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Royco Minute Soup CaseSOC Ltd. Consultancy Group
Mandate To introduce Royco Simmer Soup into the French Market - Paris, Lyon and Angers
Product launched through B2B - Supermarkets and Hypermarkets
Hiring trnd to facilitate with a WOM Campaign (B2B)
DeliverablesDevelop Simmer product within 6-9 months
Launch Royco Simmer Soup between 9-12 months
Number of Boxes sold (includes 4 sachets) 1,122,876
- Sales revenue of €1,177,671 - Profit €183,286
WOM Campaign launched in business districts with 2,500 connectors
External Analysis
Ambient Soup, French: 2013 Revenue Shares
Knorr39%
Liebig33%
Private10%
Maggi7%
Royco7%
Other4%
Sales
Knorr Liebig Private Maggi Royco Other
Buying Decisions• Soup is a moderate-involvement product, therefore
consumers pay attention when making purchasing decisions about Soup products. Especially in terms of KSF's such as Taste, Quality and Brand.
• This makes marketing and competing in this industry challenging.
• In order to excel, competing companies must establish a strong perceived differentiation (e.g premium quality or product innovation) or through cost (e.g low prices/promotion - sampling)
• Royco Minute Soup will need to develop a marketing plan to tackle and address this strategic issue
Attractiveness of the Market
• Life Cycle - Soup Market is in the Mature Stage of the Life Cycle
• Profitability - Soup market offers low profitability as it is in the Mature Stage of the Life Cycle and High level of Competition
Thus, the attractiveness of the market is LOW
Industry TrendsSoup Market• Five Categories: Instant dry, ready to serve, simmer, fresh and frozen -Ambient category: (90% of Sales) Instant dry soup (IDS) Simmer
Ready to serve
Business Districts of Paris, Lyon and Angers
-80% of office workers consume a snack in France at least one a day.-90% of offices have a kettle in their kitchens -Men are more reluctant to try a product than woman.
Advertising - Consumers Trust in relation to Adverts -Consumers trust recommendations from people they know
-Branded Websites
-Ads on Tv
Revenue (%)
9%21%70%
2013 2007 Difference
84% 78% 6%
69% 60% 9%
62% 56% 6%
Industry Trends (Continued)
Health • Consumers have become more health conscious
-Prefer snacks with less fat and less sugar.
Retail Prices• Ready to serve soup - €2.35/Litre• Simmer Soup - €1.09/Litre• ID'S - €1.58/Litre
Competitive Rivalry Level of Competition
• High Level of competition in the market • Direct competitors are Knorr, Liebig, Private Label,
Maggi • Ready to serve - Knorr, Liebig & Private Label • Instant Dry - Knorr, Royco Minute Soup, Maggi • Simmer - Knorr, Liebig, Maggi
Competitive Rivalry Market Size for France
• In 2013, Soup has a retail value of €422 million.
• Market Value:-€295,262,000 Ready to serve - €38,074,000 Instant dry - €89,551,000 Simmer• Royce Minute Soup €29,316,980 (77% - IDS)
Porters Five Forces
Fixed costs - High• Factory equipment, large staff numbers, Large quantities of
stockDifficulty in selling equipment - High• Specialised equipment that would be used to specific industries
packaging requirementsSpecialised skills – Medium• Certain parts of the industry require specialised skills specific to
soup production and would not be able to be utilised by other industries
Thus, barriers to exit it HIGH
Barriers to Exit
Threat of Substitutes
Home Cooking and Eating Out• Many people have a wide variety of options past soupLow Switching Costs• Cost of switching to alternatives is low and easyCulture• Cultural trends on popular lunch snacks can affect soup
market
Thus, threat of Substitutes is HIGH
Threat of New Entrants
Cost of entry - High. • Set up costs along with running of the business are of high costTechnology know-how - High• Significant amount of industry know how, food science’s and tacit
knowledge requiredDifficulty of brand recognition - High• Many well established brands on the market. High prices for
supermarket shelf positioning that current well known brands pay large amounts for
Life Cycle• Industry is in the Mature Stage of the Life Cycle, offering low revenues
Thus, threat of new entrants is LOW in soup industry
Bargaining Power of Buyers
Price Sensitivity – High• Consumers can easily switch products if a product is more expensive than
othersSubstitutes – High• The wide selection of substitutes means buyers can easily change productBackward Integration – Medium• Consumers can easily create their own soup. However not possible in
‘ambient’ categoryBuyer Fragmentation - High• Buyers and businesses are chasing each other for sales and value
Thus, power of buyers is HIGH
Power of SuppliersCommodity Product - Low• The main contents of soup are commodities produce can be
bought from a wide range of suppliersDifferentiation of inputs - Low• Suppliers of products for soup do not offer a difference of
inputs. Cost of Switching Suppliers - High• Soup companies would order large amounts of produce and
have presumably long term contracts
Therefore, power of suppliers is MEDIUM
Porters Five Forces Summary
FORCE LEVEL
Barriers to Exit HIGH
Threat of Substitutes HIGH
Threat of New Entrants LOW
Bargaining Power of Buyers HIGH
Power of Suppliers MEDIUM
Therefore, Competitive Rivalry is HIGH
Porters Five Forces Summary
Competitive Rivalry• The competitive rivalry within the industry is very high, this
causes intense competition within the industry and a strong downward pressure on prices
Buyer Power• There is a strong buyer power present once again putting a
strong downward pressure on pricesThreat of Substitutes• With a high threat of substitutes the soup industry as to
compete with more than direct competitors adding more pressure to promotion and pricing of products
Driving Forces• Supermarkets and Hypermarkets are both customers and
competitors through selling private labels (had 10% of overall market share)
-At the moment, retailers have roughly a 38% margin on selling branded soups. Supermarkets have high purchasing power and have the ability the to determine and vary price with their suppliers.
• Health and Nutrition -Customers have become more health conscious. The healthiness of snacks has become an important factor as customers prefer a snack with less fat and less sugar.
Key Success FactorsBranding• Royco has 3 main competitors along with various smaller
businesses to compete with standing out in this market is a necessity for sales.
• Royco Does possess this KSF
Quality• With the ease of switching to substitutes or competitors
along with consumers price sensitivity quality of produce is necessary for keeping and attracting consumers
• Royco does NOT possess this KSF
Key Success FactorsPrice• With high buyer power and competitive rivalry, price is an
important factor to consider when selling in this industry. Royco soups average price per litre is lower than the industry average, therefore Royco does possess this KSF
Taste and Nutrition• The most important measure of soup quality is taste. A
soup taste determines a customers choice in selection and is vital for developing a brand in the industry.
• Royco does NOT posses this KSF
Key Success FactorsKSF Does Royco possess this?
Branding YES
Quality NO
Price YES
Taste & Nutrition NO
Key Success Factors Summary
• We have established that there are four main KSF's are branding, quality, price and taste/nutrition.
• It is clear that Royco Soup possess some of the essential KSF's needed for this industry.
• It is clear Royco need to do more than meet KSF's, of quality and taste and nutrition in order to be competitive.
• The goal for Royco is to design a strategy that aims to be distinctively better than rivals on every one of the industry's KSF's.
Internal Analysis
Porters Generic Strategy
Cost Focus
Porters Generic Strategy
• Royco operate a cost (niche market) focus strategy.
• The company focuses on a narrow market to increase total customers by charging lower prices and therefore are pursuing a cost focus strategy
• A firm that has a cost focus strategy may possess a competitive advantage because they have the ability to obtain total customers in a niche market
Resources Tangible Resources
• Physical Resources: Products located and sold in various supermarkets and hypermarkets in Belgium and France.
Intangible Resources• Brand, image and reputation assets: Strong brand image in "IDS"
market (77% of market)• Relationships: Strong relationships with supermarkets and
hypermarkets across Western Europe. (Supermarkets are a crucial Driving Force within the Industry).
• Human assets and intellectual capital: Top Management - Has experience within the food industry and has tacit knowledge in KSF's such as branding
CapabilitiesBrand Management Capabilities
Over the last three years• Marketing campaigns aimed at brand recognition
such as TV commercials, radio, print and online advertising.
• Marketing budget has fluctuated but in 2014 is €1.2 million after several internal negotiations
Financial Analysis2011 2012 2013
Sales (Total IDS)
€44,209,000 €40,998,000 €38,074,000
Royco Sales - IDS
€21,368,000 €19,600,000 €18,445,000
Royco Volume
Growth - IDS
N/A -8.27% -5.89%
• New industry trends, stated above, show consumers have become more health consensus and looking for high quality and taste.
• This has caused negative growth in IDS market which is clearly evident in Royco Finacical performance.
• Royco has suffered unfavorably trends as it has experienced negative growth in the last two years due to being heavily involved in the IDS market.
Sales and Costings Analysis
Retail Price(Average)
Cost (42% Margin
Assumption)
Profit Royco Cost Percentage Potential Change
1.11 - IDSIDS (Royco) 1.58 1.11 0.47 -
Simmer 1.09 0.76 0.33 32% ↓ Decrease
Ready to Serve
2.35 1.65 0.70 48% Increase ↑
Overall Soup Market Positioning
(Revenue)
0
50,000
100,000
150,000
200,000
LIEBI (CVC)
KNORR
PRIVATELABEL
ROYCOMINUTE SOUP
MAGGI
OTHER
Sales Performance• Sales Performance 2013 in the Instant dry
soup market in France amounted to €29,171,000
• Royco sold 19,710,135 units in 2013
• France with 65.7 million inhabitants vs. 11.7 million in Belgium – sales in each country were more or less equal
Competitive Advantage• Currently struggling to connect with professional
women working in medium to large offices• Royco has an overall 7% market share and although
their lower prices are beneficial for customers, it is not a competitive advantage in the specific market Royco is targeting
Royco does NOT have a competitive advantage
Current Customer Profile
Target Audience
• Senior Citizens (43% of Sales) and Families (29% of Sales)
Target Location
• Paris, Lyon & Angers
Purchasing Patterns
• Customers purchase 3 times per year• 8 sachets on each occasion• Spend €3.20 on each visit (8 sachets*€0.40)• Thus, annual spend per customer is €9.60
SWOT AnalysisStrengths
Resources (Intangible) Strong brand image in "IDS" market (77% of market)
(However this specific market is declining)
Relationships: Strong relationships with supermarkets and hypermarkets across Western Europe. (Supermarkets are a crucial Driving Force within the Industry).
Brand Management Capabilities Over the last three years Marketing campaigns aimed at brand recognition such as TV commercials, radio, print and online advertising. (However Royco brand reputation is only strong in the IDS market only)
KSF'sThe four main KSF's are branding, quality, price and taste/nutrition.It is clear that Royco Soup possess some of the essential KSF's needed for this industry i.e Brand & Price
Easy & practical to use productConvenient source of food to consume as a snack or lunch (not time consuming)
SWOT AnalysisWeakness
Sustainable Competitive Advantage
No current sustainable competitive advantage as their cost focus strategy can easily be replicated.Negative sales trend
Worrying financial trend as IDS's revenue is declining year on year due to New Industry Trends/Driving Forces
Forecasted growth The soup industry is in the mature stage of the life cycle
The attractiveness of the market is low, thus the product they are selling has sluggish growth and is highly commoditised.
Only present in a certain market RMS only operates in IDS's market - limited brand awareness
RMS is targeting the lowest revenue in the Ambient sectorKSF’s
Royco currently do not possess KSF’s of Taste/Nutrition and Quality
InnovationCurrently, Royce's innovation is low in the IDS segment
Average customer only purchases 3 time a year (buying 8 sachets each occasion)
SWOT AnalysisOpportunities
Target New Market SegmentTarget a different market segment by creating a cheap, entry
productSell current products in new markets
Begin selling a soup products in different location Royco could expand further into the European market or aim
to increase its market share in Western Europe New Marketing Campaign
Using WOM Campaign to increase brand awareness for Royco
SWOT AnalysisThreats
High level of competition The soup industry is densely populated with many
competitors High number of substitutes
Large number of substitutes in the market such as snack & energy bars and fruit Negative IDS Market Growth
IDS market is experiencing weak growth annually
Current Competitive Position
• In France-Possesses the KSF of Branding and Price-However they do not possess Quality and Taste
-Currently, Royco has a market share of 77% in the IDS sector
In Summary• Royco currently are the market leaders in IDS.
However, this sector is declining year on year.• Have strong relationships with Supermarkets &
Hypermarkets • They do no posses certain KSF such as taste &
quality • Only present in one market and there are a high
number of threats and substitutes present
Q2 - Issue Identification Customer
retention rate is extremely low
Revenue is slowly decreasing
Struggling to reach new potential
customers
Brand image not where they want it
to be
Do not posses KSF’s Taste/Nutrition and
Quality
Benefits of Solving Issues Issue Benefits of Solving Issues
1. Customer retention is extremely low
Total customers
2. Negative revenue growth Improves profitability and efficiency
3. Struggling to reach new potential customers
Offers new customer base
4. Brand image not where they want to be
Improves and creates strong brand awareness and loyalty
5. Do not posses KSF’s Taste/Nutrition and Quality
Improves quality of product and brand reputation
Q3 - How could Royco grow the business in its current markets or
expand into new markets?• Through using the Ansoff
Matrix, we decided to utilse Product Development Strategy
• This is to compete in related markets with a new product
• In this way, growth by developing products should occur to replace or compliment exiting products
Product Development
Options
Product Development - Remain in the IDS market, or to develop into a new market segment
New marketing campaign
Options for Product Development
• Remain in IDS
• Ready to Serve
• Simmer (Sachet)
Product DevelopmentRemain in existing market or enter a
new segment
IDS• Risk – Continued negative growth in market sector• Cost – Costs are minimal as product is already
established for Royco• Potential Reward - Doesn’t increase brand
awareness and reputation as IDS sector is only 9% of overall market share
Product Development Remain in existing market or enter a
new segments
Ready to Serve• Risk – Leading players (Knorr & Liebig) control a
large market share in the sector• Cost – Establishing Ready to Serve as a product
would be very costly - an increase of 48% current manufacturing costs. (Shown in Sales and Costings Analysis)
• Potential Reward – Offers the largest market size in the ambient sectors. Presents the opportunity to attract new customers.
Product Development Remain in existing market or enter a
new segmentsSimmer
• Risk – Knorr dominates the market with a market share of 67%
• Cost – Creating Simmer as a product would involve less current manufacturing costs (Saving of 32%)
• Potential reward – Offers a new market segment but market size is smaller in comparison to Ready to Serve market.
Product Development Evaluation
Evaluation Criteria Option that Scores Best
Risk IDS - 77% market share but experiencing negative revenue growth
Cost Simmer - Offers huge cost efficiency
Potential Reward Simmer - Offers a new market segment with less number of competitors
Thus, Royco should pursue a Product Development of Simmer
Options for Marketing Campaign
• Adverts on TV
• WOM Campaign
• Ads on Radio
Marketing CampaignAdverts on TV
• Level of Trust: Adverts on TV offer a moderate level of trust to consumers (62% in 2013)
• Cost: Royco previous costs in 2013 was €720,000 (60% of €1,200,000 marketing campaign). Forecasted costs are €480,000 for 2014
• Ability to reach Target Market: Previous marketing campaign has shown that Adverts on TV is not reaching the Target Market (300,000 people in Business Districts) desired
Marketing Campaign WOM Campaign
• Level of Trust: WOM campaign offers the highest level of trust to consumers. (84% in 2013)
• Cost: With a sample of 2,500 participants, costings would be estimate of €120,000. (fee+spokesperson)
• Ability to reach Target Market: Over 188,000 conversations would be created towards the target audience with a sample of 2,500 participants
Marketing Campaign Adverts on Radio
• Level of Trust: Adverts on radio offer moderate level of trust to the target audience (57% in 2013)
• Cost: Royco previous costs in 2012 was €322,000 (23% of €1,400,000 marketing campaign) Forecasted costs are €180,000
• Ability to reach target audience: Previous marketing campaign has shown that Adverts on radio has been unsuccessful in reaching the Target Market (300,000)
Marketing Campaign Evaluation
Evaluation Criteria Option that Scores Best
Level of Trust WOM - offers the highest level of trust to consumers (84% in 2013)
Cost WOM - most cost effective as it estimated to be €63,000 for a sample of 2,500 participants
Ability to reach Target Market WOM - most effective method in reaching target audience as over 188,000 conversations would be created
Thus, Royco should pursue a WOM Campaign
Strategic Plan
Recommendation - Product Development
SimmerDefine • Creating a Simmer (Sachet) product under Royco's name
Features• It will be a premium quality • Flavors will be decided with the WOM Campaign by consumers
who will be enabled to create & vote on new suggestions • The selling point will be that it is a healthy snack product for the
business professions • It will be launched in line with WOM Campaign to gain as much
exposure as possible• Sampling of flavors
Recommendation - Product Development
Simmer (Sachet)Benefits• Solves issues
-Of operating in a negative revenue growth sector-Improves brand image and reputation as product is seen as a much healthier snack option-Provides greater quality and taste/nutrition as Simmer is a high quality product
• Flavors will be decided with the use of the WOM Campaign by consumers who will new suggestions Thus, creating and building customer engagement
Who will be our Simmer customers?
Business
Professions
HypermarketsSupermarkets
Wholesaler
Simmer Costings Breakdown of Costs Costs
Flavour Costs €0.05
Packaging Costs €0.10
Distribution Costs €0.04
Total Cost per sachet €0.19
Overall cost of producing box containing 4 sachets is €0.76
Population of France 65m Market Size €89.5mForecasted Market Penetration 1.3%Projected Royco Simmer Revenue €1,177,671Number of Simmer Boxes Sold 1,122,876Production Cost per box €0.76Sales Price per Box (Margin 38%) €1.05
Sample Costings
• Royco have the resources and capabilities to give out samples of 50,000 in selected cites
City Number of Samples
(includes 2 sachets)
Costings (0.19*2=0.38)
Paris 25,000 €9500
Lyon 12,500 €4750
Angers 12,500 €4750
Total 50,000 €19,000Royco (Margin 38%)
Revenue €1,177,671 (€1.05* 1,222,876) Costs of Production (1,122,876*0.76) €853,385
Sampling €19,000
WOMCampaign €122,000
Profit €183,286
Supermarkets (Margin 36% on
€1.05)
Will be explained in detail later on
Simmer Strategy• Royco should pursue a Product Development strategy to
enhance brand awareness and attract the target audience• Place Penetrate market in business districts of Paris, Lyon
& Angers • Promotion Street sampling during peak times 'Lunch
rush' - with explanation of product & demonstration (WOM Campaign will also be key promotion factor)
• Product Premium health product that is a convenient snack
• Price Per box (includes 4 sachets - €1.05)
Recommendation WOM Campaign
Define - Amplied WOM - trnd• Launching a WOM Campaign in Business Districts to increase brand
awareness to increase sales Features• Educate the public about product as a healthy alternative • Create communities such as a forum on our website so that
information can be shared easily • Through this forum we can create & build customer engagement • 2500 participants to create over 180,000 conversations• Spokesperson to be hired• Samples will be disrupted in selected cities during lunch hours and
during commuting times to and from work
Recommendation WOM Campaign Benefits• Solves issues
-Struggling to reach new potential customers-Customer retention is extremely low-Brand image not where they want to be-Negative revenue growth
• WOM Campaign will give Royco the ability to reach its target audience in Business Districts
• It will improve brand awareness by encouraging customer engagement through voting for flavours
• Trnd has the database to access our target audience to encourage word of mouth promotion
Campaign Format & Particapants
Metric ValueWOM Modules Basic+Dialogue+Visibility
Locations Paris, Lyon and Angers
Number of Samples 50,000 (2 sachets in each)
Metric Value
Number of Participants 2,500Male % 25%
Female% 75%
Costing of WOM Campaign - trnd
Number of connectors 2500
Number of conversations 187,500
Fee (€) 40,000
€/conversation 0.21
Printing materials and shipping
Total trnd Fee
€22,000
€62,000Spokesperson
Total WOM Campaign €60,000
€122,000
Implementation 0-3 Months• Contact Trnd to begin negotiation of WOM Campaign• Register Simmer brand name3-6 Months• Inform B2B relations about the prospect of new product
launch• Begin preparing for marketing campaign, promotions and
packaging• Using WOM Campaign to identify flavor selected by target
audience • Prepare for manufacturing - Royco Simmer Soup
Implementation 6-9 Months • Begin WOM Campaign with 2,500 connecters • Prepare to distribute samples to connectors in selected cites • Hire Spokesperson to be the face of the Simmer Brand • Develop pricing & promotion • Continue preparation for product launch 9-12 Months Launch• Distribute boxes to numerous retailers • Create communities for target audience to engage about the
product - forums on website
Risk & Contingency
Recommendation
Royco Simmer Soup
& WOM Campaign
Risk
Supermarkets are not
interested in new product
Mitigation
Intensive preparation before informing supermarkets about the new product
Contingency
Joint Venture with Maggi
Mitigation & Contingency explained
Mitigation• To mitigate against this risk, intensive preparation
should be arranged before informing supermarkets and hypermarkets of the new product.
• This can be an opportunity to persuade supermarkets about the benefits, such as Simmer being a prosperous market compared to IDS, and ensure supermarkets are interested.
• White paper should be prepared explaining the benefits of Royco Simmer Soup
Mitigation & Contingency explained
Contingency• Should the Royco Simmer Soup launch fail, Royco
should contact Maggi about the prospect of Joint Venture.
• Benefits for Maggi: Royco should explain that they are a leading player in the IDS market.
• Benfits for Royco: Maggi has a market share of 36% in the Simmer market
What
Royco Simmer Soup
When Starting now and beginning
launch between 9-12 months
How Using current resources and
capabilities Also through WOM Campaign
Where
Business districts of Paris, Lyon and Angers
Supermarkets & Hypermarkets
Summary
Who
Royco