In this report it will be firstly analysed the Coffee-Mate brand and current position on the market place in the UK based on the information from case of study the Coffee-Mate (Kotler at al, 2008). Secondly, it will be given proposals for future strategic development of the Coffee-mate brand in the UK.
Firstly, there should be asked the key questions in strategic marketing management (Wilson and Gilligan, 2005).
- Where are we now?
- Where do we want to be?
- How might we get there?
- Which way is the best?
- How can we ensure arrival?
The Nestle Coffee-Mate brand background
The Coffee-mate was first introduced in 1961 as first non-diary powdered creamer in US by Nestle. In 1989 was introduced Nestle Coffee - mate liquid, which was number one of non- dairy product on the market. Nestle Coffee-Mate developed a different flavours of powdered cream to keep their customer interesting in and buying their products. Nestle changed the view of "kitchen coffee" to "cafe coffee" made in the kitchen (http://www.coffee-mate.com/Faq.aspx). Customers of Coffee-mate can enjoy the different flavours also seasonal flavours (Gingerbread and Eggnog) and special edition, furthermore Coffee-mate can be found in fat free, reduced fat and sugar free in powdered and liquid products. The brand is playing important role for the Coffee-Mate. The Coffee-Mate is part of the Nestle, well known brand which will add value to the product and will differentiate Coffee-Mate from its competitors. The Nestle is using corporate umbrella branding where the 'company's name is attached to the entire product portfolio' (Wilson and Gilligan, 2005). For Heinz the umbrella is covering a wide range of products - drinks (NESCAF Gold Blend), breakfast cereals, and chocolate - full Nestle portfolio. There are advantages of corporate umbrella branding. Firstly, in Nestle case it can be reduced cost for a new campaign (promoting only the new product not the brand) and the brand name of Nestle is already well-known and established. McDonald at al (2008) believed that using corporate umbrella branding can be a disadvantage 'the brand name to not be as strongly identified with any one product' also it can be argued that Nestle will lose the name as a coffee and chocolate brand. McDonald at al (2008) agreed that the brand dilution 'occurs when consumers no longer associate a brand with a specific product or highly similar products and start thinking less of the brand'.
Market and environmental analysis
Where are we now?
Wilson and Gilligan (2005) believed that the importance of organization's performance in the market place is influenced by three key factors:
- The organization's current market position
- The nature of environmental opportunities and threats
- The organization's ability to cope with environmental demands.
The Nestle Coffee-Mate current position on the market is seen by managers of Nestle as less growth potential than for example Nestle food products. In the result, the budget for marketing campaigns was minimized, however the budget for ground coffee increased '43 million campaign aimed at reminding people that instant coffee is 100% real coffee made from pure and natural coffee beans and nothing else' (Nestle press releases,2009).
The coffee creamer market has advantages and disadvantages. Coffee creamer products have a better whitener use than dried or powdered milk, however consumers sees coffee creamer as something for special occasions but not for their daily coffee. The market for coffee creamer is complicated with different types of consumer's behaviour. Firstly, there are consumers who will not use powdered milk or cream at all. Secondly, there are users who will use powdered milk into their coffee but will not use cream (the taste is changed). Thirdly, users will use Coffee-Mate only in case of emergency (run out of milk or cream). Fourthly, there are users who are using coffee cream daily however consider creamer as a treat. The use of Coffee-Mate correlates with consumption of coffee in UK. The average consumption of coffee is about 3kg per head in the UK, which is about 1.5 cups per day which is low compare to Italy, France or Germany (5kg) and in the Scandinavian or Benelux region (11-13kg)(Kotler at al, 2008). The national Food Survey suggests that there is correlation between weekly income and consumption of coffee (the higher income the higher consumption of coffee). The UK coffee market is up 19% from 2002 (720 million in 2007). Instant coffee contributes 81% of market share however it can be seen shift from instant coffee into premium non-instant coffee (Mintel, 2008). On the other hand, Mintel researchers found that 'one in five consumers agree that it is too much effort to make ground coffee at home' (Mintel, 2008).
The strengths and weaknesses (strategic and marketing analysis)
The main strengths of the Coffee-mate are its capability to replace the real cream or milk and the length of the life time storage, however legally it cannot be defined as non-diary because it contains ingredients such vegetable fat and dried glucose which contains a real milk derivates. The weaknesses of the Coffee-mate are firstly its limitation in sales. Secondly, the Coffee-mate it is not weekly shopping item and preferably consumers are buying fresh cream or milk instead of the powdered. Consumers see using powdered cream or milk just in emergency situation and furthermore not all the coffees are made with milk or cream. Thirdly, the Coffee-mate is not independent product and can be consumed only with coffee.
The customers of the Coffee-mate are consumers who are buying instant or ground coffee and using powdered milk or coffee creamer. The survey was done by TGI and divided consumers into five potential groups for Coffee-Mate. The key variables used by TGI to segment the market are: income, age, social grade, concerning about health and environment, shopping activity and budgeting, social places (pubs, restaurants), brand versus own label, travelling, media (TV, radio, newspapers), number of children at home, area where they live, level of consumption of Coffee-Mate and creamers and occupation. TGI user survey divided consumers into five clusters.
- Cluster 1: Sharon and Tracy Experimentalists (Sample proportion: 15.4 %)
- Cluster 2: Eileen and Mary - Cost constrained, older, and conservative (Sample proportion: 23.6 %)
- Cluster 3: Sarah and Anna - Affluent, Young foodies (Sample proportion: 24.4 %)
- Cluster 4: Dawn and Lisa - Cost constrained, Young families (Sample proportion: 13.9 %)
- Cluster 5: Dorothy and Amy - Affluent (Sample proportion: 22.7 %)
The main competitors of the Coffee-Mate on the market place are fresh milk and cream. For the coffee creamer market the main competitors are Compliment, Kenco, Compleat, own label and others. Coffee-Mate has about 55% market share on the coffee creamer market. To be successful and better than competitors Coffee-mate has to concentrate on advantage for example a capacity to replace the milk which the Coffee-Mate has. To be better than competition it has to be known how the competition markets their products. The four main questions have to be asked: What is each competitor's current strategy? How are competitors performing? What are their strengths and weaknesses? What can we expect from each competitor in the future? (Wilson and Gilligan, 2005).
Strategic direction and strategic formulation
Where do we want to be? Market segmentation, targeting and positioning
It can be argued that the market for cream powder is segmented, however not mass targeted. The segmentation of market helps to identify group of buyers or potential buyers and divide them into groups within similar buyer's pattern (Wilson and Gilligan, 2005). It is advantage for marketer to segment the market because 'the marketer then decides which segments present the greatest opportunity - which are its target markets' (McDonald at al, 2008). Not everyone likes the milk or cream into their coffee. Therefore, the marketers will divide up the market into the segments by exploring behavioural, demographic and psychographic differences within buyers (McDonald at a, 2008). The Coffee-Mate developed strategic marketing to target the market segment. The particular segment cannot be contented with only one product. If the Coffee-Mate was targeting only one segment 41% of the 55% (McDonald at al, 2008) the current market share however it will lose 14.5% which is owned by Coffee-Mate Lite. The Coffee-Mate has to use multiple segments and obtain a greater market share of coffee cream market.
How might we get there?? Strategic choice - which way is the best?
The American Marketing Association (AMA) in 1985 said "Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives". To achieve the needs of the target segments the right marketing mix must be developed. The product (Coffee-Mate) has to be accessible in the right place (distribution), at the right price and in the right time (McCarthy, 1960). Thomas (1987) also believed that 'the product or services offering of a company or organization ultimately determines the nature of the business and the marketplace perception of the business. In this sense it is the core of the marketing management function'. The product Coffee-Mate will have to satisfy the target segment. In this case, it will be difficult to satisfy many segments for this reason the preference segments will be identified - clustered preferences (natural market segments). TGI user Surveys identified five potential consumers for Coffee-Mate. Based on the Appendix 3 it can be seen and argued who are potentially the most profitable group and which should be targeted. It can be said that Dawn and Lisa (young families, 13.9% sample proportion) and Sharon and Tracy (experimentalist, 15.4% sample proportion) will become Eileen and Mary (older and conservative, 23.6% sample proportion) and Sarah and Hannah will lose attractiveness for this segment (Kotler, 2008).
The Coffee-Mate marketing MIX
Abbot (1995) highlighted about product 'What people really desire are not the products but satisfying experience, however Levitt (1976) argued that the products have to be seen as the benefits not the functions. The Coffee-Mate is the product with a strong position (55% market share) on the market place, however it can be argued that one of the important aspects is brand name. Nestle is a strong, well -known brand and instead of creating, developing and maintaining a new one the Coffee-Mate become part of it. Wilson and Gilligan (2005) also agree that 'it is only in this way that the organization is able to promise and continue to deliver to the consumer a superior value than that offered by competitors'. The importance of the coffee-mate product is in which phase of the product cycle is. The Coffee-mate cream powder is probably in the mature stadium. There is not a rapid growth on the UK market also there is not a sign of the new entries on the market or decline in demand for the Coffee-Mate.
The price is one of the important factors of the marketing mix. If there is wrong pricing decision the competitors will win and Nestle will lose their customers. Managers have to know the pricing strategies of their competitors and how big are their financial resources to cope with their competition. The Coffee-Mate should concentrate on 'the maintenance and improvement of market position' (Wilson and Gilligan, 2005). Advantage of this objective is the improvements of the market share however it can be very costly and not often cost effective. Coffee-mate is already in leading position (55% market share) but there is danger that they will lose it. One the factors can be the lack of finance for campaign and promotion.
Promotion is also important aspect of the marketing mix. It can be said that promotion is 'the visible face' (Wilson and Gilligan, 2005) which symbolize the product and communicate with customers. In 2002 Nestle spent 1m on the Coffee-Mate campaign to change customers opinion on the coffee whitener from ''coffee whitener'' to ''coffee enhancers'' with main slogan 'Coffee-mate does it for coffee - so deliciously creamy tasting it's almost improper' (http://www.campaignlive.co.uk, 2002). In 2007 there was marketing campaign which promoted the Coffee-Mate ''Even when there is milk around''. It was previously discussed that young families, experimentalist, older and conservatives are the market which should be targeted. The tools which can be used to target the market can be: the TV, newspaper and a new medium Facebook and Twiter. The new campaign should be more concentrated on the product differentiation. There are not other competitors who are producing powder cream or liquid with different taste and sticks pad which can be used on the go. The Coffee-Mate should have distanced more from other in the market and create a major competitive advantage. To create competitive advantage there have to be understanding of particular segment, however the disadvantage of product differentiation can be 'limited opportunities for the sector growth and creating differences that customers do not value' (Wilson and Gilligan, 2005). Furthermore, they have to convince the customer that the Coffee-mate is better than competitor's products.
The distribution plan is final and also important part of marketing mix. The right choice of distributors and volume distributed can make huge impact on the volume of products sold. To achieve the competitive advantage the right distribution channel has to be recognized. The Coffee-mate is sold by retailers (Morrison, Tesco, Sainsbury,...), Internet and through other channels however there should be considered other options - workplace, universities and hospitals. There is a huge opportunity to be a successful. Full-time working women agreed ''first thing in the morning I tend to have coffee with semi-skimmed milk, but towards 11 o'clock I want something which is more relaxing, more substantial, so I have coffee with Coffee-Mate. It seems to be comforting.'' (Kotler at al, 2008). The distribution of the Coffee-Mate into the coffee machine which are in the workplace, universities or hospital will bring benefits, improve a market share and bring a new customers. To select a right channel of distribution the plan has to be considered (Wilson, 1983).
Marketing MIX in use
The different option (Coffee- Mate Lite, Gingerbread, Pumpkin...) will influence the marketing mix of the Coffee-Mate. There have to be concentration on the segment which is targeted and the product which is offering to this segment. The product has to convince the segment market which is for example colour of packaging, the size and quality. It will be impossible to convince a lot of segment markets with only one product like the Coffee-Mate. The price will be influenced by the cost production, consumer demand and advertisement cost. The launch of the new favour such Lite, Mocha or Latte there have to be research that there will be high consumers demand for this products.
In this report the current marketing positions of the Coffee-Mate brand was analyzed and after were given proposals for future strategic development of the Coffee-mate brand in the UK. The Coffee-Mate is currently in the leading position, however the managers do not see the potential growth in the future. Despite this believe, the Coffee-Mate has a benefit of the length storage compare to fresh milk or cream, however powder cream is still seen as the treat by users and as the emergency by non-users. The market was divided by TGI into five clusters and the most profitable group was chosen and will be targeted. The best way how to achieve the success such as market growth and profitability can be done by better segmentation of the market and better clustered preferences. The Coffee-Mate is not just cream powder and the campaign has to say it to the potential costumers. The Coffee-Mate should create the competitive advantage from the differentiation. The Coffee-Mate has to persuade the consumers that they are better than their competitors. The crucial is the concentration on the segments which are targeted and chose the right product for this segment.
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