Blue Mountain Herbal Teas Company’s Distribution Channel Options Report

Executive summary

The main purpose of the report is to discuss the available marketing options in the distribution channel of the Blue Mountain Herbal Teas. Gary Penfold is in a state of a dilemma on how to integrate supermarkets in the distribution channel of the company. This has caused a major conflict between the retailers of the health food stores and the company. The former argues that they will restrain buying products from the company if supermarkets will take their slot in the distribution channel.

Quite a several marketing theory concepts have been used to explore the case study of the Blue Mountain company and its distributional channel. From the findings, it is evident that the company enjoys a large share of the market due to the high volume of sales recorded per year. The strength of the company is also based on its unique blends of tea products. In terms of opportunities, the company is likely to experience major growth due to the presence of supermarkets in its channel of distribution.

Nonetheless, there are also associated weaknesses and threats that the company has to grapple with at the moment. For instance, intense competition from other companies and similar competitive products is a major threat. Additionally, reliance on a single product line is a major weakness since it lacks product differentiation. It is highly recommended that the company should not do away with the health food stores in its distribution channel. However, it should conduct email advertising to persuade retailers.

Introduction

To begin with, it is profound to note that marketing is both an art and science that revolves around elements such as promotions, public relations, and advertising. The information generated from marketplace data as is the case with the Blue Mountain herbal Teas is indeed vital in making relevant decisions. However, most firms often make several guesses on how to apply the information generated from marketing activities. Hence, the purpose of this report is to explore the marketing theories and options that the management at Blue Mountain Company can make use of to come up with the best business decisions.

To compile this business report, quite a several resources were consulted. The two main types of resources used were books and journals. The case study document also provided the foundation for the report since it was the primary point of reference.

The findings for the report have been documented in terms of marketing theories, SWOT analysis, and responses to the case study questions as discussed in the following section.

SWOT analysis

Strengths

The Blue Mountain Company has the following key strengths in its business portfolio:

1. Strategic positioning of its products.
2. High demand for its products.
3. Variety of its branding portfolio in terms of blends that are 15 in total.
4. A strong public image that has been created by the presence of health food stores in the distribution channel.
5. The entrance of grocery supermarkets in the distribution channel.
6. Presence of wholesalers who distribute to small scale retailers.

Weaknesses

1. The company deals with only one line of product (herbal teas) and therefore it may not benefit from the actual benefits of product differentiation.
2. There is no evidence from the case study whether the company has been using social media marketing or not. Overreliance on the health food stores for distribution and marketing of its products has been a major loophole that is currently causing conflict as the supermarkets are entering the distribution system.
3. The unilateral decisions made and implemented by Gary Penfold seem to be weakening the company at some point. Although there is a marketing management team in place, it is apparent that common decisions are not made before being executed. As such, there is a weak ability to coordinate the leadership structure of the company.
4. The recent advances made in the development of information and technology platforms have made it easy for companies to market their products without necessarily engaging in active advertising (Kotler & Armstrong 2006, p.143). Hence, the viral marketing theory can make use of social media tools such as Twitter accounts, Facebook pages, and emails to reach out to a large number of audiences within a very short time without incurring any significant costs. Promotions and public relations are not needed in viral marketing (Birkinshaw, Morrison & Hulland1995, p. 640). There is no evidence that Blue Mountain Herbal Teas has been using viral marketing. Therefore, it is highly recommended for the company to engage its active and potential customers on the benefits of consuming herbal tea products (Erramilli 2003, p.85).

Opportunities

1. The entrance of supermarkets in the distribution channel of the company provides the latter with an expanded marketing opportunity. From the case study, it is evident that supermarkets have a larger sales volume than health food retailers.
2. Under an oligopoly market structure, firms deal with similar products but adopt rigorous product branding strategies as they attempt to create product differentiation. This appears to be a major opportunity for the Blue Mountain Herbal Teas to grow since it has a total of 15 blends to meet the diverse needs of customers (Ghemawat & Ghadar 2006, p.620). The supermarkets and health food stores stock similar tea products because they obtain these food products from the same supply. Besides, branding and product differentiation for the herbal teas will boost the opportunity of the company to expand into the untapped markets (Forsgren 2008, p.36).
3. Channel marketing is also another key marketing theory that is applicable in the case study of the Blue Mountain Herbal Teas. For instance, the company decided to sell its various blends of tea through distributors. One of the oldest distributors for this company has been the health food stores. However, the company noted that selling its products through supermarkets would lead to a large volume of sales because the latter buys in bulk and has a large consumer base. This implies that a key marketing decision can be generated at the point of sale of a company’s products. The choice of a distribution channel for herbal teas can also be used by the company to send specific marketing messages to customers especially in regards to quality. Therefore, if Gary decides to use supermarkets as the main channel of distribution, then it will send a message that whatever is being offered to the market are of high quality since supermarkets and other large scale stores hardly sell low-quality products (Ghauri & Gronhaug 2005, p.104).

Threats

1. Intense competition from other companies such as Celestial Seasonings Herbal Teas. Also, some consumers are not necessarily interested in herbal tea products and would rather opt for flavored coffees and teas, decaffeinated coffees as well as the standard teas and coffees.
2. Conflict in the channel of distribution is also another potential threat that is bound to disrupt the market vibrancy of the company especially if the discontent is not resolved in the best way possible. The health food retailers are threatening that they will not buy products from the Blue Mountain Herbal Teas.
3. The company is also facing the threat of declined sales especially if the health food stores will restrain from buying products from the company. Besides, declined sales may be realized if the company will have to employ additional sales representatives in various regions to meet the needs of all the adopted channels of distribution.

The expected profit margin and the costs incurred in the process of production are not the only factors that are worth considering when setting the price of products. According to the marketing theory of the perceived value, there is a general tendency among consumers to believe that products that are highly priced are more superior to those that are relatively cheap in the market (Grier & Brumbaugh 1999, p.80).

However, if the price of a product is set below that of another competing product, it is will appeal to a particular segment of consumers who perceive that both qualities are the same and therefore, such consumers will buy the cheap product regardless of the quality (Ghauri & Gronhaug 2006, p.82). In the case study of the Blue Mountain Herbal Teas, the management could still take advantage of this type of marketing theory by lowering its price of herbal teas of herbal food stores so that the latter can also sell at reduced prices.

One of the reasons why there is growing discontent among the operators of the herbal food stores is that the company has opted to distribute its products through supermarkets who subsequently sell at lower prices. This has made it impossible for the health food stores to capture a good number of buyers since their prices are a bit higher than those offered by supermarkets. However, it is vital to note that supermarkets can sell at huge discounts because they but directly from the producer (Golden-Biddle & Locke 2007, p.62).

Case study questions with relevant marketing theories

What factors determine the strength of the position of the health food stores?

The health food stores have been the backbone of Blue Mountain Herbal Teas since the company was established. To begin with, it is pertinent to note that these stores have always been strategically positioned to distribute herbal tea products for the Blue Mountain Company. One of the strategic positioning and strengths of the health food stores is that they have been used to access the market by availing the products at the point of sale where consumers can find them.

The stores have also been used to build the brand of the company and its various blends of herbal teas. In other words, the herbal food stores assume the role of indirect adverting of herbal tea products bearing in mind that they a direct contact with customers.

Moreover, the health food stores have been used to improve the image of the Blue Mountain Herbal Teas since they sell directly to consumers on behalf of the company. It would have been impossible for the management at the Blue Mountain Herbal Teas to build the image of the firm single-handedly without the assistance of the health food stores.

Additionally, health food stores also provide an avenue where market acceptance of new products could take place. This is a strength that could not be attained by supermarkets bearing in mind that consumers tend to trust the small stores more than the supermarkets especially when new products are introduced into the market. They can make direct inquiries from the health food retailers contrary to the case with supermarkets.

Market positioning is one of the dominant theories used in evaluating the marketing strength of specific brands and products (Bjorkman, Fey & Park 2007, p.440). According to this theory, sales can only be optimized if the producer strategically positions the products at the point of sale most appealingly and attractively. Hence, product positioning will ensure that the target audiences are directly reached and the latter is also fully persuaded that the given products are beneficial (Ghauri & Gronhaug 2005, p.84).

As such, market positioning is largely similar to building the brand or image of a product so that consumers can settle for it. For instance, car manufacturers often use phrases such as affordable or safe when positioning their automobiles. In the case of Blue Mountain Herbal Teas, it is vivid that the company has managed to position its products in the market as healthy, herbal, and natural tea blends compared to other competitors who sell regular tea or coffee products. The herbal tea is perceived by consumers as safe and healthy.

Also, the company has managed to come up with various blends each with its brand name (Pearce& Michael 1997, p.307). This has made it easy for customers to settle on their best choice of herbal tea blends at any given time. This type of market positioning explains why the company has had a competitive advantage over its rivals in the same market. Nonetheless, Gary Penfold needs to unveil improved product positioning in the current market due to the growing competition from market rivals.

What should Gary Penfold do to reduce the conflict in his company’s distribution channels?

The conflict that has been generated with the entry of supermarkets into the distribution system of the Blue Mountain Company can be sorted out in different ways. Firstly, it is necessary to underscore the fact that the expansion of the company is inevitable especially if it has to remain competitive among other market rivals. While the health food stores have been instrumental in the distribution channel of the company, it is pertinent to note that the company cannot do without expanding its channels of distribution as part and parcel of maximizing sales.

Therefore, the management at Blue Mountain should consider carrying out email advertising to health food stores in a bid to offer an adequate explanation of why the company has to expand its distribution channels. For example, the health food store retailers should be made to understand that they will not lose their customers despite the presence of supermarkets who even sell at lower discounted prices. Besides, email adverting should also be used to inform these retailers that even if they were to be given exclusive rights to distribute the herbal tea products, they will not manage to meet the demand of the market as well as the varying tastes and preferences of customers.

Secondly, the company can also reduce the pricing of its various blend of tea products in special categories of trade discounts so that they can be able to pass the same price cuts to their customers. This move will make sure that there is a significant price difference between supermarkets and health food stores. Health food retailers will be excited by such price cut incentives and as such, they will gradually accept the offer. The new marketing positioning should be in line with the most effective distribution channel that will incorporate both the health food stores and supermarkets without creating a bitter relationship between the two distributors (Rotfeld 2001, p.63).

Conclusions

To recap it all, it is vital to reiterate that the distribution channel conflict noted in the above case study was caused by the entry of supermarkets in the distribution channel of the Blue Mountain Herbal Teas. Secondly, the health food stores may not necessarily reserve the right to distribute on behalf of the company since the grocery supermarkets also play a significant part in boosting the sales volume of the herbal tea products.

Recommendations

It is highly recommended for the management at Blue Mountain Herbal Teas to carry out email advertising for the health food stores. Moreover, supermarkets should be used as the main channels of distribution while the company should boost the advertising of its products and avoid relying on the health food stores for direct contact with customers. The company may opt to do nothing since the conflict will eventually end because consumers will not stop buying the herbal tea products of the company.

Before settling on a particular channel of distribution, Gary should seek to obtain adequate marketing data on the competitor statistics, the volume of sales, customer demographics, tastes, and preferences as well as the industry statistics. These kinds of information will indeed assist Gary to assess the market fully especially in regards to using either supermarkets or health food stores (Yin 2003, p.76).

It is worth to define the concept of marketing. In simple terms, marketing revolves around data gathering, storage, analysis, and retrieval so that the process of selling can be made smooth (Khatri & Nanyang 2000, p.92). In other words, marketing enhances the selling of goods and services (Fama1998, p.300). Hence, information obtained from the marketing analysis of a particular product or brand can assist business enterprises to introduce new products into the market, boost the brand image of the product portfolio, make a decision on the most effective channels of distribution or change the existing products in the marketplace with competitive brands. The aforementioned benefits of marketing data are indeed vital for the Blue Mountain Herbal Teas bearing in mind that Gary Penfold is currently in a dilemma on which distributional channel to use in the distribution of 15 blends of herbal tea (Ang, Leong & Kotler 2000, p.98).

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