CocoBanas Cocoa Beans - Research Paper Example

CocoBana’s cocoa beans Summary This paper looks at the marketing mix element strategies for introducing CocoBana’s cocoa beans from the Ghana to the Canadian market. The first part is the introduction which gives the CocoBana company description and its brand. The second section analyses the Canadian cocoa bean market looking at the market segment, opportunities, market size and competitors. The third section looks at the market constraints and market environment. The fourth section analyses the 4ps market mix in relation to the entry of CocoBana into the Canadian market. The fifth part looks at the key success factors for CocoBana in the Canadian market. 1.0 Introduction CocoBana is a joint venture business operated by Prince Khalid of Saudi Arabia, and Habib Braimah, a businessman from Ghana. Established in 2003, CocoBana is the brand name of one of the fastest growing exporter of cocoa beans in Ghana. Cocoa beans are an agricultural commodity used in the production of chocolates, XXXXXXXX. These beans are converted into different forms and state before been used in chocolate production. CocoBana specializes in the production of cocoa beans in the form of butter and powder. Ghana is ranked #2 in the world for cocoa beans production. Cocoa beans from Ghana are the ‘forastero’ variety and are of premium quality, which is noticeable in their high selling price in the international market. CocoBana conforms to the Fair Trade policy, working with the Ghana COCOBOD to eradicate child labor involvement in the farming and processing of cocoa beans. The purpose of this report is to analyze and suggest the marketing mix element strategies for introducing CocoBana’s cocoa beans from the Ghanaian to the Canadian market. This study includes a current market situational analysis of cocoa beans in the Canadian economy and the influence of demographic and psychographic characteristics on this commodity. The targeted markets for CocoBana will be chocolate-producing companies in Canada. Competitors and other market environmental constraints affecting CocoBana’s beans in Canada will be discussed, and recommendations on key success factors to entering this market will be provided. The report is organized into six sections: Section 2 provides an insight on the current market situational analysis of cocoa beans in Canada. In this section a study of the market size potentials, opportunities, and segmentations will be analyzed. A review of the target markets demographic and psychographic characteristics will be used to identify the major competitors of cocoa beans products in Canada. The uncontrollable market environments and constraints affecting CocoBana in the Canadian market are discussed in Section 3. Suggested marketing mix strategies to enter the Canadian market are discussed in Section 4. In Section 5, some suggestions and discussion about the major key factors for CocoBana to enter the Canadian market successfully are provided. Finally, the major findings of the analysis, recommendations and suggestions for CocoBana are summarized in Section 6. Section 2 2.0 Current Market Situational Analysis of CocoBana in Canada 2.1 Market Size potential, opportunities and Segmentation The market size for cocoa beans in Canada is large. This is because it is estimated that every Canadian consumes around 5.5kg of chocolate every year. The consumption of cocoa products is also not age specific and as the product is consumed by persons across all ages. The current Canadian import of cocoa powder for preparation of chocolate is $ 683,774,000 (PrideM., Hughes& Kapoor, 2012: 231). The following table shows the analysis of consumption of cocoa beans in Canada and the projected market growth (the figures are in 100 tones). 1988-1990 average 1998-2000 average 2010 Growth rate 1988-1990- 1998-2000 Growth rate 1998-2000-2010 23 48 69 7.6 3.4 From the table it can be observed that the Canadian cocoa be and market growth has slowed down since the year 2000. However, there is still a high potential of growth of the market in Canada. Nevertheless, the Canadian Market shows greater potential for growth compared to America. This is because Canada has lower manufacturing costs compared to America. As a matter of facts, Canada accounts for 2/3 of the total cocoa imported to America. It has been observed over the past years that many American based plants are either transferred to Canada or Mexico to lower the production costs. The cocoa product market in Canada is expected to continue growing despite increased health concerns. In 2012, the consumption of chocolate was increased by 4% and was projected to increase further in the year 2013-2014. Canadians have been known for their love of sweet foods and snacks which accounts for 24% of their overall food consumption. The growth in the industry is as a result of population growth combined with expansion into new markets. The market is expected to continue growing at a constant value of 2% up to the year 2017. The growth trend will be defined by two factors: planned purchases by consumers as the expansion of the luxury products market ((PrideM., Hughes& Kapoor, 2012: 235). 2.2 Target Market of CocoBana and their Characteristics in Canada 2.2.1 Demographic characteristics Chocolate consumption is higher among the females than males with 8% of males and 91% of female reported to consume chocolate products. The younger people, below the age of 35 are seen to consume more chocolate and candy compared to the older generations. This is because the youths are less concerned about their health and may not have many health complications like the older generations. Consumption of chocolate is uniform across earning levels. Despite the economic recession, people consider the consumption of chocolate as an affordable luxury. This explains why the consumption has not been affected. 2.2.2 Psychological characteristics A recent research shows that the consumption pattern in Canada has changed over the years. Currently, consumers are showing more preference of premium chocolate and fair trade chocolate products than in the past. Previously, the premium chocolate target market was people from higher classes but this has now changed. This change can be attributed to the increasing consumer awareness of the premium chocolate and this has resulted in the growth of the premium chocolate segment. The driving force behind purchases is expected to change. Impulsive buying to satisfy cravings has been reported to be the driving force behind the sales of confectionaries. The Canadian market is expected to shift to planned purchases where they seek maintain balance in health and finances. 2.3 Major Competitors of Cocoa Bean Products in the Canadian Market There are close to 200 companies in Canada that deal with the production of chocolate and cocoa products. However, the leading companies in the Market are Hershey Canada, Cadbury Adams Canada and Nestle Canada who combined has a market share of 42%. The rest of the market share is occupied by other smaller companies. Of the three companies, Nestle holds the largest market share of 16% as a result of it having strong brands in the bagged soft-lines and count-lines where it has a market share of 19% and 24% respectively. The leading brands in the industry are Nestle Canada Coffee Crisp and Kit Kat (Carr, 2003: 187). Nestle Smartie brand has a market share of 16% among the soft-line after the M& M brand by Mars. There are many small brokers in the processed cocoa bean industry in Canada. However, the largest cocoa bean supplier is the IntercontinentalExchange (ICE) Canada. ICE is the supplier of cocoa beans to major confectionary companies such as the Nestle, Cadbury and Mars (Carr, 2003: 67). Section 3 3.0: Uncontrollable market environments and constraints affecting CocoBana Company in Canada 3.1 Local culture and perception With many chocolate companies operating under fair trade, they are sensitive to the process in which the Cocoa supplied by companies such as CocoBana. This means that the company would be scrutinized to ensure that it obtained the cocoa beans in responsible way without promoting child slavery. Western Africa is the largest supplier of cocoa beans but it has also been associated with child slavery where underage are involved in the growing and processing of the beans putting their lives in danger. The CocoBana clients would require that it provides cocoa bean products that have been prepared in the right conditions. The business practices conducted in Canada may be very different from the way business is conducted in Ghana. CocoBana would thus have a problem adjusting to the new market. It may have trouble reading the signals given by the companies in the new market and end up losing on great business deal. This is because business practice does change from one country to another (Vasudeva, 2006: 172). Each country has its unique business culture which is only understood by people who have practiced it for a long time. It would take CocoBana some time to adjust to the new culture and this may cause it to lose out on business opportunities. 3.2 Tariffs and non-tariffs constraint Canada continues to charge very high tariffs on imported food products. However, charges zero tariffs on cocoa beans which an advantage that CocoBana has on this market. However, the import duty for cocoa powder is around 6%. There are also regulations that the food industry companies should meet. This includes the labeling of nutritional content of each packaging. There is also some restriction on the size of packages where some products have a minimum grams that should be packed. This creates needless restrictions to trade between Canada and foreign companies. The import duty on the cocoa powder and the packaging restrictions are trade barriers which Cocobana has no control over. 3.3 Government Regulation Restraints A foreign company intending to invest in Canada is put through serious government scrutiny and has to pass some requirements. For instance the size of investments by foreign companies is limited by the Investment Canada Act (ICA). The current total value of assets that a company investing in Canada is expected to have is $330. This restricts the foreign company growth as it is expected to remain within this threshold. The Canadian market has been observed to be very restrictive in foreign investment. 4.0 Suggested CocoBana Marketing Mix Strategies 4.1Product Decision Strategy The product decision strategy that the company should employ is product quality to be defined by the buyer. This means that the production process should be conducted in such a way that the product needs the qualities that the buyer seeks in terms of color and flavor. The buyers need should always come before the needs of the company. The company could also offer product support services such as delivery and after sales services. The company can ensure that good business relationship is maintained between it and the client firms by offering after sales benefits. Instead of just providing black cocoa butter and powder, the company can apply procedures that ensure color differentiation of the product. This would help in meeting the needs of the different buyers. Cocoa beans are processed though the process of fermentation. During this process, bacteria and yeast that occur naturally on the beans are responsible. The company can use specific products during the fermentation process that ensure that the products of fermentation have the desired color or flavor. This could be through isolation of the specific yeast responsible for fermentation would not only speed the process but also improves the color and the flavor of the final product (Cateora, Graham, Billy, 2012; 373). This would make CocoBana products stand out in terms of quality and its brand would stand out. 4.2 Pricing Strategy The pricing strategy that Cocobana should use is both variable cost pricing and penetrative pricing strategy. The company has been in operation for 10 years now and has already established its business in Ghana. Its operations in Canada are only aimed increasing its overall revenue. It is possible for the company to offer competitive prices in the new market and this would give it a price leadership advantage over its rivals. Offering goods at low prices which has been labeled as penetrative pricing strategy would help the company establish its company base in the new market of Canada. This is because CocoBana is working in a business where the competitors offer similar goods with mild differentiation. (Cateora, Graham, Billy, 2012: 526). After the company has established a good customer base, it can then use the full cost pricing strategy. This is because it will have already established its brand. It could also employ the skimming pricing strategy where the prices of different products are determined by their quality. The most sought after product for example white cocoa butter could be sold at a premium price because it takes a lot of time and energy to prepare. 4.3 Promotional Strategy In order to penetrate the new market, the company could employ a combination of promotional strategy. The main strategy used is product attribute and benefit segmentation. Cocobana should focus on cocoa products attributes such as flavor and color which sets it apart from the other similar products in the market. This concept is then emphasized through the various channels of advertising that the company may decide to use. Some of the channels include trade shows where the different businesses which are targeted by CocoBana are invited to sample its cocoa beans products. Another strategy that can be used is relationship management marketing. This is because the company is involved in B2B transaction. This means that a single tender from one company has a huge impact on the company profitability (Cateora, Graham, Billy, 2012: 463). The company could employ multiple foreign domestic advertising agencies in order to have control of the market. So that the company can have a well established brand, it should use customized themes in advertising that makes it stand out. Customization would also allow for different promotional strategies to be matched with the culture of the target market (Cateora, Graham, Billy, 2012: 462). This is because different international markets have different cultures so the promotion strategies should be modified to meet these needs. 4.4 Market entry and Distribution Strategy The market strategy that the CocoBana Company should apply is retail marketing using the strategy of direct marketing. This is because it is a B2B, it possible for the company to sell directly to its client using emails, door to door or through the telephone. This strategy would appropriate for CocoBana which currently lacks well established distribution channels in Canada. This strategy would work in introducing the company to the market (Cateora, Graham, Billy, 2012: 430). CocoBana would work with the import oriented distributional structure where the target customer relies on importation of cocoa beans from other countries. Cocobana thus gets small units from the local farmers and local brokers. It then sells the product in wholesale to target businesses such as Nestle Canada. In order to have a smooth market entry, the company could set up some of its factories and depot within Canada (Cateora, Graham, Billy, 2012: 353). This would reduce the costs as it would be exempted from some taxes imposed on imported goods. 5.0 Discussion and Suggestion CocoBana success factors Strategies As has been observed, the Canadian market demand for luxury cocoa products is increasing. This means that quality is a key success factor for CocoBana in Canada. The price may be higher but the manufacturers of chocolate and other cocoa products would be willing to pay a higher price for quality product. Product differentiation is another success factor. There are many suppliers of processed cocoa beans. The success of any product depends on how it stands out from the rest of the product. If CocoBana could produce cocoa beans in different unique flavors and colors, this would give it a leading position in the industry. The area that should be enhanced in the Canadian market is on the FDI rules. The current rules act as a major barrier to entry of foreign companies in the Canadian market. The foreign companies should be given a fair ground to conduct business as they also contribute to the overall success of the Canadian economy. The FDI advantage is that they protect the Canadian based company from unfair completion by foreign companies. Another barrier to entry is lack of chains of distribution. This has a disadvantage of the CocoBana which has to invest a lot in distribution. The older companies have an advantage since they already have established distribution channels. For CocoBana to successfully penetrate the market, it should use cheap but effective marketing method and utilize the online forum which is slowly replacing the traditional marketing strategies. It should also utilize the online forum for distribution of its products as it strives to establish supply chains in Canada. Product differentiation is also key success factor as there are many cocoa beans seller and having innovative products would make CocoBana brand to stand out. 6. Conclusion CocoBana is seeking to enter into the Canadian market which has many players but also have potential for growth. Having price leadership as a marketing strategy may not work for this market considering that the consumers taste are changing with demand for premium products increasing. The company brand could thus be established through ensuring that the company delivers quality cocoa beans to the customers. Product differentiation to offer a wide variety of products with different characteristics would ensure that the needs of different market segments are met. This would be crucial in the establishment of the company brand. References List Carr, D. (2003). Candymaking in Canada the history and business of Canada's confectionery industry. Toronto, Dundurn Press. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=610980. Cateora, P. R., Gilly, M. C., & Graham, J. L. (2012). International marketing. New York, McGraw-Hill Irwin. Chitale, A. K., & Gupta, R. (2011). Product policy and brand management: text and cases. New Delhi, PHI Learning. Davidson, A. (2009). How the global financial markets really work the definitive guide to understanding international investment and money flows. London, Kogan Page. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=473904. Mcdonald, M. (2011). Marketing plans: how to prepare them, how to use them. Chichester, Wiley. Mcdonald, M., Frow, P., & Payne, A. (2011). Marketing plans for services: a complete guide. Chichester, Wiley. Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2012). Business. Mason, OH, South-Western Cengage Learning. Vasudeva, P. K. (2006). International marketing. New Delhi, Excel Books. Read More