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Atlantic Quench Cranberries - Essay Example

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This essay "Atlantic Quench Cranberries" discusses AQC had an immense success story in the U.S. market. It has also been quite successful in its maiden venture in the U.K. market. It will be important for the company to focus on its healthy fruit drinks and snacks…
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Atlantic Quench Cranberries
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Atlantic Quench Cranberries The fruit juice market had suffered from considerable difficult times in the recent past. The growing cases of obesity and health related problems in the U.K. have greatly altered the lifestyle of the consumers and they are switching to healthy fruit and drinks. This paper discusses the case of Atlantic Quench Inc. which has its headquarters in the U.S. The company has ventured into the U.K. and is continuing its growth trajectory. This paper has focused on the marketing plan of the company for the next financial year highlighting the marketing communication and market segmentation strategies that can be used by the firm to increase its market share in the U.K. market. Theoretical frameworks of Porter’s five forces, Ansoff Matrix and Marketing Communication mix has been used in this paper. The paper suggests that AQC must continue with its quest of new product development primarily focusing on healthy products for consumers. A slightly high price can be charged from the consumers if they assume that the products provide functional value. Contents Abstract 2 1.0 Introduction 5 2.0 Current Marketing Situation 5 2.1 Internal Analysis 5 2.1.1. Market Description 5 2.1.2. Product Review 6 2.1.3. Competitive Review 7 2.1.4. Distribution Review 7 2.2. Macro Environment Analysis (Porter’s Five Forces analysis) 8 Bargaining power of buyers: Moderate 8 Bargaining power of suppliers: Moderate 8 Rivalry: High 8 Threat from substitutes: Weak 9 Entry Barriers: High 9 3.0. SWOT analysis 9 3.1. Strengths 9 3.2. Weaknesses 10 3.3. Opportunities 10 3.4. Threats 10 4.0. Objectives and issues 10 4.1. Objectives 10 4.2. Issues 11 5.0. Marketing strategy 11 5.1. Positioning 11 11 5.2. Product strategy 11 5.3. Pricing strategy 12 5.4. Distribution strategy 12 5.5. Marketing Communication Strategy 13 5.6. Marketing research 13 6.0. Marketing implementation 14 7.0. Budget 15 8.0. Control 16 9.0 Conclusion 16 Reference List 17 Bibliography 19 1.0 Introduction The global fruit juice industry is also facing a number of challenges from the health organizations in the developed countries regarding their fatty contents and the amount of sugar in these drinks. It has therefore become difficult for fruit juice companies to retain their market share in face of volatile demand conditions. In this light, this paper makes an attempt to create a marketing plan for Atlantic Quench Cranberries (AQC), a US based agricultural cooperative which have pioneered in the production of canned fruit juices. AQC had a slow but steady beginning in 1930’s. It started as a cooperative which was initially controlled by three farmers from New Jersey and Massachusetts. Presently the company is the top player in the U.S. fruit juice market. The success story of AQC had been strong even in the United Kingdom ever since its entry in the U.K. market. This report provides an elaborate marketing plan for AQC in the next one year so that the company can increase its market share in the U.K. The government of the U.K. is trying to introduce measures to reduce obesity and fruit juices are items which contains high volume of saturated sugar. However, Atlantic Quench produces drinks with very low sugar content and low calories that provide chances of growth in the U.K. markets. 2.0 Current Marketing Situation 2.1 Internal Analysis 2.1.1. Market Description The market conditions in the U.K. fruit juice industry are quite dynamic. An estimated growth of 10% has been noted in the value of fruit juice markets including the smoothies. Despite the growth in the value of the market, the total volume of sales has declined by 8%. According to a report published by Mintel, the combined market for fruit juice, smoothies and fruit related drinks are expected to grow by 13% in terms of total value (Lanschützer, 2013). Multiple factors are going to fuel the value growth of the market namely the rising inflation, improvement in confidence of customers, recovery of the economy from recession and rising proportion of household expenditure on processed foods. The snapshot below depicts the marketing trends of the future. Figure 1: Expected growth of fruit juice market (Source: Author’s creation) The market is expected to grow steadily over the next four years. The main market segment of AQC can be grouped into three main segments, the ones who fall in the age group of 25-34, 34-55 and 55 and above. The proportion of population above the age group of 55 are increasing constantly and this is primarily going to be a problem for AQC, as the main customer group of the company lies in the age group of 15-24 and this segment is going to decline. Therefore, a significant effort would be taken to develop products serving the older age group. Finally, the consumer preference has also shifted towards drinking and it has been estimated that around 56% of the U.K. consumers prefer to buy drinks which provides them functional benefits. 2.1.2. Product Review Researchers have pointed out that multiple factors have to be considered before launching new products like socio-economic conditions and customers taste and preferences (Hunger and Wheelen, 2003). AQC has always been proactive in introducing new products and constantly been trying to capture new markets by introducing variants of its products. Primarily a dealer of cranberry juices, the business has also ventured into non-juice based drinks. Some of the popular products of the company include Grab and Go, Fresh Cranberries and New conserve. New attempt of the company in creating innovative products is centred on reducing the calorie content of the drinks. Recently low-calorie products like Cranzeal have been highly popular among consumers. In the year 2007, the total sales of $1.7 billion were recorded. Crantera alone had secured 150 million dollars of sales which has become highly popular since its introduction. 2.1.3. Competitive Review Competitor’s analysis is a comprehensive method of capturing the strategies of competitor by analyzing their strengths and weaknesses (Gamble and Thompson, 2014). It helps a business to anticipate the kind of threats that is likely to be faced and help in allocation of resources giving maximum competitive advantage. The competition is highly intensifying in the U.K. market and AQC is likely to face certain difficulties to keep its market share. The chief competitors are Coca-Cola with a market share of 23% (Lanschützer, 2013), Tropicana with a market value of 15%, and the private label retailers who have a market share of 37% (Companies and Markets, 2014). The main competitors of the private labels are Tesco, Asda and Sainsburry. A new player is Morrisons which is also rising strongly. Major competitors of ASQ like Coca-Cola and PepsiCo is greatly relying on their fruit juice and smoothies market as a prime strategy to promote healthy drinks for the population. In this regard it can be said that Innocent Drinks, which has been acquired by Coca-Cola has committed itself to produce healthy and natural drinks (Innocent, 2014). Similarly, another major competitor PepsiCo has experienced 4% growth that could be largely attributed to the rising popularity of Trop50 and Naked which are brands of fruit drinks and smoothies (Buss, 2012). 2.1.4. Distribution Review The distribution channel of ASQ is strongly developed. The decision of entering into licensing agreement with Gerber has been noteworthy to relinquish the activities of manufacturing and distribution. Gerber has already established itself as one of the major suppliers of not only branded fruit juice but also private labels having a total value of more than 800 litres of volume in sale. The other competitors in the markets use three other alternative houses for their distribution which are SVZ, Döhler-Eurocitrus and Cargill (CBI, 2014). These organizations supply to both bigger and smaller institutions. Another major trend of the fruit juice industry in the U.K. is that major brands have a tendency to use multiple distribution channels to reach out to maximum number of consumers (von der Linden, 2005). 2.2. Macro Environment Analysis (Porter’s Five Forces analysis) Porter’s five forces is an acceptable method to capture the external factors that shape up the market dynamics. An industry is likely to be unattractive if the five forces as described by Porter reduce the profitability. In this context, use of the five forces will provide a clear factor of the major determinants in the U.K. Bargaining power of buyers: Moderate In the U.K. the distribution channel of fruit drinks and soft drinks are mainly conducted by the hypermarkets. Therefore the major buyers of fruit juice and juice drink companies are retailers of food and beverages. In case of Europe and particularly the U.K, the market of retail is highly consolidated, as major market players like Tesco and Sainsbury are the primary buyers (Market Line, 2014). The high volume of demand in the major retail stores makes it crucial for the fruit juice companies to be able to supply in a timely manner. From the point of view of the consumers, increasing number of options that they have in the market makes it easier for them to switch brands. Combining these two factors it can be commented that buyer’s power is medium. Bargaining power of suppliers: Moderate The bargaining power of the suppliers is moderate. This is because the inputs required for the production of these soft drinks are readily substitutable, and volatility in the price is unlikely the production capacity of businesses. However, there are certain fruit drinks which are prepared from certain ingredients which are not likely to be substituted and fluctuations in the price of these items raise the power of the supplier who supplies them (IBIS World, 2014). In case of AQC it has been found that factors like excessive supply and failure of harvest causes volatility in the price of cranberries which can create conditions of increased power of suppliers. Rivalry: High The degree of rivalry between the existing market players are quite high as has been depicted from the present market structure. The main competitors like Coca-Cola and PepsiCo along with the private labels creates a stiff competition for AQC which is difficult for them to handle. The larger companies have greater technological expertise and financial resource to invest in the production of healthy drinks containing lesser calories as this has presently become the market trend. The rivalry is expected to intensify as majority of the established market players are coming up with healthier alternatives. Threat from substitutes: Weak The threat from substitutes is likely to be weak as substitutes of fruit juice and juice drinks are soft drinks, aerated drinks, plain water or alcoholic drinks. There is no perfect substitute for fruit based drinks. There can be some variations introduced by soft drinks companies like flavoured aerated drinks which can be obtained at much lower price compared to the fruit juices. However, the growing trends among the consumers to purchase healthy drinks with lesser levels of sugar make the threat from substitute to be weak. Entry Barriers: High The established players in the industry enjoy high levels of economies of scale and strong brand names which is difficult to imitate. The financial and physical strength of Companies like the Coca-Cola and PepsiCo has made it difficult for newer players to enter the market. One of the options that are available to the new entrants is to enter in a licensing agreement with bottling companies. However, this option is likely to be expensive for the new entrants as this requires high level of initial investment and setting up new ventures is likely to be capital intensive. One of the prospering strategies among the existing large companies is to launch new products catering to the taste and preference of the local consumers. 3.0. SWOT analysis The purpose of conducting the SWOT analysis in this case is to ensure that the integral strength and weakness of the company can be documented effectively. It has been found that Marketers mainly resort to the SWOT analysis because it points to the internal and external factors that help in strategic decision making. 3.1. Strengths Constant improvement of new products and able to adjust to the dynamic market conditions have made AQC an important market player. Strong brand name will act as major strength for the company. The company has been able to establish a strong connection with the suppliers which provides it with additional competitive advantage. 3.2. Weaknesses The company have been not been able to respond to the changing market preference in a timely manner which has resulted in loss of market share previously. There is a market reduction in the loyalty of consumers towards cranberry juices. 3.3. Opportunities Considerable growth of the convenience snacking provides opportunities to AQC to introduce new products which are likely to be accepted in the market. The convenience market in the U.K. is expected to be a little more than 1 billion in 2017. The present convenience snack of AQC, Crantaras, is already a major market player. Higher growth can be expected in future. The growth of impulse buying can also provide opportunity as the company can likely promote convenience drinks which are healthier compared to confectionary products. 3.4. Threats Fruit juice and the juice drinks companies are threatened by drastic change in the lifestyle of the consumers. The continuous preference to shift towards low sugar fruit drinks have made it difficult for the existing market players to come up with variations in the product range. 4.0. Objectives and issues 4.1. Objectives The objectives of AQC Inc are to increase its existing share in the U.K. market by strengthening the current market position. In European Union consumption of fruit juice and juice-drinks are likely to grow by 13% value terms. It is also expected that sales are likely to be a little more than 10 billion litres. However, the sales in the U.K. and Germany are going to decline as has been reported. Consequently, it has become increasingly important for the company to increase the market share in the U.K. from previous year. In achieving this objective, the company is aiming to gain customers of carbonated drinks. This strategy is likely to be successful as lifestyle changes have become increasingly visible in the U.K. 4.2. Issues The present issue of the company is to control the sugar level of the fruit drinks in order to guarantee that they are healthy for the consumers. Though the company has been trying to improve the situation by effectively reducing the sugar content of their drinks, the consumers demand more. In a recent survey conducted in the U.K. it has been revealed that the fruit juice and juice drinks for children contain high level of sugar and they are not better the carbonated drinks (Hunter 2014). The dynamic market situations and the high rates of obesity among consumers have made it difficult for AQC to survive the market. Additionally, the heavy dependency on cranberries and harvest failure can disrupt effective supply. 5.0. Marketing strategy 5.1. Positioning The management literature states that it is important to consider market positioning as a part of the marketing plan to enhance the appeal to target customers. In this case, benefit positioning is likely to be a more successful strategy (Hunter III, 2014). This is because consumers in the U.K. are willing to spend more on healthy fruit juices if they can derive functional and emotional benefits from them (Loudon and Della Bitta, 1993). It is best for AQC to highlight on the fact that they serve “fresh and highly nutritious” fruit juice and juice drinks which not only provides a great consumption experience to the customers but also provides health benefits like respiratory disorders and infections in urinary tracts. 5.2. Product strategy Product strategy is closely linked to the idea of the perception that the consumers have about a particular product when it is placed in the target market (Dahlstrom,). The Ansoff matrix can be used to explain the product strategy (Ringland and Young, 2007). Figure 2: Ansoff Matrix In this case, the target market is customers in the age group of 0-14, 15-24 and 44-55 and 55 and above. The proportion of consumers in the age group of above 50 is on a rise. Blending vegetable juice with fruit juice can create products which will particularly be beneficial for customers in the higher age group. 76% of the customers in the U.K. strongly believe that fruit juice can act as a major component of healthy diet. Presently, AQC is strongly focusing on products like Diet Cranberry Quench and Diet Orange Tang to appeal the customers. Product development will be an ideal strategy. 5.3. Pricing strategy Researchers have stated that demand side pricing strategies are likely to work best when consumers have particular expectations from the products and they are willing to pay money for the value they receive (Ferrell and Hartline, 2012). Niche market pricing strategy can be considered by AQC. This is primarily because the AQC can produce differentiated products that will suit the taste and preference of consumers. Consumers will perceive the differentiated products to be of a higher value and pay higher price for the products. 5.4. Distribution strategy AQC has presently employed Gerber to distribute products in the U.K. market. Competitors of AQC in the U.K. market use multiple distributors like Döhler-Eurocitrus and Cargill to enhance the reach of the products. It is therefore recommended for AQC to employ other distributors in the U.K. to broaden its present distribution network. Use of an intensive distribution strategy instead of an exclusive distribution strategy. It is important to use multiple points of distribution as it will enable AQC to maximize its sales opportunities. Presently, the distribution system of AQC in the U.K. involves a strategic alliance with Coca-Cola apart from its own channel. Maintaining good supplier relationships can induce innovation in the supply chain which acts as a source of competitive advantage. 5.5. Marketing Communication Strategy Marketing communications strategy is an important part of the business because it allows a brand to interact with the customers and ultimately allows the later to develop a loyalty towards the products (Raghavan and Cafeo, 2010). In case of AQC it has to be stated that the marketing communication strategy that had been employed in the U.S. markets is candid as well as informative simultaneously. An instant connection with the customers has been created with this effort and the advertisements have featured in top 2% advertisements in recent times. The advertising strategy of AQC in the U.K. to launch the new product christened as “white cranberry drink” can be considered as “add-an-outcome” strategy. This can be done in an effort to highlight the reformulation of products to create low-calorie versions that are likely to be acceptable in the U.K. market. 5.6. Marketing research AQC should conduct marketing research in three potential areas in order to improve its market shares in the U.K. The first area of research should be in impulse purchase. This should be done to collect the necessary information regarding the expectations that consumers have from convenience drinks. The primary respondents will be the athletic people who prefer convenience drinks. The second area of market research should be focused on the nutritional requirements of the school children. This can also be considered as an attempt to support the initiative of the government to reduce obesity among children. Use of particular ingredients like omega-3, less additives and more anti-oxidants are likely to dominate the market in the forthcoming future. The final area of research should be convenience snacking. Secondary research state that the value of the U.K. convenience snack market is US$821.1. 47% of the citizens eat convenience snacks which makes this market lucrative (Government of Canada, 2014). 6.0. Marketing implementation The implementation of marketing plan requires coordination of multiple actions in order to ensure success (Adcock, 2010). In this case, implementation of the marketing plan will contain four main areas namely the cost of the personnel, expenditures on online marketing, expenditure on offline marketing and research and development costs. It has been assumed that the total marketing budget is 4500000 million dollars. The expenditure related to personnel is expected to be around 500000 dollars. Online and offline advertisement and promotional strategies will consist of greater part of the expenditure. Offline marketing is a very effective strategy to reach to maximum number of customers. Interacting with customers with the help of social media will help in establishing a good relationship with them. A major part of the expenditure is to be incurred in offline marketing. AQC has already established itself as an organization whose offline advertising success rates have been very high. Finally, coming up with new variants of product and investing in research and development will be important for the growth of the company in the future. The combination of online and offline marketing strategy will be the key to create a strong presence in the U.K. market which will be beneficial for the company in the long-run. The plan is presented for the period of next one year to show the chief components of the expenditure. 7.0. Budget The total estimated expenditure for the company is 45 thousand dollars in the next year to implement the marketing plan. Based on the present state of growth of the company the estimated profits can be determined. The present growth of sales of the company is 7% per year. Based on the current state of demand it can be expected that the net sales of the company will be 2600000 units in the U.K. market. The average cost of the product line is 3.5 dollars (estimated). This means that the gross profit is expected to be at 9100000 dollars. Expected net profits are close to be 4600000 dollars. This is expected to recover the entire initial investment that is being made. 8.0. Control In order to ensure that the marketing plan is successful it is important to monitor it at every step. There are certain parameters which can be checked by AQC like return made on the initial investment, measuring the deviation of actual sales made in the U.K. to the forecasted value of sale, analyzing the price of share to determine the position of the company (Adair, 2011). Any steep deviation from the forecasted figures must be dealt with. For instance, a deviation margin more than 20% should be considered as acceptable. Any higher deviation should be countered. Any deviation from this acceptable margin must be scrutinized in details. An easy way to do this is to compare the sales on account of per unit investment made in advertising. If the value is poor then the advertising budget should be remodelled (Aaker, 2010). 9.0 Conclusion AQC had an immense success story in the U.S. market. It has also been quite successful in its maiden venture in the U.K. market. 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