Lindt Excellence Chocolate Australian Target Market - Case Study Example

RUNNING HEAD: LINDT EXCELLENCE CHOCOLATE Lindt Excellence Chocolate Name Institution Date Executive Summary Lindt is one of the most prominent chocolate brands in Australia. Its Excellence brand which was initiated in 1989 is among the major players in the premium chocolate segment of the market. In order to deal with the market challenges, the brand has always emphasized quality, a variety of promotional activities and promotional activities through online, print and electronic media. As a mature brand, its competitive strategy is mostly based on the idea of taste variety, quality, tradition and a Swiss heritage which is generally appealing to the Australian market. This report offers a marketing insight into Lindt Excellence as a brand in Australia. Background Chocoladefabriken Lindt & Sprüngli AG is among the top manufacturers of chocolate products and premium chocolate in the world. Its products are found in over 100 countries, bringing in an annual turnover of almost 1 billion dollars. It is majorly Swiss-owned and has manufacturing plants in the United States, Germany, France, Austria, Switzerland and Italy. It also has sales offices in Hong Kong, Argentina and Dubai, and distribution subsidiaries in Canada, Spain, England, Poland and Australia (Lindt & Sprüngli, 2011). Lindt has always sought new flavours that bring their gourmet chocolate imaginations to life through an innovative refinement process for chocolates known as conching. This involves continuous stirring for long durations so as to refine the texture and flavor of the product. The company has maintained the tradition of quality and in 1989 its experts identified more flavours which dark chocolate could be presented in so as to ensure a new taste variety for every buyer. This marked the beginning of the 'Excellence' range. Lindt Excellence’s Australian Target Market Lindt Excellence has the advantage of a thorough understanding of its marketing audience. Its marketing activities mainly promote its Swiss heritage, tradition and quality aimed at creating a predominant awareness among the core target which is female buyers of age ranges between 25 and 45 years old who have fairly high incomes (Lindt Chocolate, 2011). All age groups are however easily incorporated into it due to the broad nature of advertising themes associated with the company. The main characteristics of the core market are: They tend to have adequate finances, are health conscious and seek ideas that promote the image of a social rise They tend to read printed texts relating to health, fashion, cookery and home-keeping Many consider chocolates a treat that they would like to indulge in, and the indulgence is closely associated with wanting to reward themselves with an occasional treat The target advertising aimed at women is well informed. This is because it is one of the main culprits when it comes to the lipstick effect. According to Allen (2010), this refers to the fact that chocolate tends to be resistant to recession, as whenever there is an economic downturn, consumers tend to be willing to purchase cheaper luxury goods for instance chocolate and cosmetics even though they may be cutting down on other luxury commodities. According to Roy Morgan (2011), past research showed that more Australian women as compared to men love chocolate, with 72% of females aged 14 and above being regular consumers. The most popular type is chocolate bars, eaten by 54% of the age group in contrast to 48% of the men in the same group. Chocolate blocks come in second, with 45% of women and 40% of men consuming them regularly. Lindt Excellence’s Market Conditions Australian chocolate consumers have generally reduced its intake, because of the increased awareness that it is not a healthy kind of food. However, there are a number of characteristics that define the market; i) Those who are truly fans have tended to increase their preference towards premium products. The rise in popularity of premium chocolates is anticipated to continue for several years ii) There is an increase in the affordability of chocolates in department stores and supermarkets which are stocking more varieties at a given time, giving rise to the need for differentiation in brands iii) Over a half of the overall revenue for the chocolate industry is from artisan chocolates iv) The chocolate industry is expected to keep growing in the near future at about 2.7% per annum, with revenue as at 2018-19 expected to reach about $319.7 million. The ability to sustain growth is however challenged by a general decline in Australian discretionary household income during 2013-14. Ingredient costs are also expected to pose a challenge, as it is expected that milk domestic prices will have increased by the end of 2014. Sugar prices in Australia and global cocoa costs are however projected to go down in the period (KPMG, 2012). There has been a considerable increase in ingredient prices, especially the flavour cocoa used in production, indicating the possibility of price increases, which are often a threat to sales. However, Lindt always has always had confidence in its Excellence range and always believes that consumers will accept the changes due to the brand’s absolute product quality and exclusive positioning as a premium chocolate variety. Pricing is as usual, relatively high but within a competitive range when compared to competitors (KPMG, 2012). The Challenges for Lindt Excellence The premium chocolate market in Australia has been growing due to the presence of fair-trade and healthier products in general. The trend is likely to benefit the Lindt Excellence brand and its major competitors in the Australian market. Premium chocolate manufacturers, both those with their plants in Australia and those in other countries are ever busy trying to innovate their products as a way of surviving in the face of a harsh economic climate Competition in the market is always getting stiffer, as other players increase their imports into Australia and commodity prices are equally highly volatile The chocolate industry in Australia is under pressure due to an increase in health consciousness among consumers who are increasingly opting for nuts and cereals instead of chocolate As a response, Lindt invests in product development and adaptations. There is a generally great amount of value addition in its manufacturing processes, as a result of which the Australian outlets of the company have managed to maintain their profit margins and remain competitive even during a hard economic phase. This is not just good news because it is likely to spur competition for the market because the trend is beneficial to both the two major players and smaller firms specializing in artisan brands, for instance Haigh Chocolates. Lindt Excellence’s Marketing Mix a) Price The brand’s premium positioning implies that consumers need not only to be assured that it is a better product, but also one which they should be willing to pay a premium price for. The main market segment targeted is people who seek premium chocolate which is of undisputedly high quality. It targets all age groups within the upper and middle classes. Lindt Excellence positions itself as the best chocolate manufactured using the ingredients and quality of cocoa in the world. It maintains its positioning as of superior quality and testing, with an enhanced, positive consumer sentiment Pricing for the Excellence range’s 100 gramme pieces is $ 2.65, offering the buyer a wide variety of tastes to choose from at the same price. In Lindt Excellence’s strategy, there is no often giving of discounts. According to Earle & Earle (2008), this is a good approach because doing so would make consumers who initially identified with the product as a prestigious brand might end up changing their perception of it if the price keeps going down. Whenever there is the lowering of price, even if seasonal, Lindt Excellence has proved that there is always the need to maintain at least a few differentiation qualities for instance the addition of some luxury appeal in other pillars of branding. The brand may in this way separate itself from the other cheaper or mainstream brands within the market. This is what the Excellence brand did away from the other Lindt brands for instance Lindor b) Product a) Presenting a premium, classy brand that has a highly enjoyable taste is a key objective of any marketing effort for the Excellence brand. The packaging also simply promotes such an image b) An understanding of the target market has so far been important because it has offered an effective tone and direction for marketing efforts together with brand identity. These might be helping to establish a human, organic connection between the brand and its audience c) Lindt carries out every production stage process in-house. This is due to its strong commitment to ensuring an uncompromised quality in the Excellence chocolates. The company is one of very rare chocolate manufacturers who still maintain total control of every production phase, including for instance packaging. Such a quality strategy differs greatly from the industry trend where one or more production steps are usually outsourced to other manufacturing firms d) Lindt Chocolates have a unique smoothness. Its objective is to offer all the five senses of the eater much pleasure. The richness of the chocolate make it melt where a finger presses, and the surface is always absolutely smooth and blemish-free. It is always pleasing to the eye with a beautiful matte sheen e) The chocolates are well-tempered and dense, making them sharply snap as one breaks them. The bitter-sweet taste and rich aroma of the pieces is a major selling point, with the easily melting characteristic once one places it in the mouth creating a unique quality perception that the company prides itself in c) Promotion Lindt Excellence is generally marketed as affordable quality. It has taken a number of measures in this respect; i) It has in the past worked with magazines such as Delicious and Donna Hay ii) It has also placed had a Lindt magazine insert put in The Australian newspaper As a way of accessing more readers, it also invested in advertisements online, specifically in taste.com.au, the home of the leading recipe and food website. To make its online advertising effective, the brand adopts displays, time targeting, keyword targeting and homepage takeover tactics. iii) More advertising is at times put in the Sunday Telegraph, the Sunday Herald Sun and in the Australian Good Taste publication iv) Sampling programmes are at times initiated as a means of sales promotion. This is guided by the belief that to be successful, a brand needs to be strong and provide a distinct and appealing offering to the consumer. Placing a sample of the product in the consumer’s hands is therefore crucial in brand awareness creation and encouragement of repeat purchases v) Sampling goes hand in hand with other advertising and marketing activities, especially during festive seasons. vi) Roger Federer, a world tennis champion is used as Lindt’s public idol model. This is an effective strategy considering that the target age group is likely to have a lot of affection towards the success that is associated with sports championship. Federer is indeed looked up on as a role model and celebrity. The marketing information generally tends to ask the audience if they would want to be just like him vii) Television advertising was only taken up in the Australian market after the brand platform had been built through measures such as sampling, with TV only generating excitement and interest in the brand Tennis is quite identifiable with the brands promotion, and appeals to a wide range of audiences other than just the main target group. Federer is very popular in Australia, and the use of his image can be received by tennis lovers or his fans who will subsequently be persuaded to shift their attention to and buy the Lindt Excellence chocolates ‘which carve out a special niche through availing emotional benefits that surpass those brought by its competitors’ by far, while raising the audience’s personal relevancy in the brand. d) Place The main distribution point for the product is in Sydney, with other branches being spread across the country. The brand adopts a selective type of distribution strategy upheld. Instead of the usual high reliance on retail stores, the brand also uses department stores as a distribution channel. However, it is acknowledges that department stores may not be as accessible as the grocery stores. The brand is in this way made to appear exclusive and not considered to be so much accessible like the mainstream brands are. This increases its attractiveness to those who identify with it for prestige purposes. Apart from having the product in selected stores, much of its marketing and even sales are done online. The Lindt Excellence brand has a dedicated website, apart from the general Lindt Australia website where any product information for both the range and other brands can be accessed. It is possible to buy the chocolates from online stores such as and . According to Sivasailam (2010), selective distribution implies that the brand will only be made available in a particular kind of store on in just a few stores. This is a common strategy for brands that are well spread geographically and which seek the attention of customers who will be ready to shop around. This is as long as the stores are in line with the policies of the brand with regard to the selling of the product. The good combinations of colors on the packages, together with a generally simple and clean layout and unique packaging might be crucial factors that help to capture buyers’ attention. The design of the chocolates is also generally stylish and has a luxurious appeal, more so in the advertisements that are put up. Lindt Excellence’s Brand Positioning Brand positioning is an important aspect in today’s marketing, especially because buyers have access to a lot of information from various sources about every product, and once they decide on something, it is never easy to convince them to change their perceptions. A good positioning strategy will have to be in line with the target buyer’s prior experience or knowledge, so as to increase their personal relation to the information. The launch of the Lindt Excellence brand can be considered to have been a case of strategic branding. Considering the competition in the markets, there is an increased need to have a unique identity that stands out. Packaging is among the significant functions of any marketing activity. It has a variety of functions. For Lindt Excellence, packaging serves a number of functions. First is containment of the product. The package at the basic level helps in keeping it safe and protected. The product will be kept fresh and safe from environmental effects. Packaging is also a part of the product’s identity. According to Allen (2010), packaging will in this way briefly introduce different products and their manufacturers. Therefore, the Lindt Excellence packaging differentiates it from both other Lindt products and other brands in general. Customers are therefore enabled to identify it apart from other products. The chocolate wrapper has the brand name, the manufacturer’s name, ingredients used, product quality, and weight of the product. The Lindt Excellence packaging plays a sales promotion role. The attractive material and colours used help in drawing customers’ attention and induces their interest in the product and as a result, offers a motivation for them to purchase it. The Lindt Excellence package is a source of brand prestige. Because it is a premium product which is well-packed, its prestige is enhanced as part of its identity. Even if a product is of high quality but fails to have an appropriate packaging, there is the possibility that the attitude of potential customers will not be positive in relation to the product. In this way, the packaging is part of the brand’s prestige and reputation. The Brand’s Competitive Strategy Lindt in general controls only about 8% of the chocolate market in Australia. However, it is the main factor behind the massive growth in the premium chocolate market. The Australian market is a lucrative one for the chocolate industry. It has a per capita consumption of 6.3 kilogrammes, among the highest ever in the Asia Pacific. Most of sales are attributed to chocolate blocks at 32% of the total, then countlines at 22% and seasonal varieties at 16%. Low sugar and low fat varieties are becoming increasingly popular in Australia. This may be a challenge to Lindt Excellence to reassess the portion size of each product in the same way that manufacturers have been doing in the United States and United Kingdom. It should also seek to generally lower the amounts of sugar and fat in the range of products. Although Lindt Excellence exists on the premium side of the chocolate market, it faces competition from all sides, including mainstream brands. When it manages to attract buyers to its premium product, this in many instances happens at the expense of the mainstream brands. Both premium and mainstream chocolate satisfy the same market demands. Lindt Excellence therefore strives to convince customers that as a premium product, it is better than the rest It is quite a competitive time, and marketing is getting a lot of attention. Research and development efforts are also continuously underway in order to seek any improvements or modifications that may be necessary in seeking a competitive advantage, while maintaining its rich heritage. The Lindt Excellence Range is marketed as the best collection of chocolates that have ever been made. This is based on its segmentation based on tastes. The Lindt Excellence Range offers many different flavours that make it appealing to almost any kind of chocolate lover It offers a variety of fruit flavors which are fused with almond slivers There is a combination of dark chocolate with chilli, a feature that many customers associate only with Lindt Another variation involves dark chocolate with mint, while in another, there has been the addition of French sea salts to the chocolate Roasted almonds are included in another while in yet another innovation, there is fusion with vanilla Milk chocolate is presented in two flavours; chocolate with vanilla and honey or chocolate with caramel A provision is also created for those who prefer white chocolate where it is fused with Madagascan Vanilla The challenge arising is that most confectionery and chocolate consumers tend to be uncompromising when it comes to taste. For this reason, the allowance for reformulating the chocolates is quite limited. Unlike most commodity markets in which price is the main determinant for choice, in the premium chocolate markets it is the brand that is most significant. For this reason, brand preference and brand awareness have always been pursued by the Lindt Excellence range. The overall strategy has sought three main objectives a) To market Lindt Excellence as a sophisticated product which provides a unique chocolate experience b) To ensure that more people choose to buy the brand more frequently c) To promote word-of-mouth advertising and subsequent trial purchases by customers Lindt Excellence targets consumers who can afford to willingly pay more so that they can have chocolate which is of higher than usual quality. The company in this regard has always been adventurous in terms of the flavours it offers. As a brand, Lindt Excellence therefore has variants that incorporate mint, sea salt, orange and chilli. Lindt Excellence’s Product Life Cycle According to Masterson & Pickton (2010), the Product Life Cycle helps in the mapping of a product’s lifespan. These occur in four phases, the introduction, growth, maturity and decline stages, each of which can vary depending on the product. The brand is already through with its introduction stage, due to the long duration of time that it has already been in the market. There is no much emphasis on letting people know that the product exists, but rather maintaining or even expanding its penetration into the market. Its growth stage passed as the product managed to grow especially in the last decade. The Lindt Excellence brand is in its maturity stage. While still there is a lot of investment in advertising, the marketing efforts do not emphasize comparison and therefore convincing of potential customers of the superiority of the brand over others. Rather, it is about continuously reminding them of the unique experience and why they need to stick to the brand. Growth is generally fast at this time, and it can be said to be relatively stable. The company focuses more on differentiating the excellence Range from those of other major competitors in the Australian market, the major ones being Mars and Cadbury. References Allen, L. (2010). Chocolate Fortunes: the Battle for the Hearts, Minds, and Wallets of Consumers. New York: American Management Association Earle, M and Earle, R. (2008).Case Studies in Food Product Development. Cambridge: Woodhead Publishers KPMG. (2012). The Chocolate of Tomorrow. HaymarketNetwork Ltd Lindt Chocolate. (2010). Print Ads- Online Portfolios on Behance. Retrieved on 02 May 2014 from Lindt & Sprüngli. (2011). Australian Packaging Covenant 2011-2015 Action Plan. Sydney: Lindt & Sprüngli Australia Pty Ltd Masterson, R & Pickton, D. (2010). Marketing: An Introduction. London: SAGE Roy Morgan. (2011). Women More Likely to Have a Sweet Tooth for Chocolate. Retrieved on 02 May 2014 from Read More