Marketing Planning of Mount Fran - Essay Example

?Topic: Marketing Planning of Mount Franklin by developing the Situation analysis, Objectives and Strategy Company Introduction Coca-Cola Amatil Limited (CCA) is a large beverage and food & services company producing and marketing health and well being drinks among a host of other soft drinks, alcoholic drinks and food products across Australia and worldwide. Under the health & well being division it distributes various water, juice and low calorie drinks with such brands that include Pump, Neverfail, Fruitbox, Goulburn Valley and bottled water “Mount Franklin” that has been available since 1991 (IBIS World, 2009). 1.1 Product Introduction Mount Franklin is pure spring water without adding any flavour into the water, which is taken from beneath the ground, travelling through layers of the rock of three natural sources in Australia. In addition to competing with bottled water, Mount Franklin also competes with other non-alcoholic beverages. Despite the presence of competition and substitute products, the market remains attractive due to strong growth in demand, barrier to entry, lack of bargaining power of suppliers, favorable customers’ preference of bottled water over other types of beverages and CCA’s competitive advantage in distribution (Coca-Cola Amatil Ltd., 2003). The objectives of this marketing plan is to improve the market position of Mount Franklin by growing the demand for bottled water and improving Mount Franklin’s image over its competitors. However, there are issues which need to be addressed e.g. cannibalisation of other products produced by CCA and negative publicity from overseas. To achieve the stated objective, both offensive and defensive strategies will be discussed. Offensive strategies will be used to grow market share, customer purchase and market demand while defensive strategies will be used to protect current market position. 2. External and Internal Situation Analyses 2.1 External: Market Definition Mount Franklin is Australia’s favourite premium spring water in broad segment of “Non-alcoholic Beverages & Brewed Soft Drinks” industry which is very large market in Australia. This market includes fruit juices and drinks, mineral water, soda water, soft drinks (cola and non-cola), tonic water, energy drinks, carbonated waters or cordials and pure spring water. These beverages are bottled in plastic, glass or else canned in aluminium for sale to wholesalers and retailers. Mount Franklin spring water is available in many stores such as convenience stores, food court, take away outlets, supermarkets and vending machines. The major players involved in this industry are Coca-Cola Amatil Limited (CCA), Cadbury Schweppes Australia Limited, Berri Limited and Golden Circle Limited (CCA, 2004). In Australia, soft drink industry is a large industry with over $3 billion annual turnover and employs a substantial number of workers as shown in table 1. The major group of consumers who drink the bottled water are young people, singles, and couples especially female aged between 14 to 35 years (Australasian Bottled Water Institute, 2004 a ). In bottled water category, the CCA share has increased from 15% to 35% in the previous 18 months. Per capita consumption of its brands, ‘Mount Franklin’, the market leader, ‘pump’ and ‘Neverfail’ has been growing (Australasian Bottled Water Institute, 2004 a ). 2.2 External: Market Analyses Porter’s Five Forces Analysis Rivalry among existing firms The industry could be considered as oligopoly. There are five major companies which account for more than 80% of the market share. Each of the major companies holds more than 1% of the market share and seeks to improve the share position. In addition, there are numerous companies which are local and international companies that compete in this industry. Thus, there is intense rivalry within the industry. Barrier to entry Although there is no regulation that prevents a company from entering soft drink industry, barrier to entry remains significant. Brand awareness is crucial because there are little differences between each product in the market segment. It will be costly for new entrants to build brand awareness and product recognition that are necessary for survival in the industry. This will deter many potential entrants to the industry. Threat of substitute products There are many products which consumers consider to be substitute to bottled water. However, the trend towards a healthy lifestyle results in the consumers switching from soft drink to bottled water. This led to a strong growth in the demand for bottled water. Bargaining power of buyers The main buyers of bottled water are supermarkets and convenience stores which account for 56% and 34% of bottled water sold in 2003 respectively. The bargaining power of buyers is considered to be moderate. Although major supermarkets such as Coles and Woolworth have significant bargaining power and demand better prices, convenience stores are small in size and lack bargaining power. Therefore, CCA could earn higher margin from sales to convenience stores. Bargaining power of suppliers Given that natural sources of water are used for Mount Franklin, the threat of suppliers’ bargaining power is negligible. Another important raw material used by Mount Franklin is plastic bottle. Since Coca-Cola Amatil Ltd. is the largest company in Australian soft drink industry, it has significant bargaining power over its suppliers. PEST Analysis Political/Legal All types of bottled water are required to meet the minimum standard set by the Food Standards Australia New Zealand (FSANZ) and Australasian Bottled Water Institute (Australasian Bottled Water Institute, 2004b). However, this should not pose a problem to Coca-Cola Amatil Ltd. given its expertise in manufacturing bottled drinks worldwide. Economic The Australian economy has been performing strongly relative to many developed countries. There is little sign that this will change in the near future. As water is one of the basic necessities, its demand is relatively inelastic and unlikely to change significantly in the event of an economic downturn. Social/Cultural As more consumers become aware of health issues, they choose bottled water instead of sugary soft drinks. This increases the demand for bottled water which grew by 20% in 2003 (Coca-Cola Amatil Ltd, 18 Feb 2004). Technological Australia has high quality water treatment plants and as a result, the tap water is safe for drinking. Many consumers choose to drink tap water instead of bottled water, unlike some countries where consumers drink bottled water because the tap water is considered unsuitable for consumption. 2.3 External and Internal: Competitor Analysis The bottled water industry in Australia is highly competitive, with split between a number of multinational and local companies. Sales are highly concentrated in the industry with the three leading brands of bottled water accounting for 33.7% of off-trade volume sales alone. The leading two players have long since been CCA and Peats Ridge Springs Parit Pty Ltd, both of which have a huge product portfolios spanning almost the entire range of bottled water. Coca-Cola Amatil (CCA) is the dominant company in bottled water and it remained the clear leader in 2002 with a 15% share of total off-trade volume sales. This represented a slight increase of 1.6% points over 2001. CCA’s main competitor is Peats Ridge Springs which hangs on in second position in 2002 with 10% off-trade volume sales. In fact, Peats Ridge Springs had dropped its share marginally by 1.3% points from 2001. Internal Competitors -- Internal competitors to Mount Franklin are Deep Spring and Pump, which are owned by CCA. Deep Spring Deep Spring improved from forth position in 2001 to third position in 2002 with a slight increased of 1% over 2001. It had overtaken its competitor, Schweppes by 0.3% in 2002. Pump In 2000, CCA launched a new brand of still water, Pump that comes with a pop-top and great for drinking on the run. Pump holds 4.3% off-trade volume in 2002, with a significant increase of 1.8% over 2001. As the result, it has a very strong potential to overtake other competitors in the short period since it had such an awesome result as a new comer into the bottled water industry. External Competitors There are top three main external rivals such as Peats Ridge Springs, Cadbury Schweppes, and Frantelle. Peats Ridge Springs Peats Ridge Springs is considered the main and strongest external competitors of Mount Franklin as it achieves second position among all the brands of bottled water. Schweppes The next tough external competitor is Schweppes. Cadbury Schweppes’ key brand, Schweppes bottled water grew slowly between 2001 and 2002 but still only reached a volume share of 8.4% by 2002. Frantelle Pure & Natural Beverages had the top five highest volume shares in 2002 with 7.1% in Frantelle still bottled water. Despite aggressive marketing strategies and volume give-aways, these brands have not yet managed to make major inroads into the shares of the major players. While fewer brands compete in still bottled water, competition between CCA, Cadbury Schweppes and Pure & Natural is still fierce, so here too value growth was affected. 2.4 Internal: Analysis of Organisational Competencies Coca-Cola Amatil (CCA) was formed in 1989. In 1989/1990, CCA sold its interests in poultry, tobacco, communications and packaging, leading to a concentration on its core businesses of beverages and snack foods. The first beverages investment overseas is in 1982 when CCA acquired Coca-Cola bottling franchises in Vienna and Graz, Austria.  In 1993 CCA focuses on beverage, so it sold its snack foods interests to United Biscuits.  Moreover, CCA expanded its global business to include operations in many European and Asia-Pacific countries.  In 1998, the European operations were established as a separate European Headquartered anchor bottler company (Coca-Cola Beverages Plc) and CCA now focuses exclusively on the Asia-Pacific region. CCA is the largest manufacturer and distributor of soft drinks and other alcohol-free beverages. Moreover, CCA is the largest bottler of Coca-Cola trademarked products in the Asia-Pacific region, with operations in Australia, New Zealand, Fiji, Papua New Guinea, Indonesia and South Korea. CCA operates seven bottling plants in Australia, but one of the plants in Darwin is owned by Pauls Industries Ltd.  New South Wales CCA has a four line production plant operating 24 hours a day with three eight hour shifts. The plant manufactures 60 million unit cases of soft drink per year, producing product in cans at 2,000 per minute and PET bottles at 600 per minute. Coca-Cola is now produced in a second plant at Smithfield, which has a 4 line production, manufacturing 30 million unit cases per year. South Australia CCA (SA) supplies hot fill products such as Powerade, Growers Choice and Fruit Box fruit juices for the Australian market. In total, the South Australian operation produced over 28 million cases of soft drink at the end of 1999. Victoria The Moorabbin (Melbourne) plant has five production lines which operates three shifts over 24 hours, five days of the week. The production facility manufactures 35 million unit cases of soft drink per year, filling cans at 1,000 per minute, 390ml PET bottles at 900 per minute and 1.25L PET bottles at 600 bottles per minute. Queensland CCA (QLD) has five production lines filling over 150 million PET bottles and 230 million aluminium cans with 65 million unit cases of soft drink each year. Western Australia CCA (WA) has four production lines. The plant operates 24 hours per day and wills over 142 million cans and 95 million PET bottles each year. From the information above, it seems that CCA has an advanced production technology, and has enough plants. CCA benefits from economies of scale and economies of scope leading to competitive advantage in production over some of its smaller rivals. Therefore, it can supply the market with quality products. Furthermore, Coca Cola is a reputable company in beverage market. Therefore, product awareness is the fundamental key to the competitive strategy of CCA. As CCA is the largest bottler of Coca-Cola trademarked products, CCA has a competitive advantage. CCA need not build brand awareness for the products such as Coca-Cola because they are already well known. Moreover, the Coca-Cola name can present the image of good quality; it can influence the customers to buy the CCA products. However, it is important for CCA to retain the standard quality of Coca-Cola products. Therefore, CCA recognizes the importance of product’s quality. For example, the concept of Mount Franklin is fresh, pure, and light. It has an expert scientist team to analyze the source of the product. Moreover, healthy beverage is the other concept, which CCA use to attract customers. The high level competition in beverage market is one of the vital issues. As there is many brand of beverage, customers have many choices. Therefore, providing direct and enough channel is a significant tactic for CCA. Customers can get the CCA’s products easily because they are available at convenience stores, food courts, takeaway outlets, vending machines, and supermarkets. Recently, CCA expand its market segment by producing new stunning blue glass bottle for serving to restaurants and hotels. In addition to the mentioned competencies, CCA has also been in a strong financial position. From 2002 to 2004, CCA gains more profit as shown in the table below: 3.5 SWOT Analysis Strengths Wide variety of packaging options e.g. new PET water package Ability to take advantage of economies of scale through existing soft-drink business Well known brand in Australia, good image and reputation Premium purification quality Customer orientation focus Quality processes and procedures Growing market share Promotion effectiveness Strong financial performance Strong distribution system Weaknesses (must be related with previous analysis) High standard regulation - Australasian Bottled Water Institute (ABWI) and The Food Standards Australia New Zealand (FSANZ) Export restriction e.g. high transport cost Growing competitive pressures Concern over cannibalising other products owned by CCA Opportunities Acquiring overseas companies with attractive local brand power Launching new brand and flavour Enhancing its product differentiation such as flavoured water and medical water (with healthy ingredients) New niche market of vitamin-enhanced water Increasing advertising to capitalise on concern over fitness and health Threats Increasing intensity of competition among industry rivals Pollution (environment) – which will require more investment on purifying systems and higher operating costs Slowdown in market growth – reaching a maturity level Many new entrants Consumers could switch from bottled water to flavoured fruit juices or other sport drinks 3. Strategic Objectives and Issues Given the degree of competition in the industry and the importance of Mount Franklin to the company’s performance, strategic objectives need to be first identified. Strategies and tactics can then be implemented to achieve the stated objectives. 3.1 Strategic Objectives Increase and maintain customer retention Obtain leadership in all segments of bottled water market in term of demographic, lifestyle, and behaviour usage. Develop leading beverage brand with very strong value-added ties with consumers. Maintain and enhance the brand image Expand to new market segment Improve the customer awareness of health benefits Position Mount Franklin as an alternative to drinking tap water 3.2 Issues Several issues need to be considered carefully when deciding on the strategies to be used to achieve the stated objectives. They are the following: Cannibalisation The company needs to be careful not to cannibalise other product lines. That is when growing the sales of Mount Franklin it has to ensure that sales of other beverages are not adversely affected. A particular area for concern is the consumers’ preference for bottled water over soft drinks. Since Coca-Cola is one of the company’s major sources of revenues, careful attention needs to be paid to protect Coca-Cola brand while promoting Mount Franklin. Effect of negative publicity from overseas The negative publicity from Coca-Cola’s bottled water sold overseas could affect the sales of Mount Franklin in Australia. Consumers will need to be assured that the water sources of Mount Franklin are natural, unlike bottled waters sold in UK which are manufactured by purifying tap water with chemicals before filling it into bottles. (Wright, G., 2004) 4. Competitive Marketing Strategy In order to achieve the mentioned objectives, the company needs to engage in both offensive and defensive marketing strategies. Offensive marketing strategies will be used to grow market share, customer purchases and market demand while defensive marketing strategies will be employed to protect Mount Franklin’s market leader position. 4.1 Offensive Marketing Strategies Grow Market Share Growth in market share depends on market forces, competitive position and marketing effort. The estimated Share Development Index of Mount Franklin is 62.8 (Appendix 9.1). This indicates that there is still room to grow market share. In order to do that, the company should improve its relative competitive position by using pricing tactics and enhancing its product quality. Greater marketing effort will also help to grow market share. The company should leverage its competitive advantage with regard to distribution and implement communication tactic to gain market share. Grow Customer Purchases Growing market share could prove to be difficult in the event of intense competition in the industry. The company could improve sales by growing customer purchases. In addition to the convenience offered by bottled water, the company should persuade the customers to buy and drink more of Mount Franklin because of the health benefits. Customers should be persuaded to drink Mount Franklin even when they are at home. Grow Market Demand Marketing tactics should be implemented to attract potential consumers who do not currently drink bottled water. To entice more consumers to buy from Mount Franklin, the company should improve on the following factors: Awareness Availability Price 5.2 Defensive Marketing Strategies Protect Market Leader Position To protect the market share position which is critical to short-run profit, the company needs to improve its relative competitive advantage and marketing effort. However, the effects of the strategies on the long-run profit performance need to be considered. Coca-Cola Amatil should continue to strength its competitive advantage in distribution channels. It should continue to ensure that a consumer could buy Mount Franklin whenever he or she wants to. It involves getting the products to the new supermarkets and convenience stores and setting up more kiosks that sell Mount Franklin. References Australasian Bottled Water Institute, 2004a. (2004). Bottled water regulations. Available from: http://www.bottledwater.org.au/scripts/cgiip.exe/WService=ASP0003/ccms.r?PageId=10058 [Accessed 19 March 2011]. Australasian Bottled Water Institute, 2004b. (2004). Did you know? Available from: http://www.bottledwater.org.au/scripts/cgiip.exe/WService=ASP0003/ccms.r?Roxy=0x0003176d&PageId=5002 [Accessed 19 March 2011]. CCA Annual Report. (2004). Rewards of innovation. Available from: http://ccamatil.com/InvestorRelations/AnnualReports/2004/2004%20Annual%20Report.pdf [Accessed 19 March 2011]. CCA. (2011). Company overview. Available from: http://ccamatil.com/AboutCCA/Pages/CompanyOverview.aspx [Accessed 19 March 2011]. Euromonitor. (2004). Soft drinks in Australia. Available from: http://www.euromonitor.com/bottled=water-in-australia/report [Accessed 19 March 2011]. Griffin, Michelle. (2004). Water, water everywhere. Available from: http://www.smh.com.au/articles/2004/01//02/1072908900109.html [Accessed 17 March 2011]. IBISWorld Australia. (2004). Coca-Cola Amatil Limited – Premium company report Australia. Available from: http://www.ibisworld.com.au [Accessed 18 March 2011]. Wright, G. (2004). Coca-Cola withdraws bottled water from the UK. Available from: http://www.guardian.co.uk/uk/2004/mar/19/foodanddrink [Accessed 17 March 2011]. Reflective Journal Page The assignment on developing a marketing plan by selecting a company and performing research and writing task seemed a very challenging and creative one at first. I was sure that the lecturs and tutorial material on the topic would be great help, as it included at least all the ingredients of the topic’s bodyline but the big issue was selection of the company and product of my choice. In my mind, I had planned to research on some FMCG sector companies. I started researching on the Google and selected Coca-Cola Amatil Company’s bottled water brand product ‘Mount Franklin’. The idea appealed to me as there are a number of brands supplying bottled water; I thought selecting one of the topmost companies such as Coca-Cola‘s product would be of great help in finding relevant research information not only of the product and company but competitor companies and marketplace as well. Class lectures and tutorials could guide to a limited extent only as work was quite practical in nature of conducting internal and external market analyses, which included different market analyses such as SWOT analysis, PESTLE analysis and Porter’s five forces besides a good knowledge of the competitor company products was essential. Further, it was crucial to perform an analysis of Australia’s bottled water market. I wanted to perform a comprehensive research on the company product and market so that when the second part of the assignment needed to be written my grasp over different analyses and research won’t be deficient. Conducing research was not easy as crucial data was not available at one click of the mouse. I had to devote additional time in finding relevant research but when finally I started writing on the topic, my confidence grew and I could finish the first part of my assignment on Mount Franklin. The assignment increased my knowledge and insight of the bottled water market. Read More