Stock Market Reaction to Unexpected Growth in Marketing Expenditure - Essay Example

AN OUTLINE MARKETING PLAN FOR THE NEXT YEAR FOR ATLANTIC QUENCH Atlantic Quench is an established fruit juice supplier primarily operating in the American fruit juice industry. The structure of the firm is co-operative in nature which has helped in reducing the cost of suppliers and out bound logistics for the business. With a change in the top managerial position the company is now looking forward to business expansion in the international segment with the help of sustainable strategy. Existing strengths of Atlantic Quench includes their high number of suppliers, strategic alliance with Coca-Cola and Gerber. The new marketing plan for the company has been developed based on achieving a differentiation competitive advantage by launching a new product in new markets. Although the competitive nature of the juice and nectar segment makes the selected process a risky affair but considering the position of other big brands in the market Atlantic Quench have to act fast and in a steady manner. The marketing plan for Atlantic Quench has the primary objective of getting a jump start by selling 3340000 units of their new product in the target markets i.e. UK, As Atlantic Quench have already created an alliance with Gerber their distribution channel is supported. Moreover, the variety in the product base and the health conscious products of Atlantic Quench will attract consumers towards them. The brand awareness process of Atlantic Quench will be based on their promotional activities with the help of television, leaflet distribution and online advertisements. Also creating alliances and mergers with local distribution channels will help the company to get in direct touch with their consumer base and understand their needs and requirements. It can be observed that the marketing planning process of Atlantic Quench has been designed in a manner so that all the functional aspects are inter-connected and aligned with the overall aim of the business plan. Following the implications of the marketing plan, the budget has been developed which fulfils the necessity of generating a jumpstart for the new product in the target market. The budget development process will also be used for controlling and monitoring the entire marketing planning process by focusing on performance of individual variables of the budget. TABLE OF CONTENTS TABLE OF CONTENTS 4 Chapter 1 Introduction: 6 Chapter 2 Current marketing situation 7 2.1 Internal Analysis 7 2.1.1. Market Description: 7 2.1.2. Product Review 8 2.1.3. Competitive Review 9 2.1.4. Distribution Review 10 2.2 Macro Environment Analysis (Porter’s Five Forces analysis) 11 2.2.1. Bargaining power of buyers: Moderate 11 2.2.2. Bargaining power of suppliers: Low 11 2.2.3. Rivalry: High 12 2.2.4. Threat from substitutes: High 12 2.2.5. Entry Barriers: High 12 Chapter 3 SWOT analysis 13 3.1 Strengths 13 3.2 Weaknesses 13 3.3 Opportunities 14 3.4 Threats 14 Chapter 4 Objectives and issues 14 4.1 Objectives 14 4.2 Issues 15 Chapter 5 Marketing strategy 16 5.1 Positioning 16 5.2 Product strategy 17 5.3 Pricing strategy 18 5.4 Distribution strategy 18 5.5 Marketing Communication Strategy 19 5.6 Marketing research 20 Chapter 6 Marketing implementation: 20 Chapter 7: Budget ($) 21 Chapter 8 Control: 22 Reference List 23 Chapter 1 Introduction: Global market forces like changing customer’s preference, consolidation and the impact of increased government regulation in business strategy has drives out an incessant evolution in beverage and food industry (Brodie and Danaher, 2000). Non alcoholic beverage like, fruit juice, tea, coffee and soft drinks are consumed an abundantly throughout the world. The rapid growth in beverage industry has mainly occurred because of the changing life style of the people, massive shifts of population from rural to urban areas and rapid growth on population. Preference of the consumers are gradually increasing towards food juice and other non alcoholic drinks, as it provides contain vitamins, minerals balanced diet, stimulates the regulatory function within the human body system. However, the fruit juice and other smoothies have plagued by the issues like charities for their high level of sugars levels, which are a huge contributor of several health related problem, like obesity. The concerns about the fruit juice content are widespread throughout the globe. Thus, majority of the fruit juice manufacturer companies are tending towards aligning it with the vegetables as this is a very good way to cut down the sugar levels of these drinks. The Atlantic Quench Cranberries Inc. (AQC) is an agricultural cooperative based in the US economy. Around 80 years ago, it was formed by three cranberry growers from New Jersey and Massachusetts and gradually becomes one of the leading bottled and canned juice producers in North America. However, it also expanded its business in the UK successfully. The current paper is reported to develop marketing plan for Atlantic Quench for the next year, 2015. The aim of the marketing plan is to increase the sales volume of their product and double over the next three years. Chapter 2 Current marketing situation 2.1 Internal Analysis 2.1.1. Market Description: The global soft drinks market includes all retailers who basically sales bottled water, functional drinks, juices, tea, coffee and other soft drinks. The global soft drinks and fruit juice market has made revenue of $642,365 million that represents a total growth by 2.4% in comparison to the previous years (Hucker, 2014). The European market saw a total growth of 2.4% whereas the Asia-Pacific market grew by 6.9% (Hucker, 2014). Market share for fruit drinks market Juice Accounts 30% Nectar 10% Fruit drinks 60% (Source: Kim and McAlister, 2011, p. 863) Due to increasing health hazards and health issues like epidemic of obesity across the nation, the US consumers have gradually declined the consumption of carbonated soft drinks. As a result, the demand for fruit juice drinks has increased tremendously during the last few years. In UK, the demand for fruit juice industry has grown by 10%. Although the sales of fruit juice have seen a considerable growth, the price of raw fruit has declined and has often been reflected on the fruit juice products price. The cost of inflation also provides negative impacts on the new products development industries and increased confidence of the consumers to boosted up the sale of fruit juice. However, as most of the soft drinks contain naturally occurring sugar, a number of consumers are concerned about it and thinks that fruit juice drinks are not good for health. Even though, it can be forecast that the global market of soft drinks will increase at a considerable rate. 2.1.2. Product Review The Atlantic Quench is best known as a seller of fruit juice, but it also sales dried cranberries with the brand name of cranberries. Thus, the product range of the company includes both, juice and non-juice drinks. The juice product range of the company includes Cranberry Original Juice, Grab ‘n’ Go (Single Serve), Juice Max (pure Juice) and Cranberry Mixed Juice Drinks. On the other hand, non juice product range includes New Dried Cranberries, Cranberry Sauces, Cranberry Cordial Juice Drinks, New Conserve and Fresh Cranberries. Atlantic Quench has especially focused on manufacturing their products with cranberry, raspberry, mango and cranberry and expands their consumer offerings especially on the light and low calories food drinks. In September 2004, the company has launched a Premium Chilled Juice Drink in 1.75 litre packaging. In the year 2007, Atlantic Quench has formed a strategic alliance with Coca Cola and started to distribute single-serve cranberry juice products in the Canadian and US market under the Atlantic Quench name. This alliance gave them the opportunities to develop their market across the multiple trade channels (Euro-monitor International, 2014). Atlantic Quench received a warmed welcome in UK market and becomes largest supermarket group in UK market to sell its product ranges. Product supplied by Atlantic Quench has been in great demand and its sales figure looks quite impressive. It has been estimated that if the company continue to grow as the present trends, the company shall make around 20% growth in its fruit juice sales within the next 3 years. 2.1.3. Competitive Review The global juice market is growing rapidly as is the competition being faced by companies existing in the concerned industry. The growth in the number of suppliers in the market has reduced the profitability scope for the existing co-operatives and farmers operating in the juice and nectar segment. Companies such as Minute Maid and Tropicana are already established brands in the international market segment (Pride and Ferrell, 2011). On the other hand, the growth of beverage and soft drinks industry has also increased the number of alternatives for the consumers. This has squeezed the space for the pure juice providing firms. Companies such as Coca-Cola are also focusing on creating a larger market space for themselves by introducing mixed juice products such as Maaza in the international market place (Hall and Rosenberg, 2009). The soft drinks industry presently occupies 31% of the overall drinks industry followed by the beverage industry that has 37% of the market share (Hucker, 2014). In comparison, juice and nectar segment only have 22% of the market share (Hucker, 2014). In order to increase their profitability and business operations in the global market place, Atlantic Quench should focus on increasing their consumer offerings and develop a diversified product base that will create the scope for serving a wider consumer base. On the contrary the increasing health consciousness among the consumers is a positive sign for Atlantic Quench for improving their market operations in the business place. 2.1.4. Distribution Review The healthy fruit and vegetable products are not available throughout the all nation worldwide. In some cases, in countries like US and UK, healthy and nutritious health drinks are available only in the certain parts of the nation. It suggests that, the distributional channels are still under a deep nascent and thereby huge development is needed. In the modern era, several changes have taken place in the fruit juice distributional channels. The global beverage brands like, Minute Maid, Tropicana and Pepsi has concentrated on FCOJ (Frozen Concentrated Orange Juice) supply and retailing stores. It is based on low input cost, the bulk transportation system and efficiency in the plant operation that gives opportunity to deliver product dispersed in various distribution channels. However, for Atlantic Quench, juice and non-juice products are sale are concentrated among the very few retailers. This decreases the alternative distributional channel for the company. Thus, Atlantic Quench needs to give more concentration on improve its distributional channel and employ large retailers by looking at overseas market nature. 2.2 Macro Environment Analysis (Porter’s Five Forces analysis) 2.2.1. Bargaining power of buyers: Moderate Considering the nature of products and consumer offerings of Atlantic Quench, the bargaining power of buyers can be stated as moderate. Atlantic Quench produces pure juice drinks mainly based on cranberry drinks only this is a very rare and health concerned product in the fruit juice market. Most of the other companies such as Coca-Cola and Del Monte have a product base of mixed or carbonated juice drinks. But observing the growing trend of health consciousness among the consumers, PepsiCo., Coca-Cola are also developing fruit juices such as Maaza and Slice for entering the juice segment. These activities have introduced lower priced segment of products for the customers but have failed to generate huge consumer support reducing the customer bargaining power in a moderate state. 2.2.2. Bargaining power of suppliers: Low The main ingredient for juice and non-juice drinks of Atlantic Quench includes cranberry fruits, carbonated water and caffeine. Atlantic Quench has strong supplier networks. These supplier channels are not differentiated or concentrated. At the same time, Atlantic Quench has a monopoly power in the niche market of blended cranberry products (Kimmel, 2008). In recent market, overproduction of cranberry has reduced the market price of raw cranberries from $60 to $20. Thus, the suppliers of Atlantic Quench have low bargaining power (Hucker, 2014). 2.2.3. Rivalry: High The rivalry position or number of competitive firms those supplies juice and non-juice products with no sugar contain is very high. Recently, more and more number of companies has focused on manufacturing juice and non-juice product with vegetables and other natural form of ingredient with almost no sugar. Orange juice, Tropicana, Pepsi are few competitors, those have committed heavily to sponsoring changing needs and healthy lifestyle of the people (bevindustry, 2012). 2.2.4. Threat from substitutes: High There are many kinds of fruit juice, non-alcoholic drinks, soda, energy drinks and non-juice drinks products in the market. Intentions of the consumers are largely driven towards health conscious food and drinks. Even though, the product quality of Atlantic Quench is much healthier, brands such as Del Monte, Tropicana (PepsiCo.), etc have focused on making products that contain natural ingredient that provide benefits to the consumers ensuring no extra cosy to their health. Atlantic Quench does not have an entirely unique product quality (fastcasual.com, 2014). Thus, threats of substitute products are quite high in the market. 2.2.5. Entry Barriers: High Compare to other industries, entry barriers to the beverage industry is quite high as there are zero capital requirements and no consumer switching costs. There is an increasing number of new brands are entering in the market who supplies better quality product at similar or lower price in comparison to Atlantic Quench’s products (Pride and Ferrell, 2011). In the market, Atlantic Quench is not only a single brand that that concentrated on creating major healthy refreshment business, but there are some other brands who positioned themselves as a supplier of liquid tasty and nutritious healthy food. Therefore, there is a low likelihood of new entrance. Chapter 3 SWOT analysis 3.1 Strengths Significant investments made towards upgrading its manufacturing process and innovative product development Creativity of Atlantic Quench in NPD (new product development) is an contributory factor for organizational success Excellence brand and strong reputation in UK and US market Rich taste and healthy food as it contain low calories food drinks, that includes blackcurrant, cranberry and mango Effective and attractive packaging using recyclable glass and polyethylene terephthalare plastic bottles Long term strategic alliance of the company with Coca-Cola in North American Markets 3.2 Weaknesses Strong competition in the beverage market as brands like Tropicana, Orange Juice are continuously fight for market share The market is full with substitute products Juice and non juice products offered by Atlantic Quench is expensive compare to other rival brand in the market 3.3 Opportunities Growing concern of the people towards eating healthy food has raise the demand for the healthy fruit juice alternatives Huge opportunities to expand their market in other areas of the country, especially in emerging markets Increasing market share of fruit juice sector from the carbonated sector Increasing market demand for convenience drinks 3.4 Threats Strong preference of the people having tea, coffee and other strong beverage Unfavourable market trends and economic condition Growing competition in the beverage market as other Atlantic Quench have a virtual monopoly power in the niche market of cranberry products, but other super fruits like gigi, acai berries also gather a substantial market share in the fruit juice market Chapter 4 Objectives and issues 4.1 Objectives Sales Production Market Share Promotion Profit Margin To increase net profit up to $330000 for the new products launched. To produce 100000 units of the new products in 1lt bottled packs. To increase the market shares in European market within the next year by creating alliances with local retailers and distributors. To create a loyal consumer base by promoting the nutritional benefits and great taste of their products through mediums such as leaflets, online promotions, mobile promotions and television ads. To ensure gross revenue earnings of minimum $350000 in the next year for providing a jump start in the new market segment. 4.2 Issues The key issues that Atlantic Quench could face shall be the common problems that firms in the beverage industries generally face. These includes High cost – As compare to other brands, the price of Atlantic Quench’s product is high. There are some other brands in the market, such as Tropicana, Orange juice, Real, Apple Juice and so on, those are offering almost same or better quality product but at lower price. Additionally, some other juice manufacturers companies in UK, also have focuses on anti-oxidants, omega-3 and healthy product development, which might be a huge threat for Atlantic Quench to expand its sales volume. Wrong advertisement – Most of the fruit juice brands have failed to prove its healthiness and put into the same category as fizzy drinks. The government and head of the obesity and diet research group has suggested that people should stop to drink vegetable and fruit juices as many of them are classical sugar drinks (Sheehan, 2011). It damage stomach and puts negative impact on the human body. Thus, even though Atlantic Quench’s products are made with sugar free ingredients, people might still being pushed not to eat Atlantic Quench’s products. Additionally, downward trend of birth rate in the European nations has decreased the number of consumer under 14s, who are the important area of their sales growth (Hall and Rosenberg, 2009). Chapter 5 Marketing strategy 5.1 Positioning Atlantic Quench is has strategically positioned itself in the world of global soft drinks and fruit juice market. It is figure out that, biggest brands like Tropicana, Apple Juice, Tang and Orange Juice, none of the company can match the quality standard set by the company in terms of healthy, nutritious and flavoured (Bottomley and Doyle, 2008). Atlantic Quench also has positioned itself as a drink for special occasions. The company is trying to expand its reach in the various segments of the country by securing placement in airlines, hotels, railways and restaurants. Atlantic Quench use strategic positioning strategy to create same image throughout the world and offer products according to the local needs. The positioning strategy of Atlantic Quench will focus on developing a positive consumer perception about their products with the help of extensive promotional means. The position process will be focused on developing the brand as provider of healthy and nutritious juices. 5.2 Product strategy Atlantic Quench is a beverage brand that recently focuses on internalization of its brand in the global market. Thus, the company has concerned about increasing its brand equity and brand loyalty throughout communication and also innovation to differentiate their products. Atlantic Quench has a range of products that are produced from the cranberries. The range of cranberry products of the company includes dried cranberries, cranberry juice and cranberry souse. The company seeks to target customers from different segments and thereby focuses on innovative product development to win trust of their customers. In this context, Ansoff matrix can be taken to analyse product strategy of Atlantic Quench. Figure 1: Ansoff Matrix (Source: Coviello and Winklhofer, 2008, p.532) The marketing strategy of Atlantic Quench clearly marked as the Box-D, which is product diversification. The company is continuously trying to develop new and innovative energy soft drinks to form basic alternatives for its strategic development. 5.3 Pricing strategy The pricing strategy of Atlantic Quench will mainly focus on creating a sustainable demand in the new markets for their products. Most of the existing products of Atlantic Quench are focused on the niche market with premium pricing strategy. In order to establish their brand in new markets with new products the pricing strategy should focus on the mass consumer market. The pricing process for Atlantic Quench in this context will be price skimming. In price skimming, the initial pricing of the products are high which helps the company to recover its capital investment (Hirshleifer and Hirshleifer, 2009). However, in case of Atlantic Quench price skimming will also help the company to maintain it brand image of a quality juice provider. Gradually the price of the products will be lowered for roping in the lower income group consumers and spreading the brand value to a larger consumer base. 5.4 Distribution strategy The process of distribution channel development for Atlantic Quench is related to the strategic option of mergers and alliances. Atlantic Quench can develop relationships with small retailers and distributors operating in the local regions of the target markets, which is a faster process of connecting with the consumers. On the other hand, focus on the local distributors is also a cheaper process for business expansion and reduce the operational and logistics cost of Atlantic Quench. 5.5 Marketing Communication Strategy The customer segmentation process of Atlantic Quench will be divided mainly on the basis of age group namely, men, women and children. It has been observed that the population belonging from 15-24 are the main consumers of juice and non-juice drinks (Flint et al. 2007). On the other hand, children are the also an important area of growth within the market of juice and juice drinks. The customer segmentation will also depend on the income group of the target population that will help in designing the pricing strategy of the products and also develop a balance between the market forces of demand and supply. Atlantic Quench has combined health benefits of their products and US heritage of cranberry simultaneously in their product promotions. This type of advertisement strategy supports the health related benefits of cranberry and at the same time undertakes promotion of their product among the customer segments of the company (Meijer, 2007). However, it also widely uses magazine and television ads at a global level in order to advertise its product range and to inform its audience about the benefits of cranberry juice. In many countries, Atlantic Quench advertises its product through television and with this purpose; the company spends a considerable amount of financial resources. However, TV ads in different regions vary according to characteristics of local culture in order to minimise misunderstandings of cultural differences and maximize the sales margin. With the help of widespread campaign on TV, newspaper and magazine, the company could make their customers more receptive towards Atlantic Quench’s brand. In this context, social networking sites are also a viable option to spread their marketing message and product visibility (fastcasual.com, 2014). Advertisement on social networking sites and TV are most cost effective way that provide an opportunity to informing their customers about the health benefits of their products. Further, the strategic alliance with the Coca-Cola Company is also a useful tool for the company for spreading their message among the mass consumers. 5.6 Marketing research In order to achieve its marketing objectives, Atlantic Quench plans to conduct an extensive market research to evaluate needs and wants and buying patterns of the consumers in beverage market. It is uncountable that demand for Atlantic Quench’s products is in the best class, but lack continuous market research may create threats for the company from other brands in the market. Chapter 6 Marketing implementation: The primary aim of Atlantic Quench is to ensure sale of 33400000 units of products at $5 each, per year by increasing their market place and product base for the new target markets. In order to design, develop and implement their strategy for the set business objectives, Atlantic Quench should focus on assessing the probable options available to them. Considering the model of Porter’s Generic Strategy, the probable options can be decided among the three variables that are cost leadership, focus and differentiation leadership. Considering that Atlantic Quench will launch a new product in a new market, their strategic direction will be towards gaining differentiation leadership. On the other hand, the process of implementing the marketing tactics will have to begin by solving the internal the conflicts among the members and the management. This will ensure full support and participation on the part of the members. The next step will be to indulge in market research which will focus on gathering data about consumer preferences, consumer behaviour and competition level in the markets. This information will form the base for the planning process of the new venture of Atlantic Quench. Finally, developing distributor network among the target market and building significant communication channels with their consumer will create the expected brand awareness among the stakeholders of the target market. Chapter 7: Budget ($) Pro Forma Profit and Loss     2015 Q1 ($) 2015 Q2 ($) 2015 Q3 ($) 2015 Q4 ($) Sales 250000 340000 480000 600000 Direct Cost of Sales 101200 140000 240360 270000 Other Costs of Sales $0 $0 $0 $0  Total Cost of Sales 101200 140000 240360 270000           Gross Margin 148800 200000 239640 330000                     Expenses         Payroll 30000 36000 45000 55000 Marketing/Promotion 25000 27000 15000 11000 Depreciation 4000 6000 8000 10000 Rent 8000 12000 15000 64000 Utilities 9000 11500 14500 12000 Insurance 6000 7000 14000 18000 Other 6000 6500 14500 19000           Total Operating Expenses 88000 106000 126000 189000           Profit Before Interest and Taxes 60800 94000 113640 141000 EBITDA 64800 100000 121640 151000 Taxes Incurred 6480 10000 12164 15100 Interest Expense 5000 7500 12000 10500           Net Profit 49320 76500 89476 115400 Chapter 8 Control: Based on the given budget for the next year of Atlantic Quench a steady trend of profit can be observed in quarterly basis. The control and monitoring process will be highly influenced by the budget monitoring process of the business. The chart of net profit will also reflect the balance between the expenses and the earnings of the firm which can help Atlantic Quench in managing their operational activities in accordance with the given planning process. Reference List Bottomley, P. A. and Doyle, J. R. 2008. The formation of attitudes towards brand extensions: testing and generalising Aaker and Keller’s model. International Journal of Research in Marketing, 13, 4, pp. 365–377 Brodie, R. J. and Danaher, P. J. 2000 “Building Models for Marketing Decisions: Improving Empirical Procedures,” International Journal of Research in Marketing, 17 (2), pp.135-139. Coviello, N. E. and Winklhofer, H. 2008. “Contemporary Marketing Practices Research Program: A Review of the First Decade,” Journal of Business & Industrial Marketing, 23 (2), pp.84-94 EUROMONITOR INTERNATIONAL 2014. 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