parlour in a city, to create the product's image, and then start distributing ice creams in supermarkets through the freezer cabinets. Of course, Farggi had the advantage of the fact that a large number of freezers had already been installed.

Consequently, all that was needed in order to expand the product range was to change the inside shelving and obtain the retailer's agreement, which was relatively easy as the sales turnover of a Farggi freezer cabinet increased very substantially, almost always to about 500,000 pesetas per year, at Farggi prices to the retailer.

Although both Farggi and Haagen Dazs maintained a discreet silence regarding their costs and margins, a number of experts in ice cream manufacture indicated that, even taking into account the fact that both brands used only top quality natural ingredients, the cost of the raw materials and packaging would probably not be more than 35 percent of their sale price for "Tub's" and "pints" to retailers.

Generally speaking, although both had started in Barcelona. there was relatively little confrontation between Farggi and Haagen Dazs. First, because both were still in an early phase of market entry.

Second, because Farggi already had a large installed base of freezer cabinets. Third, because both realized that they could coexist perfectly, sharing presence in many supermarkets and even in smaller shops.

In spite of this, there were a few clashes. For example, Farggi managed to be present in all the Caprabo supermarkets (55 points of sale), whereas Haagen Dazs would only be present in the 15 largest, sharing presence with Farggi. In those supermarkets where both brands' freezers were installed side by side, their sales volumes were very similar.

On the other hand, in the Pizza Hut chain, even though Farggi had managed to get its foot in first, in March 1994 Haagen Dazs became the sole supplier of ice creams. However, Farggi remained as a cake supplier for Pizza Hut, so the business relationship was not broken. Much the same thing happened in the Pans & Company sandwich chain, which bought ice creams from Haagen Dazs and cakes from Farggi.

In August 1993, Farggi signed a contract with the Barcelona Football Club for the exclusive sale of ice creams in its sports facilities. The purpose of this contract was to create brand impact and enable a large number of people to taste Farggi's products. "Mini Tub's" (100 ml) and "Batonets" were sold from 25 carts at 350 pesetas each. The contract would run for three years, with Farggi paying 15 million pesetas/year.

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