Sanitarium Health and Wellbeing Company - Case Study Example

1.1 - Current market mix 1.1.1 - Current product Sanitarium is a food company that produces and markets health products such as breakfast cereals, biscuits, beverages etc. across New Zealand and Australia. The company offers its most famous brand named Weet-Bix, which actually originated from a wheat biscuit recipe, to kids, teenagers and young adults across the two aforementioned countries. Indeed, the market share of this product was estimated to be just under 9% in lucrative Australian markets. The company has expanded its product / brand portfolio by adding new flavors and variety such as “Weet-Bix Fruity, Weet-Bix Hi-Bran, Weet-Bix Multigrain and Weet-Bix Crunch Caramel” (Demo Design Report, 2006). Sanitarium claims that its Weet-Bix wheat biscuits are an ideal breakfast food because it fulfills calorie needs and energy requirements. Indeed, the major ingredients include fibre, fat and sugar (low), vitamins, milk, zinc, magnesium, folate and iron (Product Review, 2010). 1.1.2 - Current pricing The Sanitarium Company offers its products at all retail stores, grocery shops and online stores for convenience of buyers across Australia and New Zealand. The company uses competitive pricing strategy because of highly competitive nature of food and confectionary industry. The prices range from $1 – 10 because of differences in flavours, sizing and quantity. In simple words, the prices will remain competitive because there is greater threat of substitute products from existing companies such as Kelloggs, Uncle Toys, House brands, Nestle and other small scale producers and marketers. It is worthwhile to mention that Kelloggs has been marketing Nutri-grain, Cheerios, Coco Pops and Nesquik in Australian market. In conclusion, there is stiff competition that keeps prices affordable for consumers from different social classes (Demo Design Report, 2006). 1.1.3 - Current distribution The Sanitarium Company has already expanded its operations all across Australia because of an efficient distribution and supply chain network. The company supplies its product to all retail and commercial stores, grocery houses, medicine shops and online stores. In this way, Sanitarium has increased market reach of Weet-Bix product and has attracted maximum customers towards its brand. In addition, the company focuses on efficient supply because the Utility of Place and Time play a vital role in success of any food product. Sanitarium has inducted a new eCargo system to ensure flexibility in distribution channels, to reduce human error and to facilitate record keeping, freight and inventory management (Ecargo Report, 2010). 1.1.4 - Current promotion The company has very strong and balanced promotional strategy. Indeed, Santarium has chosen Tim Cahill and Brett Lee as its brand ambassadors who create awareness about benefits of Weet-Bix among tween and teen groups. In addition, the company has been using Social networks and online digital communities such as Face book, YouTube and Twitter, which are used to posts news, promotion, events, commercials and related videos. However, Twitter is more famous among Australian customers of Weet-Bix in comparison to Face book as the micro-blog keeps them updated about new arrivals, events etc. For instance, Sanitarium also uses print (newspapers, magazines, publications etc.), electronic (TV), radio, and internet media for publicity and promotion of products. Partnership with Cycling Queensland for sponsoring and endorsing Weet-Bix Kids TRY-athlon series followed by agreements with My Cricket are other promotional campaigns to gain attention of kids and teens (Symes, 2010). 1.2 - Environmental Scanning 1.2.1 - Political/legal Environment The political environment across Australia is stable because the military does not intervene in government affairs. In other words, there is no political uncertainty that may lead to societal unrest in the nation. Nevertheless, there are strict quality assurance laws and regulations defined by Australian civil government authorities. Pressure and community welfare groups exist and they may compel any business organisation if it does not follow food quality standards. 1.2.2 - Economic Environment Per Capita Income in Australia is estimated to be above $19,200, which ranks 21st in the world. Hence, it is justified to argue that Australia is one of the nations where consumers have higher income level and relatively stable purchasing power. In addition, the 87% population resides in urban areas with proper access to education followed by health awareness (Internet: indexmundi.com; nationmaster.com). 1.2.3 – Socio – cultural environment Indeed, the kids and teenagers have immense exposure to electronic, print, radio and internet media. Therefore, they have significant information about new products / brands and advertisements. Also, the standard of living has been improving across Australia because of economic growth and stronger government initiatives (Internet: indexmundi.com). 1.2.4 - Technological Environment For instances, the rival organisations such as Nestle, Kelloggs, Uncle Toys and Nestle have employed state-of-the-art plant machinery and equipment to facilitate business operations. This is mainly because of the fact these competitors have extensive financial resources and their products have already received consumer acceptance and recognition. Indeed, they acquire new technology to maintain their business growth and market share (Gracewood, 2009). 1.2.5 - Natural Environment The major raw materials of Sanitarium Company are wheat, sugar, zinc, magnesium, milk, iron and folate. These minerals and agricultural products are used to produce Weet-Bix biscuits and cereals heavily demanded by Australian customers. Hence, any decrease in production of milk and agricultural products affects the supply side of raw materials in the market and increases product prices. Similarly, decline in extraction and import of minerals across Australia also results in higher prices and negatively affects production of Weet-Bix (Dunn, 2010). 1.2.6 - Competitive Environment The major competitors of Sanitarium Food Company are House brands, Kelloggs, Uncle Toys and Nestle and these companies enjoy excellent reputation and goodwill in the marketplace. Indeed, the competitors’ products also enjoy consumer acceptance, awareness and brand recognition because of constant focus on innovation, differentiation and R&D. Kelloggs has been marketing Nutri-grain, Cheerios, Coco Pops and Nesquik in Australian market that are viewed as strong brands in the Australian food industry (Product Review, 2010). 1.2.7 - Demographic Environment It should be pointed out that there are 7.5 million regular customers of cereal products across entire Australia. Also, the tween and teenagers usually rely on their pocket moneys whereas young adults do part-time jobs. In this way, the primary target market of Sanitarium enjoys stable purchasing power. It should be argued that there is immense potential for Weet-Bix products because of unique recipe and blend of ingredients (Labi, 2010). 1.3 - SWOT Analysis Strengths: Substantial past experience of over 100 years in food industry followed by production of Weet-Bix biscuits. Establish brand name and excellent reputation among the targeted segments. Excellent relationships with distribution channel members in the marketplace. High standards of quality. R&D will enable the company to offer new blends and flavours in improved packaging. Highest market share of Weet-Bix and extensive financial resources. High marketing and advertising budgets. (Dunn, 2010) Opportunities: Demand will increase because of increase in market size (population). Hence, there is huge potential of sales. Food products like biscuits have relatively inelastic demand; therefore, immense business potential (Labi, 2010). Kids and teenagers have stable purchasing power (due to pocket moneys and part-time jobs); hence, market will flourish. Weaknesses: Transportation and product movement network needs to be improved because there are certain inefficiencies in record keeping, inventory management and product handling (Ecargo Report, 2010). Threats: Highly price sensitive industry. The existing firms will retaliate that may lead to price wars. Changing buyer tastes. Consumers may shift to new products if they have unique taste. Strong competitors such as Uncle Toys, Kelloggs and Nestle. Threat of substitutes is always there (Demo Design, 2010). Chapter # 2 - Segmentation Theory 2.1- What is Segmentation? Segmentation refers to division of target market in order to analyse the scope and business potential of producing and marketing certain products to different consumer groups. Segmentation could be divided into four types known as Geographic, Behavioural, Demographic and Psychographic (Kotler). 2.2- Why is segmentation used? It should be emphasised that business organisations do not target every single customer in the market neither they could focus on social classes. Hence, there is dire need to divide consumers into various segments by considering their age, marital status, gender, education, family background, attitudes, behaviours and personal experiences. Indeed, this segmentation will enable companies to identify the ‘gaps’ that could be met through production and marketing of different products. In order words, segmentation actually helps identifying and capitalising the opportunities, which later lead to business success and growth (Kotler). 2.3- How can firms benefit from a multidimensional approach to segmentation? Multidimensional approach to segmentation is extremely beneficial for business firms because they could identify needs, tastes, desires and preferences of different market segments after which the products are developed and marketed to consumers. It should be noted that multidimensional approach also facilitates research and development in the light of specific information regarding different targeted groups obtained after segmentation (Kotler). Chapter # 3 - Target Market Identification 3.1 - Geographical Traits The Sanitarium Food Company has been targeting its Weet-Bix food products to tween agers, teenagers and young adult consumers in different geographic areas and locations across Australia and New Zealand. As far as the Australian market is concerned, it should be pointed out that Weet-Bix is offered countrywide and it has been easily available in Sydney, Melbourne, Adelaide, South Wales, Perth, Queensland and others etc. Nonetheless, the group has adopted localisation and adaptation marketing strategies to meet the tastes of local customers and to entice customers from entire nation towards its Weet-Bix biscuits and breakfast cereals (Demo Design, 2010). 3.2 - Demographic Traits The group does consider the demographic factors such as age, gender, marital status, education etc. before developing unique flavours and marketing these food products across Australia. For this purpose, the company has chosen customers from tween, teenage and young adult (from 8 – 21) age groups who participate in leisure and sporting activities. Indeed, the food products (more specifically the Weet-Bix product range) have been developed for these aforementioned customers for whom vitamins, proteins, fibre and minerals are essential. In this way, Sanitarium has created significant demand by offering Weet-Bix brands that fulfill calorie and vitamin requirements; thereby improving health of its young customers (Livesley, 2010) & (Gracewood, 2009). 3.3 - Psychographic Traits The company has also segmented its customers after analysing their tastes, living standards, life styles and other psychographic factors. For example, the customers of Weet-Bix brand belong to all social classes such as lower – middle, middle – middle, upper – middle and elite groups. Sanitarium, therefore, produces high quality products in different sizes / quantity (100 gm to 1 Kg) and packaging as its purpose behind this strategy is to meet the demand from all customers. For example, customers from elite and upper – middle higher income groups tend to demand Weet-Bix in 750 gm or 1 Kg boxes whereas the customers from lower – middle and upper –middle segments demand 100 – 500 gm weight boxes. However, the desires and preferences for Weet-Bix do not differ because of unique taste and distinctive product image in the minds of potential buyers. For instance, per capita income in Australia is just over US $19200 which ranks 21st in the world (Internet: indexmundi.com; nationmaster.com). 3.4 - Behavioural Traits It is worthwhile to argue that behaviour segmentation overlaps (to some extent) with psychographic segmentation because it also includes consideration of consumer behaviors, life styles, perceptions, attitudes, beliefs etc. Marketers of Sanitarium Food Products Company also pay special attention to behavioral segmentation because of cutthroat competition in the market from three major companies such as Kellogg, Uncle Toys, House brands and Nestle. Indeed, the changes in behaviour of primary target markets have to be studied to analyse, evaluate and assess the popularity of Weet-Bix brand in comparison to substitute grain products offered by rival companies in the marketplace. Indeed, there are 7.5 million regular customers of cereal products across entire Australia; therefore, Behavioural segmentation is an essential part of Santarium’s product mix (Labi, 2010). Reference List No author (2010) “Australia Demographics Profile 2010” Index Mundi [Online] Available at http://www.indexmundi.com/australia/demographics_profile.html No author (2010) “Gross National Income (per capita) by country” Nation Master [Online] Available at http://www.nationmaster.com/graph/eco_gro_nat_inc_percap-gross-national-income-per-capita Gracewood, Ben (2009) “Sanitarium Responds re Weet-Bix Powerplays” Ben Geek [Online] Available at http://www.ben.geek.nz/2009/07/sanitarium-responds-re-weet-bix-powerplays/ Demo Design Report (2006) “All about Packaging” Demo Design [Online] Available at http://www.demodesign.com.au/p/aap/demo_app_11.pdf Labi, Sharon (2010) “Cereal offenders” Daily Telegraph [Online] Available at http://www.dailytelegraph.com.au/lifestyle/body-soul/cereal-offenders/story-e6frf01r-1225892749553 Ecargo Report (2010) “Sanitarium distribution a picture of health” Ecargo.co.nz [Online] Available at http://www.ecargo.co.nz/case-studies/sanitarium.aspx Livesley, James (2010) “Sanitarium launches corporate branding campaign” Bandt.com.au [Online] Available at http://www.bandt.com.au/news/sanitarium-launches-corporate-branding-campaign Weet-Bix Review (2010) “Sanitarium Weet-Bix Original” Product Review [Online] Available at http://www.productreview.com.au/showitem.php?item_id=79287&next=7 Dunn, Josette (2010) “Sanitarium - From Weet-Bix to Wellbeing” Australia Food News [Online] Available at http://www.ausfoodnews.com.au/2010/09/06/sanitarium-from-weet-bix-to-wellbeing.html Symes, Sam (2010) “Cycling Queensland joins Sanitarium in the promotion of Weet-Bix Kids TRYathlon series” Cycling Queensland [Online] Available at http://www.qld.cycling.org.au/?Page=40320 Best Price Directory (2010) “Sanitarium Weet Bix Crunch Honey 510g” Grocery.bestpricedirectory.com.au [Online] Available at http://grocery.bestpricedirectory.com.au/sanitarium-weet-crunch-honey-510g_id115280.html Kotler, Phillip “Marketing” 10th edition Read More