New Product Development of Coca Cola - Case Study Example

Marketing research and planning project Contents Introduction 3 2.Corporate Objectives 4 3.Market Overview 4 4.Marketing Audit: Internal and External 5 4.1.Analysis of external challenges 5 4.2.Analysis of internal resources 9 5.Assumptions 11 6.Marketing Objectives 11 7.Strategies for the new or modified product 12 8.Promotional Program 13 References 15 1. Introduction This study would be centred towards identifying new product development in well known multinational company known as Coca Cola. It is an American multinational beverage manufacturer, marketer and retailer of beverage and syrups. The company has its headquarters located in Georgia. Asa Griggs Candler was solely responsible for introducing Coca Cola formula in 1889. Coca Cola as a fir was incorporated in 1892. The company currently operates through a franchised distribution system, whereby concentrated syrups are then sold across different bottlers located across the globe. Coca Cola Company throughout the years has acquired many companies in order to diversify their product range. In this study a new product shall be introduced which would enable the firm to acquire high revenue margins. UK market is a highly competitive market place and a company has to possess competitive advantage. This in turn supports the firm to retain its market position. Coca Cola as the trademark beverage facilitates achieving higher sales volumes. The company should shift its strategic position in order to gain maximum percentage of consumer market share. UK market highlights a tremendous growth in fruit juice market segment. This opportunity can be explored by the firm so as to formulate fruits juices and smoothie bars. The entire study would encompass various strategic frameworks to analyze UK market conditions and suitability of new product for the market. Marketing objectives and promotional program would be designed in relation to the new product designed by the company. Strategic goals shall be highlighted in this study along with marketing objectives. 2. Corporate Objectives The company’s major objective is to gain high market share and deliver superior quality products to customers. In UK market, soft drinks market segment is highly concentrated and there is a need for shifting to a new product category. It can be stated that main objective of the company is to introduce a completely new innovative product that can address rising market demand. Health drinks or fruit juices has captured maximum market share in United Kingdom. This might prove to be an opportunity for the company in terms of increasing their customer base. Coca Company can effectively utilize its brand image to promote new product being launched in the UK market. The overall goal of the firm is to develop a loyal base of customers who are inclined towards any product launched by Coca-Cola brand. This objective would be accomplished with the adoption of new product development strategy. 3. Market Overview In UK, smoothie bars and juices are witnessing a high market growth over the past five years. Though this particular industry is comparatively new in UK market but it has been able to acquire sufficient consumer market share. United States possesses an intensely competitive market of smoothie bars. The industry revenue in this particular segment is estimated to increase by 7% in next five years (Alba and Hutchinson, 2008). Firms operating in this industry segment are estimated to contribute approximately £54.1 million revenue. This growth has occurred majorly because of rising health awareness and juicing trend. It even helps to promote wide array of benefits related to vegetable based and fruit based juices. Smoothie bars are sweetened and blended made of vegetables or fruits and mixed with ice. UK’s fruit juice consumption in 2012 had decreased by 4.9% and this was due to high prices being charged for fruit juices (IBISWorld, 2014). Figure 1 clearly states the consumption pattern in context of smoothies and fruit juices. Figure 1: Statistics of UKs market trend (Source: Soft Drinks Association, 2013) Fruit juices usually possess a healthy image and customers have to be convinced that no added sugars are incorporated within the product. Single serve fruit juices have gained its importance in terms of meal deal and are preferred by adults and children. 4. Marketing Audit: Internal and External 4.1. Analysis of external challenges PESTEL analysis Coca Cola Company has been offering its products to UK market from past many years. The introduction of new product needs to take into consideration various external conditions. Political forces are highly prevalent in UK market, where new strategies are implemented by political bodies to safeguard health of individuals. GDP growth is enhanced through revenue margins acquired by fruit juice companies. Hence political conditions are in favour of launching such health related product into marketplace. Food and Drugs Act that has been passed by UK government is strongly inclined towards health and nutrition aspect of citizens. Though in legal terms there would be certain changes incorporated in this Act but it shall be in favour of nutritional content of consumers (Dahlen, 2009). UK market represents an economically stable atmosphere where smoothies and fruit juices to be launched by the company shall gain desirable profit margins. On the other hand, the new product would be placed at competitive prices which might prove to be appealing for large base of customers. UK market basically represents a society of multi-culture in terms of eating habits and religion. However in present scenario customers are more concerned about their health (Simerson, 2011). This in turn increases demand for juices, food or fruits which provides health benefits and are highly nutritive. Customers can belong to any income group but their maximum expenditure is vegetables and fruits since it constitutes a major part of their health. Technology is ever changing and this shall prove to be an advantage for the new product of Coca Cola Company. Technological advancement facilitates extraction of nutritive and healthy juices from various fruits (Wintzer, 2007). Attractive promotion and packaging is easily available due to technological advancements. The major environmental concern surrounding the new product is depletion of natural resources. However least amount of sugar and water content will be utilized in this product manufacturing process. Packaging would be totally based on disposable or recyclable bottles. This shall reduce overall impact caused on environment and prevent violation of any environmental rights through new product development. Porters 5 Forces competitive analysis The five forces identified by Michael Porter are bargaining power of suppliers, bargaining power of buyers, competitive rivalry, threats of substitute products and threat of new entrants. UK market is an intensely competitive marketplace where different flavours of juices are available. The market share of UK fruit juice flavours are highlighted in figure 3. Figure 2: Market share of juice flavours (Source: Soft Drinks Association, 2013) The firms operating in this segment not only compete in juice flavours but also in context of chilled and ambient fruit juices. This has been well represented in figure 4. Figure 3: Market share of chilled Vs ambient juices (Source: Soft Drinks Association, 2013) As per figure 3 and 4, it can be stated that fruit juice segment has enhanced in the past few years. Likelihood towards fruit juices are more commonly observed in children, then women and finally men. Competitive rivalry for the new product shall be high due to presence of big players such as Refresco Gerber, Fruitapeel and Innocent drinks. Bargaining power of suppliers is high due to presence of more companies and less number of suppliers. Bargaining power of customers is relatively high because switching costs is low and there are firms offering similar products (Russell, 2009). Threat of substitute products is low since customers inclined towards fruit juices will continue to consume such healthy drinks rather than shifting to any form of energy drinks. Threat of new entrants is moderate because there is no such entry barrier in UK market in terms of offering fruit juices or nutritious products (Porter, 2008). In comparison to other products or services, manufacturing fruit juices or smoothies requires less capital investment. 4.2. Analysis of internal resources SWOT analysis The strength of this new product is its being health oriented. High protein content is added into smoothies and fruit juices in order to supply best health juices to UK consumer market. Excellent availability and distribution networks of the new product form its strength. Superior quality of advertising campaigns shall be incorporated to acquire attention of customers. The product would even be considered as a healthy option in comparison to wide array of aerated drinks. Weakness of this product is availability in less quantity and operating within an intensely competitive industry. There are widespread opportunities available which can be explored by the company (Ulwick, 2005). Major opportunities for the new product is leveraging a successful brand, competition on basis of price, extensive advertising mechanism, more of brand recognition and focusing on some rare fruit flavours like Peach, Apricot, etc. These opportunities are closely associated with business growth and development. On the other hand, threat to be witnessed by the product is from other competitors supplying fruit juices or health drinks. Major substitute for the product is energy drinks or protein shakes offered by other players in the industry. UK market comprises of many companies who are offering fruit juices or smoothies. Marketing Mix The four elements of marketing mix are product, price, place and promotion. New product to be introduced by the company is fruit juices and smoothie bars. The texture of the product shall be normal to other fruits juices but with certain additional components. Fruit juices and smoothie bars shall be made up of seasonal vegetables and fruits. There would be some additional ingredients like yoghurt, honey, ice-cream, syrup, milk, chocolate, soya milk, health supplements or green tea (Lasserre, 2012). Figure 4: Product The company would be utilizing disposable bottles for their smoothies and fruit juices so as to reduce environmental impact. Pricing strategy to be used for this new product is market penetration pricing. Through this strategy the firm shall be able to set strong market position in UK where fruits juices or smoothies are offered at high prices. Distribution network is well established by Coca Cola Company in UK market (Mcfarlin and Sweeney, 2008). These new products shall be offered to customers through retail stores. Product bundling would also be implemented in order to offer these new products along with burgers or any other food products. Promotion will be done through traditional media and electronic media. The channels for promotion would be newspapers, billboards, TV and radio advertisement, social media and event sponsorship Fill, 2013). 5. Assumptions There are certain assumptions which have been made for introducing fruit juices and smoothies in UK market. Firstly it has been assumed that most of UK consumers are more conscious about their health and diet. This even includes the aspect that customers are likely to opt for fruit juices compared to aerated drinks. There is large number of carbonated drinks offered in UK market by established players. Coca Cola Company is expected to explore market opportunities related to growth in fruit juices segment. The other assumption is that brand image build by the firm shall facilitate market penetration of the newly launched product. Coca Cola Company desires to target its loyal base of customers. This would not guarantee achieving high revenue margins by the company since many individuals in chosen market segment may not be inclined towards fruit juices. Other assumption for the company is UK market offers high growth potential for this product type in nearby future. The entire marketing strategies for the new product are mainly based on this form of assumption. It has even been assumed that return on investment shall be achieved within the next 3 to 4 years (Picton and Broderick, 2009). These assumptions to certain extent are important because it enables strategic development and growth before a new product is being introduced into the market place. 6. Marketing Objectives Marketing objectives for the new product to be launched by Coca Cola Company is centred towards gaining maximum market share. Fruit juice segment in the past five years has noticed a slight decline. This is mainly because fruit juices are offered by firms at high prices which are not affordable by middle income class group segment. The major marketing objective for this new product is to address demand of middle income group. This shall encompass both upper and lower middle income group (Fill, 2006). Market penetration strategy has been incorporated by the company in order to offer competitive products to target market. As per market data analysis low prices would be offered for the new product such as fruit juice and smoothies. The price set for the new product would be cheapest in comparison to other players in the market place. Product to be introduced in the market shall be unique since new ingredients will be included like rare fruit juices of peach, apricot, etc (Peng, 2013). This might attract larger percentage of market share. On the other hand, main target customers for this new product are children and young adults. Hence innovative promotional tool would be utilized to highlight the product before and after its launch. Social media and event sponsorship will be effectively incorporated as it is the best medium to associate product with a particular theme. 7. Strategies for the new or modified product The strategies for the new product will be aligned with product quality and customer satisfaction. Customers’ satisfaction level can only be enhanced when hidden demands are efficiently met by a company. These demands mainly represent availability of sufficient product quantity at competitive prices (Hoskisson, Hitt, Duane and Harrison, 2007). In current scenario customers are becoming conscious about their health and try purchasing healthy items. These products are mostly costly and cannot be easily afforded by all income class segments. Hence new product strategy is to increase product quantity and reduce product prices. This can be achieved through setting lowest prices for the product and transforming packaging whereby more fruit juices or smoothies can be supplied to customers. Coca Cola Company in present scenario is gaining high revenue margins from its flagship product. These funds can be allocated for new product development in order to enter into a completely different market segment (Henry, 2011). The company in the initial 2 or 3 years will offer its product at lowest cost possible. In the later stage when desirable market share has been acquired then product prices shall be increased as per market demand trend. It can be stated that the business strategy initially would be to focus on expanding its customer base and acquiring high profit margins. Innovative flavours shall be introduced in the fruit juices so as to provide value addition to its target market. 8. Promotional Program The promotional program would be organized for a period of twelve months. It would be subdivided into various sections in order to advertise before and after product launch. Promotion can be stated as a vital component of marketing mix. There are various promotional measures and can be classified into traditional and digital media. With technological advancements advertising trend has shifted towards digital or electronic media (Churchill, 2009). However integrated marketing communication is basically incorporated by all firms so as to promote similar brand message through different communication channels. Advertisement campaigns will be designed and broadcasted through television and radio. Social media would also be utilized to promote the new product via facebook, twitter, etc (Fill, Hughes and Francesco, 2013). Billboards across various locations shall help to attract customer attention. Event sponsorship is also an effective medium where company sponsors a famous event related to sports, reality shows, etc., in order to promote their new product.   Time Period (Months)   Before launch After launch Promotional Activities 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th Advertising campaign (television & radio)                         Social Media                         Billboards                         Celebrity Endorsement                         Event Sponsorship                         As per the timeline of promotional program, certain activities shall be organized before product launch mainly advertisements, event sponsorship and celebrity endorsement (Maignan, 2008). These activities along with additional activities like advertising in social media and through billboards will be continued even after product launch. References Alba, J. W., and Hutchinson, J. W., 2008. Dimensions of consumer expertise. Journal of Consumer Research, 24(3), pp. 411-454. Churchill, G., 2009. A paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 25(4), pp. 98-116. Dahlen, M., 2009. Marketing communications: a brand narrative approach.UK: Wiley. Fill, C., 2006. Simply marketing communications. UK: FT Prentice Hall. Fill, C., 2013. Marketing communications: brands, experiences and participation, 6th edition. Harlow: Pearson Education. Fill, C., Hughes, G., and Francesco, S., 2013. Advertising, strategy, creativity and media. USA: Pearson. Henry, A., 2011. Understanding strategic management. New York: Oxford University Press. Hoskisson, R., Hitt, M., Duane, R., and Harrison, J., 2007. Competing for advantage. USA: Cengage Learning. IBISWorld., 2014. Juice and smoothie bars in the UK. [Online] Available at: < http://www.ibisworld.co.uk/market-research/juice-smoothie-bars.html > [Accessed 16th Jan 2015]. Lasserre, P., 2012. Global strategic management. Singapore: Palgrave Macmillan. Maignan, I., 2008. An international review of sponsorship research. Journal of Advertising, 36(4), pp. 13-24. Mcfarlin, D. B., and Sweeney, P. D., 2008. International management. New Delhi: Dreamtech Press. Peng, M., 2013. Global strategy. USA: Cengage Learning. Picton, D., and Broderick, A., 2009. Integrated marketing communications, 3rd edition. Harlow: FT- Prentice Hall. Porter, M. E., 2008. Competitive advantage: creating and sustaining superior performance. New York: Simon and Schuster. Russell, E., 2009. Fundamentals of marketing communications. UK: AVA Publishing. Simerson, B.K., 2011. Strategic planning: a practical guide to strategy formulation and execution. USA: ABC-CLIO. Soft Drinks Association., 2013. Refreshing the Nation. [Online] Available at: < http://www.agbarr.co.uk/pdf/2013UKsoftdrinksreport.pdf > [Accessed 16th Jan 2015]. Ulwick, A. W., 2005. Business strategy formulation: theory, process and the intellectual revolution. USA: IAP. Wintzer, E., 2007. Global competition and strategic management. Germany: GRIN Verlag. Read More