Nestle Australia Is Food And Drink Products Supplier Marketing Essay

1- Introduction

Launched in 1867, Nestle Australia Ltd is a supplier of food and drink products. It also provides a wide range of dairy milk products, noodles in many flavors, chocolate, frozen meals and coffees. Besides, it provides a variety of cold and hot drinks, light ice-creams and a variety of confectionery and bakery items. Nowadays, Nestle Australia offers catering services to cafes, restaurants, hotels and clubs. Other products that we will put a spot-on in this report are yogurts, fruit yogurts, and flavored milk and yogurts. Nestlé’s brands include Kit Kat, Nescafe, Nestea, Ortega and Crunch. Nestle provides also pet’s foods such as Purina. The company launched a joint venture with General Mills in more than 80 countries. (One Source, 2009)

History

At the beginning Henri Nestle has developed milk for babies who are unable to drink and to feed from their mothers, after five years this product was sold around the world as a food for babies and old people. In 1906, Australian market became the second largest market for Nestle and was served by many of retailers and sales agents. The best achievement in Australian market was in 1934 by the invention of new product MILO. (Nestle, 2009) Nowadays, this product is sold in more than 30 countries with sales of more than half Billion Australian dollar. In 1999, Nestlé’s head office in Sydney became the headquarter for Oceania region which includes Australia, New Zealand and Pacific islands.

Principles and Values

In the whole life of Nestle (135 years), Nestlé’s basic approach to business was the foundation and the maintenance of long term values for consumers, shareholders, employees, society and community as a whole. Nestlé’s major principal is to maintain a long term business improvement and development. (Nestle, 2009). Nestle’s major values are the following:

– Long term development

– Long term relationships

– Integration and reacting with different cultures

– The identification that customers earn information about the company besides the product that they bought

– Ethical values are basic requirements for our employees and senior line managers

These values and principles have been translated into more than forty languages around the world, and it is must that all Nestle’s mangers should recognize and apply these values in their career lives, and these values are given by training to the new employees.

Nestle Australia

Nestle also is participating in the Oceania’s community which is identified by its mixture and diversity of economic conditions, cultures, believes and tastes. We became a vital part in the community in which we activate as an employer and as a supplier to the local area. Besides, we were the leaders in many issues such as people health and environmental protection. As the largest food and beverage company in the world, we believe that we have a responsibility to customers and we are taking this responsibility seriously. We believe that people should live in a healthy style by doing sports, we are sponsoring many sports events and we are always encouraging people to get active. In addition, through our agreement with the Australian Institute of Sport, we are improving children to get their knowledge and to understand nutrition.

Mission Statement

When you read Nestle’s mission statement the following words jump to your mind: Research, good food, health and wellness. Our products bring to consumers the best tastes and pleasures. Research is the masterpiece of Nestle’s heritage and an important element for our company’s future. We still know that there is some mysterious information about health and wellness had not been discovered yet, that is the reason that we are still searching for answers to bring Good Food for Good life. (Research. Nestle, 2009).

Nestle Worldwide

Today, with more than 480 factories and 265,000 employees in 87 countries in all over the world: Americas, Africa, Middle East, Europe and Australasia, Nestle is considered as the largest food and Beverage Company all over the world. Nestle Oceania in Australia, New Zealand and the pacific island is hiring more than 5,500 employees, with more than 20 factories and four distribution centers owned and managed by the company.

Due to Nestlé’s multinational reputation, and despite the tough market conditions not only in Australia but worldwide, and due to Nestlé’s convenient place in Sydney and due to the high qualified employees and the brilliant company’s strategy, Nestle dad been ranked number one among all food suppliers in Australian market in 2008 (Nielsen Report, 2008). In 2008, for Ice-cream, yoghurt and coffees categories, Nestlé’s sales volume was more than AU$200m for each category.

5% Employees Turnover Rate

More than 6,000 Brands and 10,000 Products

More than 480 Factories in 87 Countries

Over than 265,000 Employees

Annual Sales more than 103 A$ billion

World Leading Food and Beverage Company

Nestle

Figure1, Nestle Worldwide. Source: Nestle, Australia, 2009.

2- Situation Analysis

2.1- Internal Analysis

Nestle Australia is considering the market leader in food and beverage sector in Australian market with overall sales more than , involved in more than 20 industries such as: Chocolates, yoghurts, ice cream, milk, dairy deserts coffee , confectionery and frozen meals. Nestle Australia has launched more than one hundred brands; Coffee Mate, Nescafe, Uncle Toby’s, Nesquik, Maggi, Drumstick, Quality Street and Peters are only examples of Nestlé’s brands in Australian market. Referring to Nielson’s 2008 report, Nestle was ranking high among its competitors in ice cream, milk and yogurt fields which could be a very good indicator for launching our new product that we will discuss later in our marketing plan.

Referring to the Retail Australia’s 2009 grocery magazine we will find the following:

For Chilled Diary category, Nestle value share was about 14.2% in 2008 comparing by 16.8% for the previous year.

For Dairy Desserts Category, Nestle value share was 25.2% comparing by 25.3% for the previous year

For Chilled Diary category, Nestle value share was about 14.2% in 2008 comparing by 16.8% for the previous year.

For Yoghurt category, Nestle value share was 11.8% in 2008 comparing by 15.8% for the year above.

For Drinking Yoghurt, Nestle is not involved in this market yet, only the following companies are in this market : Yakult, Jalna , Bulla and some other small companies.

As an overall trend, we could realize some declination for Nestlé’s volume trend in some industries and categories. This decrease was a natural impact of the huge affect of the global financial crisis as we will describe in the next chapter .Due to this crisis, customers might buy some products instead of Nestlé’s ones or they might even reducing their purchases for some items.

2.2- Macro Environmental Analysis (PEST Analysis)

Economic

After several years of flourish and high economic growth, The Australian economy suffered a lot in 2008, due to the huge effects of the economic global financial crisis. Australian’s GDP is declined; a reduction in job vacancies and a high rate of inflation, all these indicators could lead to an increasing in food and beverages prices

See figures 2 &3 for Australia’s GDP and Unemployment Rate in 2007, 2008 and Jun 2009.

(GDP growth reached 2.7% in Jun 2008 comparing by 4.3% in Jun 2007)

Figure2 Australia’s Unemployment Rate- Source: ABS, 2009

Figure3: Australia’s GDP Growth rate- Source: ABS, 2009

Social

Despite the lack of confidence for Australian consumers, Australia becomes one of the most optimistic countries, as in 2008, Australia was ranking as one of the most confident countries all over the world with an index score 104, 20 points higher than the world average.. (Nielsen, 2008). Generally Retail growth in 2008, 2009 stays slow, and consumers became more carefully with their money, they spend more money for dining – at- home like buying foods and drinks from supermarkets and they spend less money for out of home activities like cafes, restaurant and take-away shops. Despite the fact that supermarkets gained a good share with this new customer’s philosophy, total grocery sales have been declined in 2008. (Nielsen, 2008). The total retail sales growth reached 5.9% in august 2008 comparing by 7.5% for the same month in 2007.

Comparing by 2007, the businesses such as cafes restaurants and takeaway

Foods, had recorded the largest drop in turnover of 6.4%.

One expectation of these supermarkets is Aldi. Customers preferred to go to Aldi due to the good prices in addition to the good quality there. Aldi, with share reaching more than 22% , had took many dollars away from huge chain supermarkets.

Politics

This part indicates legal and political situation in Australia. It includes: Taxation for raw materials bought overseas, employment laws, environmental regulations, political stability and competition regulations. . In my opinion, no other politics issues would affect the launching of our new product due to the currently stable politic situation that Australia is facing now, i.e. there is no war, no revolution or even no elections are affecting Australia at this moment

Technological

Besides the innovation and application of new technology such as the RFID (The Radio Frequency Identification) , the increase in price of raw materials and other supply chain costs could affect the launching of our new product.

2.3 Micro Analysis

The Market

If we take an overall view on grocery market last year. Referring to the 2008 Nielsen report we will realize these important following items:

-An overall declining trend in grocery market, with sales growth 5.9% comparing by 7.5% as we mentioned before, which is a normal consequences due to the new situation; consumers tightening their belts

-.Drinks and confectionery are only the two sectors that have achieved an increase in growth for 2008, with 3.3% and 7.5% respectively.

-The largest growth achieved was in dairy sector by increasing more than 7.6%.

The most important sector in this report is the Chilled Diary , since our new product( which we will discuss it in this chapter) is a sub category for the Chilled Diary part.

In 2008, and despite the financial crisis, this sector achieved an AU$996.5m grocery value with an increase of 3.5% comparing by 2007. This indicator could be a high motivation for Nestle to increase its market share in this category (See Figure 4& 5)

Figures 4& 5 : Australia’s Chilled Diary Market Corporate % Shares for 2008 & 2007 . Source: Australia’s grocery magazine, 2009.

Referring to the above data, we could recognize that there is a large advantage for Nestle to increase the profit by investing in confectionery or drinks sectors, especially in dairies products.

The Product

Our new product would be categorized under the Drinking Yoghurt’s category.

(We will discuss the product briefly in the next two chapters).

The Drinking Yoghurt’s value market in 2008 reached a A$52.3m with an increase of 5.5% comparing by 2007. This market contains only 3 major companies;

Yakult with 67.7% value share (The market leader in this category)

Jalna with 10.6% value share

Bulla with 4% value share

And Private Label with 16.8% value share.

Figure 7, Australia’s Drinking Yoghurt Market Corporate % Shares 2008

Source: Australia’s grocery magazine, 2009

After all the above reasons, we could conclude that there is a big opportunity for Nestle to enter this market and it would obtain a very competitive position among the other competitors.

Target Market and Market Size

In this market plan we will focus on: children, youths and adults which are the majority of Australian population. We will concentrate on both genders male and female and our market will be in the whole Australia and not in a specific city.

Australia’s population at the beginning of 2009 was 21,644,000 persons.

The children aged population (0-14 years) was about 19.8% of the total population and the working age population was about 67.4% (15-64 years) of the total population. (OECD Fact book, 2008). However, in our market plan, we will exclude the: 0-4 and 40-65 years population which means that we will try to attract from 50-60% of Australia’s population. Undoubtedly, some of the 40-65 years population would use our product. However, they will not be potential customers as the mentioned ones.

2.4. S.W.O.T. Analysis

-Strengths

Market Leader in the industry

Good quality image and high brand awareness

A high growth rate in the desired market

A huge product lines

Parent Support

An international team working behind the plan’s achievement

A very-well trained employees in all company’s department

A supply chain management to serve the whole country

Weakness

New market forNestle

Unstable economic conditions: Decline in GDP growth rate and high inflation and unemployment rate.

Customers are tightening their belts

Exciting competitors

Opportunities

A huge market size

An identified target market

No large multinational size competitors

Increase in sales and profits

Increase in total Australia’s market share

Increase in product line

An opportunity to export the product to many countries around the world

Threats

Segments are shared by competitors

Uncertain circumstances could affect our sales

Misunderstanding of the product

Poor advertising campaign due to the market conditions

An unexpected drop in the confectionery and drink’s markets.

3-Product Launch

The product launch is the most important part of this market plan.

As we discussed in the previous chapter, we are going to launch a drinking yoghurt product. So why did we choose this product specifically?

If we take a quick view on Nestle share value in yoghurt and chilled diary industry we would realize the following:

In Chilled Diary category, Nestle value share was about 14.2% in 2008 comparing by 16.8% for the previous year.

In Yoghurt category, Nestle value share was 11.8% in 2008 comparing by 15.8% for the year above.

It is very easy to recognize that Nestle is facing a problem in these above sectors for the last year. We all know that all companies now are facing financial problems and markets are unstable and nowadays many customers are tightening their belts. However, these two markets had an increase in their value rate for the last year with 3.5% value increase for Chilled Diaries and 5.9% increase for yoghurt products comparing by 2007. (Australia’s Grocery Magazine, 2009)

Also, referring to the Australia’s Grocery Magazine, some of Nestlé’s competitors such as Diary framers had achieved an increase in value share

According to the above, Nestle is facing a small problem in this market, so how to solve this problem? The answer is including many possibilities. We could reduce our prices, we could increase our market share by an increase in production, and we could modify our advertising and promotion activities. In addition, there is another plan. We could enlarge our share in Chilled Diary category by launching a new product in a subcategory which is the Drinking Yoghurts. If we achieve this plan we could gain a higher market share, increase our sales and profits, enter a new market segment and finally we will gain new customers.

The Drinking Yoghurt market is facing a good condition these days; by an increasing 5.5% in value share in 2008 with a grocery value reached more than AU$50m , which means that this market is gaining new customers day by day and despite the unstable market situation, the drinking yoghurt market is in a developing trend.

Nestle is already producing chilled diaries, yoghurts and fruit yoghurts so many product lines are ready for the launching of the new product. Also, Nestle is already gaining a high-ranking in the grocery market, therefore all shipping, transportation, supply chain, deliver products to supermarkets could be handled easily.

Yoogo would be the brand name of our new product. We will launch the product at the beginning with three flavors; Yoogo Mango, Yoogo Strawberry and Yoogo Apricot. After three years of market and sales observation, we will launch a new Light Yoogo, which will be Fat Free drinking yoghurt for people who care more about their health and lifestyle.

Yoogo’s ingredients could contain the following:

Milk, Skim Milk, Fruit Preparation; mango or strawberry or apricot, and approved flavors and colors.

Undoubtedly, Yoogo would face a high competition when it enters the market. ( We will discuss this later in the next two chapters). However , the main competitive brands would be yakult with 67.7% and Jalna with only 10.6% value shares in 2008. (Australia’s Grocery magazine, 2008). However, Nestle could produce the product and gain a high position among these brands. (We will discuss this later in the next two chapters).

4-Market Strategy

Market Segmentation, Targeting and Positioning

To gain a desirable position among all competitors in customer’s minds, we will segment our market on two bases:

-Demographic Segmentation

– Geographic Segmentation

Demographic Segmentation

We are targeting customers depending on their ages. As we mentioned before, we will focus on: children, youths and adults which are the majority of Australian population, we will exclude the: 0-4 and 40-65 years population which means that we will try to attract from 50-60% of Australia’s population. This is a very huge segment as we are focusing on more than half of the country’s population.

Furthermore, we believe that any of these segmented people, with any sex, income, occupation would use our product as it is not a luxury product using by specific customers.

Undoubtedly, we will vary our advertising campaign for each generation, i.e. the advertising campaign for children will be different than the youths’ one. Otherwise, we will make a small bottle for children (150 ml) and a large one for adults (300ml).

Geographic Segmentation

We will divide Australia as geographically basis to zones and each distributor would be responsible for each zone. E.g. We will divide Australia to five zones: Vic, NSW, WA, SA and Queensland

Each company when launching a new product desires a high profit margin, large sales volume, high growth rate. However, we will concentrate more in achieving a long-run high profit and sales instead of the short-run ones.

We believe that there are some requirements for effective segmentation:

Measurability, Accessibility, Substantiality and Actionability. (Kotler et al, 2007) Our team will work hard to meet all of these requirements

We consider that we will face a huge competition and we will face also the threat of substitute products. However, we will do our best to cover our market targeting by maximum three years and to be the market leader for this category in maximum five years. Our plan is to gain more than 55% of supermarket shelves in five years. We realize that this is a very hard mission, but we will try to achieve it by three main steps:

Understanding our marketing segments-

Maintaining an advertising and promotion plans-

-Launching Yoogo with a reasonable price according to the company and according to our consumers.(we will discuss the price part later in Marketing Mix Strategy)

Also, we will try to gain a competitive position in customer’s minds based on the following two concepts:

Nestle Family Brand

The Nestle family brand is showing care and safety to consumers and this is a very good reason to attract the customer.

Communication

Due to Nestlé’s brand name, it is very easy to be in touch.with our customers

5-Marketing Mix strategy:

Product

Our product is a Fruit drinking Yoghurt with three flavors; Mango, Strawberry and Apricot. We will make two sizes, 150 and 300 ml. The gradients would be described as following: Milk, Skim Milk, Fruit Preparation; mango or strawberry or apricot, and approved flavors and colors

(We had discussed the product more briefly in chapter 3)

Price

In launching this product we could use one of these two pricing methods:

– Cost- based pricing: Calculating the price by adding a mark-up to the cost of the product. (Kotler et al, 2007)

– Going-rate pricing: Calculating the price basis on competitors’ prices, with less attention to our cost or to the market demand. (Kotler et al, 2007)

Value-based pricing: Calculating the price basis on buyers’ perception of value, with less attention to the seller’s cost. (Kotler et al, 2007).

In Nestle, we use the cost-based pricing method:

Unit cost = variable cost + (unit fixed cost ÷ unit sales)

Unit price= unit cost ÷ (1- desired return on sales)

We determine our prices basis of the following objectives:

Profit:

For any company the most important issue is the profit earning, however, as we are launching a new product, we do believe that we will not gain a high profit margin at least for the first three years

Consumer Satisfaction:

The most essential factor when determining the price is our customers’ satisfaction towards our products and prices.

Place

We will divide Australia to 5 zones; Victoria, NSW, SA, WA, and Queensland. However, we will try to promote Yoogo everywhere, in every small and large city in Australia. Customers will find Yoogo in hypermarkets such as Coles, Woolworths and Aldi, in medium size supermarkets such as IGA and even in small supermarkets such as Seven Eleven. Customers would find Yoogo in cafes, restaurants, hotels cinemas and beaches. In addition, Yoogo is a healthy fruity drink, so you can find it also at hospitals. This plan is a little bit hard to be achieved. However, with the well-established supply chain management in Nestle and with the very good relationships with suppliers, retailers and resellers, we could achieve this plan within maximum three years.

Promotion

Promotion is the activities that represent the value of the product and encourage customers to buy it. In our marketing campaign and promotion we will tray to reach every body every where. We will do advertising campaigns in newspapers, radio, streets and television.

Seeing that the survey research is the most widely method for collecting primary data, before launching the product we will perform a marketing survey research; we will go to clubs, streets and schools. Also, we will implement an online marketing research to collect primary data through online focus groups, using the integration of animation such as; audio, video and virtual environment would help us to overcome any limitations. We will try to select a sample of the population that has been selected, ask those questions about the product and the company and depending on the results of this research, we will implement our advertising campaign.

We will support our promotion campaign basis on these four methods:

A-Individual Selling: In this campaign, we will implement a direct selling activity especially during the summer months of November, December, January and February. Our team will go to club and beaches to meet our target segments there, they will wear t-shirts and caps with Nestle and Yoogo’s logos, and they will sell our Yoogo’s 150 ml bottle. By applying this innovative idea, we hope that our brand will get a great vision in terms of image, sales and brand awareness.

B-Sales Promotion: Besides personnel selling, we will implement some sales promotion plans. At the beginning of the product launching, we will go to streets and malls, we will offer free 150ml trial bottles to customers, we will encourage them to try our product and to give us their feedback by email or even by phone. In addition, we will offer a 150ml bottle free with the purchasing of three 300ml bottles. Adding to this trade promotion, we will give the retailer an addition discount 5% during our sales promotion. Our marketing team will implement a major healthy and education campaign about the importance of the product, our team will focus on the concept that our product is a healthy one. Invitations would be sent to parents of school children to attend these seminars. This could help us to improve our brand’s image in consumers’ minds.

C-Public Relations: Public relation is one of the most important factors in all multinational companies’ promotions. Every year, Nestle is launching its annual report containing information for shareholders and stockholders. In addition, a large amount of information regarding our product and our promotion would be found in newsletters and magazines issued by Nestle Australia.

This promotion would obviously lend a hand in formation of the awareness of our brand.