The Current Product Profile of Kettle Foods - Case Study Example

Product Management Table of Contents Introduction 3 The current situation 3 Product mix 4 Product 4 Place 4 Price 5 Promotion 6 Generic Strategy option 6 Target audience 7 Competitors 8 Market environment 10 Porter’s Five Forces 10 Degree of Rivalry 12 Supplier power 13 New entrants 14 Threat of substitutes 15 PESTLE Framework 16 Political factors 16 Economic factors 16 Social factors 17 Technological factors 17 New market opportunity 17 New product proposal 18 Reference List 20 Introduction The report highlights the current product profile of Kettle Foods and recommendation of a new product in the United Kingdom (UK) is also provided, taking into account the target market and their taste and preference. The present state of Savory Snacks in the UK is depicted in the report with respect to the operation of Kettle Foods. The sale of savory snacks grew by 3.5% in 2013, which amounted to $4,417.7 million sales revenue. However, observing the growth in the savory snacks market, it is predicted that the sales revenue will reach $5,082.8 million in 2018, which indicates an increase of 15.1% (MarketLine, 2014). The total sales revenues of savory market in UK are $4,417.7 million in 2013, which represented 3.6% CAGR during the period 2009 - 2013. However, comparing the market in the UK with that of German (3.5%) and French (4%), it is observed that the former has shown drastic growth in CAGR. The volume of sales increased to 430.1 million kilogram in 2013, which indicated 2% increase in CAGR between the periods 2009-2013. However, the volume of sales is predicted to rise to about 488.3 million kilograms by 2018 that will represent 2.6% CAGR (MarketLine, 2014). Highlighting on this facts, it can be stated that new savory snacks can be introduced in the market. Thus, the report aims at elaborating on a product proposal for Kettle Foods in the UK. The current situation Before choosing a new product for the UK market, the taste and preference of the population is required to be examined. The exact wants and needs are highlighted. Kettle Foods have penetrated the UK market with Kettle Chips, which is delicious and salty. The company targets the population with their healthy products, which signifies that they are concerned about the health of the individuals. Thus, in launching a new product, the company has to make sure they stick to the quality, and their main aim is to provide healthy and tasty savory snacks to the individuals in the UK (MarketLine, 2014). Product mix Product Kettle Foods have captured majority of the savory snacks market in the UK by its Kettle chips, which is delicious and have different seasoning. Thus, the new product of the company will be Light chips. Place Place is an important element in the product mix, as the distribution channels needs to be evaluated and whether the customers can access the products easily. The Kettle Chips are present almost in every country worldwide; however, it is preferred in West African countries and Europe. The office of Kettle Foods in the UK supports a strong network of distributors, who operates independently. These distributors make the products available in almost every part of the UK and even in Belgium, Denmark, Greece, Germany, France, Finland, Iceland, Ireland, Switzerland and Spain. The new potato chips of Kettle Foods will be available in every supermarkets and retail stores that are operating worldwide, which will be helpful for the consumers to access. Various distribution channels will be used by the company to provide the products to the consumer. The different models that will be used by the company to distribute the products are discussed henceforth. 1) Producer - Consumer 2) Producer – Retailers – Consumers 3) Producer- Wholesaler – Retailer – Consumer 4) Producer – Agent – Wholesaler – Retailer – Consumer From the above methods, Kettle Foods should take into account Producer- Wholesaler – Retailer – Consumer distribution channel, which will help the company to market its new Light Chips to the consumers worldwide (MarketLine, 2014). Price Kettle Foods uses good natural and vegetation resources that supports and enhances the quality of its business. The manufacturing unit of the company in the UK is situated adjacent to the 2-acre wetland, which helps in avoiding extra expenses. If the raw materials are purchased by the company from outside, then the cost would have increased. Thus, the company is benefitted from the wetland as it reduces the cost of manufacturing. Kettle Chips products is not cheap but it has made every effort to bring the prices to lower level. However, the company aims at maintaining the quality of the product along with the minimum level of price (Maglaras and Meissner, 2006). The new product, Light Chips will charge low price so as to cater greater number of customers in the UK. However, the quality will not be compromised. The lower price level is expected as the manufacturing process and equipments are already available to the company. The only raw material that is needed for the manufacturing purpose is the ingredients that are collected from different parts of the worlds. Kettle Chips is a strong brand, as a result they maintain Slow Skimming pricing strategy. As the company is well known and established, they are relaxed regarding the promotional activities. Consumer behaviour theories define that the consumers are more aware of those companies and its products, which spends a lot of cash for promotional purposes (Maglaras and Meissner, 2006). Promotion Kettle Foods usually advertises its product with the help of extensive advertisements in internet, television, radio and public relations. Similarly, for promoting the new product, Light Chips, the company will focus on advertising. It can also involve in charitable works so as to serve the community with healthy foods and distribute potato chips at local schools and hunger relief agencies. Newspaper campaign will boost up the sales of the new product. Newspaper advertising has successfully increased the penetration of the products of Kettle Chips and has also raised the frequency of purchase of potato chips. Hence, it is expected that the Light Chips will be successful in penetrating the UK market through advertising strategies. Generic Strategy option Porter’s generic strategy comprises the major factors that are related to the successful development of strategic management. He explained that the competitive strategies aim at achieving the most prominent position in the industry by earning profit. Higher profit can be achieved by manufacturing products at the lowest cost. The generic strategies include cost leadership, focus and differentiation (Kazmi, 2007). Figure 1: Generic strategic options (Source: Porter, 1985) Among the three strategies mentioned above in the figure. The relevant strategy for Kettle Foods for launching the new product, Light Chips, is differentiation. Kettle Chips of the company have established variations in the composition and ingredients of potato chips. Thus, the introduction of the new product, Light Chips, signifies that the company has concentrated in taking differentiation strategy. Target audience Customers constitute the most important part of the microenvironment of a company. The main objective of the delivery system of a company is to serve the customers and establish a strong relationship with them (Lamb, Hair and McDaniel, 2008). In general, there are five types of customer market, and companies can target all of them. However, Kettle Foods in order to market Light Chips will target the consumer market, which includes households. These target audience purchases products that are used for personal consumption. The demand for savory snacks in the UK has increased by 3.6% in 2013 (MarketLine, 2014); this signifies that the company there is demand for these types of snacks among the population. This is the main reason why the UK market is appropriate for introducing the new potato chips. The target market is the general population. Segmentation theory can be used to divide the market into different sections and target them individually. The main aim of segmenting a market is to make marketing more efficient and effective. Segments are created so as to target the right sets of customers who are in need of the products. There are several segments, and each of them needs different form of message that is delivered through a channel. The UK market can be segmented through demographic segmentation. This type of segmentation helps in dividing the market by the demographic indicators such as age, gender, household type, education and income level (McDonald, 2012; Lamb, Hair and McDaniel, 2008). Competitors Marketers are always concerned about the level of competition in a particular market. It encourages them to take appropriate decision towards the new product development or promotional strategies that will help them in portraying their brands and products better than their competitors. Marketing is dependent on understanding customer value and satisfying them more than competitors. One of the notable aspects of gaining strategic advantage over competitors is through positioning the offers efficiently in the minds of customers. Different companies establish their strategies for positioning their products and offers in a target market. The savory market in the UK is dominated by the presence and operation of PepsiCo Inc followed by Intersnacks Group and Kellogg Company. The companies are followed by Diamond Foods Inc, which includes Kettle Chips. ( Man,2000) Figure 3: Competitive set and model (Source: Author’s creation) The competitive set and model indicates the level of competition in the savory snacks market in the UK. It indicates that PepsiCo Inc, have captured majority of the savory snacks market in the UK by introducing new products and satisfying the customers need. Market environment Porter’s Five Forces The savory snacks market in the UK is analyzed by considering the producers as the players in the market. The key purchasers are retailers, which includes hypermarkets, supermarkets and different smaller retailers and lastly, the manufacturers of the products and packaging companies. Figure 2: Forces driving competition in the UK savory snacks market (Source: MarketLine, 2014) The figure highlights the forces that drive the market share in the savory snacks market in the UK. These forces are elaborated henceforth. Figure 3: Buyer power (Source: MarketLine, 2014) From the above figure, it can be signified that the hypermarkets and supermarkets comprise primary sales channels that are important for the savory snacks in the UK. The power of buyer can be indentified with respect to concentrated nature of UK retail market. There are a number of small and large chains of retail stores that are dominating in the market. This exerts high degree of bargaining power on the players of the UK savory snacks market. These players have to win their space in the market in order to sustain in the industry. The savory snacks products include a wide range of products that are sold by the food retailers and this is the reason why the importance of the products decrease and power of the buyer increases. Thus, it can be stated that the power of the buyer is high in the savory snacks market in the UK (Lamb, Hair and McDaniel, 2008). Degree of Rivalry The following figure elaborates the degree of rivalry in the savory snacks market in the UK. Figure 4: Degree of rivalry in the savory snacks market in the UK (Source: MarketLine, 2014) From the above table it can be stated that Kettle Chips encounters tough competition and rivalry in the UK market as a result it should concentrate on expanding its product line in potato chips manufacturing and bring variation in the composition of spices and ingredients. This innovation will allow the customers to taste different flavours of chips, which are prepared with the help of spices that are collected from around the world. Thus, it can be stated that the degree of rivalry is high in the UK market due to the existence of a number of renowned companies. Supplier power Figure 4: Supplier Power (Source: MarketLine, 2014) From the above figure it can be signified that the main suppliers in the savory snacks market in the UK comprise agricultural producers, agricultural commodity traders and manufacturers of the packaging, ingredients and factory automation machineries. The market players aim at purchasing perishable raw products such as potatoes, which are collected directly from the growers. This decreases the power of the suppliers. Nevertheless, grains and vegetable oils are provided by the commodity traders and these are often sourced from large multinational companies. This increases the relative power of the suppliers in obtaining the raw materials for production in the savory market in the UK. Thus, it can be concluded that the power of suppliers are moderate in the UK savory snacks market (Lamb, Hair and McDaniel, 2008). New entrants Figure 5: New entrants (Source: MarketLine, 2014) From the degree of rivalry it is evident that competition in the savory snacks market in the UK market is high as it is dominated by the existence of international players. In such a situation it is difficult for a new entrant to penetrate the market and operate successfully by marketing their products. Apart from that, it is challenging for the new entrants to gain control over the distribution channels as they have persuade the retail stores to replace the established brands, which is practically impossible. Thus, it can be stated that the threat of new entrants in the savory snacks market in the UK is very low (Lamb, Hair and McDaniel, 2008; MarketLine, 2014). Threat of substitutes Figure 6: Threat of substitutes (Source: MarketLine, 2014) The retailers of savory snacks in the UK market should cater to the demand of the consumers. This is the reason why the market is threatened by many substitutes such as the beverages snack confectionery and fruits. These products are sold at similar prices as a result, the retailers have the opportunity to shift focus toward the price and make it relatively cheaper. As there is an increasing awareness regarding the health issues such as higher quantity of salt, sugar or fat; consumers have shifted their attention from the traditional snacks to healthier substitutes like fruit. There are other substitutes of savory snacks such as candy bars. From the above discussion, it can be stated that the threat of substitutes in high in the savory snacks market in the UK market (MarketLine, 2014). PESTLE Framework Political factors In the UK, the integration of three government departments on the food labelling Department for Environment, Food and Rural Affairs and Department of Health (Defra) and Food Standards Agency (FSA) develop appropriate policies for the savory snacks market. FSA is responsible for supervising food safety aspects. In England, the Department of Health is responsible for the nutritional policy; whereas Defra has the duty to label various types of food that are unhealthy for the population (Lamb, Hair and McDaniel, 2008; MarketLine, 2014). Economic factors There are many economic factors that have the ability to influence the savory snacks market in the UK both positively and negatively. The factor is mentioned henceforth. Figure 7: Population of the UK (Source: MarketLine, 2014) From the above figure it is evident that the population of the country has increased over the five years. The increase is relatively high during the period 2009-2001; this is indicative of the fact that with the rise in population the demand for potato chips is also expected to increase. Thus, with the increase in population of the sales of the savory snacks will be positively influenced (MarketLine, 2014). Despite the positive effects of the economic factors, the marketers and manufacturers have struggled because of the existing credit crunch, which is coupled by rise in cost of flour, maize, wheat and potatoes and also due to the instability in the prices of crude oil. All these factors have also pressurized the manufacturers to encounter constraints in profit margin. Social factors The change in social trends has affected the demand for products of the companies that are operating worldwide. The savory snacks market in the UK has been influenced by these social factors to a great extent (MarketLine, 2014). Technological factors Presently, the use of internet and social media have influenced the sales of savory snacks market in the UK. The consumers have become internet friendly where they get all the information of the product. New market opportunity The savory snacks market in the UK have grown 3.6% in 2013 (MarketLine, 2014), which indicates the fact that there is scope of improvement in the growth percentage in future. A forecast is executed by MarketLine that highlighted the future market value of savory sncks market in the UK (Man and Jones, 2000; MarketLine, 2014). Figure 8: Savory snacks market value forecast (Source: MarketLine, 2014) From the above figure, it can be stated that the market is expected to rise by 3.3% by 2018 (MarketLine, 2014). The target customer of the new product, Light Chips, is the general population in the UK market. The demand for potato chips and other savory snacks are high in the market, which defines the needs of the customer to a great extent. New product proposal The speciality of the Light chips is that it is cholesterol free though the chips have higher amount of cheese. The cheese, which is used for preparing the chips are provolone and mozzarella. These cheeses contain lower amount of cholesterol and saturated fat (Moll, 2014). Above all, the seasonings will be different than that of the usual that are used by Kettle Chips. The different flavours of the chips will originate from different countries around the world. These flavours are famous in their respective countries; hence it will bring variation in the composition of the ingredients of the potato chips. The value proposition of the new product, Light Chips, is to deliver quality, healthy and tasty potato chips to the population in the UK. The main reason for choosing potato chips as the new product for the company among a wide range is its demand in the UK market. The following figure elaborates the Figure 9: Savory snacks market category in the UK (Source: MarketLine, 2014) After analysing the graph provided in the figure above, it can be stated that the demand for potato chips is high in the UK. Thus, choosing potato chips as the new product for the UK market is an appropriate decision. However, the potato chips will be manufactured by using natural ingredients as the spice, which are collected from different parts of the world. It will reassure the consumers that they are consuming healthy snacks. The population in the UK are health conscious and this is the reason why sales of Kettle Chips have increased over the years. Reference List Kazmi, S., 2007. Marketing management: Text and cases. New Delhi: Excel Books. Lamb, C., Hair, J. and McDaniel, C., 2008. Essentials of marketing. Connecticut: Cengage Learning. Maglaras, C. and Meissner, J., 2006. Dynamic pricing strategies for multiproduct revenue management problems. Manufacturing & Service Operations Management, 8(2), pp. 136-148. Man, C. and Jones, A., 2000. Shelf life evaluation of foods. Berlin: Springer Science & Business Media. MarketLine, 2014. Savory Snacks in the United Kingdom. [online] Available at: < http://advantage.marketline.com.ezproxy.lib.swin.edu.au/Product?pid=MLIP1407-0034 McDonald, M., 2012. Market segmentation: How to do it and how to profit from it. New Jersey: John Wiley & Sons. Moll, J., 2014. Which Cheeses Can I Eat on a Cholesterol-Lowering Diet? [online] Available at: < http://cholesterol.about.com/od/dairy/qt/cheesetips.htm > [Accessed 27 October 2014]. Porter, M. E., 1985. Competitive advantage. New York: The Free Press. Read More