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Potato chips as a product has been a major snack being consumed around the world but most predominantly in is consumed English speaking countries and some West African countries as well. Potato crisps were first developed in New York, Saratoga Springs in the year 1853 to be precise. It gradually became popular as time went on. The industry has faced several challenges over the years especially in the UK due to the economic difficulties (recession) faced by the country and consumers are also now aware of the health issues that arise due to excess consumption of such snacks which decreased the level sales level of such products. However, the industry still stands and is still leading among snack industries. There are various reasons and factors in industry still remained important and one of such is the health aspect. Many manufacturers and companies over the years have been trying to come up with a solution to the response of consumers to potato crisps as a snack product that contains a high level of fat and sodium which can lead to a high blood pressure or blood sugar and tooth erosion if consumed excessively.
As mentioned above, one of the companies which have decided to come up with a solution to the problem that affects potato chips health-wise is Kettle. Kettle has been in the business of manufacturing potato chips naturally without the use of GMO ingredients. Our analysis as will be discussed will focus on the potato chips industry using Kettle Chips as a case study.
Kettle was originally founded in 1978 in Salem by Cameron Healy. In 1987 accompanied by his son, Cameron went on a 6 week motorcycle adventure which led them to discover how much the British really liked chips. A branch was later established in the UK, Norwich (1988). Kettle foods today are one of the biggest potato chips manufacturers and have maintained their originality in taste and natural ingredients till date. The Kettle Brand potato chips was perfected in 1982 and have been improving and even expanded their line of production to include Baked Potato Chips, Kettle Brand, Tortilla Chips and Kettle Brand in order to meet varying tastes of their costumers (Kettle Foods Inc., 2009).
2.0 UK MARKET DATA
British Population is the biggest snack eaters in Europe amid growing health concerns about savory treats. As a country it consumes an estimated 6 billion packets per year, that equivalent of almost 100 packets of crisps per person. It’s a national obsession with crisps and nuts, which means that they spent £55 per person on them last year, more than double the £22.50 of nearest rival, Germany. This is projected to climb to more than £80 in 2014.
Overall, they munched through 300 tons of the snacks in 2010, worth £2.47billion and a quarter of all sales in Europe. Report author James Manley, of leading market analyst Mintel, said: ‘The UK is king in the European crisps and salty snacks market. Eating occasions are unlimited and snacking is rife throughout the day.’
Though the health credentials of crisps are questioned, it still holds 48 per cent of sales in UK. Other snacks, including tortilla chips, popcorn and pork scratching make up the remaining 52 per cent. UK Potato Crisps & Snacks Market to hit £2.61bn by 2014 Says New Report.
As per past records and analysis, in 2006 the UK market value of crisps, salty snacks and nuts was around 2500 million pounds. It has been noticed that the consumption of the chips is continuously increasing that too at a constant pace. As per current data i.e. 2011, the market value is 3176 million pounds. In Fig1.1 diagram, there is a forecast given for four years that is from 2012 to 2016. As per Mintel forecast it is estimated that UK market share for 2012 will be around 3300 million pounds and further increasing to 3500 million pounds in 2013 and so on. The end of 2016 estimates the total UK market value for this to be 4183 million pounds. By taking all the provisions it can be concluded that in the best case scenario maximum UK market value can go up to 4627 and in the worst case scenario it can go down to 3853 in 2016, keeping in mind all the different confidence level.
Thus, analyzing all the past data and future forecast of UK retail sale of crisps, salty snacks and nuts it can be concluded that UK market has got huge potential for the consumption of the crisps and all and this can be taken as an opportunity for the existing market players of crisps and they can all increase their own market share by adopting several strategies. Most of the market share is captured by walkers so this can be an opportunity for kettle chips to snatch walkers customers by putting all the marketing efforts or kettle can put such strategy to attract new different groups of customers.
3.0 INTERNAL ANALYSIS – THE MARKETING MIX
Marketing can quickly and simply be defined as the process of making a product or service available to the consumer at the right place, price, and time (James and Carlson, 1996-2012). This usually involves the careful analysis of the product or service in four different aspects known as the 4Ps (McCarthy, 1960) before proceeding. You as a marketer has to consider what the consumer wants or what their needs are, the environment or location of your business, if the price of the product or service you’ll be offering will be too high or too low and finally but not the least, how to promote the product or service.
Now we will be taking a look at Kettle Chips and how they market their products putting the 4Ps, which are Product (Service), Place, Price and Promotion into consideration. Before we go into the full analysis, it is good to have in mind the aim and objective of the company’s (Kettle Chips) product which is to provide for the consumer the best healthy, nutritious and tasty potato chips for them to enjoy and now we will see how they have managed to achieve this so far.
An effective marketing mix has to match consumer need, corporate resources and to create a competitive advantage. A market-oriented firm always keeps an eye on its environment. The environment is divided into the microenvironment and macro environment. In microenvironment, the key actors are suppliers, management of the company i.e. the company itself, customers and competitors. Micro environment are internal to the organization and the organization has sufficient controls over it. Macro environment consists of economic, social, legal, physical and technology forces. Macro-environments are usually out of the company’s control. (Jobber and Fahy, 2003)
Four P’s of marketing mix:
This part of marketing mix mainly focuses on what exactly consumer wants. Under product, we have to consider what the consumer needs are and what exactly consumers wants. For developing marketing mix of Kettle Chips we need to consider the part of the market being targeted by Kettle. Kettle Brand targets health conscious customers, which imply that their product has to be health inclined in order to appeal to the consumers and also to satisfy its customers.
Secondly, Kettle, since 1978 produce their chips using only natural ingredients (Non-GMO products) in order to give their consumers extra reassurance of steps they take to ensure ingredients with integrity (Kettle Foods Inc., 2009). Findings from research, (Mintel, 2009) provides us with information showing an improvement in the sale of crisps due to the fact that they are more healthy in terms of calories and fat than they were before.
The Non-GMO project stated Kettle Brand Chips as the first potato chips being produced without the use of GMOs in 2009. Their chips are gluten free and they use expeller pressed oil for their products in order to give their consumers a safe product to enjoy. Kettle Chips aren’t just bent on the health aspect of their products and ignoring how tasty their chips should be. They offer different seasonings of potato chips such as Sweet Onion, Tortilla Chips, Lightly Salted Sea Salt and Vinegar, Spicy Thai, Unsalted, Jalapeno, Red Chili etc. All of these are produced naturally to meet different tastes of consumers.
Product Life Cycle
This is simply a principle that suggests that every product has different stages that it must pass through before it is eventually pushed from the market.
Introduction: This is when the product is first introduced into the market and as a result of that, a large number of the consumer market are unaware of the product so its profits are low at this stage. Normally in this stage the company or manufacturer will try to cover its high cost of production, which will result in the product becoming less affordable for the average consumer.(Vernon, 1966)
According to product life cycle theory, the Kettle Chips products in this section are Jalapeno chili, Mexican Potato Bake, New Kettle Ridge Chips, Sour Cream, Corn, Tomato, Avocado and lime dip, Peach and Coriander Salsa. (Kettle Foods Ltd., 2012)
Growth: This is the stage that usually determines if the product will survive or not. The producers at this stage will try to bring down the cost of the product as to make it more affordable for the average consumer by coming up with ways to cut down the costs of production and present better offers. “In addition to this, the company will have to make use of a strong approach in advertisement and promotion strategies in order to catch the attention and interests of their customers.”(Vernon, 1966)
Under this section, Kettle Chips have products such as Mature Cheddar Multipacks, Ridge Chips, Tortilla Chip. (Kettle foods Ltd., 2012)
Maturity: The third stage is only attained assuming the product has survived the previous stage (Growth Stage). At this stage, the price must have fallen to a more affordable level for more customers to purchase due to standardized production. Here, production and technology may also be exported to underdeveloped and developing countries where production costs will be lower and developed countries can focus on innovation to make the product better.(Vernon, 1966)
Examples of kettle chips products that are currently in this stage are Sea Salt and Balsamic Vinegar and Lightly Salted. These are among the most demanded Kettle Chips seasonings.(Kettle Foods Ltd.,2012)
Decline: This is the last stage. The product begins to fade out of the market, demand, and production and of course, profits begin to crash as well due to new technologies and new products coming up. It usually still survives for a while in the underdeveloped and developing countries but is eventually completely pushed out over time. (Vernon, 1966)
The Boston Consulting Group Theory (BCG)
Bruce Henderson founded this in the early 1970s. Initially, it was designed as tool to be used for financial management but was then put to better use in marketing. ”Boston Matrix considers products in two dimensions: relative market share and market growth rate”. (Cranfield School of Management, 2000)
Boston Matrix categorizes products in four boxes, which are Star, Cash Cow, Problem Child/ Question Mark, and Dog.
Star: Building market shares as sales improve. Products here are cash neutral. They generate cash as volume and revenue builds rapidly, but they usually require special attention in funding because they are new products. Usually, aggressive marketing is required for such products.
Cash Cow: The products in this box have high a high market share but low market growth, which implies that they are mature products. These generate cash that is needed to support other aspects of the business.
Problem Child/ Question Mark: These are products that do not hold a dominant market share but are high in market growth. These are often newly introduced products that have a high tendency of failing in the market. They usually require large amounts of cash to fund their development.
Dog: These are products that were once on top but have declined and now generating low cash flow and in some cases, even become liabilities to the business. Henderson advises that such products should be discarded. (Cranfield School of Management, 2000)
In the following diagram some of the Kettle Chips products are categorized according to the Boston Consulting Group Theory.
When considering place, one have to consider the location of the business, how accessible it will be to the customers and probably the distribution channel or channels that will be used. Kettle Chips products are found almost everywhere around the world but predominantly in European and West African countries.
The Kettle Foods office in UK supports a network of independent distributors which make their products available in the Middle East and European countries outside UK such as Denmark, Belgium, Greece, Austria, France, Germany, Finland, Ireland, Ice land, Spain, Switzerland, Norway, Singapore, Sweden, Italy, Malaysia, Malta and Luxembourg (Kettle Foods LTD, 2012).
Kettle chips are found in various supermarkets and retail shops around the world making it easy for their consumers to access their products. There are various distribution channels that can be used by any business that produces consumer goods such as:
Producerƒ Retailerƒ Consumer
Producerƒ Wholesalerƒ Retailerƒ Consumer
Producerƒ Agentƒ Wholesalerƒ Retailerƒ Consumer
Source: Figure 9.8. Introduction to marketing theory and practice (Palmer 2004:357)
Kettle Chips use wholesalers as well as retailers but do not use agents in their distribution channel. They sell directly to their wholesalers. Their distribution channel would appear like this for example:
Kettle Chipsƒ Tescoƒ Off-license shopsƒ Consumers (Kettle Foods Ltd., 2012)
Under price, there must be consideration of if the price of your product or service will be too high for your consumers or too low for the company to turn in profits. Kettle as a company usually build their facilities upon locations with good vegetation and natural resources that supports their business such as the Green building mentioned above under place and their facility in Salem, Oregon which is located adjacent to a nearly 2-acre wetland (Kettle Foods LTD, 2012) . These in turn enables them to avoid extra expenses that would have been spent on purchasing some raw materials and gives them the ability to keep a low cost on their products while making sufficient profit to grow the business.
Kettle Chips products are not the cheapest and can still put up more effort in bringing their prices to a lower level. A minimum level of price should be maintained with a good quality in production because the lower the price, the higher the demand. This will give an organization an edge over its competitors that offer a higher price for the same quality or even lesser quality. (Kettle Foods LTD, 2012)
Kettle Chips Pricing Strategy
Kettle Chips came into the market in 1978 to be specific and at this period, they were not many companies manufacturing chips, especially in the UK and so, they decided to penetrate the market with their naturally made potato chips and were selling them at a high price. Kettle Chips had very little competition at this period so they were able to sell their products to high income earning consumers at high prices while having a low promotion. In other words, they used the Slow Penetration strategy to penetrate the market. This was possible for them because their kettle style cooking was unique at this period.
Presently, Kettle Chips have a strong brand, so they maintain a Slow Skimming strategy because they have a strong brand. Being already established, they are relaxed about promotion and that is one of the reasons why more recent companies such as Walkers have a higher market share. Consumers are more aware of companies that spend a lot on promotion.
Kettle advertises their products through the use of e advertising (internet), Television and radio broadcasts, and public relations such as their community giving. Kettle makes donations of money, product and time to local organizations. They donate chips for fundraising events at local schools and give more than 175,000 pounds of potatoes to local hunger relief agencies every year. They also give out their brand products to organizations and schools.
“Kettle Chips successfully created a significant uplift in sales from existing, lapsed and new purchasers through a brand campaign in newspapers”. They are now looking more confident than ever, their market share has increased as a result of this (Kettle Chips: The Story, 2012).
The result of the campaign is as follows:
Newspapers immediately boost sales by over 20%
During the newspaper campaign, Kettle Chips sales of featured products were 20.5% higher among people in the public who saw the adverts, compared with a matched unexposed sample and maintained sales impact In the 12 weeks post campaign, newspaper advertising continued to increase the sales by 19.5% (Kettle Chips: The Story, 2012).
Newspapers engage all types of buyers
“KETTLE Chips advertising successfully increased penetration and frequency of purchase as well as reengaging lapsed users.” (Kettle Chips: The Story, 2012)
Newspapers are brilliant for making big bold brand statements
“Kettle Chips’ simple but confident campaign captured readers’ attention and increased their emotional brand involvement”. This was very beneficial in the sense that it gave their customers a sense of affiliation with the product and of cause; this encourages loyalty to the brand as well. (Kettle Chips: The Story, 2012)
4.0 EXTERNAL ANALYSIS
Fig 1.3 The Marketing Environment.
Source: Jobber, D and Fahy, J. (2003), New York: Mc Graw Hill Education UK LTD
Creating customer value and satisfaction is the main key to build relationships with customers. It is not a one man task.so there are many actors playing role to build micro environment. Marketing success requires building relationships with other company departments such as competitors, suppliers, customers, various publics and marketing intermediaries’ .All these are combined to process effective delivery network.
Components of micro environment
Marketing concept is based on believing better customer value and satisfaction than its competitors. Thus the company should adopt itself to the needs of consumers.one of the important aspects of gaining strategic advantage is by positioning their offerings strongly against competitors offering in the minds of customers. All companies have their different marketing strategy based on their size and industry positioning.
In the context of kettle chips, the three most powerful competitors for kettle chips are Walkers (PepsiCo), Pringles (P&G), and McCoy’s (UB). The following table describes the leading brands value shares in crisps and salty snacks from 2009 to 2011. From the table it is clearly visible that Kettle Chips stands in the 5th position in the market of crisps and salty snacks.
Customers are the most important element in the company’s microenvironment. The main aim of the entire delivery system is to serve customers and build strong relationship. There are five type of customer market and the company may target any or all of them. To start with the customer market, first type is consumer market, which consists of individual and households that buys product for personal consumption. Business market consists of buying the goods for further processing or in the production process whereas reseller market buys goods for the purpose to sell them at profit. Government markets consist of government agencies that buy goods for public service or to transfer them to others who need them. International market is made up of buyers in other countries who may be consumers, producers, resellers or government.
Kettle chips has established itself as a premium brand for chips and thus these chips are mainly for a specific targeted customers whose income level are little high than others because as compared to walkers kettle chips are slightly costlier and kettle chips believes in delivering good quality crisps and consumers who are really health conscious go for kettle chips.
Consumption of crisps, salty snacks and nuts in the last six months, by type, by demographics, November 2011
Fig 1.5* small sub-sample (75-100)
Suppliers are important link in the company’s overall delivery system. They are the source of resources needed by the company to produce its goods and services. Supply shortage can cost sales in the short run but it can hamper customer satisfaction in the long run. Most marketers today treat suppliers as their partners for generating customer value.
The people who make Kettle Chips have always believed that the simple approach to good food is best. So the highest quality potatoes are sourced locally, and no artificial colours, flavours, preservatives or MSG are added to the process. Only the best potatoes are used to give the distinctive golden colour, crunch and flavour of a Kettle chip. Kettle Chips source 75% of the brand’s potatoes from its home county of Norfolk, and 90% from East Anglia. Kettle Chips are made in the Kettle Foods Ltd factory in Norwich, where the company has been ever since it was first launched in the UK.
Nelson County Potatoes is a bespoke growers group to Kettle Foods Ltd- makers of the famous hand-cooked KETTLE® Chips, a premium quality product made using the finest potatoes. Its Norfolk-based growers produces more than 65000 tonnes of potatoes each year, a large proportion of which go in to kettle chips at the kettle foods limited base in Norwich. From this part about 100 million bags of kettle chips are produced each year and distributed across the country to all the major supermarkets and other food store.
4.4 The company
For designing the marketing plans, the company has to interrelate and coordinate with all the departments within the company like top management, finance, research and development purchase, operations and accounting. The duty of the top management is to set the company’s mission, objective, strategies and plans. Marketing managers work closely with other departments.
Kettle chips takes pride of being a well-known and growing business with its roots based in the local community.it has got wide diversity of people from all backgrounds, working hand by hand to one common goal of making better chips. The company provides great working conditions and friendly management and this helps company retain the employees.
Currently the managing director of kettle Foods at Diamond Foods, Inc. is Dominic Lowe, the Cadbury man who became Green & Black’s managing director last year, moving from a £1bn-a-year business to a £40m-a-year one, believes the public is more concerned about the deeds of an ethical company than its ownership
The macro environment comprises of forces that do not immediately affect the business but it may have effect in the long run, as time goes on. As these environmental changes take place, macro-environment affects the micro relationships of the business as well. “The micro environment is complex and interdependent.” (Palmer, 2004)
Components of macro environment
4.5 Political/Legal factors
In UK, food products including the ‘Snacks’ are heavily influenced and controlled by legislation relating to composition and labeling requirements, such that consumers can be confident of the wholesomeness and value for money that they represent (Van Horn, 2002). On a world perspective, the availability of safe food is an increasing problem in fast-growing urban populations. Meeting this need by the provision of new food product is a major opportunity for UK as these markets develop.
These refer to government polices such as the degree of intervention in the economy. What goods and services does a government provides, To what extent does it subsidized firms, What are its priorities in terms of health of the people, Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. In developed economies, government intervention is inevitable in order to uphold the consumer’s trust and faith in the government’s systems.
Over the years, consumers’ lifestyles have become eclectic and the culture of ready meals and snacks has become popular. This has lead to several lifestyle diseases. Children studying in primary and secondary schools are the largest buyers of sweet and savory snacks. It has been observed that such snacks formed an integral part of their lunch boxes. Due to the adverse affects of snack food on children’s health, the government, through its Better Regulation Commission, has proposed certain standards for school food. The standards restrict the sale of confectionery, savory snacks except nuts and seeds, and deep fried snacks like crisps and burgers. (Better Regulation Commission, 2007).
The government in the United Kingdom has become proactive in promoting healthy eating and balanced diet patterns to the citizens. The government, along with various other organizations like the NHS, initiated several awareness campaigns to tackle the growing problem of obesity. The campaigns promote the reduction of fat, salt and sugar the consumer’s daily diet. This move by the government can lead to a projected decline of 4.1% in the sweet snacks market and 3.4% in the savory snacks market over a period of five years (Just Food, 2009).
4.6 Economic factors
These include interest rates, taxation changes, economic growth, inflation and exchange rates. Change in these factors can lead to a major impact on a firm’s behavior. Like
Higher interest rates because it costs more to borrow.
A strong currency may make exporting more difficult because it may raise the price in foreign currency.
Inflation may provoke higher wage demands from employees and raise costs.
Higher GDP growth may boost demand for a firm’s products.
The market value of ‘Snacks’ companies in the UK represents a further contribution to wealth, both in the holdings by private shareholders and in those held by institutions. The balance of trade arising from Kettle products is positive because the major materials are already found and created in UK plants. Also, the nature of the product cost structures is not ruling out significant inter-country shipment of such low price-dense, high bulk packs. The United Kingdom was faced with two unfortunate economic crises in the second half of 2007. The tumult in the financial markets along with steep increase in the fuel and food prices severely affected the business and commerce, as well as consumer confidence. The consumers have become relatively conservative in their approach to spending on consumer goods.
The sweet and savory market has however shown a steady growth in sales. This reason could be attributed to the nature of these products. Snacks are particularly seen as indulgent and impulsive products with a low unit price. Snacks are also low involvement products unlike other consumer goods. In the United Kingdom, the market for crisps and snacks grew by 5% since 2007. This is mainly because the snacks companies have responded well to the consumer’s needs in this fragile economic environment. (Mintel, 2009)
In spite of positive growth signs, the manufacturers still have to struggle due to the existing credit crunch, coupled with the rising costs of wheat, flour, maize and potatoes, and instability in crude oil prices. All these factors put a strain on the manufacturers
profit margins. (Research and Markets, 2008)
4.7 Social factors / Cultural
Changes in social trends can impact on the demand for a firm’s products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff is living longer. It also means some firms such as Asda have started to recruit older employees to tap into this growing labor pool. The ageing population also has impact on demand: for example, demand for sheltered accommodation and medicines have increased whereas demand for toys is falling.
There is now a wealth of evidence to show that consuming a high salt diet brings with it increasing health problems. High salt intake is linked to increasing blood pressure, which causes strokes and heart disease, with other less well-known effects including stomach cancer and osteoporosis. Basically, these issues are advantage for Walkers since majority of their products are potatoes. Potatoes are low calorie and excellent for people that are health conscious.
The sale of sweet and savory snacks thrives on consumption patterns of younger consumers aged between 15-34 years. Due to persistent efforts by the government to encourage consumers to adopt healthier lifestyles and eating habits, the demographics of main consumers of snacks has changed. Fewer children are attracted to crisps and snack. The Government regulations as mentioned above have also been a cause in making crisps and other sweet and savory snacks unpopular among children.
4.8 Technological factors
Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology.
In the process of building this successful brand Kettle Chips, the business found that it had developed a reporting problem in lower management. The company system consisted of 70 to 80 spreadsheets, which were constantly being updated and sent back and forth between departments. The reporting process took at least eight weeks, and if any modifications needed to be made, it took a minimum of two days.
Employees also had difficulty creating their own reports, and would have to rely on an IT software developer to do the job for them. This ended up taking most of the developer’s time, which would otherwise have been spent on other pressing IT needs.
After a long search for a solution, Kettle Foods Ltd chose IBM Cognos Express, along with Logicalis UK as their IBM Business Partner. Kettle chips selected IBM Cognos Express because it combines the planning and modeling strengths of IBM Cognos TM1 and the reporting strengths of IBM Cognos Business Intelligence in a value-for-money offering; providing a complete planning, reporting and scenario-modeling toolset.”
4.9 Environmental factors
Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, production cost and Product life. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider.
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