Marketing History of the Ferrero Group - Case Study Example

MARKETING HISTORY OF THE FERRERO GROUP Student name Subject Lecturer University Date Executive summary This report aims at presenting a company profile of the Ferrero group. Through an analysis of the global, European, and Indian confectionery markets, the paper will highlight Ferrero’s strengths and weaknesses and use it to present a SWOT analysis. Contrariwise, the SWOT analysis will be instrumental in determining future strategic action in new product introduction. This retrospect paper utilizes information from market sources, the company profile and specific business related texts and journals to formulate a strategy for action. The objective of the paper is twofold, to propose a new product for the company that seeks to strengthen its position in the Indian market, and increase the propensity of greater market consolidation in gaining competitive advantage. Contents 1.0 Company Profile 4 2.0 SWOT analysis 5 3.0 New product description 9 4.0 Marketing Mix of the Product 9 5.0 Customer Value Proposition 11 References List 12 1.0 Company Profile Ferrero Group is an Italian family owned company, which is one of the most secretive and closed companies in the world. Many investment bankers have made offers to the company, and there have been offered for takeovers and mergers by industry giants but the company has remained steadfast (Manuela and Mesco 2013). The company began in 1946 during the Second World War. The founder, Pietro Ferrero, set up a lab with which he planned to support a pastry shop he and his wife owned. However, there was cocoa rationing during the time, and Pietro came up with the idea of using hazelnuts, plentiful in the area, as a substitute. This was to be the foundation for what would become the world famous Nutella brand. Pietro passed on in 1949, with his brother taking over the company briefly before passing it on to Pietro’s son. He grew the company aggressively in overseas markets and developed new products (Forbes 2015). Presently, the Ferrero group has 72 affiliated companies, with 15 production plants, 38 business units, and three social enterprises. It has over 21000 employees and a market presence in over 100 countries worldwide. It is one of the most successful chocolate companies, with recording gross sales of over 7.87 billion euros in 2011 (USBE 2013). 2.0 SWOT analysis Strengths Strong market awareness of the Ferrero brand Quality and luxury product that makes it ideal for gifting Available in different types of packaging which are instantly recognizable Trustworthy family owned businesses Rich history with the original idea for Nutella Market presence in over 100 markets worldwide (USBE 2013) Weaknesses Products not easily available Considered exotic and luxurious, hence unattainable by many High price of products narrows the target market Low advertising rates limits market penetration Perception of chocolates being unhealthy impacts sales Opportunities Chance to introduce new products into the market to improve market share Changing perceptions on the healthiness of chocolate Marketing opportunities through the internet: social media, video advertising, and website ads. Increasing demand for the three piece pack Threats Threat of competing companies in the market Increasing competition from nutrition bars Imitations and counterfeiting of Ferrero group products especially Ferrero Rocher Poor economic cycles Strengths The brands manufactured and sold by the Ferrero Group are some of the most recognizable brands in the confectionery industry. Some of their most popular brands include Kinder, Nutella and Ferrero Rocher. The strong brand awareness their brand enjoys gives the company a strong position in the market. Customers recognize them as a provider of quality confectionery products, making them the ideal option for giving as gifts. Historically, they have a reputation for innovation and quality, straight from the idea for Nutella by the founder. The fact that they are a family owned business also improves their reputation. The general consensus is that family owned businesses tend to have a competitive edge in the markets in which they operate, with consumers considering them superior in terms of problem solving, service provision and employee benevolence (Okoroafo & Koh 2009). Weaknesses The company mostly deals with high-quality luxury confectionery products. These are often not readily available to the majority of the markets in the countries they operate. Their products are high priced and high end, and the perception of their products being high end, especially in markets dominated by similar low-end products, is a hindrance to growth. They do not do as much advertising as other competitors, and so do not derive as much benefit from aggressive marketing campaigns. Opportunities Ferrero group is highly innovative. The company always can introduce new products into the market to improve its market share and sales. Traditional perceptions of the consumption of chocolate are changing, leading to opportunities for sales (Mittal &Ravinder 2012). The company can also leverage marketing opportunities provided by the internet to attract customers, especially the millennial generation. Threats The threat from the competition is very high, especially on pricing. Most of the people who consider Ferrero products unattainable opt for cheaper alternatives. Nutri-bars, considered by many a healthier alternative, compete for market share with Ferrero group products. Some unscrupulous businessmen take advantage of the position of the Ferrero group and its brands, and the gullibility of consumers to produce counterfeits. Target market The target market for the new product initiative is the Indian market. The company entered the market in India in 2004. The first branch office the company set up was in Chennai. The entry into the market in India is particularly significant because before then, there was virtually no market for premium luxury chocolates. At the time of Ferrero’s entry into the market, there were no chocolates in the country that cost more than 25 rupees. The market leader in the country had been selling its flagship brand of chocolates for 5 rupees for more than ten years. Ferrero changed the business landscape, and now premium chocolates make up to 27 percent of the chocolate market (Ajita Shashidhar 2014). Ferrero now has a six percent share in the country, and developed the premium market from scratch. The company did this by using a geographical and cultural segmenting strategy (Neil Kokemuller 2015). The setting up of the first branch office in Chennai was not by accident. The southern region of the country has contrasting cultures. The people from Tamil Nadu are known to be conservative while the people from the Kerala region are known for their openness to experimentation. The company did not hire any experts but went into the market banking on their understanding. They realized there was a market segment that was open to buying premium chocolate even in the price conscious market. They also realized that people in the country bought expensive chocolates especially during the holiday season for gifts. Most of the competitors in the market bank on their mass market products. The Ferrero group, however, does not have any such plans. In fact, there are no plans to make cheaper variants of any of its confectionery products. Another option would be to transport some of the products on its portfolio from its overseas stations. The company admits that this would provide logistical problems. Prevailing weather conditions in the country could also get in the way of the introduction of some of its products like chocolates and beverages filled with liqueur (Ajita Shashidhar 2014). Despite the relative success of the company in India, there is a need for expansion and market segmentation. Several reasons contribute to this. The company has made India its hub for the Asian region, with more than half of their production being exported (Ajita Shashidhar 2014). Traditionally, the company does not have many production units to maintain control over its authenticity. This means that expansion into the Asian market is tied to expansion in the Indian Market. The company sells its premium chocolates all year round, but most of the orders they receive come from during the holiday seasons of between October and March. This indirectly means that their flagship product Rocher focuses on gifting for sales. However, in India, there are many premium gift options. Olive oils, pasta and cookies are fast becoming sought after options for gifting. The Ferrero group has to get ahead of the competition not only in the confectionery but also in the gifting market. Even for such a conservative company, widening of their portfolio could be a huge strategic advantage. 3.0 New product description Since 2005, the consumption of chocolates in the country has almost trebled. Most, up to 75 per cent, of the purchases of chocolates are impulsive. In a survey conducted in India, 41 per cent of the respondents bought chocolates for themselves while only 29 percent bought for others (Mittal &Ravinder 2012). This seems to point away from the fact that there is huge potential away from premium chocolates for gifting. The new product is a two-pack box of Ferrero Rocher chocolates. According to the survey, the leading determinants of chocolate choice were price, availability, packaging and taste(Mittal &Ravinder 2012). The product will be able to compete on all four fronts. The target population will be young adults aged between 18 and 25. 4.0 Marketing Mix of the Product Taste The new product will retain the signature taste of the original Ferrero Rocher chocolate brand. It will also have the same signature packaging of the Ferrero Rocher brand. Taste and branding are two of the four leading determinants of purchase of chocolates in India. More importantly, the same original taste and packaging will be a guarantee to the customer of the same signature quality and exclusivity of the Ferrero Rocher brand. Price The two pack chocolates will be able to compete on a pricing level with most of the competition’s chocolates while still maintaining the image of exclusivity and high-end quality. This is important for three reasons. The Ferrero Rocher brand has three varieties in terms of packaging. Introducing a fourth will expand the product portfolio of the company and improve sales. Since a large percentage of the country’s chocolate buyers buy on impulse, the two packs will provide them with a ready option. Finally, they will be able to offer the same competitive prices as other manufacturers, offer their signature quality and image and gain differentiation from the high-end market. Marketing The target age group belongs to the Millennial generation, born after 1977 (Fromm Lindell & Decker 2011). This generation is likely to embrace technology regardless of the age, and respond to online marketing, especially social media. The Ferrero group can take advantage of internet use to market the new product as hip and fashionable. The new product can be marketed as an easy to access and affordable luxurious product. The introduction of this new product uses a combination of the weakness-opportunities and strengths-opportunities strategy to gain competitive advantage, and in the larger region as a result. It uses the strengths of the company and the brand, luxury, exclusivity and brand recognition, to take advantage of gaps in the market. The new product also addresses some of the company’s historical weak points like pricing in a traditionally price conscious market. 5.0 Customer Value Proposition With the new product, the company strengthens its foothold in the market. It targets an age group whose consumption of chocolates has been on the rise due to changing attitudes. It also gains differentiation, moving away from the reliance on high sales related to gifts during the holiday season, to targeting sales all year round. The value proposition to the customer is that of a product that is easily available in the kiriana stores, which comes with same signature taste and quality of the Ferrero Rocher brand. The product will be affordable to the young middle-class adult, making sure they get the quality they deserve whenever and wherever they want. References List Ajita S 2014, Unwrapped, Business Today, viewed 20th April, 2015 . Forbes 2015, Michelle Ferrero and Family, Forbes, viewed on 20th April, 2015 . Manuela and Mesco 2013, Maker of Nutella and Tic Tacs Confident in Family Hands, The Wall Street Journal, Viewed on 20Th April, 2015 . Mittal P & Ravinder D 2012, ‘Consumer Buying Behavior & Perception towards Chocolates Brands and Its Consumption’ International Journal of Business and Management Tomorrow, Vol. 2, No. 9 PP. 1- 10 Neil Kokemuller 2015, Market Segmentation Variables & Characteristics, Chron, viewed on 20th April, 2015 . Okoroafo SC & Koh A 2009, ‘The Impact of the Marketing Activities of Family Owned Businesses on Consumer Purchase Intentions’ International Journal of Business Management vol. 4, No 10 PP. 3-13 USBE 2013, Ferrero U.S.A. Inc.: Thinking Globally, Acting Locally, US Business Executive, Viewed 20th April, 2015 . Fromm J Lindell C & Decker L 2011, American Millennial: Deciphering the Enigma Generation, Barkley, viewed 20th April, 2015 . Read More