Situation Analysis
Over the recent past, New Zealand beverage industry has undergone a significant revolution (Pecotich & Schultz, 2006, p. 32). Emergence of new categories of functional drinks is one of the changes evident in the market. Energy drinks have increasingly penetrated the New Zealand beverage industry.
During the period ranging from 1999 to 2001, there was a significant change of attitude towards energy drinks represented by an increment in the degree of acceptance of energy drinks by New Zealand consumers. As a result of increased acceptance of energy drinks, New Zealand has been ranked amongst countries with the highest rate of energy drink consumption. For example, in 1999, the market the market grew with a margin of $ 35 million.
Size of Market Opportunities
Frucor Incorporation is one of the firms which operate within the New Zealand beverage industry by producing and marketing V energy drink. Over the years it has been in operation in the industry, V energy drink has successfully penetrated the New Zealand market. The high rate of market penetration has resulted from a number of factors.
For example, social change such as change of lifestyle has played a significant role in the increased acceptance of energy drinks in the market. Energy drink consumption is increasingly being considered fashionable. This has led o increased consumption of energy drinks. The rate of V energy drink consumption amongst New Zealanders is twice that of other energy drinks.
Considering the fact that energy drinks are aimed at boosting the consumers’ energy, a high rate of consumption is being witnessed amongst consumers aged between 15 to 30 years. The country’s age structure depicts a high market potential. It is estimated that the 67.3% of New Zealand’s total population is composed of individuals aged between 15 to 64 years.
However, in marketing V energy drink, the firm only targets consumers aged between 15 to 30 years. Findings of a market research conducted by Frucor Incorporation revealed that demand for energy drink reduces as customers become old. This arises from the fact that their energy requirement declines. Decline in demand for energy drinks amongst customers above 30 years presents a potential market opportunity.
In marketing V energy drinks, there is a high probability of Frucor Incorporation experiencing a significant growth. For example, the firm’s the firm’s target customers are characterized by a high level of dynamism in their consumption pattern. As a result, they easily incorporate change in their consumption pattern through consumption of new products.
Market Share Position
Since its introduction in the New Zealand beverage industry in 1997, V energy drink has managed to position itself effectively in the market. The energy drink has attained a market share of 60% within a period of four years since its introduction. The high market share has made the energy drink to be the leading energy drink in the New Zealand industry. This represents a high growth rate of the energy drink.
Strategic Considerations for Determining Strategic Route
A firm’s management team has to make a decision on the marketing strategy to adopt. The two main choices relate to primary demand strategies and selective demand strategies. Pride, Hughes and Kapoor (2009, p.85), are of the opinion that primary demand strategies involves a firm increasing market share of a product in its relevant market. Primary demand is depicted by a large number of potential customers with regard to a particular product or service.
Ineffective market communication is one of the factors which stimulate primary demand. Upon introduction of V energy drink in the market, consumers were apprehensive with regard to consumption of the energy drink due to lack of sufficient information regarding V energy drink. Pride, Hughes and Kapoor (2009, p.85) further assert that primary demand may also exist if there is a potential of attracting non users to integrate the product in their consumption patterns.
On the other hand, selective demand strategies are aimed at stimulating the demand of a particular product. Pride, Hughes and Kapoor (2009, p.85), are of the opinion that selective demand results from recognition of the need to consume a particular product.
In the process of making consumption decisions, consumers undertake comprehensive information searches which entail comparison of competing products on the basis of certain product variables such as quality and value. Selective demand strategies are aimed at enhancing a product’s competitive edge.
In marketing V energy drink, Frucor Incorporation should adopt both primary and selective demand strategies. From the analysis above, only a small proportion of the country’s population consume energy drink. This means that the firm can stimulate primary demand for energy drink amongst the non-users. The firm’s core target market includes customers aged between 15 to 30 years. Individual’s aged above 30 years are not considered. Therefore, there is a significant primary demand which the firm has not exploited.
Considering the fact that primary demand does not occur in isolation, selective demand strategies should also be adopted. This arises from the fact that there will be increased realization of the benefits of consuming the energy drink in the relevant market.
The energy drink has a characteristic of stimulating an individual’s energy requirement (Frucor, 2010). The firm’s target market includes customer who lead a busy, stressful and active lifestyle. This means that the product has a high market potential upon the target consumers realizing its benefits.
Pioneering Advantage
V energy drink was not the first energy drink to be launched in New Zealand. Other brands such as Red Bull had initially entered the market. However, the energy drink has managed to attain a substantial market share of 60% which makes it to be the leading energy drink.
Competition analysis and likelihood of competitive reaction
The industry is characterized by a high degree of rivalry which arises from a large number of domestic and multinational companies operating in New Zealand. Increase in the number of entrants arises from the industry’s lucrative characteristic.
This trend is likely to continue during the period ranging from 2002 to 2004 due to the industry’s profitability potential. The firm’s core competitors include Lift Plus and Red Bull GmbH Company. Red Bull GmbH produces and markets Red Bull energy drink which has effectively penetrated the market. In addition, Red Bull GmbH has developed a strong brand image.
Increase in industry rivalry presents a threat to Frucor Incorporation in an effort to attain a large market share for its V energy drink. New entrants will lead to an increment in the number of substitute products. Currently, V energy drink substitutes include e2, Powerade and G-force.
The energy drink also faces a threat from other categories of beverages such as soft drinks, sports drinks, and other varieties of carbonated energy drinks which are increasingly becoming popular. Competing firms are also undertaking product innovation in an effort to position themselves effectively in the market.
In an effort to attain a high competitive advantage, Frucor Incorporation should consider both primary and selective demand strategies in marketing V energy drink. The firm should undertake continuous product innovation. This would play a vital role in the process of undertaking value addition to V energy drink. The ultimate result is that the energy drink will appeal a large number of the existing and potential customers.
Resource and capabilities
Possession of necessary resources and capabilities is vital in a firm’s effort to pursuing primary demand strategies. This arises from the fact that there are numerous challenges which a firm faces in an effort to implement primary demand strategies.
Since its inception, Frucor Incorporation has developed a number of internal strengths.For example, the firm has an experienced research and development team which enables it to be effective in the process of conducting product innovation. Through intensive research and development, the firm is able to meet the market demands considering the dynamic nature of customers’ product requirements.
In addition, the firm has an effective product distribution strategy which ensures that the product is easily accessible in the market. This means that there is a high probability of the firm succeeding upon implementing primary and selective demand strategies since the product will be easily accessible in the market.
The firm distributes its energy drink through restaurants, university campuses, cafes, restaurants, supermarkets, diaries, service stations and convenience stores. In addition, the energy drink can also be accessed from more than 500 BP stations which are distributed across New Zealand.
Frucor Incorporation has also appreciated the concept of creating market awareness. This is evident in that the firm promotes V energy drink through advertising using various mediums such as television. In addition, the firm has also integrated online marketing by developing its own website on which it posts information regarding the energy drink.
This increases the firm’s capacity to interact with a large number of potential customers especially teenagers who forms a significant proportion of the firm’s target market. Through advertising and online marketing, the firm has been able to create a substantial level of brand awareness with regard to V energy drink.
Lifecycle Analysis
The energy drink is in its growth stage. According to Lamb, Hair and McDaniel (2008, p. 341), a product’s growth stage is characterized by a relatively high profitability potential. In addition, intensive product innovation is conducted on product so as to be competitive. Through the firm’s research and development department, Frucor incorporation has managed to introduce a variety of V energy drinks.
Developing consumer brand equity
Brand equity refers to everything which the consumer considers to be of value to him or her in relation to a particular product (Elliot & Percy, 2007, p.82). Through development of brand equity, a firm can be able to offer high value products and services to the consumers. Frucor Incorporation has attained brand equity through effective value addition which is ensured during the production process. In addition, the firm has developed its brand equity through creation of market awareness.
Recommended primary demand strategies
In order for Frucor Incorporation to develop its competitiveness, the management team should stimulate the primary demand in the market. There are a number of strategies which the management team can consider. The core focus of the primary demand strategies adopted should be the non users.
Increasing consumer’s willingness to purchase
A large number of consumers in New Zealand have developed a perception that energy drinks are a recent introduction in the market. This has made them to be apprehensive with regard to consumption of V energy drink. In order for the company to increase V energy drink consumption rate, the management team should create sufficient market awareness regarding the benefits of consuming the energy drink.
The market awareness strategy adopted should be both informative and educative. One of the ways through which market awareness can be created is by formulating a comprehensive promotion strategy. The strategy adopted should emphasize on the qualities and values of the energy drink.
Increasing consumer’s purchasing ability
Consumers are price sensitive in their purchasing patterns. Therefore, the price of a product greatly influences a consumer’s decision making process. A large number of consumers consider energy drinks to be relatively expensive compared to other beverages such as soft drinks. This perception can have a negative effect on a firm’s effort to stimulate primary demand. In addition, the effects of the 2007 economic recession can had a negative effect on consumer’s purchasing power.
This was due to a decline in consumer’s purchasing power. During the recession, there was a change in consumer’s purchasing pattern. Most of the consumers considered purchasing necessities compared to luxuries such as energy drinks. In order to stimulate primary demand, Frucor Incorporation should formulate an effective pricing strategy. In addition, the firm should expand its distribution strategy so as to improve accessibility of the energy drink in the market.
Incorporating electronic commerce to ensure product availability
One of the factors which have led to a low rate of energy drinks consumption in New Zealand compared to soft drinks is their limited accessibility. Only a small proportion of the total markets have reliable access to energy drinks. Through incorporation of electronic commerce technology, Frucor Incorporation will be able to increase the supply of energy drinks the market. Through electronic commerce, it will be easier for the firm to attain efficiency in monitoring the flow of the energy drink within the supply chain.
Product Customization
Considering the decline in energy drink consumption by consumers upon attaining 30 years, the firm should consider adding value to the energy drink so as to meet the demand of this customer category. One of the ways through which this can be achieved is by ensuring that the energy drink has nutritional value. This will increase the probability of the energy drink being consumed by customers aged above 30 years considering the increase in the degree of health consciousness amongst consumers.
Acquiring competitors’ customers
Considering the fact that the firm is faced by intense competition from domestic and foreign companies, the management team should formulate a strategy aimed at acquiring its competitor’s customers. In order to achieve this, the firm should conduct a comprehensive consumer market regard with regard to consumption of energy drinks.
Through the market research, it will be possible for the firm to establish the level of customer satisfaction. Findings from the market research will enable the firm to undertake an effective product innovation which will culminate into the competitor’s customers considering the energy drink to be of high value. The ultimate result is that the firm will be able to increase its customer base.
Recommended strategies for selective demand
Strategies to acquire the competitors’ customers
With regard to selective demand, Frucor Incorporation should develop strategies aimed at acquiring its competitor’s customers. The ultimate result will be an increment in the firm’s market share. In order to attain this, the firm’s management team should integrate differentiated positioning and head to head positioning strategies.
In marketing V energy drink, differentiated positioning can be achieved through product differentiation leading to development of a unique energy drink. Uniqueness in its energy drink can be achieved by adding value to the energy drink. Head-to-head positioning can be achieved through product innovation so as to improve its qualities.
To ensure V energy drink’s long term survival in the market, the firm should develop strategies aimed at retaining and expanding the product demand. This can be attained through creation of a superior customer experience and in addition to ensuring a high level of customer satisfaction.
Marketing Mix Strategies
Product
Creation of a unique customer experience and a high level of customer satisfaction should be the firm’s main goal. The ultimate result is that the energy drink’s competitiveness in the long term will be increased. Conduction of product innovation is one of the ways through which a firm can develop its competitive edge. Therefore, Frucor’s Incorporation management team should consider improving the quality of V energy drink.
In the process of undertaking product innovation, the firm should consider the customers’ product requirements. One of the ways through which this can be achieved is by considering both energy and health benefits of the energy drink. Consideration of health benefits will enable the energy drink to meet the increasing health consciousness amongst the consumer’s (Plunkett, 2007, p.46). The ultimate result is that the firm will expand its relevant market.
Pricing Strategy
From the analysis above, consumers consider energy drinks to be expensive. This illustrates the consumer’s price consciousness nature. To increase V energy drink’s market penetration, the firm should incorporate penetration pricing strategy. This will involve the firm setting the price of V energy drink at a relatively low point compared to competing products.
The resultant effect is that a large number of consumers will be attracted to purchase the energy drink. In addition, the firm should consider integrating psychological pricing strategy. Psychological pricing can be achieved by setting the price of 250 milliliter can and that of 350 milliliter can at NZ $ 1.99 and NZ $ 2.99. Incorporation of these two strategies will lead to consumers considering V energy drink to be fairly priced.
Promotion Strategy
The promotion strategy adopted in marketing V energy drink should be expanded. One of the ways through which this can be achieved is incorporation of Integrated Marketing Communication (IMC). According to Shimp (2008, p.65), Integrated Marketing Communication entails a combination of a numerous promotion methods. Some of the marketing communication methods considered include sales promotion, public relations, advertising, and internet marketing.
With regard to internet marketing, the firm should consider incorporating emerging social communication networks. Some of the social tools which should be incorporated include use of face book, YouTube, twitter, blogs, wikis and MySpace. Incorporation of these tools will increase the firm’s ability to reach a large number of potential customers. This arises from the fact that a large number of individuals access social networking tools daily.
Distribution Strategy
Efficient accessibility of a product from the market can result into its success. This arises from the fact that there is a high probability of the product being purchased by a large number of customers. Currently, V energy drink is not easily accessible in New Zealand beverage industry compared to soft drinks. To improve its market reach, the firm’s management team should incorporate both direct and indirect distribution strategies. However, the firm should conduct a market research to determine the most effective distribution channel to adopt.
Effective distribution will enable the product to be reached by a large number of consumers. One of the ways through which Frucor Incorporation can achieve this is by establishing distribution outlets in various regions in New Zealand. In addition, the firm should also integrate well established local agents.
Reference List
Elliot, R. & Percy, L. (2007). Strategic brand management. London: Oxford University Press.
Frucor. (2010). Frucor Beverages. Web.
Lamb, C., Hair, J. & McDaniel, C. (2008). Marketing. New York: Cengage Learning.
Pecotich, A. & Schultz, C. (2006). Handbook of markets and economies: East Asia, South East Asia, Australia, New Zealand. New York: ME Sharpe.
Plunkett, J. (2007). Plunketts food industry Almanac 2007: food industry market research, statistics, trends and leading companies. Chicago: Plunkett Research.
Pride, W., Hughes, R. & Kapoor, J. (2009). Business. New York: Cengage Learning.
Shimp, T. (2008). Advertising promotion and other aspects of integrated marketing communication. New York: Cengage Learning.