The Confectionery Market in the UK - Assignment Example

1. The confectionery market in UK has undergone change due to tighter advertising legislation and changes to food labeling (Bainbridge, 2007). Parents have become conscious of the detrimental effects of sugar, salt and fat in a child’s diet. The manufacturers too are aware of the unhealthy nature of the products and overall the sector is under pressure from alternative healthier snacks that offer higher nutritional value. The demographics in UK are changing and the under-19 segment is falling. The 65-plus is growing but this segment has limited interest in sweets. Women are more drawn to sugar confectionery than men but according to HMRB women are very light users of this confectionery. Nestle has announced that it is overhauling its UK business by focusing on its core confectionery brands such as Kit Kat (Wiggins, 2008) as they have returned to profitable growth. In December 2007, Nelson Peltz, an activist investor who specializes in big food companies, raised his stake from 3% to 4.5% in Cadbury’s, claims that confectionery-sales growth in 2008 would be above his goal of 4-6% (The Economist, 2008). Cadbury’s works at a lower margin than Nestle, Kraft and Wrigley, its three main rivals in confectionery. The margins are expected to rise by about 5% by 2011. The Mars Bars also increased its market share during the first six months of 2007, with strong sales of Mars Planets (Marketing Week, 2007). Its market share increased from increase 1.4% to 28% despite negative publicity. Even though Cadbury has a 34% market share, Mars is better positioned in terms of structure and profitability. Cadbury’s UK market for confectionery was worth £390m in 2007 in retail sales and the sales were exceeding expectations (Financial Times, 2007) while according to Mintel value sales for the UK confectionery market is predicted to increase 9% to reach £1.3bn by 2012 ((Bainbridge, 2007). Datamonitor too had predicted that the sector would see average annual growth of 1.3% during 2003-08 even though this is a fall from the 1998-03 period (Datamonitor, 2005). The industry value however was expected to rise. The following table indicates the market share of players across different regions: Source: Just-Food (2006) These findings suggest that the confectionery sector in the UK is poised for growth but Cadbury’s needs to take note of certain changes or developments that can affect the market in future. Firstly, as the under-19 segment is decreasing, they should introduce new products that could attract the women and the 65-plus, as these are the two strong and growing segments. Secondly, they should distribute through impulse channels like small convenience stores, small groceries, tobacconists or newsagent which do not exceed 3000 sq. feet (Bruno & Vilcassim, 2006). They have flexible opening times and it has been found that about half of the confectionery sales come through such stores. Thirdly, as people have become conscious of sweets, they should bring in products that are healthier which would also be able to attract the 65-plus segment. Competition is also strong in UK with new products being introduced in the market. This makes it important for Cadbury’s to alter its strategy. 2. The salmonella contamination was a massive setback to the company and hence they decided to step up their advertising budget. There was a downslide in the market share for chocolates for Cadbury’s and this has prompted the company to undertake a research to determine to what extent the brand equity is affected. The situation warrants that Cadbury’s should conduct a research to analyze the situation. To evaluate the situation, the research should be conducted in college campuses, local clubs, and at convenience stores. At college campus focus group interviews would reveal the truth because if the college students are indulging in confectionery, many may not be keen to disclose it individually. This has certain advantages even over the personal interviews as participants tend to be more comfortable and natural in a familiar group. They are more vocal and keen to voice their concerns in a focus group. Besides, they influence and are influenced by others just as they are in real life (Redmond & Griffith, 2003). At the convenience stores, which account for 70 percent of the sales, the owners should be interviewed who would be able to give the best idea of how consumers react to the Cadbury’s brand. Information from them should also be collected as to whether all brands of confectionery are being refused by consumers or just Cadbury’s. The interview should also try to bring out information whether other products of Cadbury’s like the chewing gum are selling or whether there is a boycott against the brand as such. These should be open-ended interviews allowing the interviewee the time and space to complete the answer. Further questions could be framed depending upon the responses. For this interview, familiar company personnel should not be used as this could result in bias opinions expressed by the store owners. This would also reveal to what extent the store owners themselves are against the products, the problems they encounter and whether they are making genuine efforts to boost the sales. At the local clubs individual in-depth interviews should be conducted specially of the 65-plus and the women. Interviewing is a mode of inquiry aimed at understanding an experience and meaning that person make of that experience (Seidman, 1998 cited by Eggenberger & Nelms, 2006). The individual in-depth interview allows the interviewer to delve deeply into social and personal matters (DiCicco-Bloom & Crabtree, 2006) and it unveils a person’s emotions, beliefs, problems, experience and actions (Eggenberger & Nelms). This would particularly help with this research as the objective is to determine how women and the older generation react to the media’s projection of salmonella contamination. It would also give an insight into the image that the consumers have formed of Cadbury’s as a brand and the confectionery sector as a whole. This process would cover the teenagers, freshman, the women and the older generation. It would help to bring out the consumer attitudes and loyalty to the brand. It would then help the company to plan the production and advertising budgets for the coming years. 3. The concept of marketing mix emerged from the notion of the marketer as a ‘mixer of ingredients’. The marketer blends the elements of the marketing mix to optimize profits. The product (which includes services) is priced according to the buyer’s ability, made available to the customer (place) and is promoted to make the customer gather as much information as required before the purchase takes place (Bennett, 1997). Thus the marketing mix of any product would include the right product at the right time in the right place with the right sales and promotion strategy and at the right price. As far as Cadbury’s is concerned, the situation is grim due to the adverse publicity that it has gained as well as the competition prevailing in the market. To develop the gift-giving market, Cadbury’s would need to have the right strategy. Proper market segmentation and product positioning followed by an integrated mix of the four Ps would help the company to achieve success in the gift-giving market. Success in marketing can be achieved by matching the organizational capabilities with the requirements of the marketplace. This matching is based on market segmentation. Market segmentation has been defined as the process of dividing the total market into a number of smaller, more homogeneous submarkets, termed market segments (Danneels, 1996). Market segmentation can be based on general variables like demographic, socio-economic, geographical, or psychographic. Psychographic variable delves deeper into people’s lifestyles and attitudes and Cadbury’s should base their segmentation on this variable. They should try to attract the customers that look for gifts suitable for different occasions. As far as product positioning is concerned, this is a new area and new product development. This concept will pick up fast as the needs of the customer today are convenience and fast pace. If well packaged gift items are available at convenience stores, people would opt for this rather than browse through hundreds of different items. After the downslide, the company has bounced back as the market leader (Charles, 2007). Key consumer measures indicate that its brand equity is still in good shape. They can use this concept of gifts as a strong platform to build upon. Nestle and Mars are its strongest competitors and Nestle has achieved success by concentrating on the core brand. Cadbury’s too should concentrate on its core product with variation like catering to the customer’s need for gifts. Product is defined as anything that satisfies a need or a want. Product is the most important element of the marketing mix. The Product policy includes decisions about quantity, timing, product variation, associated services, quality, style, packaging and branding (Osborne, n.d.). Cadbury’s should concentrate on their core brand and promote it as gift item. Since chocolates and the confectionery sector as a whole is now under trouble due to obesity consciousness, promoting it as a gift item will give a different dimension to the same product. The packaging should be altered to give the appearance of a gift. Then again, for different occasions, the packaging of the gift could be altered. For instance, Easter packing should be different from birthday or wedding gift packing. The gift-giving product should carry a separate brand name as well as a ‘brand’ name establishes the product in the consumers mind. Promotion has been defined as the "the whole array of methods and procedures by which the organization communicates with its target market" (Briohny, 2006). The objective of promotion is to build awareness, differentiate products and organizations from competitors, communicate the benefits of a product, build and maintain the overall image and reputation of an organization, and persuade customers to buy a product. Cadbury’s has already allotted high advertising budgets and the new product should be advertised extensively close to the wedding season or during festivals like Christmas, Mother’s Day and Valentine’s day. While maintaining the purple color, the gift-packing should have a new packing which should be easily identifiable so that shoppers are immediately attracted to it. Consumers are drawn to a product for two reasons – appeal for the product itself or appeal for the brand. The second has emotional appeal because it speaks of the company along with the products. They should tap on the emotional reward of giving chocolates as gifts. Apart from sponsoring soap and other events on the television Cadbury’s could get into mobile advertising. Those who come to the stores with the sms still on their mobile phones could be offered special rates. This would also give an idea of the effectiveness of this method of advertising. Place is the way a product reaches the customer. Place refers to the channels of distribution used to reach the products to the end consumer. Distribution decisions include market coverage, logistics and levels of service. Competition is high in this sector and Cadbury’s should distribute through stores at university campuses and local clubs apart from convenience stores and the retail stores. These stores would have direct access to the consumers and the levels of service are reduced. Importance of the place also includes the in-store layout. Since the purple color is associated with Cadburys, the company should insist on this color for the in-store layout to immediately form an association with the brand. Cadbury’s should also consider availability of gift packs online which could be delivered directly to the recipient. This eliminates the role of intermediaries in distribution. Price is defined as the sum of values consumers exchange for the benefits of having or using a product (Briohny, 2006). Price means what a person must do in order to get the product. If the costs outweigh the benefits, the consumers may not buy the product. The benefits have to be greater than the cost for the customers to be attracted. Price is an important decision area because it is the main source of income for any organization. If the prices are too low, profitability is affected while too high prices may leave it behind competition. Pricing can be based on long-term or short-term goals. It can involve discounts and special offers. Cadbury’s have been working on very low margins and should continue to do so for some time till the sentiments of the people are healed over the salmonella issue. Besides, competition remains high. Hence their pricing should be based keeping in mind the costs, competition and the customers. Thus, the marketing strategy should concentrate on segmentation based on lifestyle and attitudes. The packaging should be appealing and trendy; the display at the stores should be attractive and the pricing should be low. Promotion would need efforts to help overcome the stigma against the company. Word count 2123 References: Bainbridge, J. (2007). Sweets riding out obesity storm. Marketing, 32-33. Retrieved April 8, 2008, from ABI/INFORM Global database. (Document ID: 1296164541). Bennett, A. R. (1997). The five Vs – a buyer’s perspective of the marketing mix, Marketing Intelligence & Planning 15/3 [1997] 151–156 Briohny (2006), Briohnys report, Retrieved April 8, 2008, from: http://www.monash.edu.au/lls/llonline/writing/business-economics/marketing/3.3.2.xml Bruno, H. A. & Vilcassim, N. J. (2006). Structural Demand Estimation with Varying Product Availability. Retrieved April 7, 2008, from. Available: http://phd.london.edu/hbruno/availability_mktsci_2006.pdf Charles, G. (2007). Crisis, what crisis? Marketing. London: Sep 5, 2007. pg. 30, 2 pgs Danneels, E. (1996). 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