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Student Names & McGill ID BRILLANT, Aïsha 260194236 CHENG, Chin-Yun 260014110 JOLIN LESSARD, Audrey 260180785 LEBLANC, Geneviève 260188501 MURCIA, Nicolas 260177704 NGUYEN, Jean-Louis 260078995 TIAN, Yu 260177360 Course Information Marketing Management I MCGR 352, Section 005 Professor: Constantina Kavadas Marketing Plan Part 1: Market and Consumer Profile Date of submission: Wednesday, March 29th, 2006 2 The following marketing plan forms the basis for the introduction of an innovative new product by the Coca-Cola Company. The analysis allows us to outline the best strategies to follow for the achievement of the company’s strategic goals. “Bubble Buzz” will be marketed as a unique functional drink while striving to reinforce the company’s status as the leader in innovation and successful product launches. The marketing strategies will enable to reach a market size of an estimated 8,688,300 people (targeted) with a forecasted sales growth prospect of 7.3% over the next 4 years ($243,029.47 profits), while satisfying the needs of the still-unserved market for ready-to-drink bubble tea. Success will be reflected by a sizeable capture of market shares within this market, while strategically carrying the company up to the top spot as the market leader in the functional drinks segment of soft drinks. Export potential will be considered in China. Brief description of the company The Coca-Cola Company’s core undertaking is to benefit and refresh everyone it reaches. Founded in 1886, we are the world’s leading manufacturer, marketer, and distributor of non-alcoholic beverage concentrates and syrups, which are used to produce nearly 400 beverage brands that make up for our wide portfolio. Our corporate headquarters are established in Atlanta, and we are holding local operations in over 200 countries around the world. Our activities cover all sectors of the beverage industry. We are the second leading player in functional and Asian specialty drinks, while ranking number one in value for the ready-to-drink tea sector (ref.1, p.1). 3 Brief description of the new product, & strategic role in the future position of the company “Bubble Buzz” will be a bottled beverage and will be positioned as the only ready-to-drink Bubble Tea product available on the market. The beverage will have a green tea base with enhanced fruit flavors (passion fruit, strawberry and lime) as well as tapioca pearls. It will bring an entirely unique drinking experience to its consumers. It will present itself as a funky and unusual alternative to traditional tea while providing the great taste of authentic fruit juice in an attractive and convenient packaging. The strategic role of Bubble Buzz for The CocaCola Company is centered around three objectives: • To stay at the forefront as the market leader in innovative product introductions and successful product launches; • To strengthen and satisfy the needs of the more adventurous Generation Y consumers with a new eye-catching and FUNctional product; • To become the market leader in the functional drinks segment with increased market shares. INDUSTRY ANALYSIS Consumption: The sales volume for the functional drinks segment (ref. D2) in Canada has reached $342.2 millions in 2004 for a volume of 125.9 million liters (ref.2). This product segment has shown a steady growth since 1999: an increase of 13.5% over a period of 6 years (Appendix A). The consumption rate per capita in 2004 has reached 4 3.94 liters, which represents a 4.0% increase compared to 1999 (ref.3). The growth of this particular market is largely due to a slow shift in consumer trends. Trends: Through the early 1960s, soft drinks were synonymous with “colas” in the mind of consumers. In the 1980s and 1990s, however, other beverages (from bottled water to tea) became more popular. Coca-Cola and Pepsi responded by expanding their offerings through alliances (e.g. Coke & Nestea) and acquisitions (e.g. Coke & Minute Maid), but also by focusing efforts on portfolio diversification. Today, while the soft drink industry’s value has increased in 2004, the volume sales of carbonated soft drinks has declined due to a large proportion of consumers who are opting for the trend towards healthier alternatives in the functional drink segment (energy drinks, smoothies, milk & juice drinks, sports drinks) as well as bottled juices and water (ref.5). Companies have been actively engaged in new product developments in order to counter the growing concerns about negative health impacts of high-fructose drinks, but also to increase the demand in a market where product offerings are quickly maturing (ref.4). New flavor introductions and health-conscious formulations have been launched in an attempt to offset the decline in carbonated soft drink sales (ref.6). The functional market is expected to show sustained growth and consumer interest in the future years as consumption shifts to trendier, healthier and more sophisticated products (ref.7). Profitability & future growth potential: In 1993, Concentrate Producers earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14%. While the functional drinks sector only accounts for 3.7% of the total soft drinks sales in 2004 (Appendix B), estimates are forecasting a growth of 7.3% in sales and 11.0% in volume consumption by 2009 (ref.4). 5 SWOT ANALYSIS (Strengths and weaknesses, opportunities and threats) Strengths Brand strength Effective stride in new markets Results of operations Strong existing distribution channels Opportunities New product introductions Brand is attractive to global partners Explanations in APPENDIX C Weaknesses Reliant upon line extensions Reliant upon particular carbonated drinks Brand dilution Entrance into difficult non-core categories Saturation of carbonated soft drink segment Threats Strong competition Potential health issues Free trade COMPETITION Coca-Cola’s top competitors for the soft drinks industry are PepsiCo (31.6%) and CadburySchweppes (15.8% of market), which combined, represent about 48% of the total market (ref.9). Coca-Cola is leading with 43.7% of the total soft drinks market. In the functional drinks sector, PepsiCo is the current market leader with 60.5% of the market shares in 2004. Coca-Cola Co is second with 32.8% (ref.2, see Appendix D1). Bubble Buzz will launch into a currently unserved subset of that market (RTD “Ready-To-Drink” Bubble Tea), which is until now unexisting. It is anticipated that the following brands could potentially compete with Bubble Buzz in the functional drinks market: Brisk, Lipton Iced Tea, Sobe (owned by PepsiCo), as well as Snapple’s and Hawaiian Punch (owned by Cadbury/Schweppes). Bubble Buzz also creates a potential situation for cannibalism with Coca-Cola’s very own brands of iced tea and other functional drinks. The current market for traditional Bubble Tea is fragmented, since the distribution is restricted to local outlets and selling points such as counters and small Bubble Tea shops in scattered locations across Canada. However, direct competition from these local players is not anticipated, since the marketing roll-out will initially emphasize on product awareness and both sales channels do not reach or serve the same market (retailing vs. 6 counter/restoration). A strong distribution system already exists with Coca-Cola, since partnerships and channels are already in place. This will facilitate the product’s reach into its target market. Further data concerning competing market shares and distribution channels are available in Appendix D(1-3). Barriers to entry: Business practices Manufacturing Due to the number of competitors, it will Producing bottled Bubble Tea requires be hard to prevent imitation behaviour sizeable capital investments for the (especially from PepsiCo) specific needs of the manufacturing chain (from ingredients to final packaging Risk of competing with emerging specifications) private labels (e.g. President’s Choice) The marketing campaign to make this Given the wide array of brands unknown brand popular requires more (saturation in the soft drink market), it promotional expenditures than a becomes a challenge for Bubble Buzz to traditional brand extension stand out TARGET MARKET Segment identification: RTD (Ready-to-drink) bottled Bubble Tea, to be established within the Functional Drinks sector Segment needs: The product will cater to both physiological needs (hydrating and nutritional value) and social needs (perception of a social, fun drink with a sense of belonging within peer consumer groups) – (ref.11, p.127). Segment trends: The current trends include a shift away from junk foods and carbonated drinks, a growing interest for healthier / beneficial products for the “mind and body” (ref. 10), the trend towards the availability of on-the-go products for those with an active lifestyle, as well as the trend for personalization through customization (or for beverages, through variety-seeking in a wide introduction of flavours – ref.6). Segment growth potential: Statistical reports anticipate a segment growth of 1.72% over the next 9 years (2015) for the 10-29 years old subsets (ref.12). Refer to Appendix E. 7 Size of the segment (population): 8,688,300 (329,600 L). Refer to Appendix E. 8 SEGMENTATION VARIABLES AND BREAKDOWNS FOR CANADIAN CONSUMER MARKET OF BUBBLE TEA MAIN DIMENSIONS VARIABLES BREAKDOWNS Region Area size Density Climate Age Gender Income Occupatio n Education Race Home ownership Personality Nationwide (all provinces and territories) with emphasis on urban / metropolitan areas, and adapted strategies for all geographical groups 5000-19,999 to 4,000,000+ Urban, suburban All (East, West) 10-29 years old (teenagers, studying age and young adults) Male and Female All under $30,000 Students; new graduated; new workers; young professionals Elementary 4th grade, High school, CEGEP and University All: Asian, Black, White, Native; other; with adapted strategy for Asian consumers already familiar with Bubble Tea Renting apartment/condo, living with parents (Highly discretionary in personal spending) Brand conscious, anchored in popular culture, inclined for differentiation and sophistication, very tolerant towards multiculturalism and internationalism (open-minded), quick maturation with modern products Most of them dependent on parents, no major responsibilities, highly influenced by peer groups, active life, importance of school, work and social life COMMUNICATION BENEFITS -Nutritional information -Informational text on history of product FUNCTIONAL BENEFITS -Healthier than soft drinks -Convenient, easy to take out PERCEPTUAL BENEFITS -Quality/Premium price -Social standing/good-looking Seasonal (peak in summer), daily-basis, weekly basis Non-user, regular user (current user through existing bar-shops) None, medium, strong Lifestyle Benefits sought Usage rate User status Loyalty status Positioning strategy: The only RTD bottled bubble tea available. Funky & eye-catching bottle, functional packaging, premium-priced, cool, new and unusual, unique drinking experience, aspects of play (tapioca pearls, oversized colored straw), variety of flavors, sweet, refreshing, for hip & young people, healthier alternative to heavy-sugar drinks. 9 CUSTOMER ANALYSIS Profile: Name: Bob Thomson Date of Birth: 25.03.85 Age: 20 Occupation: University Student Country: Canada Needs: Healthy lifestyle/Social belonging People: Roommate/Friends/Family Places: Clubs/Coffee shops/University/Gym Activities: Basketball Team Due to his active and quick-paced life, Bob wakes up at 6:30AM every morning. Today, he puts on his trendy Lacoste Polo and Diesel Jeans, and of course, he always has his Puma shoes on. After having called his friends with his new Samsung camera phone, he leaves his apartment and goes to his gym by metro, while listening to his favourite music that he downloaded to his iPod. Bob usually likes to work out before he has to head to University. That way, he feels he has more energy and feels ready to confront his busy day attending courses and getting things done. On his way to school, Bob knows he is thirsty and he feels the need for something very refreshing. He stops at a convenience store next to the gym. Standing in front of all the choices in the beverages aisle, one particular bottle catches his sight. And he instantly recognizes the brand. He knows that this is a bottle of Bubble Buzz, because not only does his other friends often drink it, but he also heard them talk about this brand new product that Coca-Cola just launched. He also previously saw Bubble Buzz ads when he surfed on his favourite websites. He grabs a bottle, and takes a closer look at the nutritive information label. He is very pleased to see that the new drink is more nutritive and definitely healthier than the other soft drinks that were available on the shelves next to it. The higher price of the product doesn’t bother him, since he perceives “Bubble Buzz” as a high-quality, functional product, 10 which is manufactured by a well renowned company. Plus, he did not feel like simply buying bottled water, or carbonated soft drinks. Because of his inclination towards more sophisticated tastes, and because he likes to try new products on his own, he thinks this bottle is worth the price. Because of his busy schedule, Bob prefers to save time as much as he can. Thus, he decides to buy two bottles. One to quench his immediate thirst, and another one that he wants to save for later in the day. He sees that the packaging is so convenient and easy to carry, and so when he exits the store, he puts the second bottle in his backpack. He attends all of his classes. During his break, he always hangs out with his friends. A lot of them are drinking from different “Bubble Buzz” flavours. He opens his second bottle, since he had such a great experience with the first one. He liked that the beverage was so unusual, yet refreshing. The drink surpassed many of his expectations. He has no doubt about it. Bob will continue to buy Bubble Buzz for its good taste, and also because at his age, he sees it is the coolest trend right now. Based on the aforementioned analysis, Bubble Buzz appears to be a profitable and innovative product with a strong outlook for market share presence and segment growth opportunity. Upon implementation of the marketing plan, the Coca-Cola Company will regain increased market shares and claim its targeted situational position of market leader in the functional drinks segment as well as keeping its long-standing consumer recognition for innovative and successful product launches in diversified markets. Projected profits will be $243,029.47 (see financial projections). 11 Marketing Plan Part 2: Marketing Strategy 12 The objectives of the marketing plan are strategically centered around 3 criteria: to create a strong consumer awareness towards a completely new bubble tea product from CocaCola, to establish a wide brand recognition through the capture of market shares in the functional drinks segment, and to become the top market leader in that particular segment within the forecasted sales figures. PRODUCT STRATEGY The core o Bubble Tea beverage in a pre-bottled, ready-to-drink format. The actual product o Packaging and labeling: see figure below o Branding: colorful, aspect of play, round shaped, prominent Bubble Buzz logo written in modern font, catchphrases such as “Think outside the Bubble” and “Get Your Buzz”. o Trade name: Bubble Buzz™, a Coca-Cola product o Brand personality: energy, funky, cool, functional, original, funny, healthy, etc. o Brand equity: Coca-Cola provides a quality, consistent, innovative and accessible soft drink reputation. Augmented product o Nutritional information, Status (social drink), Features promoting the website, Health benefit of a green tea base (ref.17) Marketing considerations o Product life cycle: Bubble Buzz is a low-learning product. With a strong marketing campaign, “sales [will] begin immediately and the benefits of the purchase are readily understood” (ref.11, p.301). Since Bubble Buzz is prone to product imitation, Coca- 13 Cola’s strategy is to broaden distribution quickly, which is currently feasible thanks to the company’s high manufacturing capacity. o Product class: Food & beverage Soft Drinks Functional Drinks (refer to Appendix D2 for a break-down of the functional drinks market). o Bubble Buzz follows the practice of product modification (ref.11, p.304): Coca-Cola is introducing an existing beverage (bubble tea) but redefines the drink with a new, more convenient package. Bubble Tea will now become a widely available drink in multiple retailing (distribution) channels. PRICE STRATEGY The price strategy that will be undertaken should consider the following aspects: 1. Consumer demand 2. The product lifecycle 14 3. Potential substitutes Customer demand Customer demand is a crucial factor which is driven by tastes, income and availability of others similar products at a different price (mentioned later in the potential substitutes section). For a lot of consumers, value and price are highly related: ‘’the higher the price, the higher the value’’. Consequently, Coca-Cola’s intention to position Bubble Buzz as a unique, innovative and attractive product gives it a certain control over Bubble Buzz price. To be able to implement higher pricing though, the minimization of the nonmonetary costs to customers should also be include along with awareness of the product (notably by advertising) and value (benefits) . The product lifecycle The company should take advantage also to the fact that the newer the product and the earlier in its lifecycle the higher the price can usually be. It ensures a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly and it also brings a certain prestige to the product. Potential substitutes Coca-Cola is constrained by the monopolistic market in which it competes. The main characteristic however is product differentiation. Other constraints (See Appendix M) PROMOTION STRATEGY Objectives: • To initiate strong awareness about the launch of Bubble Buzz throughout Generation Y (10-29 years old) consumers as well as their parents. 15 • To win market shares over our top functional drinks competitor, PepsiCo. Message: The promotional outputs will convey the clear message that “Bubble Buzz is a healthy drink for sporty and young people who simply enjoy taking care of their body and life.” Concepts: • • • “Think outside the bubble”: Be Bold, Be Original, Be Different, Be Yourself. “A good spirit in a good body.” “For the out-of-the-ordinary individuals who like to challenge themselves.” Media selection: Before choosing the appropriate medias, it is important to note that Generation Y consumers only give partial attention to media. However, they can be reached through integrated programs. They are typically using more than one communication media at a time; a behaviour that is often called “multitasking”. This group of consumers doesn’t give its full attention to one single message, but rather uses continuous partial attention to scan the media. Marketers can still communicate with Generation Y by using a variety of targeted promotional tools. Another important tactic to reach our target market is through “Viral” or “Buzz” marketing, which Coca-Cola will heavily use in this campaign (campus, contests). Advertising: Refer to APPENDIX H for detailed explanations Output Examples Television MTV, Much Music, VrakTV, YTV Radio MIX96, CKOI 96.9, 94.7 FM, Universities Magazines For girls: Cosmo, Elle For boys: Sports Illustrated (or Kids edition) Internet Banners on select websites (gaming, sports, etc.) Official promotional website: www.BubbleBuzz.ca Outdoors Billboards and prints in select areas including: Campuses, transportation (bus, metro, stations) Tourist areas in high seasonal periods Outskirts of key cities in geographical reach 16 Others Personal selling Public relations Publicity Not relevant Direct contact with retailers, sales kit strategies to be explained later in the text. Stands or special displays and events in schools, malls, sports events (i.e. 2008 Beijing Summer Olympic Games), sponsorship activities Conferences, press releases (print and online), buzz marketing through TV coverage Promotional Mix: Consumer oriented: • Contests: “Win another Bubble Buzz flavour”, “Uncover a secret code underneath the bottle cap and win sporting goods and electronics by logging on the website”, “Win a trip for the 2008 Olympics in Beijing”. (Arguments: It will increase consumer purchases and encourage consumer involvement with the product). • Samples: distributed in supermarkets, school/universities. Samples are a way to avoid product resistance since people are not used to find bubbles in their drinks. Arguments: It will encourage new product purchases and it represents low risk for consumers since they get it for free. They have nothing to loose by trying it. • • • Point-of-purchase: in supermarkets (to reach the parents of generation Y). Arguments: It is also a mean to increase product trial and provides a good product visibility. Others: In subsequent years, engage in product placement in TV shows or movies. Trade oriented: Allowances and discounts: case allowance (Arguments: The “free goods” approach will be used so it can encourage retailers to buy more of the product to get a certain amount for free). • Cooperative advertising: to encourage retailers to buy our product and to maintain our high level of advertisement that consumers expect from Coca-Cola. Other considerations: • • Scheduling of the advertising: Pulse scheduling (promotional presence year-round, but emphasized and intensified before and during summer). IMC (integrated marketing communication) Target Audience: • Intermediary: personal selling will be more often used 17 • Ultimate consumer: Coca-Cola will use more of mass media because the amount of potential buyers is large. PLACE (DISTRIBUTION STRATEGY) Bubble Buzz will be distributed through these channels: supermarkets, convenience stores, independent food stores, discount stores, multiple grocers, vending machines, direct sales. Requirement for success analysis: C.M. per bottle = 382,159.36 / 328,000 = $1.17 Break-even: (113,453.56+25,676.33) / 1.17 = 118,914 (bottles) Market share: 118,914 / 1,000,000 = 11.9% In one year, if Coca-cola can sell 118,914 bottles of Bubble Buzz, or in other words achieve 11.9% of the functional drink market share, it will break even. After this point, every bottle Coca cola sells will generate average $1.17 towards the profits. The potential profits can up to $1,030,770.001 based on our target market. Expected Costs: COGS: $597,124 * 36% = $214,964.64 O/H: $597,124* 38% = $226,907.12 Expected Revenues (total) = $597,124 (refer to Appendix J) 1 $1.17*(1-11.9%)*1,000,000 = $1,030,770 18 China is the target country we’re going to expand our product. Reasons: 1. With a total population of 1,313,015,000 in the end of 2005 and 327,714,000 in our target market (age 10 to 25 years old), compared with the total population of Canada---304,453 million, there definitely is a great potential worth to work on. 2. absolute expenditure on food and non-alcoholic beverages is expected to increase from 1,777 billion in 2005 to 2,154 billion in 2010 (though the proportion of consumer expenditure on this part is decreasing from 28.39% to 25.75% ) 3. Soft drinks industry is one of the fast growing industries in China, especially fruit/vegetable juice, RTD tea, and Asian speciality drinks and bottled water have shown a sharp increase during 1998 to 2003. 4. Bubble tea was originated in Taiwan. Soon after its introduction in China, it became one of the most popular beverages sold in tea stores on the streets due to the similar taste and similar cultural background. So, it is a good chance for us to enter into this market. 5. Since we are the top sponsor for the upcoming Beijing Olympic in 2008. With more opportunities to expose to the public, it is going to benefit our sale there. Our entry-strategy for entering China is through licensing. Reasons: 1. We have already provided licenses for manufacturing our products in China (licensing the bottlers and supply them with our syrup required for producing). Therefore, added in one or two more products in our production chain would not be that difficult. 2. It is relatively low risk when compared with direct investment there. It is low cost to export our new products there since we can maintain lower labour cost and lower material cost if we produce our products locally, especially in China. 19 Changes to be made: 1. Price: Price sold in China is going to change to accommodate the local desire. As we set our price sold in Canada $2.00. Compared to the price sold in the bubble tea store ($ 3.50), it is about 57.14%. So, with the information we gathered from the tea store in China2, the price sold there would be 57.14% of what sold in the tea store---$12 Yuen in China currency. Then, it would be around $7 Yuen, about CAD$13. 2. Naming the product: In order to be recognized and accepted more easily for the local market, we need not only translate our product name but also make sure there’s not hidden unintended meaning that would damage our product. 3. Develop other flavours that would attract the local market: Since milk based bubble tea sell better in China, we will add in this product line. Also, we will avoid using too many artificial colors as they are not appreciated as much as in Canada. Moreover, people in China are becoming more and more health concerned, especially the amount of sugar and additives added in the drinks. We will make some changes in the ingredients used to appeal the local market, i.e. less sugary drinks. 4. Promotion: In contrast to the radio ads in Canada, we will use more TV and Web advertisement there due to the highly exposed environment in China. Also, we will put more emphasis on the ads on the public transportation such as underground/subway system and bus service due to the more frequent use of the public transport service there. Also, since the outdoor display screen is quite popular in big cities, we will also take advantage of it. 2 3 Appendix L (Prices in China) The change of currency: CAD$1= CNY$ 6.88 20 APPENDIX A (ref.2) Off-Trade Consumption Indicators (Functional Drinks) 350.0 300.0 250.0 Million Litres / Million $CDN 200.0 150.0 100.0 50.0 0.0 Volum e Sales 1999 115.3 296.7 2000 117.8 312.1 2001 119.7 318.1 2002 122.1 324.7 2003 124.0 327.4 2004 125.9 342.2 APPENDIX B (ref.4) Off-Trade Sales of Soft Drinks by Sector: Value 1999-2004 C$ million Carbonates Fruit/vegetable juice Bottled water Functional drinks Concentrates RTD tea RTD coffee TOTAL 1999 4,651.40 2,135.20 385.9 296.7 193 234 0.2 7,896.40 2000 4,726.30 2,239.60 447.3 312.1 186.5 257.4 0.4 8,169.60 2001 4,828.20 2,347.00 551.2 318.1 171.3 265 0.6 8,481.30 2002 4,991.10 2,454.60 666.8 324.7 166.5 275.4 0.8 8,879.90 2003 4,959.60 2,497.60 763 327.4 159.2 286.8 0.9 8,994.50 2004 4,938.90 2,613.10 859.4 342.2 161.9 307.4 1.1 9,224.10 Off-Trade Sales of Soft Drinks by Sector (2004) Carbonates Fruit/vegetable juice Bottled water Functional drinks Concentrates RTD tea RTD coffee TOTAL APPENDIX C (ref.1 & 8) STRENGHTS Brand strength (see Appendix F for brand rankings) The Coca-Cola Company is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. The Coca-Cola brand is unarguably one of the most recognizable brands in the 200 countries where it sells its products. The strong brand name is one of the basis for the company’s competitive advantage on several of its core markets. Effective strides in new markets Coca-Cola has partnered with several companies (such as the joint venture with Nestlé) in order to increase the ability to react to demands and changes in the markets of iced tea, coffee and juices. The developing markets are more complex than the carbonated soft drinks. Results of operations In 2004, net-operating revenues totaled approximately $21.9 billion, an 8% increase from 2002. Gross profit totaled $14.3 billion in 2004. The company generated $5,968 million from its operating activities and re-invests heavily into its business. The ability to generate significant cash flows is one of the its key strengths (ref.16). Strong existing distribution channels Coca-Cola has operations worldwide and is well established in its distribution channels (such as store retailers or vending machines). Therefore, a new product launch can typically rely on the existing distribution system in order to reach the majority of its target market while requiring no major supply / delivery developments. WEAKNESSES Relying upon line extensions Coca-Cola is relying on brand extensions increase sales in specific lines, particularly its long-time carbonated soft drink products (i.e. the introduction of Vanilla Coke helped maintain sales for the core Cola beverages). However, there is a strong risk of cannibalizing existing sales in the long term (for example, Bubble Tea might deter on sales for iced tea). Reliant upon particular carbonated drinks The long-time presence of Coca-Cola’s Coke beverage has established this particular line as a flagship product. While the core Coke products bring a solid base of sales and loyalty to the company, consumers’ expectations also become more and more anchored and single-lined, taking away freedom in the areas of line diversification and product modifications (taste, packaging, price). Brand dilution The tremendous amount of existing brands and new product being introduced by the company could diminish the value and differentiating strength of each product that is being manufactured. Entrance into difficult non-core categories The Coca-Cola Company is a truly global multinational business giant. While some categories of products are distributed in many areas of the globe (Coke, Powerade, etc.), geographical needs already require that these global brands are heavily adapted to their target region. Furthermore, many smaller and diversified product lines are more or less popular in one particular region over another. Therefore, the process of diversifying the production and marketing each product involves costly investments. These capital requirements typically increase as the product becomes heavily focused (for example, since the Coca-Cola brand is highly recognizable worldwide, marketing a bottle of Coke in Japan would be less difficult than marketing a bottle of “Qoo” in that same country – “Qoo” being a lesser-known non-carbonated drink which was one of CocaCola’s newest brand introduction in 1999). Saturation of carbonated soft drink segment Due to the countless number of brands available on the market, it becomes increasingly difficult in the soft drinks segment to innovate and create new products that genuinely stand out from their competition. And as we have seen, an analysis of the industry has shown that growth in the soft drinks market becomes difficult and challenging when the conditions and consumer trends cause a market demand that stays stagnant. OPPORTUNITIES New product introductions The functional drinks market is one that particularly allows more innovation opportunities and gives greater freedom for creativity in the design, production, manufacturing, distribution, promotion and retailing choices and processes. Brand is attractive to global partners Because of the company’s size (including value, brand name and operating revenues) and wide portfolio base, Coca-Cola enjoys a strong purchasing power over its suppliers, and also attracts large partnerships with various levels of consumer reach (e.g. Burger King, movie studio promotions, sponsorship agreements, etc.). Existing brand awareness also provides an international playing field for powerful marketing strategies. THREATS Strong competition Coca-Cola is competing in a global market that is characterized by an oligopoly between several (but few in numbers) competitors. The fight for market shares and sales in crowded markets becomes a complex one. Potential health issues The current trend of consumer and consumers groups’ awareness towards goods and services is both beneficial and threatening for companies in the food and beverages industry. Over the last few years, concerns over health issues have risen in the media through an expanded and evergrowing network of “knowledge outputs” (journals, TV channels, internet and so on). The move of the younger generation towards a healthier lifestyle call for careful planning and decisionmaking in new product developments. Large companies can also easily become the target of consumers’ apprehension. Free trade In an era of globalization, large international competitors can come out with comparative advantages (the constant fight to remain the first mover and market leader in a long-term spectrum). Issues arise when dealing with price competition and economic growth. Trade organizations are also faced with public pressure which can disrupt operations in one or more areas of the company. APPENDIX D (ref.2 & 5) D1. Off-Trade Company Shares of Functional Drinks by Value 2000-2004 % off-trade value rsp QTG Canada Inc (PepsiCo) Coca-Cola Ltd Monarch Co, The South Beach Beverage Co GI Energy Drinks Corp Snapple Beverage Group Private label Others TOTAL 2001 56.4 32.2 7.5 1.1 0.1 0.1 0.8 1.7 100.0 2002 58.2 32.4 5.8 1.1 0.1 0.1 0.8 1.4 100.0 2003 59.5 33.1 4.5 1 0.2 0.2 0.8 0.7 100.0 2004 60.5 32.8 3.3 1 0.2 0.2 0.8 1.4 100.0 D2. Functional Drinks Sectors (Segmentation) by Value, 2005 *Based on United States report D3. Functional Drinks Sales by Distribution Format (2004) Distribution Channel Supermarkets/hypermarkets Independent food stores Convenience stores Discounters Direct sales Vending Others Total % Sales 30.8 2.8 1.5 5.9 0 0.1 58.9 100 APPENDIX E (ref.12) Population by Age: 1990-2015 '000 1990 10-14 yrs 15-19 yrs 20-24 yrs 25-29 yrs TOTAL Source: Note: 1995 1,997 1,980 2,009 2,185 2000 2,056 2,096 2,070 2,076 2005 2,111 2,157 2,264 2,209 8,741 2010 1,963 2,228 2,348 2,438 2015 1,868 2,068 2,426 2,529 8,891 1,877 1,938 2,124 2,583 Total (Canada) = 32,241 National statistical offices, Euromonitor International as at January 1st Functional Drinks: Consumption growth (Liters) from 1998 to 2003: 0.06 per year Projected consumption (Liters) in 2005: 4.12 Market size calculations (ref.14 & 15): Total Canadian (10-29yo) Soft Drink Yearly Consumption (L) # Male 10-29yo Yrl Consumption (soft drinks) (Population) (Liters) 4,436,800 # Female 10-29yo (Population) 4,251,500 4,858,296 Yrl Consumption (soft drinks) (Liters) 3,103,595 Total yrl consumption (soft drinks – Liters) 7,961,891 ≈ 8 million Liters Total Canadian (10-29yo) Functional Drink Yearly Consumption (L) 8,000,000 L x 4.12% (functional drink market share) = 329,600 L 329,000 L is approximately equivalent to 1,000,000 cans (355mL volume) MARKET SIZE: 8,688,300 people 329,600 L ≈ 1,000,000 cans The market size represents our targeted pool of consumers. Further analysis in the marketing strategy plan will allow for estimates of the forecasted sales in the market segment specific to the RTD Bubble Tea drinks. APPENDIX F (ref.13) APPENDIX G APPENDIX H (ref.16) APPENDIX I (ref.16) APPENDIX J CALCULATIONS Based on Coca-Cola’s previous financial statements, we will see the average COGS/Revenues for year 2005, 2004, and 2003 is 36%4. Similarly, Operating Costs / Revenues = 38%5 Moreover, since our target market are 1,000,000 cans annually assuming Coca-cola maintains its market share in functional drink 32.8%, we predict our sales as 1,000,000 * 32.8% = 328,000 bottles. We use the ratio of average capital expenditures / net operation income for North America to estimate the fixed cost we need for producing Bubble Buzz in Canada: 4.3%6 of the total revenue. Expected Revenues: Supermarket Price ($) 1.50 Sales (%)7 30.8% Sales ($) 101,024 Revenues ($) 151,536 Independent Stores 1.75 10.2% 33,456 58,548 Others $2.00 59% 193,520 387,040 Total 100% 328,000 597,124 Note: “Independent stores” include convenience stores, independent food stores, and discount stores. “Others” include multiple grocers, vending machines, & direct sales. Expected Costs: COGS: $597,124 * 36% = $214,964.64 O/H: $597,124* 38% = $226,907.12 Note about expected costs: O/H costs include operations overhead and general and administrative overhead. The former is generally associated with the recurring management or support of the activity, which is normally relevant cost. The latter includes salaries, equipment, space and other activities related to headquarters management, accounting, personnel, legal support, data processing management and similar common services performed outside the activity, which are irrelevant. Because there is no enough data to show the ratio of these two parts, we estimate half of the O/H costs as irrelevant costs. 4 5 From table 1: (8,195+7,674+7,776) / (23,104+21,742+20,857) = 36% From table 1: (8,739+85+7,890+480+7,287+573) / (23,104+21,742+20,857) = 38% 6 From table 2: (265+247+309) / (6,676+6,423+6,157) = 4.3% 7 From table 3 APPENDIX K Population data for Export Potential analysis APPENDIX L Sample board of bubble tea prices in China (with price range from $10 to $15). APPENDIX M Pricing strategy (Other constraints) The first possible constraint would be the regulations on pricing. Another constraint would be that Coca-Cola must not set a price that is too high because competitors will be attracted by potential profits and will follow by a lower price. After having taken all the important factors into consideration, two price-level fixing approaches seem appropriate. 1. Profit-oriented approach: Target profit One of the central objectives of this project being to become the market leader in functional drinks, Coca-Cola is willing to stay among the top competitors, if not becoming the greater, by achieving a certain target profit. This could be obtained by establish a price that will largely cover variable and fixed costs while bringing tremendous profits. 2. Competition-approach: Above market Competitors and potential substitutes prices can also be part of the strategy. Having a higher price could make customers aware of the additional benefits and the higher quality of Bubble Buzz. APPENDIX N Promotion Schedule Step 1 Output Personal selling Period of time February to September Arguments To make Canadian retailers aware of Bubble Buzz so they can order it in time for Summer time Radio is the most listened media by students (based on researches); the target market would hear our radio spot several times a day. This will ease the recognition of Bubble Buzz in future promotion tools. 2 Radio spots February to April 3 4 5 6 7 8 9 10 Magazines ads Television spots Sample distribution Point of purchase Outdoors Public Relations Contest Publicity Mid-March to June April to September April to September April and September May to September May to September August to end of September All the time The target market will then match an image with the name of the product more easily. The recognition of Bubble Buzz will be faster. To send a widespread message over Canada that Bubble Buzz is now available. Critical step in the promotion. To get potential buyers to try Bubble Buzz and to create an addiction to it. Making a special section for the Bubble Buzz in Grocery store will help the new potential buyers to find our product faster and more easily. Putting adds in specific places where Generation Y hangs out will create an increased awareness of Bubble Buzz We will use special events (sports and others) to promote Bubble Buzz and also to get in touch with our potential market. It will allow Coca-Cola to interact with our Generation Y Consumers. When the summer will come to its end, we will use contest to give a second "push" to the sales of the Bubble Buzz. Use of conferences and news to make the general public aware of the existence of Bubble Buzz. APPENDIX O Other considerations for the promotion strategy Product life cycle of Bubble Buzz: Bubble buzz is at its Introduction stage; we thus must inform consumers in an effort to increase their level of awareness. Awareness is our primary promotional objective. Then the following months after the launch of Bubble Buzz , in its Growth stage, Coca-Cola will have to persuade the consumer to buy the product, to gain preference and to solidify the distribution. Product Characteristics: • Complexity: Bubble Buzz is more sophisticated than already existing functional and soft drinks. Consumers can eat and drink it which has never been experienced before. Unlike most functional drinks, it also requires a straw. Understanding and familiarity is different when compared with other comparable drinks. We should thus use a little bit more of personal selling to retailers, give more sample, and create advertising on how to use bubble buzz than with other brands from the company. • Risk: there is no financial, social or physical risk associated with Bubble Buzz thus Personal selling is less needed. • Ancillary Services: No support or service are required after the sale; refer customers to the website or free 1-800 number for any questions or comments. Stage of Buying decision: Our target consumer are at the pre-purchase stage: advertising is more helpful at this stage then personal selling because advertising informs the potential customer of the existence of the product and the seller, but in this case the seller is already well known. Channel Strategy: (ref.11, p.478) For Intermediary: Push strategy, in order to gain retailer’s cooperation in ordering and stocking the product. For Ultimate consumer: Pull strategy: We want to direct our promotional mix at ultimate consumers in order to encourage them to ask retailer for the product. APPENDIX O Justifications for advertising selections -TV: channels for teenagers and for young adults: MTV, Much Music, VrakTV, YTV Arguments: TV communicates with sight, sound and motion, which is needed for Bubble Buzz. It is the only media that can reach 99% of the homes in Canada. Coca-Cola has the budget to cover the high costs of this media. -Radio: 94.7 FM, 96.9 FM University Radios (McGill, UDEM, UQUAM, Concordia, UOTTAWA...) Arguments: Radio is an already segmented medium. There are over 900 radio stations in Canada. The average University or college student is a surprisingly heavy radio listener and spends more time during the day listening to radio than watching network television (book p.502) We could also use of “Interactive radio” as Pepsi has already done in the past. (p.503) -Magazines: We should take advantage of the fact that magazines have become a very specialized medium. There are about 500 consumers magazines in Canada. Good color production is also an advantage that create strong images which is the purpose of CocaCola with its Bubble Buzz brand. Each magazine’s readers often represent a unique profile. Reaching: -Young girls: COSMO -Young women: ELLE -Young boys: Sports Illustrated for kids -Young men: Sports Illustrated -Internet: Online advertising is similar to print advertising in that it offers a visual message. It also has additional advantages , it can also use the audio and video capabilities. As we are targeting our ads to young outgoing people, sound and movement may attract more attention from viewers and has the unique feature of being interactive. Interactive media would offer Coca-Cola the opportunity to reach younger consumers who have developed a preference for online communication. Official Website (www.bubblebuzz.ca) -Outdoor: Billboards in specific geographical area would allow us get a good reach and frequency. It is a low cost and flexible alternative. (Campus, malls, Bus and metro stations) REFERENCES (Direct) 1. The Coca-Cola Co. (Company Profile). Global Market Information Database (Euromonitor). Jul 20, 2005. Accessed Feb 08, 2006. 2. Functional Drinks Off-trade Sales in Canada (Country Report). Global Market Information Database (Euromonitor). Oct 03, 2005. Accessed Feb 25, 2006. 3. Functional Drinks, Canada, Retail Volume (Statistics). Global Market Information Database (Euromonitor). Oct 03, 2005. Accessed Feb 25, 2006. 4. Soft Drinks in Canada (Industry Report). Global Market Information Database (Euromonitor). Oct 03, 2005. Accessed Feb 08, 2006. 5. Functional Drinks in the United States. Datamonitor. Dec 2005. Accessed Feb 08, 2006. 6. COSGROVE, Joanna. The 2005 Soft Drink Report. Beverage Industry. Mar 2005; 96; 3; p.22. Accessed via ABI/INFORM Global. Feb 08, 2006. 7. THEODORE, Sarah. RTD coffee, tea create a buzz. Beverage Industry. Feb 2005; 96; 2; p.16. Accessed via ABI/INFORM Global. Feb 08, 2006. 8. The Coca-Cola Company. (Company Profile). Datamonitor. Jun 2005. Accessed Feb 08, 2006. 9. HANNAFORD, Steve. Industry Brief, Beverages I. Oligopolywatch. http://www.oligopolywatch.com/2003/04/21.html. Accessed Feb 07, 2006. 10. POPP, Jamie. Leading in a healthy direction. Beverage Industry. Dec 2004; 95; 12; p.22. Accessed via ABI/INFORM Global. Feb 08, 2006. 11. BERKOWITZ, Eric N. CRANE, Frederick G. KERIN Roger A. HARTLEY, Steven W. RUDELIUS, William. Marketing, 5th Canadian Edition. McGraw-Hill Ryerson. 2003. 12. Consumer Lifestyles in Canada. Global Market Information Database (Euromonitor). Feb 01, 2005. Accessed Feb 08, 2006. 13. Top 20 Global Brands, Ranked by Brand Value, 2004 & 2005 (in billions and as a % increase/decrease vs. prior year). BusinessWeek; Interbrand. Jul 22, 2005. Accessed via eMarketer. Feb 28, 2006. 14. THEODORE, Sarah. Surprising suggestions from teens. Beverage Industry. Vol.96, no 7. Jul 2005. p.4. 15. Canadian Statistics – Population by Sex and Age Group. Statistics Canada. http://www40.statcan.ca/101/cst01/demo10a.htm. Modified Oct 27, 2005. Accessed Feb 28, 2006. 16. 2004 Annual Report – Form 10K (The Coca-Cola Co.). The Coca-Cola Co. US Securities and Exchange Commission, File no. 1-2217. http://www2.cocacola.com/investors/annual_other_reports.html. Accessed Feb 13, 2006. 17. WILBERT, Caroline. Coke, Pepsi focus on China market. The Daily Sentinel. http://www.gjsentinel.com/world/content/shared/news/stories/COKE_0224_COX.html. Cox News Service. February 24, 2006. OTHER CONSULTED REFERENCES 1. New Age Beverages in Hong Kong. Datamonitor. May 2004. Accessed Feb 05, 2006. 2. Boba Tea Direct. Boba Tea Direct LLC. http://www.bobateadirect.com. Date N/A. Accessed Feb 06, 2006. 3. PREVILLE, Philip. Bubble Tea. http://www.geocities.com/hello_tai_tai/bubbletea.html. Accessed Feb 02, 2006. 4. KING, Paul. Will bubble tea burst out across country or go bust?. Nation’s Restaurant News. P.24. May 31, 2004. Accessed via Business Source Premier. Feb 08, 2006.
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