Nestle's Situation and SWOT Analysis, Critical Issues, Marketing Objectives, and Strategies - Case Study Example

 Executive Summary Swiss food and beverage conglomerate Nestlé is launching a new coffee blend for its branded instant coffee soluble line, the Nescafe Greenblend. This new blend aims to capture the rising consumers of green tea and the health-conscious markets in Australia. Capitalizing once again on its company strengths, particularly its R&D and Marketing and Promotions arms, the introduction of the new coffee blend will be a tough and challenging one as it aims to compete with top tea brands. In order to capture a sizable share in the hot drinks market of the country, Nescafe set that it will strive to make the young, health-conscious Australians add another cup of the new blend in their weekly consumption of coffee. In particular, the marketing strategies will be as follows: Introduce Nescafe Greenblend into the market, then strengthen and improve its market position. Penetrate the green tea market and increase to at least 1,000 the number of cups of Nescafe Greenblend coffee drunk every second [compared with the estimated 3,000 cups of Nestle coffee are drunk every second] Penetrate healthy food market with higher revenues for the newly-launched product. The Nescafe Greenblend launch shall showcase the breadth of quality coffee experiences that Nescafe can offer. In order to do so, it will need to incorporate integrated marketing efforts from print to online activities. Table of Contents 1. Executive Summary ................................................................................................ 2. Table of Contents ................................................................................................ 3. Introduction ............................................................................................................ 4. Mission Statement ................................................................................................ 5. Situation Analysis ................................................................................................. a. Internal Environment ......................................................................... i. Products ii. Financial and non-Financial Situation iii. Channels b. External Environment ........................................................................ i. Markets ii. Competitive Environment iii. Economic Environment iv. Demographic Environment v. Social and cultural Environment vi. Political and Legal Environment vii. Technological Environment c. SWOT Analysis .................................................................................. d. Critical Issues .................................................................................. 6. Marketing Objectives .................................................................................. 7. Marketing Strategies .................................................................................. a. Target Markets b. Product Strategies c. Pricing strategies d. Promotion Strategies e. Distribution Strategies 8. Recommendation for Change ............................................................................... 9. Implementation for Change ................................................................................. 10. References ......................................................................................................... Introduction Nestlé , considered one of the largest food and beverage corporations in the world today with headquarters in Vevey, Switzerland, is consistently committed in its goal to be the market leader in each food ranges where its diverse product line are either leading and a household brand. Over the years, the Swiss food and beverage conglomerate has a proven track record in different product lines including: soluble coffee, infant nutrition, confectionary, dairy, chocolate milk drinks, bottled water, pet care, and ice cream. These credentials are backed by its strong financial portfolio with gross revenues amounting to US$89.65 million last year, which translates to 1.7 percent share from the total world food market. Also in 2008, the company has an outstanding 276,000 people working for its global headquarters. According to Forbes Magazine, Nestle is the top 57th corporation from a poll of the top 500 global companies last year, and it still holds the No. 1 spot among other food consumer products sector, trailing Unilever and PepsiCo behind in second and third places. Recently, as demand for nutritional food and beverages rose, a new industry is branching out – healthy foods. In recent years, green tea is receiving wide promotions from tea-making companies for its health benefits due to its high anti-oxidant levels. In a 2008 report by the Department of Agriculture and Food titled “Western Australia Agri-Food and Fibre Market Outlook,” stated that herbal tea retail revenues through supermarkets in 1995 were worth $US15.8 million and specialty tea were worth US$23.1 million.” Nestle believe it needs to respond to this trend to target the market for antioxidant-rich beverages. So, in mid-September last year (2008), the food and beverage giant launched Nescafe Greenblend to capture the hot-tea-drinkers niche market in Australia. In its press release for the media, Nestle indicated that Greenblend is made up of a blend of green and roasted coffee beans, which it claims to deliver 70 percent more antioxidants than green tea. [See Appendix A.] Without totally riding away of its premium soluble coffee product, Nestle capitalizes on its research and development capabilities to come up with a competitive product that also delivers the consumers’ demand for anti-oxidant-rich foods. To wit, Dotpoint.com reported that Nescafe is considered the market leader in the instant coffee product line with over 70 percent market share. The launch of Greenblend coffee augurs well to Nescafe’s thrust to establish its presence on the health and wellness niche to meet consumer demand. However, rolling out a new product and capitalizing on the projected long-term potential of this healthy food sector also pose some serious challenges to Nestle. Brand cannibalization is one of the most feared major effects of this new product launch. So, embarking on a strategic marketing effort will obviously entail major review of the brand along with identifying and prioritizing the growth drivers. This paper will thoroughly conduct an internal and external review of the growth drivers, and will end with its proposed marketing strategies and implementation plan. Mission Statement Nescafe shares the thrust of the mission set forth by its parent, Nestle, in providing local products for local needs. In particular for Nescafe’s Greenblend, Nestle targets creating a niche demand for its innovative anti-oxidant rich coffee through investing heavily in a concerted, integrated marketing plan designed to be a ‘shot in the arm’ for the category. Situation Analysis A. Internal Environment i. Products With massive brands under its sleeves, adding a new line of product called Nescafe Greenblend will either prove a new-found opportunity and a challenge. But with its extensive experience, Nestle is seen weathering any anticipated weaknesses with a comprehensive marketing and well-established focus group studies with consumers. With Nescafe Greenblend, Nestle is doing the remarkable by not directly entering the tea drinking market but by capitalizing on its research and development arm and innovation through a coffee that can deliver 70 percent more anti-oxidant. ii. Financial and Non-financial Situation According to Austrade.com.au, the official website of Austrade, Nestle generated annual revenue of Aus$2.8 billion in 2007. With 15 factories in Australia out of 481 globally, eight distribution centres and more than 50 offices, Nestle has more than 5,500 employees across the continent. To protect its brands and to accommodate the diverse cultural nuances globally, Nestle makes sure it registers local trademarks for its products. In view of this, it also carries out extensive research and development efforts, coupled with product technology areas scattered globally. Apart from these, it also ensures the licensing-in of its innovative technology from external sources to complement its R&D works for internal purposes due to the high regard it places to technology. ii. Channels Since Nestle has a remarkable presence globally, its presence in Australia will not hurt its reputation either. For the record, Nestle has established a well-grounded footprint in Australia for almost a hundred years already, in addition to its recent announcement that it is making Sydney as one of its three major global IT support centres. The country also serves as the national headquarters for the Swiss food and beverage giant’s operations in the Oceania regions that encompass New Zealand, Papua New Guinea and other South Pacific archipelagos. Also worth noting is Australia’s rich diversity, which is a great thing for Nestle because it provides Nestle greater opportunities to vary its products from sector to sector. B. External Environment i. Market Nescafe is the prevailing leader with around 70 percent share of the total instant coffee market in Australia, with total worth of about US$425M annually. Based on figures released by Euromonitor International, a think-tank research agency, the hot drinks market in Australia is expected to improve to Aus$1.3 million by 2006, hence, predicting that growth will be limited by the mature market. But, it added that such will continue to grow as relentlessly strong marketing effort in major product areas brings rising number of market consumers. In its full report, it stated that hot drinks in Australia are worth $1,000. Meanwhile, APFoodOnline.com, a trade magazine, noted that tea’s popularity is rising with the arrival of ready-to-drink products. In Japan alone, the market for liquid green tea performed significantly higher with 46 annual percentage growths between the years 1990 and 1999. The city-state Singapore experienced the same improvement, with 30 percent year-on-year. ii. Competitive Environment In Australia, several green tea products, which are classified as specialty tea or herbal, are blends of imported teas or Australian-grown tea. These are sold through the wide networks of supermarket retail chains. Leading brands include Lipton, Tetley, Twinings and Dilmah. By account, retail sales through supermarket of herbal tea in 1995 were worth 15.8 million US dollars while specialty teas were worth 23.1 million US dollars. There have been market opportunities recognised within Australia. For several years, there have been many specialty shops that were established that offer different types of tea and tea extract products. Other lesser- known tea brands are sold in health food and speciality markets. While there seems to be a relevant increase in the demand for green tea and green tea extracts in Australia, producers are still grappling with meeting demands. As a result, Australian producers import from China, Malaysia and Japan and other nations. iii. Economic Environment While the likelihood of shortages of supply of tea is relatively small, however, these are all derived from imports from other countries, most particularly from over three dozen countries globally. Importation of raw materials is prone to wide fluctuations in price, and the availability of materials. There is also the risk of shortages of supply of tea and this could result in higher costs to tea packers who care enough for the origins to maintain the flavour profiles of said tea products. This is where Nestle coffee can be take advantage of since it can produce the raw products organically from the soils of Australia and its home-grown plantations. iv. Demographic Environment Annually, there is an estimated 2,000 tons of green tea consumed in Australia while 17,000 tons of black tea. Most of these tea products are imported since Australia are only able to grow around 2,000 tons of black tea and just only recently started production of green tea. Green tea products are mostly exported to Japan. Age and ethnicity are reported as twin factors that influence the consumption of tea in Australia. In a national nutrition survey released recently, Australian adults with ages ranging from 25 and over were said to be likely to drink tea. But with the highest mean intake of tea can be found among adults born in London, Ireland, and New Zealand. It is also revealed that more coffee was consumed than tea by adults aged 19-44, while adults over 45 consume more tea than coffee. v. Social and Cultural Environment In recent years, there have been marked changed in consumer tastes hence the need for producers to take notice to improve and enhance the tea drinking experience of consumers who demand a more convenient, pleasant and fashionable way of enjoying their tea drinking. Consumers put high premium to living a healthy lifestyle because they believe they should be responsible for their well-being. With the advent of modern technology and new media, consumers are more than ever having information load about nutrition facts. The recessionary fall out and demand to look for more work have other consumers looking for ways to relieve stress and simplify their lives. There is higher reliance on a more natural, organic way of treating oneself from diseases. Sustainability and greening the environment have been put in the limelight recently, making customers feel the need to get involve also. Quality product and true value are demanded for each expenses being made. There is a prognosis that the demand for tea will be stronger over the next decade. vi. Political and Legal Environment Today, there are regional and global policy-making bodies (South Asian Association for Regional Cooperation (SAARC) and World Trade Organization (WTO)) that can greatly impact tea trades, in turn, creating new opportunities and threats for such. From this scenario alone, it can be assumed that the supply of tea may be unstable due to various factors, which may include military conflicts, among others. vii. Technological Environment To improve productivity level of tea and coffee outputs, modern technology has been utilized extensively to at least thwart the damage that the unpredictable weather condition may cause the industry. With the aid of innovation and new inventions, plantation space is also minimized, in turn, scaling down the labour or human resources costs. As a whole, the entire process becomes faster now. C. SWOT Analysis Company Strengths Pioneer of soluble coffee drinks Nestle owns massive brands Extensive research and development Good amount of acquisitions Good reputation among government bodies Improving experience in global adaptation Decades-old experience in marketing and rolling out new product lines Advanced infrastructure in refrigeration and transportation Company Weaknesses Suffered few misses with forecasting of growth drivers Lacks experience in competing with leading tea drinking brands. Challenged by the huge distances for transportation External Opportunities Growth possibilities in different global footprints Innovation and inventiveness of a tea with the power more than that of the health benefits of tea. Consumers always on look out for fresh, inventive products. Broad cultural diversity of Australia External Threats Brand cannibalizing Strong competition Price war Boycott calls from purists tea consumers D. Critical Issues To successfully carry out the implementation plan in marketing Nescafe Greenblend, there are issues that the planners need to address. These are – Company needs to increase its experience in the green tea sector Massive, as well as aggressive promotion works need to be undertaken to establish the brand name and earn market share Develop effective marketing mix Re-assert company image that is tied with high quality, great value the money spent Explore distribution deals with major supermarkets, specialty coffee and tea shops Try to gain market share for Nescafe Greenblend Marketing Objectives Marketing and brand managers who shall be involved in this marketing effort should be guided by the following marketing objectives – Introduce Nescafe Greenblend into the market, then strengthen and improve its market position. Penetrate the green tea market and increase to at least 1,000 the number of cups of Nescafe Greenblend coffee drunk every second [compared with the estimated 3,000 cups of Nestle coffee are drunk every second] Penetrate healthy food market with higher revenues for the newly-launched product. Marketing Strategies a. Target Markets The target markets for the Nescafe Greenblend are the savvy coffee drinkers. Based on our external audit – demography profiles of tea and coffee drinkers, we will capture the young 19-44 years old market who consume more coffee than tea, and also the over 45 adults who consume more tea than coffee. b. Product Strategies To ensure that the marketing objectives set are met, Nescafe Greenblend shall be made with the following characteristics: Like other Nescafe coffee products, the Greenblend brand will be an instant soluble coffee beverage made up of a combination of roasted and unroasted green coffee beans. And while the unroasted coffee beans are a very light green colour, the end product/blend appears similar to regular coffee. Greenblend will be made available in 50g, with well-conceived packaging, in harmony with the design objective to make Nescafe Greenblend coffee capture its premium quality label and being consistent with its thrust to promoting health and wellness. The rationale for the ingredients and the resulting colour of the coffee after preparation is based on the company’s consideration that consumers want the “cult of ingredient” attitude whereas familiar flavours are associated with themes such as health and wellness. c. Pricing Strategies Nescafe Greenblend will be sold on price range higher than other Nescafe instant soluble coffee products to project that this is a high quality product and the amount paid will be equated to the high value that consumers will get. Beside, the new label will be competing head on to other major tea labels in the market. The price set will also be used as one of the means to combat the threat of brand cannibalization. Nescafe Greenblend Size Price 50g RRP $4.99 100g RRP $8.79 d. Promotion Strategies To be able to compete with the tough tea market, the effort for promotion should be given high amount of attention and investment. The rationale for such effort is three-fold: Nescafe Greenblend will be launched as the first of its kind in the market, and to achieve leadership in the sector, it will need more than a simple promotional campaign in the marketing mix. The new coffee label will be competing with top tea labels in the market, as well as to provide people background information about the benefits of anti-oxidant rich foods. The marketing objective is very ambitious – to at least make Australian drink at least 1,500 cups of Greenblend every second, or at least make Australian drink additional blend of Nescafe product a week. e. Distribution Strategies The Nescafe Greenblend will be made easily accessible in major supermarkets and also specialty cafe shops across Australia and the Oceania regions (New Guinea, etc.) to make its presence felt and accessible by everyone. Retailers, such as supermarkets, will be encouraged to provide special areas where Nescafe Greenblend will be prominently showcased. At the first three month of its launch, there will be special booth situated at the entrance of the supermarket so people can immediately get a taste and buy at the same time the product. [See Appendix C]. Recommendation for Change Nestle, through Nescafe, will need to address the following identified behaviour drivers to push the new product line Nescafe Greenblend in the market: How Nescafe Greenblend can be a health and wellness booster How taking a sip of Nescafe Greenblend coffee can be an excuse for a break or rest Helping people to understand better the health benefits of drinking coffee with high anti-oxidant contents, hence making them appreciative of coffee more With well-conceived marketing mix, the launch of Nescafe Greenblend should make consumers try to get more expensive coffee variants or flavours Encourage the young, health- and non-health conscious adults to try the new Nescafe Greenblend Change the negative perception about the alleged bad health benefits that drinking coffee gives In the end, this marketing plan shall focus on creating activities that will revolve on the drivers set forth above. Implementation Plan The Nescafe Greenblend launch shall showcase the breadth of quality coffee experiences that Nescafe can offer. In order to do so, it will need to incorporate integrated marketing efforts from print to online activities. [See Appendix B]. In addition, the marketing team will also need to consider the following actionable plans: 1. Embark on a strategy to locate outlets within popular locations, apart from supermarkets, that can give visibly high premium and prestige to the new product line. 2. An aggressive national ad campaign to be rolled out massively in the different media: print, radio, television, web, among others will be made for a span of three months. 3. Promotional campaigns in Supermarkets (2 weeks). With a promotional stand that should be designed reflecting the branding themes for the product, this will be established in key stores. Supermarkets’ clients will be encouraged to have free taste of the Nescafe Greenblend. 4. Promotional offers will also be set up for avid buyers of the product. 5. During the launch of the product, there will be a promotional event that will feature some light entertainment, contests and giving away of free products. References Coffee drinkers celebrate 70% more antioxidants with launch of NESCAFÉ® Greenblend, Nestle.com.au, viewed 24 May, 2009, Coffee: Black as hell, strong as death, sweet as love, Dotpoint.com.au, viewed 25 May, 2009, Department of Agriculture and Food, Western Australia 2008, Agri -Food and Fibre Market Outlook, Government of Western Australia, viewed 25 May, 2009, Global 500, Fortune Magazine, viewed 25 May, 2009, TechSearch: Technology Acquisition Service, Nestle SA, Enterprise Ireland, viewed 25 May, 2009, Appendix A. Nescafe Greenblend Research on the health benefits of the new product line: a. Recent studies released by the Bioavailability of Coffee and Tea Antioxidants in Humans clinical study, conducted in Switzerland and completed in March 2008, stated that the new Nescafe Greenblend has 70 percent more antioxidant than any other tea products. b. Based on studies released by the Bioavailability of Coffee and Tea Antioxidants in Humans conducted in Switzerland, the polyphenol antioxidants levels present in blood samples were measured and compared over 12 hours after consumption of the beverages, under carefully controlled conditions. The level after consumption of Nescafe Greenblend was 70 percent more after consumption of the green tea. B. Marketing Action Program Marketing Strategy Action Responsible Officers/Personnel Control System Timing/Duration Costs [Aus$] Integrated Marketing communication campaign TVC, Website, Radio, newspapers, campaign ads on health journals Marketing managers Monthly Sales data Sept 2008 – Sept 2009 600,000 Marketing promotion campaign Set up special stand for personal selling Marketing Managers, Sales managers, Counter staff Supervisors Count customers and monitor sales per moth Sept 2008 – Jan 2009 30,000 organize promotional event Marketing Managers, Supervisors, Hostesses Count participants Jan 2009 60,000 Promotional offers e.g. free gifts with purchase Marketing Managers, Production Managers Produced output figures Jan 2007 – Jan 2009 – May 2009 20,000 Distribution of free samples to customers at cash point Marketing Managers, Cashiers, Supervisors Count customers First week of January 2009 7,000 C. Example Store sampling schedule Week Commencing Monday, 10th November, 2008 Area Suburb Store Date Day Time East Camberwell Safeway 16th Nov 08 Sun 10am-2pm East VERMON Safeway 15th Nov 08 Sat 10am-2pm East Victoria Gardens Coles 13th Nov 08 Thu 3pm-7pm East Burwood Safeway 13th Nov 08 Thu 3pm-7pm East Kew Safeway 16th Nov 08 Sun 3pm-7pm North Brunswick Coles 16th Nov 08 Sun 3pm-7pm North Preston Safeway 13th Nov 08 Thurs 3pm-7pm North Coburg Safeway 10th Nov 08 Mon 3pm-7pm Read More