International Marketing Profile of The United Kingdom - Research Paper Example

I. Introduction A. Country profile The United Kingdom of Great Britain and Northern Ireland is an island-country that is situated in northwestern Europe. The country is composed of four countries: England, Scotland, Wales, and Northern Ireland, with a population of 61 million, and headed by Queen Elizabeth II as head of state and Prime Minister Gordon Brown as head of government (BBC.co.uk). B. Brief history UK has a long history in terms of international affairs, local affairs, culture, etc. During the time Cadbury is founded by John Cadbury, the United Kingdom as an economy poses high taxes on certain imports such as cocoa. This makes cocoa prices very high, when during that time it has become a luxury because it is only affordable to the wealthy (BirminghamUK.com). After the government has reduced the high import taxes on cocoa, John Cadbury has been able to extend the chocolate and make it affordable to the masses. This significant change in history, coupled with Cadbury’s being acknowledged as the manufacturers of chocolate for Queen Victoria, has set to propel the company’s operations up to where it is today. C. Current economic state As of the current, the United Kingdom has been in a dismal economic state, being one of the wealthier countries that are more deeply affected by the global financial crisis. According to BBC.co.uk, the British economy is in a deep recession (Schifferes 2009), shrinking by an estimated figure of 4% this year. Coupled with this recession is the lowering inflation as consumers’ purchasing power weakens and many people are saving for the rainy days, cutting down on consumption (BBC.co.uk). Output is negative although unemployment is rising in a slow rate. D. Relevant external environment The global economic crisis has brought other different external forces which can influence the confectionery market. This includes political forces as well as societal forces which are also part of the external environment, Political forces may come in the form of government bailout to the ailing industries within the economy. As these come in the form of government spending aimed to channel the resources to the investment and consumption function of the aggregate demand of the economy, they can have significant impact on the confectionery industry in the form of increase or decrease in investments, as well as increase in purchasing power of the consumers. Societal factors come into play when we consider the attitudes of consumers in response to the global financial crisis. As consumers tighten their belts, and make a drastic shift in their consumption patterns, the snack food category which comprises the confections can be greatly affected when consumers opt to choose alternatives that are cheaper and perceived as healthier. II. Body A. The European confectionery market 1. Industry structure a) Major markets (1) France In a Mintel report entitled “Sugar Confectionery - Pan-European Overview - Europe - October 2003”, the French market for confectionery has been reported to be one of the fastest growing segments in the European region back then (2003). This market is found to be low in overall consumption of confectionery, but high in consumption of gums. According to this report, sweets in France are bought from supermarkets and hypermarkets (Mintel 2003), with Cadbury being the leader in the confectionery market. Shifts in trends in this market are also mentioned in the report where the shift is toward healthier new products--one form can be sugar-free confectionery, and an emerging youth market which has better preference for sweets. In 2007, Raymond Heinz, President of Bell Flavors and Fragrances Europe quotes from Datamonitor that France’s per capita consumption of confectionery is 9.5kg, third largest in the European region (Heinz 2007, 3). (2) Germany According to the Mintel report, the confectionery market in Germany “continues to grow, but prices fall (Mintel 2003).” The industry is already maturing with some “600 specialist stores that cater to the sweet tooth (Mintel).” This confectionery market has two big brands leading them—Haribo and Wrigley. Similar to the French market, certain shifts in consumer preferences have implications on the confectionery market. For example, according to the report, consumers that are part of the youngsters’ category “demand new shapes and flavors.” The gum is also more preferred by this segment in the market. Similar to France, healthier snack foods have a brighter future in the German confectionery market. According to Raymond Heinz, as he has quoted from Datamonitor in 2007, the Germans are the second biggest market of confectionery in the European region with 14.0 kg in per capita consumption (Heinz 2007, 3). (3) Italy Mintel’s report in 2003 states that Italy is a mature market for confectionery and there is little growth in the regional market. However, the sugar-free and functional segments, according to the report are growth areas. The major consumers for confectionery products in Italy, back then are still children. But, as the report suggests, middle-aged consumers also provide some great promise. As Raymond Heinz in 2007 quotes in his presentation Datamonitor, the Italy is only the fourth largest confectionery market in Europe. It has a per capita consumption of 4.7kg (Heinz 2007, 3). (4) Spain In 2003, a Mintel report states that, when the Spaniards may not constitute a huge market for confectionery; the growth of sweets in the Spanish market is high. The major reasons behind this high growth are the inflation of the Euro and the growing trend in preference for sugar-free sweets (Mintel 2003). The Spanish confectionery market is lead by multinational confectionery companies. Grocery chains have been the major distribution channels for confectionery products, pulling sales away from impulse outlets. According to the article, a growing trend is also apparent in Spain, where “sweets can form a part of a healthy diet (Mintel 2003).” This change in perception has a significant impact on the growth of the market in the years to come. (5) UK In contrast to other markets, Mintel reports the future in the confectionery market in the UK “may not be so encouraging” due to “unfavorable demographics” (Mintel 2003). According to the article, major shifts in consumer attitudes have impacted the confectionery market. These include “the battle for pocket money spend” as well as “the health issue” that prevail the market back then (Mintel 2003). Apart from these issues, there are other reasons why the confectionery future looks less brilliant for the UK market. These include the declining size of the market for confectionery as one of the reasons. The fluctuating expenditures in advertising also signal some changes within the industry. According to the article, the largest sector for the UK confectionery market is the gums and jellies sector. The major distribution channel for confectionery products is the grocery multiple. Multinational players lead the confectionery sector in the UK. According to Datamonitor, as quoted by Raymond Heinz in 2007, the UK market is the largest in Europe. Its per capita consumption is 15.6 kg (Heinz 2007, 3). b) Other industry elements According to the report by Mintel in 2003, the core consumers of the confectionery market are still the children. The market is segmented into two: the chewing gum segment and the sweets (Mintel 2003). The report has raised insights as regards the market for confectionery in the European region. The report has found out the following: that people whose ages are less than 55 are more likely to buy sweets; women are more likely to buy sweets than men, true for all countries; and that children play a major role in the purchase decision involving sweets, as influencers. According to the report, gum is most popular in Italy where almost half of the Italian adult market chews gums; on the contrary, it is in Germany where it is least popular (Mintel 2003). Also, Mintel’s report has found out that the 35-year-old and below market is more likely to purchase gums; and that the British people are “the most likely to eat mints Mintel 2003).” According to Datamonitor as quoted by Raymond Heinz, the market for confectionery in Europe is growing by 1.5 percent. The countries that offer the highest possible growth areas include Ukraine, Russia, Poland, Croatia, Slovenia (Heinz 2007). Country per capita consumption in 2006 estimated growth until 2010 Ukraine 2.2 kg 18.0 % Russia 11.8 kg 7.9 % Poland 8.9 kg 11.4 % Croatia 3.3 kg 12.8 % Slovenia 4.8 kg 11.3 % Adapted from: Confectionery: Trends in Europe, by Raymond Heinz, 2007. Source: Datamonitor. Raymond Heinz in his presentation has presented numerous significant insights that represent the emerging trends in the European confectionery market. Among these are the following: “increase in premium products in Europe as they are no longer reserved for special occasion; consumers want indulgence with higher quality food and drink; Europeans are increasingly seeking more ‘unusual and exotic flavor’ experiences in confectionery; and, increasing attractiveness of natural ingredients such as real fruits and botanical extracts (Heinz 2007, 5-9).” 2. Major players Cadbury in its website has determined its major competitors in the confectionery market. These include the following: Mars-Wrigley, Kraft, Ferrero, Nestle, Hershey, and others (Cadbury.com) Adapted from: CadburyInvestors.com, 2009. Currently, due to the merger of Mars and Wrigley, Cadbury becomes the second largest confectionery company in the world. Mars-Wrigley has a market share of 14.8% in the total confection market. Cadbury is second at 10.4%, Nestle is third at 7.6%, Hershey is fourth at 5.1%, then there is Kraft at 4.5%, and the other smaller players constitute the 53.5% of the total world market. The market is further divided into three sectors: chocolate, gum, and candy. Leading the chocolate category is Mars-Wrigley at 14.9%, followed by Nestle with 12.2% in market share. Cadbury and Hershey are third at 7.5%, Kraft holds 8.1%, with Ferrero’s 7.1% and 42.7% is shared by other smaller brands (Cadbury.com). Mars-Wrigley still leads the market in the gum sector with 35.8% market share. Cadbury follows at 28.9%, with small percentages for Hershey (0.7%), Nestle (0.1%), Kraft (0.1%), and Ferrero (0.0%). 34.4% is shared by other lesser known brands (Cadbury.com) Cadbury takes the lead in the candy category, with 7.2% market share. Mars-Wrigley follows at 5.1%, then Hershey with 2.9%, Nestle with 2.8%, Ferrero with 1.5%, and Kraft with 0.3%. The rest of the market, 80.2% is shared by other competitors (Cadbury.com). 3. Indirect competitors The confectionery industry is a sub-segment in the snack food industry. Aside from the major competitors that are mentioned above, the confectionery industry faces indirect competitors in the form of alternatives according to functions. Aside from satisfying the sweet tooth, confections serve as snack food. By offering certain health values that are considered when the market buys snack food, confections are just one of the choices that a consumer will be considering for purchase. B. Cadbury Plc. 1. Company overview Cadbury Plc is a global company that is a major player in the global confectionery business. The company operates in 60 countries and employs 50,000 people (Cadbury.com). The company’s operation dates back to 1824 when its founder John Cadbury started a shop in Birmingham, UK that sells tea and chocolate drink. Today, Cadbury Plc has thirteen focus brands in its brand portfolio, which includes Cadbury, Green and Black, Halls, Stimorol, Hollywood Chewing Gum, Trident, Bubbaloo, Clorets, Dentyne, Flake, Crème Egg, Cadbury Eclairs, and The Natural Confectionery, Inc (Cadbury.com). Aside from these, Cadbury has a number of lesser known brands in its portfolio. Cadbury Plc has experienced a couple of strategic changes within the company. According to the company’s website, Cadbury had merged with Schweppes in 1969 which had created its new name, Cadbury Schweppes (Cadbury.com). The company acquired Adam Confectionery in 2003, enlarging its portfolio from chocolate and cocoa products with the global candy brands Halls and Trident. After selling its beverage business in the Americas, the company then changed its name into Cadbury Plc in 2008. 2. Major segments served Cadbury as a global confectionery company caters to three product segments of the confectionery market—chocolate and cocoa beverages, gum, and candy. According to the company’s fact sheet, the distribution of the company’s revenue is as follows: 46% of its revenues come from the chocolate and cocoa beverages, 32% from gum, and 22% from candy (Cadbury.com). The company operates globally, in 60 countries. This global market can be broken down into segments by geographic region. According to the company’s fact sheet, the global market can be segmented into four major geographic regions which include: Americas; Asia Pacific; Britain, Ireland, Middle East and Africa; and Europe. 27% of Cadbury’s revenue comes from the Americas, 25% from the Asia Pacific, 31% from Britain, Ireland, Middle East and Africa, and 17% from Europe (Cadbury.com). 3. Description of the target marketing activity Over the years, Cadbury has capitalized and leveraged its brand by utilizing brand extension strategy in its products (Douglas and Craig, 2002). With the strength of the Cadbury brand with its long standing reputation in the confectionery industry, adding the Cadbury name to its individual product lines enables it to leverage the brand name of the company. As the years progress however, changes in the confectionery industry prompted the company to enter the other segments in the market by acquiring another confectionery, Adam Confectionery. With the increasing number of products in its portfolio, the company has decided to create different brand names. Looking at the current portfolio of the company’s brands (Cadbury.com), we can see that the company has retained only a few of its product brands linked to the Cadbury brand. These product brands are chocolate producs—Cadbury Eclairs, Cadbury Crème Egg and Cadbury Dairy Milk, are among the three focus brands of the company (Cadbury.com). Although only have been the focus brands of the company, a number of product brands from its previous brand extension strategy has been utilizing the Cadbury brand name alongside it. Cadbury’s focus candy brands include Clorets, Dentyne, and Halls. The focus gum brands include Bubbaloo, Bubblicious, Hollywood Chewing Gum, and Stimorol. However, there are two chocolate brands that Cadbury carries without its corporate brand name—Flakes and Green & Blacks. The diversity of the company’s product portfolio reflects the different sub-segments in the respective product segment in the confectioner market where it operates. As the product segments in the market demand more choices, the company has developed different brands in order to cater to different tastes of consumers. The company’s target markets are defined by the individual product brand that respectively cater to them. For example, for the chocolate and cocoa beverages, the segment is further divided into different sub-segments as when it comes to food, preference varies a lot. A good example within its chocolate segment would be the brands Green & Black, and Cadbury Dairy Milk. Both are product brands under the chocolate category, but both differ in their respective target markets. Green & Black caters to the premium block market of the chocolate category (Cadbury.com)—making it compete with other premium block European brands such as Switzerland’s Lindt and Germany’s Sarotti. Green & Black’s original proposition is ‘organic farming and intense chocolate taste’ (Cadbury.com)—that is, green for organic farming and black for the intense chocolate taste. By utilizing a different brand, Cadbury can cater to a distinct segment in the whole chunk of the chocolate category of the confectionery market—the premium block chocolate brand, which product range extends to hot gift chocolates, ice cream, biscuits and hot beverages as part of the brand’s own portfolio. Cadbury Dairy Milk on the other hand caters to a different segment in the chocolate category with its different offering—a smooth and creamy taste in contrast to the intense chocolate taste of Green & Black. Cadbury Dairy Milk emphasizes the amount of milk that the recipe contains in the chocolate—containing liquid milk “far more than any previously known product (Cadbury.com).” This product caters to a segment in the chocolate category that prefers a certain taste. Given the two examples, we can see that Cadbury, in order to solidify its hold in the market targets many different sub-segments within the segments of the confectionery market. Instead of utilizing brand extension and putting the Cadbury tag in all its products, it has created different brand names to stand for different offerings in the market. Therefore, its product brands cater to varied demographics in the confectionery market. 4. Current brand positioning Cadbury’s company brand name is narrowed down to being a confectionery company after it has sold its beverage business in May 2008 (Cadbury.com). After numerous brand extensions during the past years, the company focuses its brand essence on being a confectionery company. The major association for Cadbury as a brand name is still with chocolates. This is apparent in retaining the Cadbury brand name in its chocolate products, and utilizing different names for its candies, gums, and other products that constitute its portfolio. Instead of extending its brand like what it has done before, the Cadbury brand’s essence rests where it had long been known for—for its chocolate. C. Major competitor analysis 1. Competitor overview Mars has long been Cadbury’s competitor, one of the company’s direct rivals in the confection industry. Recently, Mars has become the largest confectionery company, taking the title away from Cadbury after it has acquired Wrigley. In April 2008, the company has announced its intention of buying Wrigley, which solidifies its position in the market as the largest confectionery company (MarketIntelligenceCenter.com). With an acquisition amounting to $23 billion in a cash deal, the new company, Mars-Wrigley is comprised of 64,000 employees around the world and is estimated to generate a yearly $27 billion in sales. Mars is not just a major contender in the snack food business and confection, its diverse portfolio of products from snack food, food, drinks, to pet care. Its portfolio of brands extends beyond the confection market. According to Mars, 49.5% of its revenue is generated from the pet care category; 42.2% comprises its snack food category where the confectionery brands belong; 1.8% of revenue is derived from drinks, and 6.5% is generated from sales of food (Mars.com). Included in the portfolio of Mars’ brands are Starburst, Snickers, Dove, Twix, Mars, M&M, Skittles, Sheba, Cesar, Whiskas, Pedigree, Royal Canin, Uncle Ben’s and Flavia. 2. Major differences The major difference with Cadbury and Mars strategy is that the Mars brand carries a more diverse set of products than Cadbury. When Cadbury as a company brand name positions itself as a confectionery company, the largest in the industry before Mars and Wrigley have merged; the Mars brand stands for food, overall. This difference in the brand essence determines the scope of the company brand’s ability to include a number of product lines under its umbrella manufacturer brand. Both companies have started with chocolates and confection as their main products. Due to this, both brands have been associated with confectionery. However, over the years both brands have included a number of products in their category. While Cadbury utilized brand extension, Mars utilized brand enrichment. Mars has evolved, as it says in its website “There’s a lot more to Mars than chocolate” and has included in the corporate brand’s essence other food categories. This is the major differences in the two companies’ corporate brand strategy. III. Conclusion Cadbury has become a valuable brand over the long period of its existence. However, like any other, its brand is dependent on the meanings that it conveys to its target market. Like any corporation, its actions determine the meanings that it conveys. And the meaning that it conveys becomes the essence of the brand over time. As the environment forces a company to act, its actions when are not actively monitored, distorts the meaning that it sends to its brand stakeholders. The Cadbury brand has long been a trusted name in terms of confectionery, especially chocolate. As various laws in the United Kingdom where the company is situated have enabled Cadbury to mass market chocolates, this original product is associated with the brand until today. Over the course of its long existence, it has leveraged its brand name in order to include more product brands under its umbrella brand name. However, brand extension strategy can distort a brand’s meaning if it is not done well. If a brand is known for something, then having additional products or extensions under the umbrella brand may change what the brand is known for. Cadbury has realized this as it goes from putting its brand name associated with chocolate alongside its other product brands to gain leverage, to developing individual brands that cater to different preferences in the market. The major difference with Cadbury and Mars, although they have both started with chocolate, is that Mars has made the effort to expand the meaning of the Mars corporate brand—more than just chocolate. By not confining itself with the chocolate manufacturer image, Mars is able to enter the different food categories as diverse as pet care without harming its corporate brand image. It is also a good thing that it does not extend the Mars brand to the pet care line in order to not give a different impression to its other target markets. The major issue with Cadbury is that with the long year of its existence, the Cadbury brand has been associated with great chocolates. This same strength limits the ability of the company to strengthen its corporate brand and utilize its almost 200 years of reputation as a company. For almost 200 years, Cadbury has not intentionally redefined its corporate brand with its own efforts. A solution that we see in order for Cadbury to strengthen the Cadbury company brand is for the company to decide to market the Cadbury company brand for something—like other consumer goods company such as P&G, Mars, etc. By putting a meaning to the Cadbury brand distinct and broader than its product brand, the company can be flexible enough to increase its portfolio without distorting the meaning of its corporate brand—because it has a concrete meaning of its own. The way we see it, with the company’s long existence, the Cadbury brand can stand for concepts like expertise, quality, and taste; perhaps it could even include its current concept for its chocolate product which is joy. The Cadbury corporate brand can embody both functional benefits—expertise, quality, and taste, and emotional benefits such as joy. With a broad yet defined meaning, whatever Cadbury adds to its portfolio, it can attach the Cadbury name in order to strengthen the credibility of the product. It is very usual that the manufacturer brand stands for quality in order to provide credibility for the individual product brand. The first thing that Cadbury should do is develop a slogan that will embody its new unique selling proposition for the corporate brand. Then, with the Cadbury corporate brand having a brand personality of its own, it could incorporate some slight touch of that personality in all the different campaigns of its individual brands. This way, consumers will know the product is made by Cadbury, and that it should be trusted. Creating this corporate brand name gives consumers a reason-to-believe, which will aid them in their decision and eventually choose Cadbury. By including small touches of the Cadbury corporate brand personality in the various marketing communications effort of the individual brand of the company, consumers will have a more integrated perception of the range of Cadbury’s portfolio. The Cadbury corporate brand will be embodiment of the meaning that is shared by the individual brands. This will help the Cadbury brand gain stronger presence in the market. Stronger brand will enable Cadbury to retain its financial health even during these times of global financial crisis. As consumers narrow down on their options in terms of purchase, a strong brand as part of a consumer’s evoked set has a bigger chance to become the ultimate choice, especially in times where small purchase can be considered a significant financial risk during a down economy. 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