The UK Soft Drinks - Assignment Example

 Contents Page No 1. Introduction 04 2. Corporate Objectives 04 3. UK: Soft Drinks Industry Analysis 04 3.1 Current Trends 05 3.2 Future Trends 07 4. Soft Drinks Industry Analyses 08 4.1 SWOT Analysis 08 4.1.1 Strengths 08 4.1.2 Weaknesses 08 4.1.3 Opportunities 08 4.1.4 Threats 09 4.2 Porter’s Five Force Analysis 09 4.2.1 Threats of New Entrants   09 4.2.2 Bargaining Powers of Buyers 09 4.2.3 Threats of Substitutes 10 4.2.4 Bargaining Powers of Suppliers 10 4.2.5 Determinants of Rivalry among Existing Competitors 10 4.3 PEST Analysis 10 4.3.1 Political Factors 10 4.3.2 Economic Factors 11 4.3.3 Social and Cultural Factors 11 4.3.4 Technological Factors 12 4.4 Marketing Mix 12 4.4.1 Production 12 4.4.2 Distribution 13 4.4.3 Pricing 13 5. Marketing Objectives and Strategies 13 6. Promotional Plans 14 7. Control and Performance Measuring 15 Appendix-I: UK Soft Drinks Consumption, 2004 – 2010 17 Appendix-II: UK Bottled Water Consumption, 2004 – 2010 18 Appendix-III: UK Carbonates Consumption, 2004 – 2010 19 Bibliography 20 1. Introduction UK soft drinks industry is one of the most established and progressive beverages industries in the world. With the application of Porter’s Five Force analysis, it is evident that both bottlers and concentrate producer has excellent potential of generating the revenue. Up to great extent, both these facets of soft drinks are inter-reliant. Different segments of UK soft drinks industry have overlap functions, but interestingly they enjoy their share through mutual coordination and mutual aid in terms of procurement, manufacture, marketing, and supply of their brands. This report primarily deals with the UK soft drinks industry by highlighting its size and current analysis and current potential with the help of analyzing its SWOT analysis, Porter’s Five Force Model, PEST analysis and marketing mix. The report further provides the guidelines and promotional strategies for a new proposed brand X-Power of Britvic Soft Drink Ltd. 2. Corporate Objectives The main intention of XYZ Company is to launch and market its totally new beverage product X-Power through the following objectives: (a) Create strong, loyal, and convicted target market (b) Product innovation with its success campaign and marketing (c) Attaining the leading seat in consumer market through a handsome amount of market capitalization 3. UK: Soft Drinks Industry Analysis The UK soft drinks market has substantial contribution in building up the national economy. Presently a huge numbers of companies are operating in the market. Some of the leading soft drinks companies are Barr (AG) Plc, Bottlegreen Drinks Co, Britvic Soft Drinks Ltd, Coca-Cola Enterprises Ltd, Danone Waters (UK & Ireland) Ltd, GlaxoSmithKline Plc, Highland Spring Ltd, Innocent Drinks Co Ltd, and Tropicana UK Ltd (datamonitor.com). 3.1 Current Trends UK soft drinks market is well established and deep rooted industry having significant contribution toward the national economy. During 2010, UK experienced 14585 million liters in soft drinks which is 7.95% greater than of 2004 and 0.5% greater than of 2009. In terms of bottled water, the industry produced 2055 million liters of water in 2010. In the category of carbonates, UK consumed 6400 million liters in 2010. The detail of these consumptions is shown at the end of this report as Appendices I, II, and III (euromonitor.com). In the carbonated category of soft drinks, the industry has experienced a decline in 2010. The volume sale fell by 2% as compared to 2009. Bad weather spells is the leading factor responsible for this turn down. Further, pressure groups of environmental concerns put a continuous pressure on soft drinks industry in terms of carbon emissions as it has a close relation with the manufacturing of plastic bottles. These factors enforced the customers to drink straight from the tap. Consumers are really worried regarding the impact of transportations and packaging; therefore, the water producing companies essentially advertise the advantages of purity of water, its mineral content, and preferences. Since 2010, the soft drinks industry has been observing a promising trend in terms of hygiene standards. Due to continuous imposing efforts of UK governments, the inclusion of artificial contents (coloring and flavoring) in soft drinks has been minimized. This action has motivated the insightful parents to purchase drinks for their children. The Robinson’s product ‘Be Natural’ has come out as the first squash made up of natural ingredients (Female First, 27 March, 2009). Britvic introduced 600ml PET format in April, 2010 which earned the best record sale of the last 15 years of the industry. Britvic Soft Drinks Ltd along with its Robinson brand dominated the consumer market with 33% unparallel share of total revenue of concentrates. The products like Fruit and Barley Water, Be Natural, and Vimto are the most popular concentrate flavors available in all supermarkets and stores. Tropicana UK Ltd is the most recognized and one of the leading fruit/vegetable juice companies in UK with a share of 10% of the total volume of soft drinks in 2010. The share is less than 1% as compared to its revenue in 2009. After the withdrawal of Minute Maid pure juice of Coca-Cola Enterprise, Tropicana’s 100% juice gained appreciation in target market (euromonitor.com). The year 2010 observed new trends in consumer behavior as most of them remained money oriented instead of quality of products. The global turndown has minimized the buying powers of a general consumer to purchase high cost juices. Alternatively the presence of cheaper concentrates has created extreme difficulties for juice manufacturer companies to promote their products. Despite of offering several juices on discount rates, this category of soft drinks is still under pressure. RTD coffee is struggling due to extreme cold seasons in recent years. In terms of RTD coffee, the British has conventional behavior. They like to have hot coffee, therefore no concept of drinking cold coffee. Further UK summer weather is also a cause of declining the RTD coffee because it also negatively affects the recognition of hot soft drinks. In 2010, Kraft Foods dominated the RTD coffee with returns of 65% of the total volume. However, the company observed a sharp failure of 5% as compared to earnings of 2009 (euromonitor.com). Nestlé UK Ltd held a 3% off-trade share in 2010 which observed the first time loss for Nescafe since its appearance. Emmi’s starting reception in 2006 was one of the best records in RTD coffee in recent years. In 2010, Emmi increased its share from 24% to 30%. The year 2010 also observed the supremacy of Coca-Cola Enterprises Ltd (CCE) in many categories of soft drinks. The company successfully kept its consumers sticks with its brands. Coca Cola introduced Powerade in 2010 along with the partnership with the London Summer Olympics scheduled in 2012. Coca Cola is expected to enhance its growth and sale through this partnership. 3.2 Future Trends Global warming and other environmental concerns are burning issues in European countries and same like other countries UK civil societies, NGOs, and official agencies have particular concerns towards it. Due to these environmental concerns and global recession, water bottled industry is expected to remain effected during next several years. It seems that consumer will develop a sense of fear and financially a perceptive attitude because of impact of packaging and transportation. Due to this factor, the inclination of consumer will remain towards tap water and therefore 1% reduction is predicted in volume turn over during next year (euromonitor.com). The compound annual growth rate (CAGR) of concentrates is expected to fall by 1% during next couple of years because the global recession will reduce the consumers’ bargaining power. The downfall is expected to persist even after the improvement in economy; however, the recovery of economy will enhance the status of consentrates and it will become one of the mainstream beverages. The value and sale of double-strength concentrates is expected to remain short of normal in near future however by getting a standard status in the mainstream products, the category will become stable. The category of fruit/vegetable juice of soft drinks is struggling at slower pace and likely to drop more than 0.5% compound annual growth rate in next couple of years. After the revival of UK economy, the category is expected to flourish because consumer behavior will become health oriented instead of value oriented. As far as RTD coffee is concerned, this category observed a 5% decrease in compound annual growth rate during the last forecast period. Since coffee houses are continuously increasing their market share in UK, therefore, RTD manufacturers will have to introduce new ideas to cater this challenge. 4. Soft Drinks Industry Analyses 4.1 SWOT Analysis SWOT represents the inner Strengths and Weaknesses of any organization and also the external Opportunities and Threats in front of that company. SWOT evaluation is really a widespread method by which supervisors produce a fast summary of the company’s proper scenario (Hill & Westbrook, 1997). 4.1.1 Strengths Huge and progressive industry both in UK as well as on global scale A detailed history available regarding leading soft drinks companies and markets Affordable products’ rate One of the basic requirements of a general consumer Non-alcoholic Variety of brands, flavors, and packages 4.1.2 Weaknesses Small range of using material Low per unit cost Traditional preservations Negative publicity regarding to some brands or drinks 4.1.3 Opportunities New packaging material Replacing of alcoholic drinks Soft drinks can replace the demand of tea and coffee Progressing bottled water markets in UK 4.1.4 Threats Strong competitive environment in consumer market Dependency on bottle manufacturers Slow growth in terms of carbonated drinks Pressure from environmental controlling and sustaining agencies Health issues particularly obesity and diabetes Exceeding distribution costs 4.2 Porter’s Five Force Analysis The PEST analysis of UK soft drinks industry highlights the major influences in target markets and consumer behavior. According to Sanderson and Luffman (2001), this analysis indicates “current strategies of competitors, the potential of new competition to enter the market, the behavior of suppliers and buyers, and the availability of substitute products” (2001, p.20). 4.2.1 Threats of New Entrants   Although it is considered that competitive environment is all the time available at a reasonable cost in UK, even then the threat from new entry in the soft drinks industry is low because it needs a huge amount of capital investment. Further the presence of Coca Cola and Pepsi is a real threat to new entrants. It is not easy to have access to the exclusive territories for the distribution of new brand. 4.2.2 Bargaining Powers of Buyers Since soft drink industry has less pricy products per unit therefore in UK the customers have reasonable buying power to purchase a soft drink of their choice. However, the location and quality may lessen their bargaining power. 4.2.3 Threats of Substitutes The threat of substitutes is quite low in soft drinks industry because it also possesses numbers of alternate options such as juices, tea, etc. 4.2.4 Bargaining Powers of Suppliers In UK soft drinks industry, the bargaining power of suppliers is somewhat low because main ingredients of some exclusive products are either quite costly or are not easily available. For example, the suppliers have less bargaining powers because of high costs of packaging, transportation, and damaging. 4.2.5 Determinants of Rivalry among Existing Competitors In UK, the soft drinks industry is growing swiftly and a fierce competition exists between few competitors. An intense competition is on peak for many years between Coca Cola and Pepsi. This intense competition is also an external threat to the new entrant to challenge the two strong companies of the industry. 4.3 PEST Analysis The competitive marketing environment continuously changes, therefore a well thought-out, composed, detailed and consistent analysis is necessary for best evaluation. Despite of the fact that PEST analysis is used on the basis of previous data, interestingly it can be used as a forecast model (Wilson and Gilligan, 1998).  4.3.1 Political Factors Although the distressing incident in London on 7th July 2005 has turned out the most difficult time for the business world in UK but even then political conditions in UK remained good as government institutions are strong and reliable. In current scenario, there is no such situation or government agreement that has a negative effect on soft drinks industry. However, in terms of human health particularly with respect to children, UK government has passed several legislations including the education acts of 1996, 1998, 2002 and 2006. The government announced its nutritional regulations for school children as “new standards for school food” in 2006. These regulations are a sort of external pressure on the soft drinks industry. 4.3.2 Economic Factors Due to war in Iraq and war against terrorism, the fuel cost has risen tremendously throughout the world during recent years (http://www.whatmattersweblog.com). In response of fuel cost, soft drinks industry might add more investment to meet its necessary requirements particularly with respect to transportation and packaging. Further the decline of GDP is a also a serious concern for soft drinks industry in UK as it has dropped significantly from 3.9% in 2000 to 0.7% in 2009 (http://www.wikipedia.com). In case, the global economy falls down, corporate environment decreases, and ultimately a negative impact will occur on consumer behavior. 4.3.3 Social and Cultural Factors The social and cultural environments vary in different societies. They mainly depend on the nature of business, demographic aspects and custom values. These factors highlight the consumer behavior and the strength of the potential markets. Previously, the demand of soft drinks was based on its facilities but due to global economic downturn, the trend has been changed and now it is primarily associated with the prices. UK people have diversified cultures and therefore have a direct effect on soft drinks industry. The industry has to rebuild the confidence of customers especially from young generation. 4.3.4 Technological Factors In UK, a growing pressure on prices has been building up by the influence of technological advancements. Due to the presence of latest manufacturing plants and transportation modes, the supply of soft drinks items across the borders is going fast and creating valuable revenue to the industry. 4.4 Marketing Mix UK soft drinks industry has used number of strategies over the years to maximize its growth and to maintain its market share in corporate world (Bokaie, 2007). Some of the leading strategies are highlighted below. 4.4.1 Production UK soft drinks companies provide both top quality frosty and cozy beverages which might be of similar value to buyers at anytime. It is the production technique of the organizations to generate a wide variety of items to ensure that everybody of UK, belonging to any age group could possibly ingest them all. Furthermore, beverages are manufactured in numerous styles to enable the customers to end up being paid for by every individual irrespective of whether affluent or poor (Paley, 2006). Although, companies distribute their products of different brands to every one in UK, yet there are a few beverages which concentrate on specific citizenry in the particular community. For example, the drinking products objectively focus on senior citizens who are associated with age group of 35 to 39 years. Similarly, beverages related to sports activities focus on the individuals who undergo lots of exercise and training while pooh sipper generally spots the youngsters of 5 to 12 years (Coca Cola Annual Report, 2010). 4.4.2 Distribution The distribution utilized by soft drinks companies has earned a lot of revenue to this industry. Primarily, the companies operate throughout the UK and even having their network across the borders. For example, Coca Cola operates through its sub-offices in around 320 countries in the entire world which assist the headquarters in disbursing the particular items (Coca Cola Annual Report, 2009). 4.4.3 Pricing Pricing strategy of soft drinks tends to be the most effective in the beverage market. The reason is sure i.e. its competitiveness structured pricing strategy has enabled the companies to stiffly contend with some other refreshment providing corporations. Since the products are generally consisting of distinctive dimensions, the price strategies are based on the quantity (Pride & Ferrell, 2008). 5. Marketing Objectives and Strategies Britvic Soft Drink Ltd is intending to sustain a widespread marketing campaign to ensure its utmost visibility in the target market. The company is aimed to follow the following salient features of the marketing objectives and strategies to ensure the achievement of its strategic objectives. Each soft drinks company service does not require to be installed at a retail location; however, since soft drinks outlets mostly depend on retail traffic, therefore Britvic Soft Drink Ltd has to establish its distributing outlets at appropriate locations to maximize its visibility amongst consumers. Traffic density is an important factor that must be taken into consideration prior to the establishment of any soft drinks outlet. A watchful analysis would enable the managing authorities to consider diversified opportunities for immediate drinking assertions along with two important factors. First one is to figure out the approximate sales potential of each pedestrian while second is the total strength of pedestrian traffic during working hours and its percentage which may patronize the new distributing source. Easy access through adequate and convenient parking with trouble-free access is essentially required to gain the loyalty of potential customers. Britvic Soft Drink Ltd may experience some strict government regulations regarding soft drinks industry, therefore the company has to launch an extensive campaign in the local targeted market of UK through electronic and print media and word of mouth advertising. 6. Promotional Plans Britvic Soft Drink Ltd will be required to put its best efforts to enhance the customers’ awareness, loyalty, and conviction about its products and services. In order to gain its initial short terms goals, the company needs to focus on its communication strategy to the target markets. Advertising policy will be a key factor. There are numbers of theories and models which marketers apply to motivate the consumers towards the positive attitudes of their brands, however, the Hierarchy-of-Effect Model is considered as the predominant model of advertising because it elaborates the awareness, knowledge, liking, preference, conviction, and purchase processes without any ambiguity (Clow & Baack, 2007). By the application of this model, Britvic Soft Drink Ltd emphasizes to keep itself present on regional basis i.e. UK. An electronic campaign is quite beneficial through newspapers, radio, television, and online contact to know the trends of local customers. To make the communication more effective and productive, an advertising consultant can be arranged to carry out this important campaign. Promotional plan for X-Power is diversified and will incorporate a variety of marketing connections. Therefore, in order to monitor and observe the services, products, and market position, the company intends to arrange a program to receive the feedback from the customers. Different techniques will be applied to do this such as telephonic conversation, direct mail, opinion through public surveys and online comments. Since internet is the most ready and widely used medium to communicate, therefore the company’s website can be a great channel for communication. 7. Control and Performance Measuring Managers of Britvic Soft Drink Ltd will control the routine operations by applying categories of task performance and group maintenance. This process will consist of 03 separate and distinct steps. In order to determine what actual performance is, it is necessary to acquire information about it. Managers will gather the information through 04 common sources which include personal observations, statistical reports, oral reports, and written reports. Each has particular strengths and weakness. However, a combination of them will increase the reliability of information for reviewing the overall control process. Employee satisfaction, turnover and absentee rates are some controlling factors applicable to all Britvic Soft Drink Ltd managers. The comparison of actual performance with standard performance is the second step the managers must undertake in soft drinks industry. It determines the degree of variation between actual performance and the standard. In all activities, some of the variation in performance cannot be avoided. So a flexible approach of management determines the acceptable range of variation. Deviation in excess of this range is significant and receives the managers’ attention. The third and final step is managerial action. Britvic Soft Drink Ltd managers will either correct the actual performance or revise the standards. If the source of variation would be deficient performance, managers would take corrective actions which will include the changes in strategy, structure, training program, replacement of the personnel, or improvement or change in taste of brand etc. Immediate corrective actions get things back on track. After determining the root causes of deficient performance, the basic corrective action proceeds to correct the source of deviation. Managers tend to rationalize that they do not have the time to take basic corrective action; however, they would analyze the deviation and spend their time to permanently correct significant variances between standard and actual performance. One of the most significant facets of launching and controlling the marketing of an innovative products is to take risks without a clear foundation (Harvey and Brown, 2006; Todnem & Rune, 2005). Change management is also a part of controlling of organization and there are two theories in change management i.e. the individual change management, and the organizational change management. Individual change management is the process in which the company provides tools and training to its employees to be able to handle their personal transition through change (Aladwani, 2001). The ADKAR Model is a model that can be used as an individual controlling and change management (Hiatt, 2005). The use of ADKAR model in Britvic Soft Drink Ltd would deal the marketing plan of X-Power in four aspects. It will include management of personal transition; focus on conversation on the conflicting issues, composite feedback from the consumers and employees about the product, and corrective preventive measures against the deficiency aspects of marketing. Appendix-I UK Soft Drinks Consumption, 2004 - 2010 Year 2004 2005 2006 2007 2008 2009 2010 Million liters 13510 13565 13985 13865 13725 14005 14585 % change -1.4 +0.4 +3.1 -0.9 -1.0 +2.0 +4.1 Liters (per person) 224.8 224.5 230.3 227.1 223.6 226.9 235.1 Value( £ million) 11955 12155 12525 12595 12720 13120 13880 % change -1.4 +1.7 +3.0 +0.6 +1.0 +3.1 +5.8 Value per liter (£) 0.88 0.90 0.90 0.91 0.93 0.94 0.95 (Source: British Soft Drinks Association, 2011) Appendix-II UK Bottled Water Consumption, 2004 - 2010 Year 2004 2005 2006 2007 2008 2009 2010 Million liters 2060 2140 2240 2125 2005 2040 2055 % change -0.5 +3.9 +4.7 -5.1 -5.6 +1.7 +0.7 Liters per person 34.3 35.4 36.9 34.8 32.7 33.1 33.1 % of all soft drinks 15.2 15.8 16.0 15.3 14.6 14.6 14.1 Value (£ million) 1380 1470 1550 1460 1385 1425 1440 % change -1.8 +6.5 +5.4 -5.8 -5.1 +2.9 +1.1 £ 0.67 0.69 0.69 0.69 0.69 0.70 0.70 (Source: British Soft Drinks Association, 2011) Appendix-III UK Carbonates Consumption, 2004 - 2010 Year 2004 2005 2006 2007 2008 2009 2010 Million liters 6195 6015 5875 5810 5920 6100 6400 % change -5.1 -2.9 -2.3 -1.1 +1.9 +3.0 +4.9 Liters per person 103.1 99.6 96.8 95.2 96.4 98.8 103.1 % of all soft drinks 45.9 44.3 42.0 41.9 43.1 43.6 43.9 Value (£ million) 6930 6795 6755 6850 7120 7515 8000 % change -1.8 -1.9 -0.6 +1.4 +3.9 +5.5 +6.5 Value per liter (£) 1.12 1.13 1.15 1.18 1.20 1.23 1.25 (Source: British Soft Drinks Association, 2011) Bibliography Aladwani, A. 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