Healthy Snacking Strategy Submission - Case Study Example

KEY CONTACTS ACCOUNT MANAGER CONTACT DETAILS COMPANY NAME JAPANESE FOOD CORPORATION PARTI: PRODUCT INFORMATION PRODUCT CATEGORY HEALTHIER SNACKING PRODUCT NAME YOGO PRODUCT DESCRIPTION (INCLUDE HEALTH CLAIMS AND BENEFITS)   is one of the Australian brands of dairy yogurt snacks. The product lacks the typical yogurt flavor and is essentially a high sugar dessert containing less protein than yogurt. Yogo flavors comprise strawberry, strawberries 'n' cream, chocolate, choc marshmallows, banana, choc mint, cookies and cream. These flavors are absolutely classic made out natural, tasteful and high quality ingredients. Health Benefits; Fat free Gluten free Low sodium Low cholesterol Yogo is fit for people of all ages since its fat free and comfortably taken in warm weather (summer) since it is frozen. Individuals, workers and partying groups can take Yogo while resting, chatting and making fun. It refreshes and adds energy to the body. It can be topped with granola, mochi, strawberries or dark chocolate chips. Source: www.yogofactory.com/nutrition.html‎ CARTON QUANTITY Each carton (will have 180 packets for small size, 140 packets for medium size and 100 packets from large size cups. The cartons measurement is (30cm*20cm*10cm). The length of the shelves is 15 metres with 5 layers from the bottom. The food shelve accommodates 50*5=250 cartons of Yogo. There will be 100 cartons for small size, 80 cartons of medium size and 70 cartons of large size. Total packets of Yogo to be supplied are 18,000 for small size, 11,200 packets for medium size and 7000 packets of large size. The sizes will be placed in shelves in three sections horizontally running from the bottom upwards. Source: www.agrotrade.net/‎ REASONS TO BELIEVE Yogo provides all the flavours desired by many consumers. It pretty thick, rich with good variety of toppings such as Cookie crumbs, Sliced Almonds, Blueberries among other flavours. With a small cup, one gets 1 topping, two topping with regular and tthree topping with large. The small cup is not expensive only $3, regular $4 and large $6. It has tarty taste, sweet, delicious and good for after lunch dessert. One feels good and energized to work in a hot afternoon. It is extremely fabulous with favourable pricing. When one buys three larger sizes he/she gets one smaller size for free. It will sell faster at Coles and breaks even within four months of sales. The product is taken at all times of the year in Australia. PICTURE OF PRODUCT i) Yogo (regular size with chocolate) ii) Yogo ( with strawberry and granola topping) Source: http://www.yogoalley.com.au/#/products/ TIMELINE The product will be available in the shelves in three days time on 28 October 2013 FINANCIAL 100 STORES – COST PRICE Small size= $2 Regular (Medium) size=$2.3 Large Size=$4.5 800 STORES – COST PRICE Small size= $1.9 Regular (Medium) size=$2.2 Large Size=$4.4 RRP (AUD$) 100 STORES – SELL PRICE Gross margin: Selling Price- Cost Price / Selling Price *100 Small size= $3 Regular (Medium) size=$3.5 Large Size=$6 800 STORES – SELL PRICE Small size= $2.8 Regular (Medium) size=$3.3 Large Size=$5.8 MARGIN RETURNED TO WOOLWORTHS 100 STORES Small size= $(3-2)/3=0.33 or 33% Regular (Medium) size=$(3.5-2.3)/3.5=0.34 or 34% Large Size=$(6-4.5)/6=0.25 or 25% Units sold per 100 stores; Small size= 1.8million In the case of small size Yogo Fixed costs=$23million; Variable costs; $15million. Total cost=$38million. Total revenue=$54million. Profit =$16million 800 STORES Small size= $(2.8-1.9)/2.8=0.32 or 32% Regular (Medium) size=$(3.3-2.2)/3.3=0.33 or 33% Large Size=$(5.8-4.4)/5.8=0.24 or 24% Units sold per 800 stores; Small size= 14.4million In the case of small size Yogo Fixed costs=$23million; Variable costs; $145million. Total cost=$168million. Total revenue=$432million. Profit =$264million Break even=0.32*378million=$120million; This covers the entire fixed costs when sold in 800 stores than 100 stores. More units sold mean more profit due to less fixed costs. NUTRITIONAL INFORMATION PANEL The panel shows low levels of fat and protein with higher energy and nutritive content. The level of saturated fat and sodium is also low but high in Calcium and sugars. Source: Australian Food and Grocery Council www.afgc.org.au/‎ COUNTRY OF ORIGIN Australia MARKETING SUPPORT The Yogo product will be displayed on the shelves after three days of going on the Television. The company will also have a customer care desk outside every store for the first three days with give aways and a shopping voucher of $50 for every customer buying the product. Any queries will be channelled to the customer care desk or e-mail yogo@roysnacksltd.co.au. Two sales persons wearing Yogo branded T-shirts will be stationed beside the shelves to assist customers with any queries in each store. The marketing budget will be as follows; Item Cost (AUD$) ‘000’ Advertising 1,800 Customer service 500 Field sales 1,900 Marketing research 800 Promotions 3,000 Marketing Management 600 Total 8,600 PART II BRAND IMAGE & PRICE SUPPORT Brand Strength and Weaknesses Brand Image Attributes The findings from the brand image data show positive values of the actual in relation to the expected. This shows that the brand is way above the base value and has grown to delight customers and shareholders. The overall value was +3 which came second to brand E (+5) and followed closely by brand B (+2). Yogo brand was evaluated on the basis of the following attributes; Health, Convenience, Reliability, Affordability, Innovativeness, Familiarity and Awareness. The values for Innovative, Familiarity and Convenience were positive meaning that customers value them most compared to the other attributes. Despite that, the deviation is very small in all meaning that customers get maximum benefits from the use of Yogo product as shown in the table below. Yogo brand Strengths: Yogo brand is reputable and well known product especially among the Australian consumers. More than 50% of the adult Australians are aware of the product with popularity increasing among children aged 5-15years. To the consumer, Yogo identifies them with ‘coolness’ and great quality. It goes at favourable pricing offering a great competitive advantage to other health snacks. The packaging element is great with shiny and attractive labels (Fry 2007). Brand 2011 Brand value($million) 2012 Brand Value($million) Brand contribution to market capitalization Yogo 680 710 43% TrailMix 751 810 51% Rich Corn Crackers 439 523 33% LL Cheese 589 620 38% The brand value is rising given the increase revenue owing to increased production though fixed costs and variable costs also rises each year. The target brand value for 2013 is $760million and market capitalization to increase to 45% (Berry 2012). The strengths focuses two aspects; i) The Company: Japanese Food Corporation limited is committed to a great vision for the mass market, innovativeness, asset leverage, financial commitment and managerial persistence. The company has a well established production processes and systems that ensure quality and reliability. Employees and management are dedicated through visionary leadership to continuously improve on the products to keep abreast with changing customer tastes and preferences (Chaudhuri 2002). ii) Product: Yogo is a snack preferably taken on a hot day as a dessert. It replenishes lost energy and refreshes for a tough afternoon. The product is fat free an contains strawberry, strawberries 'n' cream, chocolate, choc marshmallows, banana, choc mint, cookies and cream which can be topped with granola, mochi, strawberries or dark chocolate chips. It is great with superior taste and appealing colors. The product meets Australian Nutritional specifications given the ingredients conform to the Alcohol and Foods Act. The product is differentiated from competition through superior quality and variety of ingredients that appeals to people of all ages (Arnold 2012). Weaknesses Health attribute did not meet the expectation of customers and requirements further build up of ingredients to meet health considerations. The pricing strategy in this case comprises setting of prices and dealing with various price sensitivities. Market entry pricing requires penetration pricing because there are major competitors like TrailMix offering premium prices which may be a disadvantage. It will be easier for Yogo brand to quickly build shares, adopt faster, higher stock turn from more channel support and a way of discouraging further entry by competitors. The price discounting tactic will involve an order discount of 1 free carton for every 100 cartons purchased (Reichheld 2001). To attract more customers the salespeople will have the Small Size going for $3, regular at $4 and large size at $6 retail prices and may be way up for customers. To overcome the price weakness, the store selling price is determined by the outcome of production and the margin required. This justifies the prices offered. The price elasticity for 100 vs 800 stores will be; Small size Yogo= 1.8million units selling at $2 for 100stores when price $1.9 goes in 100stores sales go up to 2.3 million units. The price elasticity of Yogo=%change in volume/ %change in price=27%/-5%=-5.4 The contribution margin will be given by; Selling price of Small Size Yogo= $2 Variable cost/unit=$0.5 Fixed costs=$0.4 The contribution margin before price change=(Price-Variable costs)/Price = (2-0.5)/2=75% After price change, the contribution margin will be; (1.9-0.5)/1.9=73% This means that Yogo is a high margin product since a small price decrease ($0.1) gives a relatively a smaller decrease in contribution margin (2%). Therefore, it is more easier to gain from cutting the price of Yogo and not much from rasing its price. Elasticity is more negative (-5.4) meaning that the brand has greater price sensitivity which makes it harder to scale the prices upwards. Price Elasticity The price elasticity graph is as shown below; Price Promotions Price promotions are regarded by Yogo to be temporary price reductions. The strategy used is used mainly for Multiple-Buys especially in stores (Buy 100 cartons, get one carton Free!) in 100 stores. Similarly for 800 stores, (Buy 400 large sizes and get 4 cartons Free!). The marketing budget for Yogo product is covered by a larger extend by price promotions. This is approximately 52% of the budget which comes as an instant boost to sales. The company promotes this product by price to defend the market share of 18% and respond to competition. It is good for it build good relationship with Coles and other business buyers. Sales promotion of Yogo will help increase the sales volumes and make quick returns much faster than selling at the normal price. In the shaky and turbulent Australian market, price promotions will help boost sales beyond the margin of safety and the growth of Yogo brand will emerge from attraction of new customers. For the category of new customers, the brand will exploit an estimated 68% will have bought the brand in the next six months while more are anticipated to buy in the next one year (Batra 2002). The brand will not count from positive after effects arising from the short term promotions but will assess individually on the margin gained. Since buyers are knowledgeable on price there will not be frequent price promotions. Since Yogo is a growing brand, promotions will help it grow faster. Neighbourhood price effect will be felt by TrailMax since the sizes of its products are within the $3 and $6 ranges for almost similar quantities. Both price discounting will be used since advertising offers greater reach with long-term and smaller direct effects. Price discounting is short term, reaching few but has large direct effects on customers. Improving price promo reach: The company will use displays in the form of pull ups and banners, feature adds and signage showing price discounts. For bulk orders over 20million units bought at once, off-invoice promotion will be undertaken. The seasonal promotion will grow the brand but is expected to turn inventory into cash and take care of the seasonal troughs and peaks. Brand Growth strategies and Positioning The product will use both product penetration strategy where achieving a sales growth of 7% is possible through increasing business penetration in every three months from 15 to 18% in New South Wales (Dawar 2002). Major targets will be stores in the form of B2B distribution channels. B2C distribution will also be sued to wade against multiple competitor products. The positioning option for Yogo is based on application or use ‘Yogo for tarty and sweet taste’. This will be the reason why people will buy the product since it is known for the taste. The buyers already know Yogurt and it will sell behind the well known product since it has a name in the market. This will help reinforce the opinions of the buyers (Ambler & Styles 2005). Because Yogo is closely linked to yogurt, it will be linked to the brand in terms of needs, attributes and cues so as to increase the consideration set. The communication is set to emphasize on the attributes and building in the probability to think and buy Yogo. The brand architecture is on a one platform of the master brand (Reichheld 2001). Reference List Ambler, T & Styles, C 2005, Brand development versus new product development, Journal of Marketing Intelligence and Planning, 14 (7), pp 10–19 Arnold, T 2012, Accounting for the value of brands, Accountant’s Magazine, Feb, p 12 Batra, R 2002, How brand reputation affects the relationship of advertising and brand equity outcomes, Journal of Advertising Research Berry, N C 2012, Revitalizing brands, Journal of Consumer Marketing, 5 (Summer), pp l5–20 Chaudhuri, A 2002, How brand reputation affects the advertising brand equity link, Journal of Advertising Research, Vol3: 37-65 Dawar, N 2002, How brand reputation affects the relationship of advertising and brand equity outcomes, Journal of Advertising Research. Vol 1: 345-361 Fry, J N 2007, Family branding and consumer brand choice, Journal of Marketing Research, 4, Aug, pp 237–247 Reichheld, F 2001, The Loyalty Effect, Harvard Business School Press, Boston, MA Read More