Profitable Growth and Value Creation in the Soft Drink Industry - Example

Introduction to Marketing Part B. Name of Student: Name of Professor: Name of Course: Code of the Course: Date of Submission: Executive Summary The Australian soft drink industry is as competitive as the global industry. The following paper will analyze Coca Cola Amatil and Schweppes and their products Minute Maid and Passiona respectively with respect to several marketing concepts. The introduction section gives and introduction to the topic of assessment. The second section gives background information on the soft drinks industry while the third section of the apper gives an introduction of the companies and products being assessed. The fourth section of the paper assesses various marketing concepts. The marketing concepts assessed includes strategic marketing, macro environment forces, micro environment forces, SWOT analysis, market segmentation, target marketing, targeting strategy and the positioning strategy. The paper will then give recommendations and the conclusion section will give an overview of what is cover in the paper. Table of Contents Executive Summary 1 Table of Contents 2 1.0 Introduction 3 2.0 Background information about the Soft Drinks Industry 3 3.0 Company Background 5 3.1 Coca Cola Amatil 5 3.2 Schweppes Australia Limited 6 4.0 Product Overview 6 4.1 Minute Maid 6 4.2 Passiona 7 5.0 Marketing Elements 7 5.1 Strategic Marketing 7 5.2 Macro Environmental Forces 9 5.3 Micro Environmental Forces 9 5.4 SWOT Analysis 10 5.4.1 Coca Cola Amatil 10 5.4.2 Schweppes 12 5.5. Market Segmentation 12 5.6 Target Market 13 5.7 Targeting Strategy 14 5.8 Positioning Strategy 14 6.0 Recommendations 14 7.0 Conclusion 15 References 16 Introduction to Marketing Part B 1.0 Introduction The soft drinks manufacturing industry is one of the biggest beverage industries in the world. Currently, soft drinks are on the verge of overtaking hot drinks as the largest beverage industry in the world (Deloitte, 2005). The soft drinks industry is highly competitive, which explains the reason as to why the players in the industry are engaged in rigorous marketing and sales programs. Some of the important elements in marketing which organizations must take into consideration in their operations includes; strategic marketing, macro environment forces, micro environment forces, SWOT analysis, market segmentation, target marketing, targeting strategy and the positioning strategy. The following assessment paper will discuss the above marketing elements with respect to Coca Cola Amatil and Schweppes, the major soft drink manufacturing companies in Australia. 2.0 Background information about the Soft Drinks Industry Soft drink manufacturing industry is among the most profitable industries in Australia. However, for the last five years, the industry has experienced low growth in its revenue due to unfavorable economic conditions, changes in weather, and also consumer trends. The financial crisis that occurred in the late 2008 weakened the economy as a result of increased uncertainty in both domestic and global market. This affected the industry consumers opted not to spend on purchases but to pay down debt. The industry has establishments that manufacture various soft drink products both carbonated and non-carbonated (Tucker, 2006). As pointed out in the introduction, soft drinks will soon overtake hot drinks as the largest beverage sector in the world. Carbonated / fizzy drinks dominate the soft drinks industry. With the changes in market forces and consumer demands soft drink manufactures have been continuously developing new products aimed at meeting specific market demands. One of such examples in the introduction of sugar/calorie free and diet drinks. The following pie chart illustrates the global soft drink industry. Non alcoholic beverage industry in world (Deloitte, 2005) The consumption of carbonated drinks in Australia is currently at 2 million liters annually. Out of the total amount of total amount of carbonated drinks consumed in Australia, 90% of them are soft drinks. In addition to this, soft drinks account for about 70 % of the non alcoholic beverages consumed in the country. The soft drink industry is highly competitive. This has necessitated the use of strategic marketing strategies with an aim of ensuing that organizations have a competitive edge over their competitors in the market. The two main competitors in the Australian soft drinks industry are Coca Cola Amatil and Schweppes. 3.0 Company Background 3.1 Coca Cola Amatil Coca Cola Amatil (Aust) Pty Ltd is among the biggest soft drink manufacturing company in Australia. It is a privately owned company, and is categorized under Bottlers. The company is located in northern part of Sydney in Australia, and was established in 1996 (Yoffie, 2002). The company is also on eof the largest soft drinks manufacturers in the Asia Pacific region. The Coca Cola Company operates in the region under Coca Cola Amatil. The countries in which the company operates in includes Australia, Fiji, Papua New Guinea, Indonesia and New Zealand. The company engages in the mass manufacturing, sale and distribution of a wide range of products. The product line of the company includes fizzy drinks, energy and sports drinks, water, fruit juice, coffee, ready to eat vegetable and fruit products and flavored milk. Its other activities include the distribution and sale of premium spirits manufactured by Beam Global Spirits & Wines. 3.2 Schweppes Australia Limited Schweppes Australia Limited is a beverage manufacturing company which is wholly owned by the Asahi Group Holdings Limited. Schweppes Australia Limited is involved in the development, manufacture, sale and distribution of a wide range of beverages. The company’s products are ready to drink non alcoholic cordials and beverage. Its products include Apple Time & Orange Time, Cool Ridge, Cotee’s Cordial, Extra Juicy, Frantelle, Gatorade, Glo, Kokomo, Monster Energy, Mountain Dew, passiona, pepsi, Play, pop tops, Schweppes, Smart Juice, Solo Original, Spring Valley and Sunkist (Schweppes Australia Limited, 2013). Schweppes Australia Limited was initiated in 2009 when Asahi group assumed its full ownership. Asahi group is a major beverage manufacturer in Asia based in Japan; in fact, it is the largest brewer in Japan (Schweppes Australia Limited, 2013). The Asahi group is able to distribute and sell Schweppes products in its wide range of business enterprises. 4.0 Product Overview Both companies which have been introduced above engage in the development, distribution and sale of soft drinks in Australia. The following section will analyze a product from each of its product range. The section will analyze Minute Maid, a product of Coca Cola Amatil and Passiona, a Schweppes Australia Ltd product. 4.1 Minute Maid According to Yoffie, (2002), Minute maid pulpy is a product that was branded from 1945 by Florida Food Corporation. In1960 Cola-Cola Company acquired minute maid company through stock swap. In 1997 coca cola launched a new orange juice called Minute Maid Premium which from there the drink started to sell in the market. It is considered to have all the nutritional facts. Its ingredients includes, flavoring substances, food colors, orange juice, water among others, making it have higher nutritional value, and one of the best juices in the soft drink industry. Minute Maid is a non carbonated drink which is manufactured and distributed under The Coca Cola Company (Silaen & Otto, 2013). Minute Maid is fruit drink which mostly focuses on orange and lemonade. Currently, minute maid is not in the product range of Coca Cola Amatil. However, the company is making moves of introducing the product in its Asia Pacific region. 4.2 Passiona Passiona is a soft drink product manufactured by Schweppes Australia Ltd. It has been an existing soft drink product in Australia since the 1920s. It is the Spencer Cottee who started making passion fruit cordial from the passion pulp. The cordial was later sold to Lismore family company. The mixture was carbonated to form a taste sensation now referred to as Passiona soft drink (Schweppes, 2013). 5.0 Marketing Elements This section will assess the marketing elements identified earlier with respect to their influence on the marketing of Minute Maid and Passiona. 5.1 Strategic Marketing Strategic marketing is a marketing approach where an organization evaluates its current situation in the market and identifies specific objectives which it wants to achieve within a given duration of time. A strategic marketing plan is normally established after an organization has done a situational analysis on itself upon which it identifies specific areas which need to be worked on. Currently Minute Maid is not manufactured in Australia by Coca Cola Amatil. On the other hand, Passiona has been in the Australian market since 1920. Therefore, Passiona is way ahead of Minute Maid in market share. On the other hand, it is important to acknowledge that Minute Maid is a reputable brand in the world; hence it is likely to attract a steady market in the Asia Pacific region. Strategic marketing begins by the thought process after which the message is delivered to the masses. The producers first understand what their customers are, and what is important to them before supplying them with the product (Ashcroft and Rowley, 2006). Looking at the two drinks, it can be acknowledged that they are substitutes of each other; hence they are competitors. Therefore, there’s a need for the two companies to come up with an appropriate marketing strategy which ensures that Passiona is able to retain its competitive in the market while Minute Maid managing to get a substantial market share. The key element which must be part of the marketing strategy is a marketing mix. Coca Cola Amatil and Schweppes must take into consideration the 4P’s which include: Product – the products which they offer in the market must be able to meet the specific needs of the Australian market. Product proliferation may be of great importance to both organizations Price- the price at which they offer their products must be competitive. Both firms must use an appropriate pricing strategy which makes sure that customers get value for their money. Place – the distribution system conducted by both companies must be able to ensure that customers get the various products at a place which is convenient to them. Specifically put, the products must be available in the next door/ street vendor. Promotion – both companies must come up with appropriate promotion strategies which ensure that they are able to reach out to the target market in addition to increasing their sales. 5.2 Macro Environmental Forces They are uncontrollable external factors which affect the operations of a business. These forces are in most cases beyond the control of business enterprises, and their existence leads to changes in management, production, operation and marketing strategies. They include such factors such as government regulation and the availability of raw materials and labour. The Australian soft drinks industry is affected by several macroeconomic forces which affect the two organizations being analyzed din this paper. One of the factors is the availability of raw materials, for instance in 2012 when Schweppes was making losses due to the shortages of fizz (Fickling, 2012). Other macro economic factors include those factors which affect the market forces. Ideally these are some of the most powerful macro economic factors in the soft drinks industry. For instance, manufactures are faced with the challenge of reducing sugars and calories in their products in the wake of increased health awareness. This has led the two manufactures to develop proliferated products which are able to reach out to the customers concerns. So far, Minute Maid is ahead of Passiona in this. It has many proliferations aimed at meeting the specific needs of specific customers. Schweppes needs to consider the current and future macro economic factors and come up with passiona proliferations which will realize with the needs of the consumers. Government regulation is also an macro environmental force which the two companies have to counter. 5.3 Micro Environmental Forces These factors do exist close to a business, and they affect the operations and success of a business enterprise (Ashcroft and Rowley, 2006). Micro environment forces have to be analyzed by businesses before developing corporate strategy. They include customers, employees, suppliers, shareholders, media and competitors. Each of the two companies has different micro environmental forces which affect their operation. Coca Cola Amatil is influenced largely by The Coca Cola Company which owns part of it while Schweppes has to get orders from the Asahi group which owns it. Therefore, both companies cannot make independent decisions but have to wait for decisions from the main offices. For this reason, it is of great importance that the two companies devise appropriate managerial strategies which ensure that the forces do not compromise the success of their products in Australia. Suppliers are also a major force to the two companies, for instance Schweppes was facing a shortage in the supply of Fizz in early 2012. The media also poses a microenvironment force in the operation of the two companies. 5.4 SWOT Analysis A strength, weakness, opportunity and threat analysis is necessary to evaluate the current situation of an organization in the market and possible areas where it needs to work on in order to improve its overall performance. According to Dibb et al, (2005), SWOT analysis identifies the strengths and weaknesses together with the opportunities and threats the businesses face during their daily operations. It provides a well-established ground upon which the performance and prospects of the business are examined. The following section will presents a SWOT analysis of the two companies with respect to their products; Passiona and Minute Maid 5.4.1 Coca Cola Amatil Strengths The Coca Cola Company is good global reputation- the company boasts of a good global reputation which would make customers want to be associated with it via its products. Reputable global Products- Minute Maid is a reputable global product by the Coca Cola Company. Therefore, it will be easy for the product to be successful in the Australian Market. A good distribution and sales system- the company already has a good distribution and sales channels which will beneficial to the sale and distribution of Minute Maid. Weaknesses Small market share – Minute has a small market share as compared to Passiona. Market Loyalty- Passiona has been in existence in Australia since 1920, hence enjoys a greater customer loyalty as compared to Minute Maid. Minute Maid is a new arrival in the Australia market although it has been in existence since 1960. Bureaucracy in the decision making owing to the co-ownership. Opportunities The Australian beverage industry is growing and has an opportunity for fruit juices Minute Maid has more proliferations as compared to Passiona hence will be able to reach out to more market segments. Minute Maid will benefit from the systems which have already been established by Coca Cola Amatil. Threats Minute Maid faces stiff competition from other products in the market There is a potential threat of a shortage of raw materials. 5.4.2 Schweppes Strengths The company has a good reputation the market Passiona has a good reputation in the market and enjoys customer loyalty owning to its long existence. The company has a good sales and distribution network. Weaknesses The company has bureaucratic issues in its management. Passiona has fewer proliferations as compared to Minute Maid hence is set to face stiff competition. Opportunities There is an opportunity to exploit the market by the developing of more product proliferations, hence being able to capture more market segments. The product enjoys a stable distribution systems which is put in place by Schweppes and the Asahi group, Threats Passiona faces stiff competition in the market from other beverages. 5.5. Market Segmentation It is the subdividing of a market in consideration of some similarity or commonality. Members of a particular market segment have something in common that binds them together. Market segmentation enhances a competitive advantage for a business (Ashcroft and Rowley, 2006). The variables for market segmentation are normally the specific consumer needs. The market segment which the Coca Cola Amatil and Schweppes Australia Ltd targets with Minute Maid and Passiona is fruit juice drinkers. 5.6 Target Market Target markets constitute both the current and prospective consumers of a company's products or services at a given time (Dibb et al, 2005). It is a customer base for a business. Having a reliable customer base facilitates the overall sales and marketing strategies initiated by the business. Coca Cola Amatil and Schweppes Australia Ltd targets fruit juice drinkers with their products. However, Minute Maid has more proliferations which enable it to target more market segments. Main targeting variable targeting strategy Main targeting variable targeting strategy Tastes Minute maid comes in various flavors under lemon and orange. Passiona only has one flavour Packaging Minute Maid is packaged in both paper and plastic containers Passiona is currently packaged in plastic containers 5.7 Targeting Strategy This is the process of identifying and selecting most appropriate customers, and at the same time ensuring that customers' performance is enhanced effectively. Targeting strategy also referred to as marketing strategy involves management of the entire customer interface (Dibb et al, 2005). The targeting strategy used by the tow companies is undifferentiated. The two companies send the same promotional message to every person each of the companies tries to indicate why its fruit juices are the best. The four targeting strategies include Cost leadership, product differentiation , cost focus and differentiation focus. In cost leadership, organizations offer the lowest cost possible in broad markets while in cost focus, organizations offer products at low costs to specific consumer groups. In differentiation focus, organizations offer unique products which meet the specific needs of specific markets while in product differentiation, organizations offer unique products to the largest market segment. Schweppes uses a differentiation focus strategy while Coca Cola Amatil uses a product differentiation stategy. 5.8 Positioning Strategy This is the decision by a business to emphasize particular aspects of its product, and leaves out the rest (Ashcroft and Rowley, 2006). The major idea behind this is that the buyer understands what the brand stands for, considering its distinct features amongst product category. 6.0 Recommendations From this assessment, the following recommendations are made: Coca Cola Amatil should engage in promotion so as to introduce Minute Maid to the market. The company should make use of its existing structures so as to do this more effectively and faster. Schweppes should develop more product proliferations of Passiona so as to be able to reach out to specific markets. Both companies should develop appropriate marketing strategies. Coca Cola Amatil should aim at introducing Minute Maid in the market successfully while Schweppes should aim at increasing its market share in addition to exploiting more market segments. 7.0 Conclusion In conclusion, this assessment paper has been successful in giving an insight into the Australian soft drinks industry. The paper has analyzed Passiona and Minute Maid which are products of Schweppes Australia Ltd and Coca Cola Amatil respectively which are the largest soft drinks manufacturers in Australia. One thing which came out strongly in the paper is that the soft drinks industry is highly competitive, hence the need for appropriate marketing strategies. The paper has discussed about strategic marketing, macro environment forces, micro environment forces, SWOT analysis, market segmentation, target marketing, targeting strategy and the positioning strategy with respect to the two companies and their products. From the assessment, it has been recommended that the companies need to establish appropriate strategic marketing plans which will enable them compete effectively. Schweppes needs to develop more proliferation of Passiona with an aim of reaching out to unexploited market segments. On the other hand, Coca Cola Amatil needs to develop and execute appropriate promotion strategies so as to introduce its product successfully in the Australian and Asian Pacific region. References Ashcroft, L., & Rowley, J. (2006). Section-1 Marketing Concept: A Changing Perspective. Marketing in Library And Information Services: International Perspectives, 3. Australian Carbonated Flavored Soft Drinks, (2012). Putting the Fizz Back in a Flat Category, ozbevnet.com, Retrieved on 1st May 2013 from http://www.ozbevnet.com/index.php?option=com_content&task=view&id=118&Itemid=36 Coca Cola Amatil, (2013). Company Overview, Coca Cola Amatil, Retrieved on 1st May 2013 from http://ccamatil.com/AboutCCA/Pages/CompanyOverview.aspx Deloitte, (2005). Profitable Growth and Value Creation in the Soft Drink Industry. A view From Deloitte and SAP, 1-16 Dibb, S., Simkin, L., Pride, W. M., & Ferrell, O. C. (2005). Marketing: Concepts and strategies (p. 850). Houghton Mifflin. Schweppes Australia Limited, (2013. What We Do, Schweppes Australia, Retrieved on 1st May 2013 from http://www.schweppesaustralia.com.au/Who-We-Are/What-We-Do.aspx Schweppes Australia Limited, (2013). Passiona, Schweppes Australia, Retrieved on 1st May 2013 from http://www.schweppesaustralia.com.au/Our-Brands/Passiona.aspx Silaen, L., & Otto, B., (2013). Coca Cola to Step Up Spending in Indonesia, The Wall Street Journal, Retrieved on 1st May 2013 from http://online.wsj.com/article/SB10001424127887323646604578402303624659868.html Tucker, J. C. (2006). IBISWorld. Reference Reviews, 20(6), 30-31. Yoffie, D. B. (2002). Cola wars continue: Coke and Pepsi in the twenty-first century. Harvard Business School Publishing Corporation. Read More