Nestle SA - SWOT Analysis, New Product, Target Market, and Customer Value Proposition - Example

Executive Summary The paper presents a detailed marketing report on a distinctively new high-end chocolate confectionery product by Nestle S.A in South Africa. The target market for the product is upper middle income consumers, who apparently constitute most of South Africa’s population. The customers are going to enjoy value for the product because the core raw material for making the product; cocoa, will be grown and sourced from rich and fertile tested lands in West Africa. These customers will also enjoy the benefit of product customisation so that they can dictate on the type and form product packaging to meet their specifications. Concentrated target marketing will be used to identify and secure the abovementioned marketing niche. Such marketing campaigns as television advertisements and social media will be used vigorously to place the product into the market because it is assumed most of the potential customers possess television sets as well as tablets, personal computers and smartphones where they can login to Facebook and Twitter among other social media platforms. 2. Introduction The focus of this marketing report is on analysing Nestle S.A confectionery business in South Africa. The marketing report is set to assist potential investors into venturing new confectionery product like high-end chocolate bars into an economy. The reports identifies the SWOT analysis for both Nestle S.A and South Africa, as an economy that is likely to provide ready market to the product due to the fact that it enjoys extensive upper middle income potential consumers. The report provides detailed explanations, assumptions and recommendations that might prove useful in making informed decisions relating to introduction of the new products into the developed market. Nestle S.A is a Swiss based multinational food and beverage company that conducts its operations from Vevey-Switzerland (Nestle, N.d). It is considered to be the largest food multinational in the company measured by the substantial size of its revenues base (Cooper &Antkiewicz, Shaw, 2007). The company offers more than 2,000 brands of food and beverage across the globe and provides about 339,000 employment opportunities. It conducts its operations in more than 197 countries with total sales of about CHF 91.6 billion at the end of 2014 (Cooper &Antkiewicz, Shaw, 2007). Some of the most popular brands offered by the firm include; Milo, KitKat, Nestle-Toll House and Maggi. South Africa is a country positioned within the Southern part of Africa with a population of about 54 million as at the end of 2013 (EuroMonitor International, N.d). It is an upper-middle income economy with four capital cities that serve different functions: Pretoria (executive function), Bloemfontein (serves the judicial purpose), Cape Town (serves the legislative purpose) and Johannesburg (EuroMonitor International, N.d). 3. Market Description In South Africa, Mondelez has enhanced the country’s capacity to generate at least 70% of the world’s overall confectionery growth (EuroMonitor International, 2014). Considering the fact the economy’s continues to record recommendable growth in such areas as middle class population, the level of disposable income as well as a vibrant economy, Frost & Sullivan ascertains that there would be sky-rocketing chocolate industry revenues from $545m to $3billion in the period between 2013 and 2017 respectively (EuroMonitor International, 2014). As at 2012, the country’s confectionery market size stood at $688.3m with a $13.5 per capita and 0.7% growth expectations. A significant portion, in fact 43.1% of the confectionery business is enjoyed by Mondelez International Incorporated as Nestle S.S holds 27.4%; 10.8% for Tiger Brands Ltd; 2.3% for Chocoladefabriken Lindt&Sp;1.8% for Mars Inc while others occupy the remaining 14.6% of the market share of both sugar and chocolate confectionery (EuroMonitor International, 2014). 4. SWOT Table & Findings Explanation South Africa-SWOT Analysis Strengths; i) The country enjoys a well-laid out agricultural sector, which promotes large scale farming enterprises (International Trade Centre, N.d). ii) It enjoys top notch physical infrastructure for transportation purposes. iii) There is a strong governmental policy framework that promotes legal way of conducting business operations (International Trade Centre, N.d). iv) It also enjoys a sound and efficient financial institutions platforms as well as ICT sector, which is good for research and development as well as innovative-related activities (International Trade Centre, N.d). Weaknesses: i) The economy suffers from low skilled personnel. ii) There is a high cost of labour iii) The South African Rand is mostly unstable compared to such world currencies as pounds and dollars iv) The current governing body lacks enough expertise required in overseeing and promoting international and trade relations (International Trade Centre, N.d). Opportunities: i) The country enjoys SADC preferential trade agreements, which provides a platform for expansion of operations (International Trade Centre, N.d). ii) The economy provides a much aggressive skills and development programmes (International Trade Centre, N.d). Threats: i) The country suffers from high unemployment and crime rates that includes the recent xenophobic attacks (International Trade Centre, N.d). ii) It suffers from immense levels of labour costs and inflexible labour legislative frameworks (International Trade Centre, N.d). Nestle S.A SWOT Analysis Strengths; i) Nestle S.A enjoys a substantial share of the food and beverage market hence commands a significant number of markets. With annual earnings hitting at least $1billion and more than 2000 product brands (Nestle, N.d). ii) The firm possess one of the most sophisticated research and design prowess that they usually adopt whenever they embark on introducing newer products. This gives the brand an edge over its immediate competitors in both local and international levels. iii) Nestle S.A currently operates in more than 190 countries, which means that it enjoys unmatchable distribution patterns. Weaknesses: i) The company lacks the consistency needed in producing high quality food and beverage products. This is witnessed by the rampant calling in of products by the company due to in-affective supplies and contamination (Nestle, N.d). ii) The firm has faced numerous levels of criticism especially the recent horsemeat scandal as well as being indicted with child labour. Opportunities: i) The current global demand for both healthy food and beverage products continues to increase tremendously. Due to this level of demand, Nestle has enjoyed opportunities related to open up markets for its products (Nestle, N.d). ii) The company already enjoys substantial business partnerships with such other huge MNC like Coca-cola in respect to offering products and distributions channels (Nestle, N.d). Threats: i) The company suffers from high brand irresponsibility given that it failed to effectively adopt quality assurance programs hence resulting to generation of poor quality and contaminated products that can harm its reputation level as well as it might lead to significant amount of losses (Nestle, N.d). ii) The entity enjoys substantial levels of revenues mostly from chocolate and sugar related products. However, with the current changing trends in regards to healthy living the company is likely to experience reduced demands in the future. iii) There is a higher demand expectation for raw food, which will likely increase in comparison to the population and economy growth. Due to thus, Nestle S.A is likely going to experience higher level of costs as well as diminished profit margins (Nestle, N.d). 6. Recommendations a) Target Market It is important to note that there is no single marketing strategy that is expected to satisfy all consumer groups, thus there is a need to create specific strategies for the proposed target market. For the confectionery related products from Nestle S.A, the proposed segmenting variable will involve concentrated targeting (US Commerce Service, 2011). The market target technique is solely focused on selection of certain marketing niches, which in this case falls under upper-middle income consumers brackets, under which marketing efforts are targeted. Since the company will be focusing on a single market segment, it will be easier to solely focus on comprehending the specific needs, tastes and preferences of this particular marketing niche thoroughly. This proposed concentrated market targeting strategy is expected to cut down on possible competition against products from other entities. b) New Product Description Product: The product at hand is quality chocolate bars meant to meet the needs of both the upper-middle income bracket consumers. The product will be unique because the cocoa used in its production will only sourced from specific tested farming grounds in West Africa. In fact, the company will provide seedlings and supervisory teams to these farmlands to ensure that the cocoa produced is of high quality. The selling of this product will only be offered in dozens in order to offset costs associated with manufacturing and distribution. Price: the product will be priced slightly higher in comparison to the current similar products in the market. The price will clearly reflect its customer value. This pricing strategy is meant to cover for effective distribution and value channels as well as realise the mark up amounts for investments made. Promotion: given that South Africa economy is made up of huge upper-level middle income potential consumers, it thus means that they have access to such advertising tools like television as tablets for social media campaigns. Following this line of assumption, marketing promotions will involve vigorous television adverts, as well as social media campaigns for that matter. Place: The product will mostly be availed or rather accessed by these upper middle-income potential consumers mainly through well-known and high-end supermarkets in the country. c) Customer Value Proposition The high-end chocolate bars will be offered to the customers at a slightly higher price because it will have a distinctive package and customers having special occasions will be offered a chance to order for these bars generated with customised specifications like packaging, colours and even having their names encrypted within these packages at a small fee. Furthermore, the customers are expected to enjoy the great taste from the specific cocoa generated from tested farmlands in West Africa. d) Justification Of the Choice Of New Product Using at Least One Strategy: The product is likely to fit in within the South Africa’s confectionery market because the economy enjoys a significant number of upper middle-income consumers. These consumers will likely see no hurdle in paying a premium price for the product since they can afford it. The niche is also in need of distinctive and unique products in comparison to what is being offered at the market currently. Subsequently, the current global demand for both healthy food and beverage products continues to increase tremendously. Due to this level of demand, Nestle will likely enjoy opportunities related to open up markets for its products. It thus means that the propensity to launch the high-end chocolate bars into the market will be successful. References List EuroMonitor International. 2014. Confectionery in South Africa. Retrieved on April 17, 2015 from http://www.euromonitor.com/confectionery-in-south-africa/report EuroMonitor International. N.d. Middle East and Africa: South Africa. Retrieved on April 17, 2015 from http://www.candyusa.com/files/International/South%20Africa_NCA%20Mini%20Country%20Profiles.pdf Cooper, AF &Antkiewicz, Agata; Shaw, Timothy M. 2007. "Lessons from/for BRICSAM about South-North Relations at the Start of the 21st Century: Economic Size Trumps All Else?” International Studies Review vol.9, no.4:pp. 675, 687. International Trade Centre. N.d. South Africa: SWOT analysis. Retrieved on April 17, 2015 from http://legacy.intracen.org/Appli2/Leather/AfricanPlatform/CountryProfile.aspx?info=SWOT&countryid=47&countryname=South%20Africa&kk= KPMG.2014. A taste of the future: The trends that could transform the chocolate industry. Retrieved on April 17, 2015 from https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/taste-of-the-future.pdf Nestle. N.d. About us. Retrieved on April 17, 2015 from http://www.nestle.com/aboutus US Commerce Service. 2011. “Doing business in South Africa-2011 country commercial guide for US companies. Retrieved on April 17, 2015 from http://export.gov/southafrica/build/groups/public/@bg_za/documents/webcontent/bg_za_034197.pdf Read More