global marketing greg noel ref and app

0

Global Marketing

MKT 6005

Gregory Noel-Butterworth – S12794493

Darling Spuds Into Germany

Table of Contents

INTRODUCTION 1 PEST ANALYSIS 1-2 MARKET APPRAISAL 3 COMPETITOR ANALYSIS 4 KEY BUYING BEHAVIOURS/TRENDS 5 MARKET ENTRY & DISTRIBUTION 5 MARKETING STRATEGY AND OBJECTIVES 6-7 UNIQUE SELLING PROPOSITION 8 SEGMENTATION 8 MARKETING MIX 9-15 EVALUATION AND MEASUREMENT 15 REFERENCES 16-23 APPENDIX 1.0 (MARKET APPRAISAL) 24-25 APPENDIX 1.1 (KEY BEHAVIOURS/TRENDS) 26 APPENDIX 1.2 (PEN PROFILE) 27-28

1

Darling Spuds in Germany

Crisps account for 24.2% of the German savoury snack market and this

market is forecasted to grow by 21.4% over the next five years, a rate of

growth that far exceeds that of the UK’s (15.1%). (MarketLine, 2014)

With an underdeveloped, but growing market, Germany offers an attractive

export opportunity for Darling Spuds (DS).

PEST

Political

Germany is a democratic republic and one of the driving forces in the

EU (MarketLine, 2014)

Andrea Merkel and has a minimum of three years in power, therefore,

no remarkable change in policy making will take place. (MarketLine,

2014)

Policies

European integration – Germanys most important foreign policy.

(MarketLine, 2014)

Members of the EU & WTO (UKTI, 2014)

World Bank Report – Government KPI’s

Political Stability – 71.09%

Regulatory Quality - 92.34%

(MarketLine, 2014)

Economic

Biggest economy in Eurozone with a GDP of around than $2.7 trillion

(UKTI, 2014)

The economy is expected to grow by 1.4% by 2014. (MarketLine,

2014)

2

Germany is the UK’s largest export market in Europe. (UKTI, 2014)

International Investment Position

Exchange rate-€1=£0.78p. (XE, 2014)

Interest Rate-0.05% (UK 0.5%)

Inflation Rate-1.5% (UK 2.63%) (MarketLine, 2014)

Social

Structure

Population–81.5 Million(74.2% urban/25.8% rural)

(MarketLine, 2014)

Germany has one of the fastest ageing populations in Europe. Over a

third of the population is over 50, and controls around half of

Germany’s total consumer spending power. (UKTI, 2014)

Literacy Rates–99% (MarketLine, 2014)

English is widely spoken and accepted as business language. (UKTI,

2014)

Income

Average Disposable Household Income–Germany $30721, (UK-

$25828)(OECD, 2014).

Social Class

Middle Class-58% of the population (Kotch, 2012).

Technological

Highly advanced in technology. In 2013, 84.5% of the population had

access to the Internet.

(MarketLine, 2014)

Conclusion

Germany’s favourable PEST provides DS with an opportunity to develop a

long term exporting strategy without the fear of major fluctuations in the

economic or political landscapes.

3

Market Appraisal

(Appendix 1.0)

Market Value-$2516.6m.

CAGR of 4% between 2009-2013. (UK 3.6%)

By 2018, market value is forecasted to have increased by 21.4%

(MarketLine, 2014)

Premium product offerings play a key role in the markets increase in

value. (Passport, 2014)

Market Volume–277.6m Kg.

CAGR of 2.4% between 2009-2013 (MarketLine, 2014)

By 2018, market volume is expected to have risen to 311.3m Kg

(CAGR of 2.3%) (MarketLine,2014)

Crisps registered positive volume growth in 2013. (Passport, 2014)

Market Segmentation

Crisps account for 24.2% of the market ($610.1m in value), and are the

driving force behind future category growth (ReportLinker, 2014)

4

Competitors

Brand Company Product Category % Of Total Market

Share

Funny Frisch Intersnack Low-end Crisps

Flavours-

Paprika/BBQ

11.5%

Chio Intersnack Low-end Crisps

Flavours-

Paprika/Cheese

6.3%

Pringles Kellogs Crisps

Flavours-Paprika

4.8%

Crunchips Lorenz Low-end Crisps

Flavours-Paprika

3.2%

Seeberger Seeberger High-end, Healthy

Nuts and Fruits

2.3%

(Passport, 2014)

5

Key Buying Behaviours/Trends

(Appendix 1.2)

Savoury snack market is profiting from the growing trend of staying in,

and on-the-go consumption Snacking takes place in the evening, with

indulgence and health properties high on the agenda (Passport, 2014).

Consumers are responding positively to hand-cooked healthier (low-

fat/gluten free) crisps. (Passport, 2014)

Older consumers have the highest number of savoury snack occasions

per year. (Canadean, 2014)

Market Entry and Distributor

Directly exporting through the use of a local distributor provides the

manufacturer with a number of competitive advantages. As well as ensuring

quicker entry into the market, a local distributor also understands the needs of

the domestic market and is better suited to cater for them (Musetescu, 2013).

Genuport will be used as the brands primary distributor as they are the largest

distributor of savoury snacks in Germany and specialise in the selling of

imported premium brands (such as DS) (Genuport, 2014)

Genuport played a vital role in the successful introduction of Tyrells crisps (a

similarly aligned brand) into the German retail environment, and has

experience of building strong premium brands (OpentoExport, 2013). This

experience gives DS a better chance to quickly establish their brand into the

market (Lee & Carter, 2012).

6

Marketing Strategy

According to the Ansoff Matrix (1965), the most appropriate growth strategy

for DS is ‘Market Development’ as it represents a new product entering an

existing market (Henry, 2008).

This strategy has a considerable amount of risk attached to it due to the

uncertainty of the German markets reaction to DS’ product offering

(Ansoffmatrix.com, 2013).

The models applicability to SME’s has drawn criticism from academics such

as Mintzberg (1990) who argues that the Matrix ignores external factors, and

is very difficult to scale with efficacy for smaller firms (DS).

On the other hand, Perry (1987) suggests market development as the most

appropriate strategy for small-to-medium food manufactures as these

organisations (such as DS) have restricted access to alternative strategies

due to limitations in resources and market share (Carson, 1985).

Fuller (1994) goes on to propose that the strategy of small to medium food

manufacturers must be ‘reactive’ to the new markets needs. Fuller (1994)

states that the use of a market development strategy will allow DS to react to

the needs of the market more effectively, whilst also alleviating the risks

associated with alternative ‘proactive’ strategies such as diversification. As

stated previously (in key buying behaviours and trends), there is an increasing

demand for healthy, premium and gluten free crisps. These characteristics

match with DS’ product offering. Through the use of a reactive market

development strategy, DS can respond and match their product offerings to

the preferences of the market, which in turn, gives the brand a better chance

of establishing itself.

It is vitally important that DS strategy allows them the scope to adapt their

products to the preferences of the German market. For small to medium food

manufacturers, the use of market development is recommended as the

strategy allows for the development of product adaptation (Storey & Sykes,

1996).

7

Objectives

1. To achieve a market share of 0.3% of the total German Savoury Snack

Market by December 2015 (equates to $7.5498m)

2. To achieve a 0.2% growth in market share for the period of January

2016 to December 2016.

3. To target 500,000 potential customers for product trail by July 2015

and ensure that 30% of these potential customers successfully trial the

product.

4. To ensure that of this 30%, 15% make at least one repeat purchase by

December 2015.

Unique Selling Proposition

A USP is the distinctive product features that attract customers (FT.Com,

2002). A strong USP helps organisations to develop a competitive advantage

and is closely related to differentiation (FT.Com, 2002).

When devising USP’s, it is important to consider both the functional (e.g.

product quality), and the non-functional benefits (e.g. country of origin effect)

(De Pelsmacker et al, 2013).

This is especially true for premium snack brands as,

‘product quality perceptions can only explain a part of what consumers are

willing to pay for premium packaged food products’ (Sethuraman, 2000).

Porter (1985) recommends differentiation as a route to create a competitive

advantage/USP. The UK has a wealth of premium priced hand-cooked crisps,

thus, the level of differentiation of DS’ USP of being a premium healthy snack

brand isn’t as strong. However, the German premium crisps market is

underdeveloped (FT.com, 2012), and DS’ USP’s would be highly

differentiated. For example, DS has unique flavours when compared to that of

its competitors. The majority of DS’ German competitors have a narrow range

of flavours (usually Paprika/BBQ), whereas DS offer a unique and wide range

8

of flavours such as ‘West Country Cheddar, Leek and Pink Peppers’. This

differentiation of flavours will benefit DS as German consumers are

developing a taste for authentic British crisp flavours (OpentoExport, 2013).

DS’ chips are hand-cooked and healthy. This differentiates their product from

competitors such as ‘Chio’ and ‘Funny Frisch’ in terms of the superior product

quality and health benefits. This differentiated USP has the potential to be

very profitable for DS as German consumers are seeking healthy, hand-

cooked chips (see key trends).

An intangible USP usually offers the strongest USP (FT.com, 2002), and

Maheswaren (1994) proposes that consumers will respond favourably to a

product that has a positive country of origin effect. This is especially true for

DS. The ‘British crisps’ segment in Germany is small (FT.com, 2012), yet

Germans show favourable attitudes to, and identify the premium crisps market

as being ‘English’ due to their superior quality and unique flavours

(OpentoExport, 2013).

In conclusion, DS’ functional and non-functional USP’s are high in demand in

this new market. By having strong and differentiated USP’s, the brands

position as a unique, healthy and artisanal British crisp brand becomes more

identifiable in the minds of German consumers (Coleman & Prisco, 2006).

Segmentation

To improve communication efficiency, and lower the scattering loss of mass

advertising, it is important that DS (an SME) focus their marketing activities on

a niche and distinct group of people (Esch, 2001)

Please see appendix 1.3 for further detail on DS ’ target segment.

9

Marketing Mix

Product/Branding/Packaging

In terms of the product life cycle, the premium savoury snack market in the

UK is reaching maturity, whereas the German market equivalent is

underdeveloped and in growth (FT.com, 2012). With reference to the growth

of the German premium market, it is important that DS consider standardising

the parts of their products that already make them differentiated when

compared to its German counterparts (i.e. flavours/health benefits/quality)

(Lorette, 2014).

DS will use ‘product extension/promotion adaptation,’ as the product (i.e.

flavours) will be standardised, yet the positioning of the brand will be adapted

(Keenan, 1989).

Kotler (1997) proposes four important components of a product to consider.

Of these four components, DS must decide on whether to adapt the products

‘attribution’ benefits in order to successfully create a unique position in the

market (Lee & Carter, 2012).

In order to succeed as a British premium brand, it is essential that DS

standardise their current flavours for the German market. On entrance to the

German market, Tyrells (a similarly aligned brand) attempted, and failed to

adapt their products from their own to paprika (Germanys most popular

flavour). Tyrells soon found out that it was the unique and original British

flavours that attracted German consumers. Tyrells decided to revert back to

their British flavours and standardise them for German consumers. The move

paid off as German demand for the product doubled (OpentoExport, 2013).

In evaluation, the standardising of DS’ flavours is crucial for the brands

survival. Standardising the flavours will help the brand to differentiate itself

(important in growth stage of PLC), whilst also creating the desirable, and

distinctive position of an original, and flavoursome British premium brand.

Another benefit of standardisation is that it saves on the high costs and risks

that are associated with adaptation (Murphy, 2003).

10

Another part of the products attributes that DS must consider is the quality.

DS’ product quality derives from the processes of creating the chips. The

brand is built on its artisanal product. The crisps are hand-cooked, low in fat,

free of GMO’s and gluten free (Darling Spuds, 2014). The process, and

therefore the products superior quality should also be standardised as it,

again, serves to differentiate the brand with reference to its German

competitors.

By standardising this product feature, DS achieve quicker ROI returns (Lee &

Carter, 2012) by capitalising on Germans willingness to pay more for healthier

hand-cooked crisps (Passport, 2014).

The third product feature to consider is the packaging. DS’ largest share pack

is 140g (Darling Spuds, 2014), whereas German consumers are used to

share portion sizes of 175g (Intersnack, 2014). The brands target segment is

couples aged 50-65, therefore, adaptations to increase the share pack size to

175g must be made to aid the brands repositioning as a brand to share in the

evenings. With pack sizes being similar to that of competitors, consumers are

more likely to justify paying for DS goods as they are getting better value for

money.

DS must consider the German consumer demand for sustainable packaging

(Kraus, 2012). New BASF technology means that DS can adapt their

packaging to make it completely compostable (Springfield, 2012). Adapting

this feature demonstrates DS’ dedication to their CSR, which will result in

brand preference (and therefore a competitive advantage) amongst DS’ target

segment (Lee & Carter, 2012).

British snacking occasions commonly take place in between meals

(Winterman, 2012), whereas Germans prefer to eat snacks during the

evenings (Passport, 2014). To help reposition the brand as a ‘premium

evening time snack’, DS must adapt their current colour scheme. In Germany,

royal blue means ‘to promise the moon’ and has connotations with evening

use (About.com, 2014). By adapting the colour scheme of the packaging to

include royal blue, DS will be able to take advantage, and cater for the cultural

differences in terms of consumption (Lee & Carter, 2012).

11

Germans have a good grasp of the English language (UKTI, 2014), which

means that a German brand name is not essential. The new adapted brand

name is ‘Sundown Farm’ (SF). First of all, SF is English and helps to create a

clear and desirable position as a British premium snack brand (OpentoExport,

2013). Secondly, the brand name is descriptive and matches with the

consumption patterns of the target segment. The final point is that it gives

Germans the impression that the product is locally sourced from British farms.

Germans are buying in to, and showing a preference for crisps that have been

sourced from British farms (OpentoExport, 2013).

Promotion

Germany has a ‘low-context’ culture (when compared to UK)(Hall, 1977). SF

must consider adapting parts of their creative positioning to accommodate for

cultural differences (Rutigliano, 1986).

Applebaum & Haliburton’s (1993) framework has been used to decide upon

the nature of SF’s creative position.

Characteristic Adapt/Standardise Comment

Use of Humour Adapt Promotional material in the

UK uses light-hearted

humour. British humour

may not be understood in

Germany due to a culture

of risk avoidance

(Hillebrand, 1992).

Argumentative/Narrative Standardise UK promotional material

narrates the story of where

the product was

founded/sourced.

Standardising this aspect

for low-context cultures is

important. Germans

12

demand detailed narrated

information on ingredients

and processes (Lee &

Carter, 2012).

Competitive/Non-

Competitive

Standardise Use of a competitive

stance is less common in

Europe (Lee & Carter,

2012).

A non-competitive position

provides SF with a point-of-

difference, which helps the

brand position itself as

artisanal.

Soft/Hard Sell Standardise Soft selling allows for

emotion to be used in

promotional material.

Emotion is effective when

used with ‘low-involvement’

products (i.e. crisps).

(Rossiter & Percy,1991)

13

Direct/Indirect Adapt Germany’s low-context

culture means that

promotion material must be

explicit and descriptive

(Lee&Carter, 2012).

Format=Story Standardise Germans are buying into

the story of how British

crisp brands are sourced

(OpentoExport, 2013).

Type of

Appeal=Emotional/Health

Standardise Germans seek both the

health benefits (Passport,

2014), and the COO effect

(OpentoExport, 2013)

when buying premium crisp

brands.

14

Promotional Mix

An integrated communications mix leads to higher brand recall (Baidya,

2010); therefore, SF must consider a range of communications.

Direct marketing (push strategy) attempts to create a relationship between the

brand and its potential customers (Ogilvy, 2007). This method is appropriate

for SF as it’s a cost effective way for new market entrants to build brand

awareness (Ogilvy, 2007).

Leaflets would be sent out to SF’s target segment with information about the

health benefits, and origins of the brand, whilst encouraging a behavioural

response to subscribe to the companies’ mailing list (Duncan, 2002).

Subscription encourages brand loyalty (which helps achieve objective-4)

(Lee&Carter, 2012).

Those subscribed will then receive an online voucher that entitles consumers

to a free pack of their choice delivered. The ability to trial a product in ones

own home makes initial purchase (objective-3) and repeat purchases

(objective-4) more likely (Lee&Carter, 2012)

To take advantage of the target segments increased use of social media,

those on the mailing list will be encouraged to join German versions of the

brands existing social media sites. SF will run a competition on twitter called

#SundownMoments where consumers tweet pictures of themselves with the

product. The picture with the most retweets wins a years supply of the

product. Through retweets, the brand benefits from increased visibility

(DeMars, 2014). The use of social media is a cost effective strategy that

allows SF to increase brand recognition beyond the target segment (Driller,

2011).

15

Pricing

Those with considerable disposable income (SF’s target segment) show a

preference for highly-priced differentiated products (Akan, 2006).

Germans willingness to pay more for healthy, premium hand-cooked crisps

means that SF can justify charging a premium price of €2.30 (similar to

Tyrells) for a ‘share pack’ (Passport, 2014).

Evaluation and Measurement

SF will evaluate their level of success by comparing their performance with

their initial objectives (after the time allocated for each objective has passed).

Total Word Count – 2743 (+10%)

Please Note – The ‘Distribution’ part has been covered in ‘Market Entry

and Distributor ‘ section.

16

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24

Appendix 1.0

Market Value-$2516.6m. This represents a CAGR of 4% between 2009-2013.

(UK 3.6%) (MarketLine, 2014)

Premium product offerings (such as Darling Spuds) play a key role with

regard to the markets increase in value. (Passport, 2014)

Source: MARKETLINE

Market Value Forecast – By 2018, market value is expected to have grown by

21.4% to reach a total value of $3,054.8m, which represents the largest value

increase in Europe. (MarketLine, 2014)

Source: MARKETLINE

25

Market Volume – 277.6m Kilograms, which represents a CAGR of 2.4%

between 2009-2013. (MarketLine, 2014)

Potato chips registered positive volume growth in 2013. (Passport, 2014)

Forecasted Market Volume – By 2018, market volume is expected to rise to

311.3m Kilograms, which represents a CAGR of 2.3% over the period.

(MarketLine, 2014)

Market Segmentation

Source: MARKETLINE

Potato Chips account for 24.2% of the market, which represents a total of

$610.1m in value.

Potato Chips are driving growth in the savoury snacks market, and will

continue to do so for the period of 2014-2017. (ReportLinker, 2014)

26

Appendix 1.1

Key Buying Behaviours/Trends

Savoury snack market is profiting from the growing trend of staying in.

Snacking takes place in the evening, with indulgence high on the

agenda. Potato chips must offer both indulgence and health properties

in order to succeed. (Passport, 2014)

Consumers are responding positively to hand cooked, healthier crisps.

Especially if they are low in fat and gluten free. (Passport, 2014)

Unit prices increased in 2013 due to a growing demand for healthy,

high quality products. Prices will continue to increase during the period

of 2013-2018. (Passport, 2014)

Consumers perceive savoury snacks as being more healthy then

alternative snack options, which has led to potato chips outperforming

alternatives. (Passport, 2014)

Older consumers have the highest number of savoury snack occasions

per year. (Canadean, 2014)

German consumers seek artisanal products. (Canadean, 2014)

Consumers look for convenient, on-the-go consumption. (Canadean,

2014)

27

Appendix 1.2

Pen Profile – ‘The Silver Foxes’

Demographics

Age – 50-65

Income – Combined average income of €38,954 (Eurostat.com, 2014).

Control over ½ of countries wealth (Passport, 2014).

Most valuable age group in savoury snack market with 22% of value

share (Reuters.com, 2014).

Education – 84% of age group achieved secondary school attainment

(OECD, 2014).

Social Class – Middle (Koch, 2012).

Geographic

Target audience live in urban cities such as Munich, Berlin and

Gelsenkirchen. Urban dwellers account for 72% of the savoury snack

market (Reuters.com, 2014).

Behavioural

Snacking takes place in the evening (Passport, 2014).

This target audience have the highest amount of savoury snack

occasions per year, and seek on-the-go consumption (Canadian,

2014).

Psychographic

Growing trend of staying in (Passport, 2014).

Growing demand for indulgent, and healthy premium crisp products

(Passport, 2014).

Seek healthy lifestyle. Increased participation in activities such as

cycling, walking, swimming and going to the gym (Passport, 2014).

28

Media Consumption

Bild is the most popular national newspaper, however, this age group is

more likely to regional newspapers such as the Berliner Zeitung

(Passport, 2014).

Increased use of social media platforms such as Facebook and Twitter

(Esche, 2013)

92% consume TV every day (Reuters.com, 2014)

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