Nestle is going to launch Kit Kat Nuts which is extension to the existing Nestle Kit Kat chocolate. Kit Kat Nuts will particularly target the young adult segment between the age of 22 to 40. Kit Kat Nuts has to compete with the well established chocolate brand like Snickers and Cadbury Fruit and Nut, Cadbury whole Nut. The quality of the products offered by Nestle to its customers will help to drive the sales of the Kit Kat Nuts.
Kit Kat Nuts has its goal to minimize the losses in the first year with increasing the product awareness by huge promotional and marketing activity as well. In the second year it estimated to achieve at least break even point and thereby kick start the growth in the sales and profits.
(1)Individual Situation Analysis report
Nestle is world’s highly efficient nutrition, health and wellness provider. With head office in Vevey, Switzerland it was founded in 1866 by Henri Nestle. Nestle company as a whole made up of various others brands which offers various products such as coffee, water, ice cream, chilled products, confectionary and chocolates, frozen foods, cereals etc. Nestle is delivering its product services to almost all over the world which is mainly possible due to thorough knowledge and understanding of the domestic nature of tastes, preferences and health of the people. Nestlé’s main source of income is food and beverages, in addition it produces pharmacy product as well like Alcon. The food industry is very competitive field which means no company can feel relaxation at any time, therefore Nestle has to consistently evaluate its performance and search for the new ways of satisfying the customer needs. Nestle needs to carry on with its marketing strategy of segmenting the customers and producing the product keeping in mind the trends and demands of the product.
(1.1) Market summary:
Since Henri Nestle started its operation in 1867 as a milk food provider, Children are one of the main targeted segments for the Nestle. In addition it spreads its market to adult and older people as well by targeting them their specific tastes and preferences. Kit Kat nuts will specifically target the adult people for the reason that children do not normally like the nuts but the adult people do prefer the chocolates with some nuts in it. The segmented market will be targeted for the near term say first two years and then after evaluating its performance it will be spread to other segment accordingly.
Following table 1.1 summarizes needs and corresponding features/benefits of the Kit Kat nuts.
Corresponding feature /benefits
Kit kat nuts includes peanu which provides healthy options
Kit Kat nuts satisfies hunger needs by about 25% nuts in one product
Milk chocolate with some nuts
Kit Kat Nuts includes 50% milk chocolate with option to buy dark chocolate as well.
The competition in the confectionary market is so immense that Nestle has to match its every step with its industry rivals for continuous and long term growth of the company.
(1.2) Strength, Weaknesses, Opportunity , Threat analysis
Nestle is a well established company and got huge experience of about 150years of providing highly qualified products. These facts provide great strength for the functioning in the competitive market. Nestle got weakness as lack of success in the organic food industry. Nestle got major opportunity to exploit their brand awareness in the market by launching new lines of products. The major threat consists of competition form the near rivals.
Strength: Nestle got following strengths.
High market share: Nestle is delivering its product to almost all countries in the world. Globally its share in the market is quite substantial. The first quarter sales of the year 2010 for the group were 26.3 billion with 4.8% internal growth.
Branding: Nestle got ability to consistently keep the existing product in the mind of the consumer vis a vis extending the product line to cover additional market share. Nestle has been successful in keeping major brands from sleeping by renovating existing product lines.
Recognizing local preferences: Nestle is performing its operations in the whole world. The main idea of understanding and producing the product according to the local nature of nutrition, health and wellness of the people provides strength to the company.
Insufficient growth in organic food: Nestlé’s growth in organic food is not significant. In fact it was flat in 2008, even though industry grew 8.9%.
Health and safety issues The FDA have been constantly examining the breakfast and cereals industry from quite some time. They are of a view that false claims like “heart healthy” and “lower cholesterol “should not exist on the packaging of the cereals.
Lack of presence in retail market: Nestle is lacking in somewhat as a presence in the retailing market. The retailing section is very vital as most of the consumer go through the traditional shop for the day to day buying and if there is no existence or less existence of the Nestle product the sales going to be suffered.
Introducing more health products: As they are market leader, it can introduce more health based products for the health conscious society. They are more likely to be successful because it is already accepted by the people as a “health and wellbeing company” and they got the successful history behind them.
New acquisitions: Nestle is integrating in the developing economies with the help of new acquisitions of businesses which provides them opportunity to enlarge their share in the market.
Opportunity in the emerging economies: There is vast amount of market in the new emerging economy like china and India. Nestle got significant operation in the emerging countries like India, china and Brazil.
Competition: Nestle is competing with some of the big market giant like Cadbury(Kraft foods), Kellogg’s, Heinz, Starbucks, Hershey’s etc .These industry rivals poses all time threat to the company to put up its substitute product in the market.
The FDA regulations In 2007 findings of the FDA suggests that certain pet food item were the cause of the death of the cat and dogs. The outcome is that tougher norms and regulations posed by the FDA for the import of the raw material from another country.
Increase in the chocolate ingredients: Raw chocolate ingredients prices have increased substantially in last few years e.g in 2008 dairy costs itself consists of 50% alone. This threat often poses challenge on the company to produce the same standard quality products keeping in mind the pricing factor as well.
The confectionary industry is highly competitive in nature. It comprises of other world class chocolate maker like Cadbury (now Kraft), Mars, Kellogg’s etc. Nestlé’s nearest rivals are Cadbury and mars. They often introduced new lines of products that are difficult to copied or produce the similar product.
Following are the nearest competitors of the Nestle.
Cadbury: Cadbury is one of the strongest competitors which got tremendous variety of products with significant market share. With the takeover of the Cadbury by Kraft which American base company, it has been stronger than before. Cadbury got presence in almost each country in the world with the various lines of products.
Mars: One more US based company which produces various lines like mars, snickers, galaxy, bounty etc. Mars is not that much stronger competition as compared to Cadbury, but still it is starting to concentrate on the growing market like India and China. With our product of Kit Kat Nuts the first rival is Snickers which is being produced by Mars. As they got successful history behind providing the nuts product, it is going to be challenging for the Nestle to enter into the market with the new line.
Kellogg’s: Kellogg’s is mainly competitive in the breakfast and cereal products and they are targeting the customers by variety of nutritional products. Nestle has been competing with Kellogg’s by its cereal line like Cheerios, Minis, Chocó Pic ets. Following table suggest the various competitor of the current product under study and their pricing.
Made up with nuts
1.4 Product Offerings
Nestle kit kat which is the existing product of the company and one of the highly selling chocolate in the world. Extending it to include the nuts to the chocolate will provide great additional feature to the existing product. Following are the main features which will be offered by the Kit Kat Nuts.
New feature of nuts in the chocolate.
The nuts will be roasted and will be fresh.
Presence of caramel in between as well.
Extention of the both normal and dark chocolate.
Low amount of flavourings and maximum use of milk in the chocolate.
1.5 Distribution Channel
Mostly retailers are the main channel of distribution for the Nestle .Nestle is using other forms of distribution like Supermarket Tesco and Asda for covering large market at one time.
While it is worthwhile to think out of the box here that is it not the good idea to open Nestlé’s own chain of stores around the market which will give company direct interaction with the consumer, decrease the presence of the middleman and increase efficiency in delivering those products.
(2.1) Marketing Strategy:
The marketing strategy of the product under study describes the objective of the product, what are the target markets and how the target market is going to be targeted? Positioning and pricing strategy, how the product is going to be distributed and advertising of the product.
As nestle is comparatively known to the market and already got healthiest brand in the market, following objectives has been set for the new product line ” Kit Kat Nuts”.
First year objective is to put maximum efforts towards familiarizing customers with the new line and try to cover at least 5% of the market covered by the other rivals.
In the second year it is likely to introduce with new lines like kit Kat ginger. It is likely to show negligible profit or even loss in the first year, but in the second year equilibrium or significant profit may be achieved.
*Market Segmentation is the process of dividing a market into subsections based on specific needs and wants. These people will have similar reactions to products.
This will help marketers design their marketing mix (4 P’s!) (Kate Notes)
Nestlé’s main targeted segment will be the working class adult because nuts can provide for hunger needs with sufficient amount of calories in one chocolate. The secondary target will be older people as it can prove worth for the older people to have some nuts with the chocolates. Other markets that may be targeted are the young students studying in colleges and in universities. These segments then can be targeted for the advertisements and promotional activity of the product.
It is important to note here that the segment created should be targeted using appropriate channel of advertisements otherwise it can lead to unexpected results for the future.
It is vital to develop different strategy for the different group of persons for success of the new product line.
Positioning means creating the position in the mind of the cusotomers. Positioning may be done mainly in two ways.
(1)Differentiation: Differentiating current product with the other product on the bases of superior quality.
(2)Pricing: Setting competitive prices of the product so that creating position in the mind of the customer e.g Reynar has created themselves as a cheap air service provider in the mind of customer.
For the product under review we will use differentiation strategy because Nestle got the image in the market as nutrition, health and wellness provider so there is no need to compete on the bases of prices.
Product: Product strategy will particularly emphasized on how many lines of product to be introduced, how the product should be packaged?, what kind of guarantee to be offered to the customer .
Kit Kat nuts will be packaged similar to the normal Kit Kat but additional feature of picture of almond on the wrapper will be shown to pass the message to the customers that kit kat got nuts. In addition on the back side of that there will be short questionnaire to be complete so that gathering the views form the customers about the new product line.
Each packet will contain returned information if customer is not satisfied with the product.
Particularly Nuts word on the packaging will be highlighted in different colour to build up product awareness and brand awareness among the customers to easily locate the Nestle Kit Kat brand.
For the first 6 months only Kit Kat 4 fingers will be extended to the new line, after assessing this short term outcome it will be spread to the other lines of Kit Kat.
Pricing strategy highlights the various pricing strategy at various time of the product in the near term.
Kit Kat Nuts will be first sold to the wholesaler at the price of 13pound per box of 48 pieces and estimated 50p price per unit by the retailer.
There will be promotional offers e.g get 48 for the price of 44 to be offered to the retailer to encourage them to buy and stock the Kit Kat Nuts so that to increase the availability of the product for the customers.
Distribution strategy refers to determining the chain by which the product is going to be delivered to the end user. We can choose from available two options (1) Direct distribution or (2) Indirect Distribution.
Indirect distribution is the only better option here as it is possible to reach wider market with the use of retailers and Supermarket than having specialized stores at one location.
Most of the competitor is also using the indirect channel of distribution for the better service and availability of the product. Wholesalers and Supermarket will also be able to put the order online on the company’s website.
The Communication with the targeted market is vital element of the strategy part. By the proper communication with the targeted segment and with the distributing channels better results and partnership can be buildup with agents or middle people.
The retailers and other middle persons will be using push strategy by employing personal sale through the specialists sales persons. Further sales promotion activity like camp gathering and stall activity to actively communicate with the customers directly and bring there views and advises.
By delivering messages through media and available communications resources, differentiation will be made between Kit Kat Nuts and the rivals’ product.
Advertisement: There will be huge investment on the advertisement by Nestle.e.g The product is going to be launched in the moth of july which come across with the Football World cup, so advertisement will be made showing Football stars eating chocolates for hunger needs when one of the footballer being hungry form playing long football.
Nestle Kit Kat Nuts will be introduced in July. Research outcomes will be gathered and accordingly the following various actions at various times will be taken.
Initial set-up: It is going to be huge sales and promotional activities to be carried out in the months of May and June. Personal distribution of the template showing introduction of the Kit Kat Nuts will be introduced. Sample distribution will be undertaken to educate dealers and wholesalers to set-up the product launch in the july
1st quarter (July-sept): We will immediately start advertising our new product mainly through TV/ media. We will use other print media as well e.g Big Hoardings on the main roads showing new Kit Kat Nuts.
2nd quarter (Oct-Dec): As customers get familiar with Kit Kat Nuts, more sales promotion activity will be done by putting prizes under the wrapper, thereby encouraging the customers to buy more of the product. Christmas offers will be made to boost sales and brand awareness among the customers.
3rd quarter (Jan-March): We will introduce New Year sales for quick generating of the sales turnover and increasing market share and brand awareness.
For the first ending year there will be special offers to be made to wholesalers and collaboration will be made with the Supermarket to kick start the new promotional activity for last gasp increase in the sales for the first year ending.
By using a well designed, well executed form of marketing research and data collection, decision makers will have the best quality information at hand and will be able to make informed decisions for the product and the company. (Kate Notes)
It is clear from the above stated statement that with the well organized research and development operation, it is possible to be proactive to the future trends in the market. Marketing research facilitates to gain timely knowledge and understanding of the changes in the consumer tastes and preferences and take decision accordingly.
Nestlé’s marketing research is one of the key factor behind its success in various product development. Nestle got 29 research centre worldwide by which every efforts has been made to understand and deliver product according to domestic nutrition level and health requirements.
With the help of various research techniques like surveys, answers to the questionnaire, getting feed back form the consumer by adding additional feature in the packaging for the consumer suggestions will be used to verify any changes to be made in the product .Marketing research will provide base for the new product development and innovation in the new market opportunity.
Financial matters are the estimated forecast of the sales and expenditure of the company using suitable method of statistics.
In the starting year of operation sales revenue is expected 30million pound, with an average wholesale price of 40p and variable cost per unit 20p for units sale of 7.5million and with the fixed cost of 20million pound. It is anticipated to show a net loss of 5million pound in the first year. The Net loss in the first year is mainly due to the higher material cost and heavy advertisement expenses for the promotion and distribution of the new product in the market. But the situation is expected to improve in the second year because of fewer expenses on the advertisement and increase in the sales revenue.
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At the end of the second year it is expected to achieve break even point or to achieve better than expected result by showing Net profit. The estimated sales for the second year is expected to 40million pound at the wholesale price of 40p with the variable cost at18p and fixed cost similar to the previous year at 20 million pound by selling 100 million units so that to show net profit of 2 million.
There may be time when company does not achieve the desired results in the near term, but that is not the end of the world. The actual result will be compared with the budgeted or expected results and the difference may be put forward in the meeting of the senior executives or marketing department.
Controls are being performed for the better implementation and organization of the marketing activities.
Implementation: Control measures have been monitored to effectively understand any deviation from the planned action, to efficiently locate the causes for the difference in the action and actual outcome and to take corrective steps. These will ensure that customer satisfaction is being given due importance and that quality standards have been maintained.
Marketing Organization Marketing organization may be created for the effective implementation of the action plan. Marketing department may be organized by function or by geography, product, and customer.
Individual critical reflection on learning outcome
“Creating shared value is a fundamental part of Nestlé’s way of doing business that focuses on the specific areas of the company’s core business activities namely Water, Nutrition and rural development-where value can best be created both for the society and shareholders”.
One of the main reasons to believe that Nestle delivers value to the customers is that every function and operation has been performed keeping in mind the nutrition, health and wellness of the people. Nutrition, Health and wellness is Nestlé’s strategic direction.
Through science based nutrition product and services, emphasis has been put to enhance the quality of the lives by providing care for the consumers and healh supporting.With the opearation in almost 100 countries over the world by over 20000 employees worldwide Nestle Nutrition operates in basic 4 key areas.
Achievements from study of the elements of the marketing mix and role of different element in achieving marketing objectives.
For any business organization or entity, the concept of marketing used to be given utmost importance. To be more specific most of the decisions under the marketing management lies around the decision of the 4 P’s of marketing mix namely Product, Price, Place, and Distribution.
Marketing Management module provided in depth knowledge which is left unattended by the previous understanding of the subject.
I used to believe that Marketing is only a science that follows set of methods and guidelines, but at the end of this module
I came to know that marketing is not only science but it both art and science.
The Marketing mix of the product assumes that the lerner have fundamental insight of the marketing but not in depth knowledge.
I am likely to change my views on application of various marketing tools because of the creative understanding brought forward by the module.
In between the process of learning I felt that Marketing is really a very wide concept which requires in depth knowledge and expertise for the individual to gain success in the real world.
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