Expansion of a Yoghurt Producing Company in the Market of the United Kingdom - Case Study Example

Marketing Principles Introduction This report concentrates on business expansion of a yoghurt producing company in the market of the United Kingdom (U.K.). The researcher is a marketing official of the company and aims to frame proper segmentation strategies on behalf of the U.K. organization. The company desires to penetrate within the business-to-consumer market of the U.K. The firm desires to trade its product to only household consumers of the U.K. and hence, would conduct business within the dairy industry. The Dairy Industry in the U.K. It is noted that demand and supply of the dairy products is rapidly growing in the U.K. as well as in rest of the world. The British dairy industry has garnered success both in national and international business. Analysts believe that by 2020, the domestic demand for dairy products in the U.K. would require approximately five billion litres of additional milk production (Dairyco., 2014). This proves that new companies can enter within the U.K. dairy industry and reap some benefits of the growing demand therein. Figure 1: Excess Demand in U.K. Dairy Market (Source: NFU, 2012) From the above graph, it can be claimed that average demand for milk (in form of different dairy products) in the U.K. is more than its supply. The U.K. primarily imports different types of desert products such as, yoghurt and milk powder, from other countries. The term “dessert deficit” is very popular in the U.K. dairy industry. Almost 40% yoghurts sold in the U.K. are imported from other countries of Europe, especially France. It is estimated in 2014 that total yoghurt consumption in the U.K. is 740k tonnes; of which 296k tonnes is imported (Dairyco., 2014). As a result, the yoghurt company (case company) will be able to successfully launch its product in the U.K. market and increase its sales, provided proper segmentation strategies are framed. Figure 2: Trend of U.K. Dairy Industry (Source: Dairyco., 2014) The above table shows market trend of the dairy industry in the U.K. Total yoghurt expenditure in the U.K. (2014) so far is slightly below £1.5 billion. The average price of every kilogram of yoghurt has increased by 4% from 2013 to 2014, to a level of £2.49/kg (Dairyco., 2014). Total yoghurt sales in the U.K. for 2013 were 593 thousand tonnes. Figure 3: Yoghurt Sales Private and Branded (Source: Dairyco., 2014) The above graph implies that sales of both private labelled and branded yoghurts in the U.K. are increasing with time, but demand for private labelled products are higher than the branded products. However, yoghurt producing market of the U.K. is highly competitive in nature. Some of these companies are Muller, Activia, Actimel, Yeo Valley and Onken (Dairy Reporter, 2014). Product Segmentation The yoghurt company with plan to expand business in the U.K. can implement differentiated product strategy. One of the ranges of yoghurt produced by the company comprises creamy yoghurt combined with nuts, fruits and granola. This item comes in various fruit flavours such as, apple, guava, cranberry, lichi, mango, strawberry and orange. Each of these flavoured yoghurts is different in colour and some are filled with delicious and healthy nuts. The company has recently launched a new range of yoghurts, which are prepared without sugar and are 100% fat free. These yoghurts though low on sweetness, are considered to be good in taste, because they are favoured. Fat free yoghurts offered come in popular flavours such as, apple pie, coconut, lemon and strawberry. Another range of yogurts produced by the firm contains probiotic ingredients. Products are considered to be probiotic in nature, if it contains large microorganisms. The probiotic yoghurts produced are slightly more expensive than the other variations, but are more nutritious and healthy. The marketer of the company claims that these yoghurts are popularly served as breakfast deserts (Dairyco., 2014). Finally, a premium range of yoghurts produced by the company contain organic products. The company claims that this variation of the product offered is the rarest of all and are 100% natural. These products contain no added preservatives and hence, are more perishable compared to other preservative added yoghurts that they sell. Customer Segmentation This is the era of consumerism and in order to win over market competition, companies try to implement marketing mix strategies in business for enhancing utility levels of the consumers. However, proper marketing mix strategies cannot be formulated by a firm without productive segmentation, targeting and positioning strategies. Through the process of segmentation, a company tries to segregate customers in ways, where each group of buyers comprise similar characteristic features. The aggregate demand faced by a firm is heterogeneous in nature. The process of market segmentation helps to isolate the heterogeneous demand faced by a firm in the manner of separating customers in homogeneous groups (McDonald, 2012). The predicted response to the products of a firm, created by each set of homogeneous group, is same and consequently, the firm can impose appropriate marketing strategies. Market segmentation can be practiced by a firm in terms of demographics, psycho-graphics and geographical aspects (Juwaheer, Pudaruth and Noyaux, 2012). The concerned company would segment its buyers’ demand in the U.K. through the process of demographic market segmentation. Under this process, the company would segregate buyers in terms of demographic features such as, gender, age, income and lifecycle (McDonald, 2012). For instance, creamy yoghurts produced by the company (including fruit and nuts extracts) should be potentially targeted to be sold to children belonging to the age of 4 to 18 years. This is because these yoghurts are colourful and rich in carbohydrates as well as calories. These products would be targeted to the youth and children because at a young age, they can afford to consume deserts that are high in terms of calorie constrain (Nigel, 2000). On the other hand, fat free yoghurts of the company are primarily targeted to be sold to the old, middle aged and obese customers. Market researchers claim that modern individuals suffer from choric degenerative diseases such as, cholesterol, triglyceride and diabetes, after the age of 30. Hence, the creamy fruit and nut flavoured yoghurts are not healthy for old and middle aged consumers. These consumers, if conscious about health, should be more willing towards consuming the protein filled fat free flavoured yoghurts offered. Additionally, market reports even state that since 1950, the proportion of junk food consumption in the U.K. has substantially increased. These foods though are low in price, appear to be high in calorie and are clearly unhealthy. Extensive fast food consumption habits among the U.K. consumers have enhanced the prevalence of obesity. The doctors and physicians of the country are strictly prescribing obese people to consume fat free yoghurts. Thus, the range of fatless healthy yoghurts of the company should also be targeted at overweight customers (Tyan and Drayton, 1987). The range of probiotic content and organic yoghurts of the company are likely to be demanded more by young customers interested in sports or health conscious buyers. The company should aim to sell these products to those who can afford to pay slightly higher prices for improved nutrient content. The above segmentation process is considered on the basis of age and lifecycle demographic attributes. If the classification is done on the basis of income, then the organic and probiotic yoghurts should be targeted at rich and upper middle income consumers. This is because; economically affluent buyers will possess the purchasing power to buy these nutritious yoghurts at premium prices. On the other hand, all other variations of the yoghurt sold by the company will be primarily targeted at middle income consumers. If the company selects geographical segmentation, then it should aim to sell more expensive products in urban localities of the U.K. such as, Birmingham, Liverpool and Southampton. This is because rich people primarily reside in busy cities of the U.K. On the contrary, lower priced products of the company should be distributed mainly in the suburban areas. The consumers living in the suburban farming locations often consume domestically produced dairy products and hence, might not be eager to purchase expensive branded yoghurts (Nigel, 2000). 4 P Analyses Product The company primarily produces four major segments of yoghurt. These categories are mentioned below. Types Creamy Yoghurts included fruit and nut extracts Fat Free Nutritious Yoghurts Organic Yoghurts Probiotic Yoghurts From the above table, it is seen that the company implements differentiation strategy to prepare its products. Each range of its yoghurt is targeted at a different customer segment. Furthermore, the firm also invests money so as to innovate new variations of products. Price The company prices its differentiated products through competitive and premium pricing strategies. These strategies would also be followed by the organization in new market of the U.K. It will not attempt to draw in more buyers by merely lowering the prices of products as the target market constitutes middle and rich consumers (Nigel, 2000). These buyers, according to the Veblen theory, often judge quality of the products, in terms of price. Place The company should distribute its products in both urban and suburban localities of the U.K. It can establish direct retailing outlets in busy locations of the country as well as circulate products in some of the giant supermarkets of the U.K. such as, Sainsbury and Tesco. Certain products of the company should be sold online over the official website and also other online retailing firms such as, ASDA. The proportion of consumers visiting in the U.K. supermarkets and digital retailing websites is increasing with time. Thus, by distributing the company products through these selling sites, the company would be able to tap a wide base of loyal customers (Hennessey, 2004). Promotion As the firm will operate in a highly competitive market of the U.K., it will need to differentiate its products through increased advertisement and promotional activities. The company can offer discounts on bulk purchases and provide free samples to potential buyers. At the same time, the company should commercialize its brand through different means of communications such as, social media, television, newspapers and radio (Nigel, 2000). The company follows the word-of-mouth promotional strategy in business, which must be maintained even in the U.K. markets. Important External Market Trends Commercial success of the company in the U.K. will substantially depend on political, social, economic and technological aspects of the external market. Social A research report printed by the institute of Mintel has stated that the U.K. consumers are at present found to favour healthy eating habits (Mintel, 2013). The report states that 36% of individuals in the U.K. consider fruit and dairy products to be their indispensible dietary components. Even soft drink producers such as, Coca Cola, are launching low calorie drinks in the U.K. for serving the health conscious consumers (Nigel, 2000). Moreover, health instructors and nutritional experts are advocating that products rich in protein such, as, yoghurt, adds to the health quotient. The statistics of the abovementioned industry shows that demand for dairy products in the U.K. is higher than its supply. Furthermore, population of the U.K. is also gradually rising and this has enhanced the market demand for edible goods and services. As a consequence, it can be claimed that prevailing social conditions would help to popularize products of the company in the U.K. Economic The political authorities of the U.K. have adopted strict open door policies for promoting international trade within its economy. While expanding its business in the U.K., the company can select variable mode of entry such as, joint venture, direct investments or indirect exports. Over time, per capita income levels of individuals of the U.K. are improving. This has helped to enhance the discretionary spending power of consumers in the country (Nigel, 2000). All such factors would effectively enhance sales and profit of the concerned company in the U.K. market. Conclusion The current state of commercial activities has become highly complex in nature. At this juncture, rise in revenue or profit level of a firm in long run can be assured with successful business internationalization process. The concerned company selling yoghurt should expand its business in the U.K., as demand for dairy products therein is higher than the supply. Even so, the dairy industry in the U.K. is highly competitive in nature. As a result, commercial success of the company highly relies on its product, pricing, place and promotional strategies. Nonetheless, these marketing mix strategies of the firm would not become successful in long run without appropriate market segmentation. The company in this case will use demographic and geographical segmentation, while trading yoghurts in the U.K. (Porter, 2013). Reference List Dairy Reporter, 2014. Dairy reporter. [online] Available at: [Accessed 24 June 2014]. Dairyco., 2014. Market information. [online]. Available at: [Accessed 24 June 2014]. (2) (3) Hennessey, J. 2004. Global marketing strategies. Massachusetts: Houghton Mifflin. Juwaheer, T. D., Pudaruth, S. and Noyaux, M. M. E., 2012. Analysing the impact of green marketing strategies on consumer purchasing patterns in Mauritius. World Journal of Entrepreneurship, Management and Sustainable Development, 8(1), pp. 36 – 59. McDonald, M., 2012. Market segmentation: how to do it and how to profit from it. New Jersey: John Wiley & Sons. Mintel, 2013. Mintel reveals UK consumer trends for 2014. [online] Available at: [Accessed 24 June 2014]. NFU, 2012. Compete to grow. [pdf] NFU. Available at: [Accessed 24 June 2014]. (1) Nigel, P., 2000. Retailer Marketing – Informational Strategies. European Journal of Marketing, 17(6), pp. 5 – 15. Porter, M. E., 2013. On competition. Massachusetts: Harvard Business Press. Tyan, C. A. and Drayton, J., 1987. Market segmentation. Journal of Marketing Management, 2(3), pp. 301-335. Read More