Marketing Strategy For The Ice-Cream Sector Essay, Research Paper
TABLE OF CONTENTS
ITEM DESCRIPTION
PAGE #
1. EXECUTIVE SUMMARY 3
2. SITUATIONAL ANALYSIS 4
3. MARKET SUMMARY 5
4. MARKET OVERVIEW 5
4.1 Macroeconomic Overview 5
4.2 Industry Overview 6
5. SWOT ANALYSIS
5.1 Strengths 7
5.2 Weaknesses 7
5.3 Opportunities 8
5.4 Threats 9
6. COMPETITOR ANALYSIS
Table 1: Competitive analysis of lubricants market in S.A. 10
7. PRODUCT OFFERINGS 12
8. KEYS TO SUCCESS 12
9. MARKETING STRATEGY 12
10. MISSION 13
10.1 VALUES 13
11. OBJECTIVES 14
12. TARGET MARKET 14
12.1 SIZE OF MARKET 14
13. STRATEGIES
13.1 Sales and Distribution Strategies 15
13.2 Promotion Strategies 15
13.2.1 Promotion Strategy 15
13.2.2 Industry Exhibition 15
13.2.3 Packaging 16
14. MARKETING MIX
14.1 Product 16
14.1.1 PCMO’S 16
14.1.2 HDEO’S 16
14.1.3 Industrial Lubricants 16
14.2 Price 17
14.3 Promotion 17
14.4 People 18
14.5 Customer support 18
15. RECOMMENDATIONS
15.1 Organizational Factors 18
15.2 Sales Organization 18
15.3 Personnel count Projection 18
16. BIBLIOGRAPHY 19
UNILEVER COMPANY MISSION
“Our purpose in Unilever is to meet the everyday needs of people everywhere – to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services which raise the quality of life”.
“Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers – a truly multi-local multinational.”
“Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively and to a willingness to embrace new ideas and learn continuously. ”
“We believe that to succeed requires the highest standards of corporate behaviour towards our employees, consumers and the societies and world in which we live. ”
“This is Unilever’s road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees”
2. COMPANY BACKGROUND
Unilever is part of an Anglo Dutch fast moving consumer goods manufacturer and marketer, one of the largest of its kind in the world.
Unilever South Africa is headquartered in Durban with facilities in Johannesburg, Stellenbosch, Durban as well as Pietermaritzburg and consists of four Operating Companies: Lever Pond’s, Unifoods, Ola and Hudson & Knight. Unilever is also represented in South Africa by Elizabeth Arden.
Because Unilever has a policy of marketing the brands and not the company. The result is that they have been an integral part of life in South Africa without the consumer being aware of it.
The following operating companies fall under the umbrella of Unilever South Africa
Unilever South Africa has Regional Innovation Centres that are a part of the ongoing research and development that Unilever continually conducts around the globe. It is this international status that makes this company such a dynamic and forward thinking company. Unilever South Africa has brand leaders in virtually every sector in which they operate.
Apart from the massive investment in providing training for their people, Unilever is also the largest advertiser in South Africa, spending many millions annually in support of their brands.
The focus of this report will be the operating company Ola South Africa Pty (Ltd) It will show what the current macro environmental trends are that influence consumers and how the current marketing strategy of Ola must be adjusted to suit the ever changing needs of the customers. It will give a future course of action regarding how the Product, Promotion, Place and Distribution of Ola Ice Creams should be adjusted with accordance to the new changes in the industry and the environment.
. MARKET SUMMARY
. MARKET OVERVIEW
The Following trends and issues will impact on the success of Ola South Africa.
Macroeconomic Overview
Distribution of income – The distribution of income is changing drastically as the emergent black middle class starts to displace its white counterpart. A greater percentage of black people are now found in middle and upper living standards category. The black middle class constitutes 8% of South Africa’s 12million economically active black people.
Social Class – Social class strongly influences consumer lifestyles, and is a good predictor of resources. People buy products to demonstrate their membership in a particular social class , and consumers also purchase goods that will help advance their social stand. Segmentation should ensure that social class is taken into consideration in relation to the target market.
GDP growth rate – The anticipated growth rate for the year 2001 to 2002 is between 3 and 3.5%. The inland consumption rate is also expected to grow in line with this growth in GDP.
Inflation –.
Interest Rates – Interest rates have been decreasing since 1999. An interest rate cut is expected towards the end of 2001. The consequences are that people will have more disposable cash to spend on luxury items such as ice-cream.
Price of Oil – So far in 2001, the crude oil price has been unstable reaching a high of $31 per barrel. These increases have made the market unstable and more than one industry price increase has occurred in less than 6 months. The outcome of this for the consumer is an increase in the price of petrol. This influences the disposable income available to spend on luxury items and so far in 2001 the price of petrol has increased more than once.
Health factors – The HIV pandemic also influences the amount of disposable income available to consumers, the cost of medication for anti retroviral drugs is very high and escalating medical costs eats into the consumers disposable income
Climate – The climate in Africa is ideal for the consumption of ice-cream which is a seasonal summer product. Our winter is shorter and not as extreme as that of Europe so our total consumption should easily be more than that of other European countries
Eating out – The trend of eating out is growing and and over the past 10 years has increased from 15 % to 30%.
4.2 Industry Overview
5. SWOT ANALYSIS
The following SWOT Analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats facing Ola South Africa.
5.1 STRENGTHS
Distribution – Ola has a very strong distribution channel. They have 32 exclusive concessionaraires who agree not to deliver other brand of ice-cream. In addition the company supplies branded freezers to its retailers free of charge, but they are not to be used for rival brands. Inevitably, the majority of retail outlets do not have room for more than one freezer.
Strong brand – Magnum is the number one selling luxury ice cream in South Africa as well as the world. It currently enjoys over 60% of the market share in South Africa
Resources – Ola has been very successful in other countries and this has resulted in products like magnum being 50% bigger than any other ice cream brand in the UK. Knowledge acquired from other countries with regards to these products can be utilised in South Africa, her the product life cycle has not reach the full maturity is enjoys elsewhere in the world.
Technology – The aquisiton of the Portable Data Terminals. and the PS8000 printers which ensure immediate tracking and verification of fixed assets, as well as a means to generate sales orders is what gives Ola the competitive edge with regards to distribution. The resources that they have allow them to indulge in technology that has resulted in faster order collection
5.2 WEAKNESSES
Product portfolio – The product range is large and uneconomical. There are a great number of products on the range that are very slow movers. Some of the products also have a limited shelf life and often expire on the shelf. Caltex seeks to supply a full range and this has resulted in some of the products in the range being uneconomical.
Level of service for the Manufacturing plant – The manufacturing plant does not deliver the required level of service to the sales people in the field. Often orders are not met and they have been incidents of contamination of products. These have sometimes lead to loss of accounts when customers are not satisfied with the level of service.
Positioning in township spare shops market – Caltex has to make adjustments to penetrate this growing market sector. There are a considerable number of spares shops operating in the townships that are moving high volumes for the DIY mechanic and individual. Castrol seems to be dominating this market and has established distribution points at locations near taxi ranks and major shopping centres within the townships.
Weaknesses in certain sectors – There are lucrative markets like the pulp and paper as well as the crop spray market, which Caltex is currently not involved in. Internationally Caltex has access to this technology and some operating Caltex companies are very strong in these areas, but this advantage is not utilised here in South Africa.
Spares shops and service centres – Caltex is not well represented in these sectors. The smaller non-franchised service centres use small volumes but since there are many of them, the combined volume is rather substantial. However, there is the added advantage that their negotiating power is weak, and therefore capital equipment investment is low and this culminates in low discounts.
5.3 OPPORTUNITIES
Brand and product strength – Ola can take advantage of the strength of their brands like Magnum and Cornetto which have established themselves strongly in the ice-cream sector.
Growth in cutting oils – an opportunity exists in the highly specialised and lucrative field of cutting oils. Caltex have the technology to become a market leader in this field.
Communication – Caltex should create adverts that are relevant to the local market. Traditionally Ola uses international adverts which they apply to the market, although they are successful to some extent. A local flavour would ensure better success.
Taxi Recapilatization Project – The government intends to change the taxi industry by having fewer but bigger diesel engine minibuses. The plans are at an advanced stage. Larger taxi’s means a bigger platform to advertise products, especially among the growing black market. Ola must be proactive and ensure that it is at the forefront when manufacturers are decided. Contact should be established and maintained with companies like Toyota, Iveco and Mercedes Benz.
5.4 THREATS
Brain Drain – With the current exodus of highly qualified professional, a major threat is the that the people that have been groomed and trained might leave the country or work for competitors, taking along with them valuable skills.
Healthier Substitute Goods – substitute goods such as yoghurts are a threat to the industry as products such as yoghurts are being offered as a healthy alternative to ice-cream , especially in light of the growing trend of leading healthy lives. companies, this results in volatile prices to the customer. These may lead the consumers to be price sensitive and more prone to switching suppliers.
6. COMPETITOR ANALYSIS
In South Africa, Ola has one main competitor. Nestle.
Table 1: Competitive analysis of lubricants market in South Africa
COMP STRENGTHS WEAKNESSES
SHELL Nestle chocolates are an established brand in S.A. and therefore they can diversify easily to other related goods.
Their core business is chocolate, not ice-cream
Lack of technological resoures which related directly with ice-cream
Strong in marketing planning.
Good with major accounts
Distribution cost advantage due to joint venture with BP.
Strong product technology.
Strong brand awareness
Strategic Direction
Closer to Caltex in product technology and service. They also compete with Castrol with an effective PCMO brand (Helix).
7. PRODUCT LIFE CYLCE
8. PRODUCT OFFERINGS
The primary point of differentiation that Caltex lubricant offers is as follows:
Sales people with exceptional selling skills and who come from a technical background. The people are capable of independently performing the entire product support function
Superior product design, the products have been designed, not only with technology from Caltex, but also with technology from Chevron and Texaco, which are powerful international companies in their field.
8. KEYS TO SUCESS
Rectifying the inefficiencies of the manufacturing plant to ensure an acceptable level of service to the customer. Customers must be able to obtain the right product at the right time in the correct quantities.
Building the brand by active advertising that relates to the local environment.
Counter the effects of the BP acquisition of Castrol by more aggressive marketing.
Tapping into the specialised field of cutting oils
Acknowledging that the source for competitive advantage lies within the human capital and implementing measures to retain this capital.
Acknowledging that Black empowerment is a reali
9 MARKETING STRATEGY
After a thorough investigation of the current marketing strategy and also based on the information detailed above, its evident that for Caltex to be able to be successful, their marketing strategy has to be with accordance to the current industry changes. The focus for Caltex needs to be establishing themselves as the brad of choice for their target market, and also project an image of an organization with exceptionally high technical competencies and advanced technology. Brand awareness also needs to be created and Caltex needs to focus on the specialised field of cutting oils.
By undertaking the above strategy, Caltex will be able to gain the competitive advantage in the industry. They also need to maintain their current Market Share by offering better customer care, as compared to competitors. The mining sector generates substantial income for Caltex, they use a large amount of lubricants therefore problems related to lubrication are common. When these arise, they have to be resolved timorously as they may cause costly breakdowns. The mines also do not want to take responsibility for resolving lubricant related problems so they demand that the suppliers be responsible for this task. This can only be achieved by having sales people who not only service the accounts but who also meet the technical needs of the customers over and above the supply function.
Having sales people who are technically proficient, can assist in making the customer appreciate the fact that Caltex products are better than those of competitors. The sales people must monitor customer lubrication practices and also offer training on the correct lubrication practices. The sales people must also participate in the overhauling of equipment, which will give them the opportunity to point out minimal wear on the various components of their machinery which is due to using a superior product.
All the sales people in the Lubricants Business Unit are from a technical background and should do the entire product support functions independently. They can all carry out on site oil analysis and thereby solve most queries on product contamination and fuel oil dilution, which are very common problems. The idea is for a sales person to be able to acquire a new account, carry out a full lubrication survey on all the equipment and attend to all technical queries that might arise. The sales person can therefore single handedly handle all the product support functions.
10 MISSION
10.1 VALUES
Integrity in our relationships – with our customers, government and colleagues.
Respect for the individual.
Respect for cultures the environment and society.
“By fulfilling the above mission and values, Caltex seeks to establish itself as the brand of choice.”
11 OBJECTIVES
To establish Caltex as the brand of choice as the market realises and appreciates the extraordinary quality of their products.
Maintain the current price position between the most expensive and the cheaper supplier.
To create brand awareness and create an awareness of lubrication issues so that the market moves from the old paradigm of perceiving all oils as being the same.
Retain the technical manpower within Caltex Lubricants.
Attain improved customer care and satisfaction.
12. TARGET MARKET
Age: 20 – 45
Sex: Female & male
Family Lice cycle: young single and or married
Income: R7000 and above
LSM Upper middle and lower middle
Lifestyle: Liberal, adventurous, health orientated
Currently the target market is the adult market and the ice cream is positioned as the ultimate in personal indulgence as per the diagram below
12.1 Size of market
The product consumption patterns for the industry for 2000
are as follows:
Motor oil – 199 million litres
Industrial oil – 152 million litres
Grease – 14 million KGs
12.2 Market Share
Caltex is the industry leader in terms of lubricants, The graph below details the total market share for the Lubricants industry.
Figure 1 Lubricants Total Market Share
13 MARKETING MIX
13.1 MARKETING OBJECTIVES
Product: To increase the market share by 5%
Product: Economise the lubricants product range
Price: Maintain the current price position, between the more expensive & cheaper.
Promotion: Establish Caltex as a brand of choice while increasing brand awareness
Place/Distribution: Improving the current distribution network
Place/Distribution: Increase customer care and satisfaction
Personnel Retain current staff through increased job satisfaction
14. STRATEGIES AND TACTICS
14.1 Product
To increase the market share as well as gain the competitive edge Caltex needs to market the lubricants for the cutting oils industry, this product was created through the technology of Chevron and Texaco. Although the market is small, it is highly specialized and highly lucrative.
It is recommended that presentations be made to stakeholders in the cutting industry, where the product capabilities can be highlighted. An idea might be to offer a 24 hour customer care service which might give Caltex the competitive edge. Another alternative could be to provide the cutting oil free for trails to the customer and only when the client is satisfied, with the performance of the oil, will payment be expected.
The product range should be streamlined so that slow movers which are uneconomical can be removed. More focus should be placed on products that are doing well, like the PCMO’s, HDEO’s and industrial lubricants range, and more brand awareness should be created for these products.
PCMO’s
Caltex has the Havoline range, which caters from the lower spec to the highly specialised fully synthetic oils. The Havoline Energy has outperformed the competitor’s fully synthetic oils though it is a mineral based oil.
HDEO’s
Caltex has a comprehensive range of HDEO’s. It is the Delo range (diesel engine lubricating oil), which caters from running in oil to the highly specialised fully synthetic. It therefore caters for all individuals from high spec to low spec.
Industrial lubricants
Caltex has wide range of industrial oils and greases that are well established within the mining sector. The Meropa range on industrial gearbox oils enjoys a strong position in mining. It has managed to resolve overheating problems in many instances.
Caltex will have to embark on an aggressive promotional strategy running competitions through the service station network and the retail outlets. The competitions will be aimed at getting people to read more about Caltex products thereby creating brand awareness
14.2 Price
The oil industry is very price sensitive. The strategy is to maintain the prices between the most expensive and the cheaper supplier also capitalise on selling a better product for less. In a price sensitive market such as the lubricants market this can create a real competitive edge. Caltex has better products in terms of quality and specifications.
Castrol are the most expensive in the market, they can do so because their aggressive marketing has created the perception that their products are better, because of this, people do not object to paying a small premium. What Caltex also has to do is to maintain their pricing position until such a time that the market realises that they have a better product and they can raise their prices above the market. The current margins are good and viable for the long term
14.3 Promotion
Caltex should embark on a sales promotion project with the help of a high profile sports person to be identified. It will be effective to carry out these promotions on a Saturday after month end, at major shopping malls , when they can reach a maximum amount of people.
It is also recommended that a strategy that creates an awareness of the capabilities of the Caltex products be embarked upon. Currently the perception is that all oils are the same and people do not focus on the real capabilities of the different brands.
While workshops understand a bit about lubrication, their objective is to make this filter down to the vehicle owner so that they may be able to demand that only the best be used in their car. Some customers take a 5 litre of the oil of their choice when they take their cars in for service. This is the level of awareness that Caltex should seek to create.
All Caltex carry approvals and endorsements from all the major OEM’s in the various fields. The plant is to publicise the OEM approvals. For example Caltex has the only AA approved unleaded fuel and Caltex does not utilise this edge to the maximum. The average person on the street does not know this, yet market research has shown that most people are aware of the motto for Castrol as “A Can of the Best”.
The approvals of the products should be loudly displayed on the packaging so that people are drawn into reading it. While most people are not interested in lubricants, they can see that a product that comes highly recommended by most OEM’s must be a good product.
Another marketing tool may be the use of testimonials from other customers that feel that they have attained value from Caltex. This can be done on videos and testimonial letters that are used when making presentations to prospective customers.
More aggressive advertising of their superiority in the cutting oils sector should be embarked upon. The adverts can be placed in print media such as Engineering News, Fleet watch, and Auto Engineering.
14.4 Place/ Distribution
By improving the distribution network and also increase customer care , sales will also be increased, this can be achieved by ensuring that the distribution channels are sufficient to service all potential buyers.
Although the current distribution network is good and has outlets in all-major centres, i.e. in Johannesburg there are three depots (Alrode, Benoni and Krugersdorp), it has been found that they are not enough to effectively service all potential buyers Its imperative to identify the most commonly used industrial products, select a few strategically positioned service stations, which would carry industrial stock on behalf Caltex and get a handling fee. When a customer calls to make an enquiry about a product they would then be directed to the nearest service station that carry both stock of automotive and industrial products.
Its recommended that better co-ordination between manufacturing, distribution and sales is established so as to ensure that customer needs are met and that the expected level of service is achieved.
A customer service centre has to be established so that better customer service can be achieved. The aim is to ensure that with a single phone call, customers can have all their needs met in terms of account queries, technical support and product and price queries.
14.5 Packaging
In order to penetrate the growing township market, the packaging should be taken into consideration. Packaging will remain largely as is it except for a few brands. The idea is to have packaging, which is viable for the individual servicing one vehicle to the small workshop servicing four cars to the big workshop requiring bulk supply. There are several gearbox oils, which are not available in 500ml and only available in 20litres and over. Such a package is not viable for the DIY individual. Discounts can be provided for the township sector if they use Caltex products.
14.6 People / Retention of staff
In order to retain their staff, job satisfaction has to be increased and Caltex has to ensure that the needs of their staff are met simultaneously with the needs of the company. Offering better rewards systems is an option and also shifting from a sales to a marketing orientation organisation where the relationship building with the customers is emphasised and where the relationships are long term and based on adding value and meeting customer needs.
15 RECOMMENDATIONS
In order for Caltex to penetrate the new desired markets of retail sector, pulp and paper and cutting oils, more people will have to be employed and trained to meet these challenges. The sales team will have to be supported by a strong marketing team to direct strategy and provide the relevant information about the market. A business analyst who will be based in Johannesburg will have to be employed. Currently there is one business analyst for the entire business unit, who is based in Cape Town, while 70% of the market is based in Gauteng.
It is also recommended that a Lube Engineer who is familiar with the pulp and paper industry be employed. Two people have already been brought on board for the retail sector and additional two have also been employed for cutting oils.
Another recommendations is that the current Training budget be increased from R17 000 to R67 000 in order to meet the training needs of this sector. The cutting oils sector, is very lucrative and will enable Caltex to meet its objective of attaining and increase in the market share of 5% by year end.
The detailed promotional strategies should also be embarked upon to ensure that increased brand awareness is attained, the financial implications of it, will be evident in the bottom line, as we forecast a 3.5% increase in sales by the end of 4 months.
15. CONCLUSION
Bibliography
16. BIBLIOGRAPHY
Summers, M. (1996): Marketing Management, London: TVU
Kotler, P. (2000): Marketing Management: The Millennium Edition, New Jersey: Prentice-Hall
McDonald, M. H. B. (1992) The Marketing Planner, Oxford, Butterworth-Heinemann.
Etzel, M. J., Walker, B. J. , Stanton, W. J. (1997) Marketing 11th Edition, Irwin – McGraw-Hill