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Final ISMP
- 1. Integrated Strategic Marketing Plan By Shahzeb Jafri
- 2. Title Slide Executive Summary 3 Industry Analysis 4-5 Competitor Analysis 6-8 Perceptual Map 9 Value Chain 10 Customer Analysis 11-12 Company Analysis 13 Company – Distribution Strategy 14 Company – Positioning 15 Marketing Mix – Butterfinger 16 Company – Core Competencies 17 Butterfinger – Expanded SWOT Analysis 18 - 19 Balanced Scorecard 20 Recommendations 21 Updated Customer Pyramid 22 Updated Value Chain 23 Marketing Mix – Butterfinger Spreads 24 Marketing Mix – Butterfinger Stores 25 Implementation Plan 26 Profit and Loss Statement 27 Contingency Plan 28 Appendix 29-33 Table of Contents
- 3. • The Spreads market being $1.5 billion1 in worth with a CAGR of 7.9% in 20131. • Spreads industry to grow by 1.6% for next 5 years1. • Nestle’s success story as the world’s largest food company can be credited to the nutrition based positioning, accurate communication and extensive research and development measures taken by the company. • An example of Nestle’s success is Butterfinger that in 2 years was able to capture 17% market share of the peanut butter cups category, giving tough competition to Reeses, the industry leader1. • Butterfinger should target consumer segments falling between 18 – 60 years, particularly families with at least one child and average income of above $40,000. • Provided its success as a peanut butter based product, Butterfinger should: Launch the next generation in the form of Butterfinger peanut butter spreads Provide the most unique experience by opening Butterfinger stores • By adopting these strategies, Butterfinger spreads can achieve greater than the industry growth of 10% in the three years to follow. • Financial targets for the implementation of these strategies would be: Net Revenue for 2017: $ 144 million Net Income for 2017: $ 17 million Executive Summary
- 4. Industry Analysis Industry Definition: The Spreads Industry include nut-based, chocolate and sweet spreads. Sales of the industry reached $3.9 billion in 2014, growth from 2009-2014 was 31% and from 2014-2019 would be another 10% Moreover, the industry is expected to grow an additional 10 % from 2014-2019. Nut-based spreads generate 71% revenue, while chocolate spreads have had a growth of 20% in 20141. Industry Characteristics: • The category is continuing to grow every year • Competitors are innovating constantly for differentiation • Consumer base is one that is health conscious • Provision of original ingredients in Peanut Butter category to drive growth • Variety to drive growth in chocolate spread category Industry at a glance: • U.S Sales: $3.9 billion1. • Annual Growth (2009-2014): 31%1 • Expected Future Growth (2015-2019): 10%1 • Key Players: J.M Smucker & Co., Hormel Foods, ConAgra Foods1
- 5. Industry Analysis • Innovation • Social Media • Engaging retail advertising • Generation of electronic data Technological Issues: • Product Recalls • Law Suits • Ingredient Acquisition • Product Safety Legal/ Regulatory Issues:
- 6. Company J.M Smuckers Ferraro USA Inc. Hormel Foods Inc. ConAgra Foods Inc. Type of Product Jam/ Jellies/ Peanut Butter Chocolate Hazelnut Spread Peanut Butter Chocolate Spread Core Products Jif, Goober, Smucker’s, Adam’s, Laura Scudder’s Nutella Skippy Peter Pan Sales 2014 $1863m1 $206m1 $337m1 $192m2 Strengths Market leader, Product variety, innovative, vast production facilities Strong awareness, Loyal customer base 2nd largest brand, Brand Awareness, Strong financial backing, Existing strong markets Well known brand, market penetration, strong retail landscape Weaknesses Jam jellies declining sales, easy product substitutability Consumers becoming health conscious Skippy being a Unilever brand, Newlu bought so needs efforts Salmonella issue led to recalls Competitor Landscape
- 7. Company Trader Joe’s Safeway Kroger’s Type of Product Jams, jellies and peanut butter Jam and peanut butter Jam and peanut butter Core Products Traderr Joe’s Jelly, Trader Joe’s Peanut Butter and Trader Joe’s Jam Safeway Creamy peanut and Safeway Jams Kroger Jam, Kroger Crunchy Peanut Butter Strengths Market presence as a retail store, chance for complementary gifting to regular customers Marketing efforts of big brands make category awareness, zero in-store advertising cost Existing retail set up, awareness amongst shoppers, known for organic products Weaknesses Lack of consumer trust in store brands, difficulty of using other retail stores Difficult to secure loyal consumer base Consumer doubts regarding private label brands Total Private Label Sales ending November 2014: $435m Competitor Landscape – Private Labels
- 8. Competitor Landscape – Private Labels • J.M Smuckers is the market leader in the spreads industry with a market share of 40%. • It has a 33% share in peanut butter category. • Hormel Foods is the next biggest company in the market • Private labels are penetrating the market with a share of 18% Source: Topper, Amanda. Nut- based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- 9. Natural Ingredient Nutrition High Low Low High Competitive Analysis – Perceptual Map Having Nestle’s reputation over health, there is a potential chance for Butterfinger to become the most nutritious peanut butter brand Offer a wide variety of food and beverage products that enrich the very experience of life itself Offer a wide variety of food and beverage products that enrich the very experience of life itself Positioning Statement: Offer a wide variety of food and beverage products that enrich the very experience of life itself
- 10. Supplier Value Chain - Industry CustomerRetailerDistributorManufacturer
- 11. Customer Analysis Health Consciousness: ₋ Stress on natural ingredients ₋ Consciousness regarding sugar content ₋ Protein content plays an important role Preference for taste amongst consumers ₋ Special texture for peanut butter preferred (Creamy) ₋ Hesitation towards any artificial taste General Consumer Trends: ₋ 90 – 92% households consumer peanut butter and jelly in US2 ₋ 67% household consumer peanut butter regularly in US2 ₋ Approx. 20% consumers eat more than what is recommended in US2 ₋ 60% (12 to 17 years) to 80% (6 to 11 years) kids consume peanut butter3 ₋ 84% households prefer creamy peanut butter in US3 Customer Segments: ₋ End Consumer: a). The Two + 1s b). The Snackers ₋ Retail Partners: Walmart, Costco, Ralphs etc
- 12. Platinum Gold Iron Lead Households having an income of $55,000+, at least one tween child, parent age 28+, health conscious, almost daily consumers Retail chains specific to regions, generate moderate amounts of sales through breakfast foodstuffs and provide mixed shelf spacing to Butterfinger spreads Households having an income of $40,000, health conscious, have kids in tweenage or teenage, consumption of 4 times per week College students who work part time making $500 - $800 per week, cover meal cost with nutritious and filling snacks, consume often but individual consumption Individuals that occasionally consume peanut butter or chocolate/peanut butter. Rarely make purchases. Consume at a friend’s place National Grocery chains that generate large sales revenues from breakfast foodstuffs and provide ideal shelf spacing to Butterfinger spreads Breakfast and Dessert stores that buy Butterfinger spreads for usage in their products. Butterfinger should try and acquire advertising in menu cards Restaurants that rarely purchase peanut butter since the ingredient is used in a limited number of their products Customer Pyramid - Industry
- 13. • In 1867, Henri Nestle developed an infant cereal which led to the formal formation of Nestle in Vevey, Switzerland.1 • Over the decades, the organization has given birth to a vast array of brands and has become the world’s largest company with a focus on Nutrition, health and wellness. • The mission statement of the company is “to enhance the quality of consumers lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle”. Key Stats about Nestle (As of May 2015): • Market Capitalization: $247.3 billion1 • Sales: $100.08 billion2 • No. of Employees: 339,0001 • Headquarters: Vevey, Switzerland Key Brands: • Cerelac, Nestle Pure Life, Nesquik, Nescafe, Milo, Butterfinger etc. Company Analysis
- 14. Company – Distribution Strategy Retail Distribution Restaurants and Coffee Shops Universities Company – Distribution Strategy
- 15. Company - Positioning Provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. Offer a wide variety of food and beverage products that enrich the very experience of life itself.
- 16. Brand Butterfinger Bar Butterfinger Peanut Butter Cups Butterfinger Crisp Butterfinger Bites Product Flaky, crispy peanut butter center covered with chocolate Combination of creamy milk chocolate and smooth peanut butter in the form of cups Layers of light and crispy wafers, butterfinger candy crème and crunchy candy bits Classy butterfinger taste packed in bite-sized packs SKUs Original, King Size, Giant, Fun Size, 6 pack, Minis, Snack Pack Single, Share Pack, Minis Reclose-able Bag, Mini Share Pack Original, 6 Pack Stand-up Bag, King Size, Concession Place Online and grocery stores. Website has a shop locater Online and grocery stores. Website has a shop locater Online and grocery stores. Website has a shop locater Online and grocery stores. Website has a shop locater Price Industry line pricing for single bars. Prices vary according to pack sizes from $10 to $40 Industry line pricing for single bars. Prices vary according to pack sizes from $10 to $40 Industry line pricing for single bars. Prices vary according to pack sizes from $10 to $40 Industry line pricing for single bars. Prices vary according to pack sizes from $10 to $40 Promotion Television, print and digital advertising along with in- store advertising and promotions Television, print and digital advertising along with in- store advertising and promotions Television, print and digital advertising along with in- store advertising and promotions Television, print and digital advertising along with in- store advertising and promotions Company – Marketing Mix for Butterfinger
- 17. • Consumer Insights ₋ Analyzing consumer psyche ₋ Understanding consumer trends • Marketing Strategy ₋ Consistent communication • Research and development ₋ Integration with consumer insights • Retail Network ₋ Extensive ₋ Well spread out Company Analysis – Core Competencies
- 18. Expanded SWOT Analysis Strengths: • Strong parent company: Global company with strong financial muscle • Brand awareness: Butterfinger’s successful communication • High peanut butter consumption in US: 90% - 92% households consuming peanut butter1 • Strong research and development: 34 R&D facilities Weaknesses: • Production by consumers: 10% consumers tend to make their own peanut butter1 • Product Recall • Peanut allergies Opportunities: • Consumers’ increased demand for spreads with greater nutrients and protein: Nestle’s reputation for health and wellness • Millennial’s inclination towards spread usage in foodstuffs • International business: Peanut butter consumption rising in China Threats: • Strong Competition: A number of big brands already present in the industry • Private Labels: Penetration rising steadily • Government Regulations: Government keeps revising types of ingredients that can be used Butterfinger – Expanded SWOT Analysis
- 19. • Consistent Innovation: Constant innovations should be made to product offerings. • Leverage on Financial Backing: Utilize parent company’s strengths in business areas. • Introduce experimentation in the industry. Maximizing Opportunities and Strengths • Develop business analytics to counter competition • International expansion • Check on government regulations: Brand should stay aware and ensure all production regulations are met. Minimizing Threats and Weaknesses Future Strategies
- 20. Balanced Scorecard Metrics Financial Perspective: • Volume Increases • Return on Investment • Return on Equity • Net Income after taxes • Revenue per retailer • Revenue/ retail segment • Cost per retailer/trade promotion Consumer Perspective: • Percentage loyalty • Percentage intent to switch • Share of grocery spend • Share of voice/ wallet • Repeat purchase ratio • Trial Ratio Innovation Perspective: • Number of new products. • Return on innovation • Time to market • Time spent talking to customers • Number of consumer suggestions for innovation • New skills learnt / employee Operational Perspective: • Process quality. • Right first time. • Right on time. • Batch accuracy • Stock/ inventory level Balanced Score Card
- 21. • Primary Recommendations: Enter the spreads category with peanut butter and chocolate/peanut butter ₋ Consumer demand for natural ingredients and nutrition in spreads is increasing. Butterfinger has Nestle’s reputation to leverage the opportunity. ₋ Households with $40,000+ income with at least one child should be targeted ₋ Students should be targeted so that future loyal customers can be gaines Open Butterfinger Stores: ₋ There is an increasing demand for innovation in the category, where consumers want to try differentiated consumption. ₋ Stores can provide the most unique experience. Customer engagement should be ensured and they should be encouraged to customize their own meals. • Financial Objectives: Revenue from Spreads: FY17: $130m, FY18: $143m, FY19: 157m Store revenue: FY17: $14m, FY18: $16m, FY19: $17m Net Revenue: FY17: $144m, FY18: $158m, FY19: $174m Net Income: FY17: $17m, FY18: $21m, FY19: $25m Recommendations
- 22. Platinum Gold Iron Households having an income of $55,000+, at least one tween child, parent age 28+, health conscious, almost daily consumers Retail chains specific to regions, generate moderate amounts of sales through breakfast foodstuffs and provide mixed shelf spacing to Butterfinger spreads Households having an income of $40,000, health conscious, have kids in tweenage or teenage, consumption of 4 times per week College students who work part time making $500 - $800 per week, cover meal cost with nutritious and filling snacks, consume often but individual consumption so frequency is low National Grocery chains that generate large sales revenues from breakfast foodstuffs and provide ideal shelf spacing to Butterfinger spreads Breakfast and Dessert stores that buy Butterfinger spreads for usage in their products. Butterfinger should try and acquire advertising in menu cards Recommendations – Customer Pyramid
- 23. Recommendations – Value Chain Distributor RetailersSupplier Manufacturer Customer Butterfinger Stores Procurement MarketingResearch and Development Recommendations – Value Chain
- 24. Recommendations – Marketing Mix Product Place Price Promotion Objectives • Introduce 4 peanut butter variants (Creamy, Chunky, Old School and Diet) • Introduce chocolate/peanut swirl • Provide consumers with variety of pack sizes according to differing demand trends • Launch peanut butter variants and peanut/chocolate swirl in January 2017 (National Peanut Butter Day) • Develop automated online retail channels • Maintain competitive pricing with an upper and lower range of 2%. • Remain affordable to all consumer segments • Provision of greater nutrition for the same money. • Leverage on Butterfinger Simpson partnership to drive sales. • Communicate the launch through Butterfinger marketing mediums • Create immense buzz in the market (social media, OOH) • Engage consumers before product launch. Strategies • Conduct large scale qualitative and quantitative consumer research to identify lifestyle, preferences and habits of different segments. • Pack sizes: mini, regular, large and squeeze jars. • Launch Bartman SKUs and Simpson merchandize. • Educate sales and marketing teams about products • Purchase Nielsen regional spreads category retail subscription to identify most profitable retail regions for launch • Understand shopper psyche for different consumer segments • Develop a system that can deliver peanut butter to high frequency consumers • Conduct pricing studies to identify consumer price sensitivity. • Monitor competitor prices. • Price different pack sizes according to the targeted segment • Maintain 2% gap for adjusting peanut prices. • Initiate ‘Bartman’s Secret’ campaign before launch to make buzz (print and social media). • Integrate brand into Simpson new season featuring Elvis Pressley. • Dedicate $20m for television, print media and in-store promotions • Dedicate $5m for social media Recommendations – Marketing Mix
- 25. Marketing Mix – Butterfinger Store Product Place Price Promotion Objectives • Introduce products such as peanut butter pancakes, donuts, waffles and shakes • Provide consumer segments with a chance to make their own custom peanut butter meals. • In-store meal preparation techniques • Launch 3 Butterfinger stores in regions in Mid West, West and Southern U.S by April 2017. • Busy consumer locations such as shopping malls to be targeted • Operations to be expanded after 1 year • Maintain a product offering that is affordable. • Experiment new pricing strategies by introducing new products. • Set a pricing system where consumer’s consumption determines total bill. • Communicate store launch from September ‘16 to January ’16. • Communicate the launch through Butterfinger marketing mediums. • Create immense buzz in the market through social media. • Make consumers anticipate something unique in spreads industry Strategies • Conduct consumer research regarding the types of experimentations they would prefer. • Extract consumer data through interviews, focus groups and surveys. • Run a pilot phase in order to test the potential success of the idea. • Purchase Nielsen data on shopping mall traffic to identify most profitable regions for launch • Consumer research to Identify what store aesthetics can be most successful • Work towards expanding operations • Monitor pricing strategies of other dessert places and price accordingly. • Keep a minimal base price for foodstuffs (pancakes, waffles etc.) and charge for toppings. • Make Bartman the official store ambassador for Butterfinger stores • Initiate curiosity driven campaigns on social media to create a buzz. #ITheNextGeneration • Private invitation videos to selected consumers by Bartman. Videos uploaded on Facebook. Marketing Mix – Butterfinger Store
- 27. Dollar figures in millions 2017 2018 2019 2020 2021 Sales Spreads 130 143 157 172 190 Butterfinger Stores 14 16 17 19 21 Total Net Revenues 144 158 174 192 211 Cost of Goods Sold 33 36 40 44 48 Gross Profit 111 122 134 148 162 Operating Expenses R&D 26 25 28 31 34 Distribution 16 14 16 17 19 Marketing and Administrative 26 33 37 40 44 Store Expenses 15 15 15 15 15 Trading 3 3 3 4 4 Financial 1 2 2 2 2 Total Expenses 87 93 100 109 118 Taxes 7 8 9 10 11 Net Income 17 21 25 29 33 Most Likely Profit and Loss Statement
- 28. • Conduct further consumer research in making more variants and pack sizes to drive sales volume • Profits to be reinvested in additional communication measures such as Mobile Apps and games • Profits to be reinvested in incentivizing retail partners • Increase store locations and invest in enhancements • Focus more on consumer research to find out communication gaps. • Sales data should be analyzed to identify shortfall areas • Value chain should be revisited to improve cost structures • Pull back money from advertising and increase consumer promotions If objectives are exceeded If objectives are not met Contingency Plan
- 29. Dollar figures in millions 2017 2018 2019 2020 2021 Sales Spreads 207 228 250 276 303 Butterfinger Stores 23 25 28 31 34 Total Net Revenues 230 253 278 306 337 Cost of Goods Sold 53 58 64 70 77 Gross Profit 177 195 214 236 259 Operating Expenses R&D 41 40 45 49 54 Distribution 25 23 25 28 30 Marketing and Administrative 41 53 58 64 71 Store Expenses 15 15 15 15 15 Trading 5 5 6 6 7 Financial 2 3 3 3 3 Total Expenses 130 139 151 165 180 Taxes 12 13 14 15 17 Net Income 36 43 49 55 62 Appendix 1 - Best Case P&L
- 30. Dollar figures in millions 2017 2018 2019 2020 2021 Sales Spreads 77 85 94 103 113 Butterfinger Stores 9 9 10 11 13 Total Net Revenues 86 95 104 114 126 Cost of Goods Sold 20 22 24 26 29 Gross Profit 66 73 80 88 97 Operating Expenses R&D 15 15 17 18 20 Distribution 9 9 9 10 11 Marketing and Administrative 15 20 22 24 26 Store Expenses 15 15 15 15 15 Trading 2 2 2 2 3 Financial 1 1 1 1 1 Total Expenses 58 61 66 71 77 Taxes 4 5 5 6 6 Net Income 4 7 9 11 14 Appendix 2 – Worst Case
- 31. Appendix 3 - Expanded Product List Spreads Creamy Peanut Butter Crunchy Peanut Butter Old School Diet Chocolate Peanut Butter Swirl Butterfinger Store Cookies Waffles Pancakes 4 varieties of bread (plain, bran, banana, milk) Shakes Live cooking courses
- 32. Appendix 4 – Posters and Billboards
- 33. Appendix 5 – Bartman Game
Notas del editor
- References: 1. Brennan, Andy. Peanut Butter Production. Industry Report, IBISWorld, 2013.
- U.S Spread Industry: The Spread Industry in the U.S has experienced tremendous growth, where the industry sales for 2014 were recorded to be $3.9 billion with a CAGR for 2009-2014 being approximately 31%. Sales for the category are mostly driven by nut-based spreads, where these spreads accounted for $2.7 billion sales in 2014, a growth of 1.8% from 2012. On the whole, nut-based spreads have shown a 2009-2014 CAGR of 54%. The particular kind of spreads are expected to grow by an additional 15% from 2014-2019. Specific to the nut-based spreads, consumers are becoming more and more health conscious, where they come across as concerned about cholesterol related issues from products not using original ingredients. In the last six months, 67% of U.S adults have bought peanut butter. The younger generations are more inclined towards almond or seed butter as a result of health issues. However, these generations are willing to buy peanut butter, if original ingredients are used.’ The presence of a large number of companies with strong financial muscle makes the potential of tapping in the industry self evident. Moreover, the entrance of other smaller players for having a piece of increasing profits also showcases the growth potential in the market for spreads, particularly nut-based and chocolate. In addition, studies show that the consumer of spreads is becoming more conscious about his health, where the demand for original ingredients is rising. Consumers continuously agree that nut-based spreads have the potential to play the role of a major protein source. Among the U.S consumers: Millennial parents, 60% want to see spreads with natural ingredients 52% want spreads to have added nutritional benefits Lesser people eat spreads with main dishes and desserts (opportunity) Men inclined towards more adventurous consumption of spreads Reference: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- Technological Issues: Innovation: Given the changing consumer needs, it is extremely important to be constantly innovating products. Technological innovation plays the vital role of differentiating products in the spreads industry, where a constant revision of the product offering helps making the brand exciting and in turn retaining customers. Moreover, growing health consciousness amongst the consumers requires companies to use technology to make spreads from natural ingredients and satisfy the consumer need. Social Media: In this technology driven world, social media plays a vital role in attracting and engaging customers towards a particular brand. Butterfinger already has an updated social media platform for its consumers, where it is active on all major platforms such as facebook, twitter and instagram. These platforms can act as mediums to connect with the customer, provide customers with necessary feedback, make them aware regarding promotions and activities of the like. Moreover, social media also plays the role of being a customer satisfaction medium. Engaging Retail Advertising: The retail landscape has progressed, where retailers use provisions for brand advertising to generate extra money from manufacturers. Therefore, these facilities should be used tactfully in order to draw new customers to the brand. Generation of electronic data: Consumers in this era of technology are data generators, where the generated data is the biggest key to business success if used efficiently. By following the consumer on social media, tracking facebook posts, likes and tweets on twitter related to the company brand, the organization can develop an understanding about consumption trends and forecast how these trends would change in the coming future. Legal/ Regulatory Issues: Product Recalls: Products that do not comply with the food inspection authorities such as FDA are often forced to be recalled and in severe cases, banned. Given Nestle’s strong financial muscle, the company should ensure that the ingredients, machinery, packaging should be approved by the relevant food and safety authorities Law Suits: Organizations functioning in any sector of the marketplace should always be aware of the legal procedures that are followed in their respective industry. By complying to all procedures, the company can ensure no legal action being taken against it which would be followed by business prosperity. Ingredient Acquisition: Since the customer for spreads in the US is becoming evermore concerned about artificial ingredients being used I products, the company should always focus on making its products from natural ingredients. This would ensure customer satisfaction and retention. Product Safety: The well being of the consumer must be kept at the heart of business. Therefore, all facilities that handle the product must be authorized by the relevant authorities so that no legal action is taken against the company. Source: The 2013-2018 Outlook for Peanut Butter and Other Nut and Seed Bread Spreads in the United States, Prof. Philip M. Parker Nut-based Spreads and Sweet Spreads - US - March 2015, Amanda Topper, Mintel Academic.
- J.M Smuckers: Industry leader Variety of brands (Jam, jelly, peanut butter) Strong parent company for peanut butter brands Strong innovation capability Sweet spreads (jams, jellies) sales declining continuously Ferraro USA Inc. Loyal chocolate hazlenut customer base Successful communication of alternate uses of the spread (milkshakes, icecreams) Strong market penetration Consumer health awareness regarding chocolate consumption is rising Hormel Foods Inc. 2nd largest manufactured peanut butter brand, Skippy Innovates regularly Strong parent company Established markets in the US International brand Owned by Unilever earlier and taken over by Hormel in 2013, requiring strong effort to maintain progress Had recalls in the past due to which the brand is still recovering in terms of consumer perception ConAgra Foods Inc.: Has been a known brand amongst the Baby boomers Salmonella issue in the past have tarnished brand reputation Brand recalls left a bad impact on the brand Source: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015. 2. International, Euromonitor. CONAGRA FOODS INC IN USA. Industry Report, Passport, 2014.
- Private Label Brands: Private Label brands are penetrating into the market at a high pace In the peanut butter industry, private labels have an 18% market share Close to no retail advertising costs Older customer segments, however do not trust store brands Consumers are often doubtful of store brand quality Reference: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- The market shares according to a study by Mintel shows that J.M Smucker leads the $3.9 billion spreads industry. It is also the market leader of the peanut butter category with a market share of 33%. Hormel Foods comes in the second place as an individual company with a share of 10% in the spreads industry. Although consumers still have doubts about the quality of private labels, these retailer turned manufacturers are continuously penetrating the market, where private labels have altogether captured 18% of the spreads industry. In the peanut butter category, however, their market share is comparatively lower. Reference: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- In general, the spread industry is one, where final purchase depends a lot on the consumer perception of the brand. When buying jams, jellies, peanut butter or chocolate spread, the usage of natural ingredients and nutrition level of the product is specifically looked upon. Households are extremely concerned about providing their children with spreads that are healthy. So far in the peanut industry, sweet spreads sales have been consistently declining because of the consumer perception of artificial ingredients and sugar in these spreads. J.M Smucker has therefore faced a declining sales trend for its sweet spreads. Similarly, Nutella is also going through a consumer backlash on promoting the brand as a nutritious breakfast source. Private labels rank mid way on the nutrition level as well because they are still in the process of gaining recognition as healthy brands in the eye of the consumer. Moreover, Peter Pan by ConAgra and Skippy by Hormel foods remain low because of the salmonella incident that caused the recalling of the product. Source: 1. Dips and Spreads – US . Mintel Academic Study, Mintel, 2011. 2. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- Supplier: In any industry, suppliers are usually the resource or raw material provider. Suppliers provide access with the material that is required for the completion of any finished product. With regards to, suppliers can be divided into two parts. On one hand, raw materials such as peanuts, ready made peanut butter, peanut butter ingredients and things of the like are made available by suppliers. On the other hand, packaging material from product pack to plastic for wrapping stocks are provided by suppliers. They play a pivotal role in the value chain, where the provision of good quality raw materials ensures the preparation of the perfect product. If faulty materials are provided, low quality finished products can lose customers. Manufacturer: Manufacturers in an industry perform the role of preparing the product that is to be forwarded in the market for selling. In many cases, the manufacturer is usually the entity that owns a particular brand or product. In cases where the final product (jam, peanut butter) is bought from someone, the manufacturer becomes the supplier while the entity owning the brand becomes the manufacturer. In the spreads industry for instance, the manufacturer is usually companies owning the brand, for example J.M Smuckers, Hormel Foods and the like. The manufacturers can make it or break for the brand as the preparation of a product not satisfying consumer needs can cost the brand everything. Distributor: Distributors for every industry is the body that gets the final product from the manufacturer to the selling point. In the spreads industry, the distributor can be a company or entity that takes final packaged goods from spread makers to selling points such as grocery stores, super markets, small retailers and the like. Distributors influence the prosperity of a brand immensely, where proper handling of final products without any breakage or spillage can get good quality products to the final consumer. Retailer: Retailers are the most prominent point of sale for the spreads industry. They consist of a vast array of grocery stores, hypermarkets and small stores as well. Usually, retailers also target different segments of groups. High end national chains such as Trader Joe’s or WholeFoods target high end customers by providing specialty food products such as organic foodstuffs. Mid tier retail stores include stores such as Ralphs where the mid segment of the consumer base goes. Similarly, low end retailers such as Walmart put their focus on price sensitive consumers. Often, daily and weekly special prices are offered so that consumers traffic can be generated. Customer: Customers are the consumers of the final product. They are the target market for a brand. At times, people outside the assumed target market can also consume the product and be a part of the value chain. For the spread industry, customers are usually families who are looking for a healthy option of spreads which the parents as well as the children can consume as part of breakfast or snacks. Constituent Groups that Impact the Customer: In every industry, there are several groups outside the direct value chain who have the power to influence the buying decision of the consumer. There can be a number of these groups for the spread industry: Social Media: In this age of technology, social media has a great effect on the purchase decision of a consumer. Potential consumers could come across the prevalent sentiments of the consumer base and can get influenced as to buy or not buy a particular brand. Traditional Media: Media can also be a big consumer influencer in the spread industry. Good or bad practices of a particular brand could be captured by media agents such as television, newspaper and magazines and can make or break a brand’s image. A particular example could be the salmonella that was found in ConAgra Food’s Peter Pan peanut butter, a news that came in the press and tarnished the brand’s image in consumer mind for a significant amount of time. Government: Governments also have a big role to play in the success a brand or company is able to garner in a country. In essence, government anywhere is the ruling body and decides what products or even ingredients are used for any consumable in that market. Manufacturers, therefore need to stay up to date on such market knowledge from the government end and use ingredients that are in line with the governing bodies. Agricultural price index Fluctuations in the price and availability of key raw material inputs, mainly peanuts, can significantly affect the industry’s profit performance. These inputs largely determine manufacturers Source: 1. Brennan, Andy. Peanut Butter Production. Industry Report, IBISWorld, 2013.
- Consumer Needs and Preferences: Health Consciousness: The consumer today for spreads, specifically peanut butter and chocolate is significantly health conscious as compared to before. Before buying a brand of sweet or nut-based spread, consumers pay attention to the usage of natural ingredients, the amount of sugar used in the manufacturing and the amount of protein that the spread will be able to provide to a specific household. Preference for taste: Consumers for sweet and nut-based spreads are specific about the kind of taste they want from their spread. As far as peanut butter is concerned, consumers prefer a peanut butter spread that leaves a taste on their palates for longer. In essence, 84% of the consumers have an inclination towards a creamy peanut butter. Moreover, a peanut butter jar that tastes artificial or comes across one that has ‘peanut flavoring’ stands very low survival chances in the market Price sensitivity: Since the target consumer for the spread industry is families, price sensitivity is something prevalent in a smaller proportion of the consumer base. In essence, if a new brand is able to sell itself at the market average, it should not be very tough to secure a large customer base. General Trends: Peanut butter consumption is still very high in the US. Most consumers prefer to have peanut butter in sandwiches, while a considerable amount of people have it directly from the jar. Moreover, approximately 20% of the consumers end up consuming more than the recommended amount of peanut butter, therefore a new brand has the opportunity to come up with portion packs for the industry. Target Consumer Segments: Primary: The primary target market for Butterfinger spreads would belong to an age bracket of 20 to 40 years old. This ages band woud comprise of two segments: The healthy Two + 1s: Primarily, Butterfinger will target married families with at least one child. These families would be ones having parents aged between 28 to 30 years old, earning more than $30,000 and living in apartments/houses located in middle tier neighborhoods or above. This target market is very conscious about the well being of the whole family, especially the children. Therefore, they look forward to buying products that are natural, nutritious and without too much sugar. Furthermore, these families should be regular users of social media platforms such as Facebook, Twitter and Instagram. It must be noticed, peanut butter is a product that is a staple food for the US populace. Additionally, 93% parents in a study agreed that their children had an influence on their purchasing behavior. Also, tweens account for $43 billion sending annually. Therefore, Nestle having a reputation for providing a ‘pure life’ to its consumers can target such families who want to provide a healthy lifestyle to their children. The Snackers: An intelligent brand’s communication strategy should focus on the most profitable consumer segment along with maintaining contact with the sub groups which can also be potential consumers. Butterfinger, when launching its chocolate peanut butter and peanut butter spread will focus on college students that the brand would like to call ‘The Snackers’. These are individuals who look for small nutritious snacks between their busy study schedule and need something nutritious, tasty and affordable to satisfy the need. These students fall in the age bracket of 20 years old to 27 years old, have an average income of $5,000+, live in either dorm rooms or rent a room for themselves near their universities. These ‘snackers’ (college going) try to save money on food by having an alternate mid-day nutritious snack like peanut butter with jelly. Those having a full time job, on the other hand, have a busy schedule and try to save time by having small snacks that are healthy. Furthermore, this target market should be tech savvy and regular users of social media platforms such as Facebook, Twitter and Instagram. Secondary: Since peanut butter is a product widely used with breakfast products such as pancakes, waffles and bread, Butterfinger would target breakfast places such as IHOP and dessert places that serve foodstuff made out of peanut butter, chocolate or peanut butter and chocolate. Butterfinger can be advertised in the menu cards of these restaurants and dessert cafes. Source: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015. 2. Dips and Spreads – US 2011, Consumer Lifestyles in the US 2015. 3. Income and Expenditures in the US. Industry Report, Passport, 2015.
- Target Consumer Segments: Primary: The primary target market for Butterfinger spreads could belong to an age bracket of 20 to 60 years old. This ages band would comprise of two segments: Platinum Consumers: Primarily, Butterfinger will target married families with at least one child. These families would be ones having parents aged between 28 to 40 years old, earning more than $55,000 and living in apartments/houses located in semi-upper or upper tier neighborhoods or above. This target market is very conscious about the well being of the whole family, especially the children. Therefore, they look forward to buying products that are natural, nutritious and without too much sugar. Furthermore, these families should be regular users of social media platforms such as Facebook, Twitter and Instagram. It must be noticed, peanut butter is a product that is a staple food for the US populace. Additionally, 93% parents in a study agreed that their children had an influence on their purchasing behavior. Also, tweens account for $43 billion sending annually. Therefore, Nestle having a reputation for providing a ‘pure life’ to its consumers can target such families who want to provide a healthy lifestyle to their children. Gold Consumers: The Gold consumers for Butterfinger spreads would consist of households that have an income of $45,000 or less. These households aspire to provide a healthy lifestyle to their children and want to do so in their limited means. These families live in an apartment or small house in mid tier households and take special care of what their kids want. 90% of their purchase decisions are influenced by their children. Moreover, the parents of these households fall in the age bracket of 28+, while they have at least one children in his tweenage or teenage. Furthermore, the family as a whole is exposed to social media and utilizes platforms such as Facebook, Instagram and Twitter on a regular basis. Iron Consumers: An intelligent brand’s communication strategy should focus on the most profitable consumer segment along with maintaining contact with the sub groups which can also be potential consumers. Butterfinger, when launching its chocolate peanut butter and peanut butter spread will focus on college students that the brand would like to call ‘The Snackers’ and these would be the Iron consumers. These are individuals who look for small nutritious snacks between their busy study schedule and need something nutritious, tasty and affordable to satisfy the need. They fall in the age bracket of 20 years old to 27 years old, earn approximately $500 to $600 through student jobs (if students), live in either dorm rooms or rent a room for themselves near their universities. These ‘snackers’ (college going) try to save money on food by having an alternate mid-day nutritious snack like peanut butter with jelly. Those having a full time job, on the other hand, have a busy schedule and try to save time by having small snacks that are healthy. Furthermore, this target market should be tech savvy and regular users of social media platforms such as Facebook, Twitter and Instagram. It should be noticed that these people have been categorized as Iron customers because of the potential in them to be the future Gold customers. As time progresses, the Iron customers will get married, obtain better jobs and become much more regular in buying Butterfinger Spreads. Secondary: Since peanut butter is a product widely used with breakfast products such as pancakes, waffles and bread, Butterfinger would target breakfast places such as IHOP and dessert places that serve foodstuff made out of peanut butter, chocolate or peanut butter and chocolate. Butterfinger can be advertised in the menu cards of these restaurants and dessert cafes. Source: 1. Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015.
- Nestle was found in 1867 by Henri Nestle after he discovered an infant formula that saved a child’s life. Since that day, Nestle has formed the provision of health and nutrition as the core value of the organization. Over the passage of time, the company has invested vast amounts of resources in coming up with products that provide the global populace with the access to a healthy lifestyle. The mission statement of the company is “to enhance the quality of consumers lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle”. Over the passage of time, Nestle has become the world’s largest food company, where it has a number of global brands such as Kitkat, Nescafe, Nesquick, Nestle Pure Life and the like under its umbrella. The company not only delivers a better life to its consumers. It invests heavily in its research and development department in order to come up with products that can help in uplifting global health standards. Additionally, the organization runs various CSR projects such as The Cocoa Plan, a plan that ensures regular income to the cocoa farmers of African countries. Therefore, the company has secured a wide global audience which has helped Nestle in gaining $247.3 billion in market capitalization. Furthermore, it provides employment to approximately 339,000 individuals as well. Source: 1). Nestle USA Website. 2). Nestle 2014 Annual Report. Company Report, Nestle, 2014.
- Being a large scale global company, Nestle owns a vast variety of brands and products. Since the company has its operations in different categories, it has developed a distribution network that is wide as well as deep. Almost every product Nestle owns is provided to the customers through retail channels including National grocery stores such as Wal-Mart, Costco and Ralphs. Secondly, a number of Nestle products such as Coffee-Mate are sold to Coffe retailers such as Starbucks and university café such as Popovich Café at Marshal School of Business. Furthermore, Nestle beverages are also made available to consumers through partnerships with fastfood chains, restaurants, cinemas and many other business partners. In order to run such a vast distribution network efficiently, the Nestle Sales force manages the distribution network largely. Although, Nestle has Acosta as its distribution agency, the sales teams make the distribution plan, set sales targets and review the sales performance. Throughout the process, distribution agencies for Nestle work as executioners, whereby the Nestle team works towards the efficient running of the business. Thus, Butterfinger spreads have the opportunity to utilize a). Butterfinger’s existing distribution channels and b). Leverage on the rest of the distribution channels that Nestle possesses. Additionally, such a vast distribution channel means an even broader chain of retail stores that shelf Nestle products. Butterfinger can advantage of the healthy company-retailer relations in getting good shelf placement at better rates. Source: 1. Information gathered from Marketing Manager at Nestle, Bianca Schuster. 2. Nestle 2014 Annual Report. Company Report, Nestle, 2014.
- Positioning to: Families: Nestle is a company that from its inception has been driven towards the provision of a healthy lifestyle to its target audience. Therefore, the brand positions itself as the most healthy food and beverage option to its major consumer segment of families (household with children). These households hold the provision of nutritious food to their children imperative and possess a strict aversion against products with artificial ingredients. Being known for its health driven communication, Nestle uses a bird in a nest with its children as its logo to communicate the values of the company to its target audience. Young Individuals: By being available in almost the whole Food and Beverages category, Nestle seeks to attract the young consumer base as well. These consumers include college going students and those who have recently started working. The schedules of this consumer segment is either occupied with studies or work. Therefore, Nestle posits itself as a nurturing option in their busy schedule, where a small Nestle product could provide them with the energy that is required. Source: 1. Nestle USA Website.
- Product: As a brand, Butterfinger successfully incorporates four different kinds of products under the umbrella. Although the product has the same peanut butter and chocolate as main ingredients, Butterfinger increases consumer interest in the product by changing the product offering through four different variants. SKUs: Since Nestle as a company believes in satisfying all consumer needs, Butterfinger provides its four different products in different SKUs. These sizes vary from single sizes to fun sizes, packs of 6 and even king sizes. By doing so, consumers can select from a vast array of product sizes to meet their demand. Place: Falling under the umbrella of a company that has vast distribution networks, Butterfinger makes itself available to the consumer through a number of ways. Firstly, the product is made accessible to the consumer through grocery stores such as Wal-Mart, Costco, Ralph and stores of the like. Consumers can find all sorts of Butterfinger SKUs at these stores, where special consumer promotion packs are also available. Other than grocery stores, Butterfinger also has online retailers as its partners, where consumers can order the product through websites such as Amazon. Most interestingly, Butterfinger makes its distribution more efficient by having a store locator on its website which tells the consumer about the nearest location where a Butterfinger could be found by using customer zip code. Price: As explained above, the brand has a number of SKUs available. The reason for such a strategy is to be affordable for every consumer segment within the Butterfinger target audience. The products are line priced with the industry, where a single bar of any Butterfinger costs the same as other competitor candy bars. The brand sells single chocolate SKUs such as the Butterfinger Original Bar from $0.89 to $1.29 and King Size from $1.69 to $1.99. Prices differentiate according to the pack sizes that are made available. Butterfinger has packs of 6, packs of 12 and packs of 18 that are priced from $10 to $40. Promotion: Butterfinger is a Nestle brand that took up the challenge to optimize its sales in a market dominated by the famous Hershey’s Reeses. Besides the impressive role played by the consumer research and R&D team, Butterfinger’s promotion efforts have also led the brand towards success. Butterfinger uses a number of promotion mediums, where significant amounts are spent on television and print media. In this respect, the brand has partnered with the famous animated show, The Simpsons. By using Bart Simpson as the brand’s ambassador, Butterfinger successfully promotes a youthful and exciting image in its target audience. Other than television and print media, the company also utilizes digital media heavily to reach out to its target audience. The brand is actively present on social media platforms such as Facebook, Twitter and Instagram, where consumer engagement is ensured by constantly introducing different recipes of making Butterfinger foodstuffs and exciting ways of eating the product. Furthermore, Butterfinger also uses in-store advertising to make potential consumers aware of the product, once they are in the retail landscape. In addition to the in-store advertising, the brand also furthers many consumer promotions such as holiday season bundling to celebrate the joyous occasions with its fans/consumers. Source: 1. Nestle USA Website
- Consumer Insights: Nestle is a company that regularly invests in consumer research, where the goal is to be fully aware of the consumer psyche. In addition, the organization remains informed of the changes that occur in consumer choices. A good example of this is the reshaping of the Butterfinger cups which led to increase in sales. Marketing Strategy: Nestle, as a marketer invests in developing customer loyalty through its well thought out marketing strategies. Every marketing strategy is made in accordance with the chosen consumer segment, where all communication tools are used. Additionally, a consistent brand message is conveyed through every communication medium. Butterfinger’s integration with The Simpsons is a good example of such a strategy. Source: 1. Nestle USA Website
- Strengths: Strong Parent Company: Butterfinger is a brand that falls under the Nestle umbrella. Nestle has the privilege of being the world’s largest food company. Moreover, the company has a strong financial muscle which can be proved by its market capitalization and most recent revenues. Thus, belonging to Nestle comes across as a strength for Butterfinger as the brand can leverage the organization’s capabilities to conduct consumer research, understand the needs of the market and produce a top quality peanut butter and chocolate/peanut butter spreads. Brand Awareness: After the launch of Butterfinger in the U.S market, the brand launched the ‘Nobody’s gonna lay a finger on my Butterfinger’ campaign, where the famous American animated TV series, The Simpsons was used as an integration platform. The brand integrated the product in the show, developed television and print advertisements featuring Bart Simpson. In essence, Butterfinger tactfully made Bart its brand ambassador. By using this particular strategy, Butterfinger was able to accurately communicate itself as a youthful and exciting brand. Therefore, if a new generation of the Butterfinger is introduced, the brand can efficiently use the marketing communication mediums already in place and leverage on the already existing brand awareness. High Peanut Butter Consumption in U.S: As it is known, peanut butter can rightly be called the staple food of the US. It is a product that is widely consumed in every household for breakfast in sandwhiches and with waffles, pancakes etc. According to a study in 2014, 90% to 92% households in the U.S consume peanut butter. Therefore, this fact can be established as a strength for Butterfinger as the demand for the product about to be introduced is still on the rise, where the consumers are now looking forward to innovations in the product. Strong Research and Development: As an organization, Nestle believes in innovating its brands consistently. A proof of such an assertion is the different types and SKUs of the Butterfinger candy that were introduced and secured success for the brand. The company innovates through the vast research and development network that it has set, where these facilities are available at 34 stations. Butterfinger has the opportunity to make the best use of Nestle’s research potential in order to come up with spreads that satisfy consumer needs and resonate with the target audience. Weaknesses: Production by consumers: With the growing health awareness amongst the spread industry’s consumers, a large proportion have started producing peanut butter and other spreads at homes only. In addition, there are many companies that provide consumers with products that help them in producing their own peanut butter. Therefore, this comes across as a weakness for the brand as it can reduce the customer base significantly. Product Recalls: If by accident products of lower quality (ConAgra’s salmonella incident) are produced, then product recalls can tarnish brand perception amongst the consumers and its performance over all. Peanut Allergies: Peanut allergy is something that is quite common amongst the consumer base, where people with such allergies can not become a part of the Butterfinger spreads’ consumer segments. Moreover, if an individual finds out about his/her allergy after having Butterfinger spreads might put forwards a negative brand perception. Opportunities: Demand for nutrients and proteins: With the growing health awareness in the American population, consumers are demanding an increased amounts of proteins and nutrition in spreads (21%). Since Nestle is a company that has been one of the pioneers in promoting health and wellness on the globe, Butterfinger should use the organization’s health philosophy to communicate the new products about to launch. As the company has established authority over providing a healthy lifestyle to its consumers, it has a fair chance to be welcomed by the target market. Spread Usage with foodstuffs: In addition to a demand for healthier spreads, consumers of this industry also show an inclination towards experimenting spreads with various foodstuffs. They expect companies to now provide them with exciting new ways to consume sweet as well as nut based spreads. Therefore, Butterfinger can capitalize on this growing consumer demand by coming up with creative ways to consume its peanut butter and chocolate peanut butter spread. International Business: With the advent of globalization, Western ideals have begun spreading throughout the globe and into the emerging markets. Amongst these markets, the most profitable one is the Chinese market. Recent studies show an increasing inclination of the Chinese populace towards spreads such as peanut butter, where the product has penetrated the market as a breakfast product. Moreover, food companies such as J.M Smucker have already started businesses in China. Thus, Butterfinger has an opportunity to tap into a market that is relatively new. After successfully launching its spreads in the US, Butterfinger should look towards China as a potential market. Threats: Strong Competition: The spreads industry is one where a number of big companies are already present. Amongst these, J.M Smucker, ConAgra Foods and Hormel Foods possess large shares in the market. Since Nestle is a company with a strong financial muscle, the companies already in business might try to make survival difficult for Butterfinger. Moreover, with the growing number of smaller players in the peanut butter industry, cheaper products might become available in the market, a notion that can significantly hurt Butterfinger’s performance. Private Labels: With the increasing consumer income being spent on the food and beverages indsutry, a large number of retailers have started practicing backward integration in their businesses. This essentially means large retail chains such as Trader Joe’s, Safeway and Kroger providing their own brands in the stores. Although a large proportion of consumers doubt the quality of private labels, the large numbers of private labels present has resulted in 18% market being captured by these retailer turned manufacturers. Therefore, these private labels can prove to be a danger for Butterfinger. Government Regulations: The government of any country regulates the kinds of ingredients and processes that can be used for production in the food industry. Although all Nestle’s brand products are certified by the food authorities, this is a particular area in which the company needs to be watchful. The reason for doing so is the smooth functioning of the business without any restrictions from the governing bodies. Sources: 1). Income and Expenditures in the US. Industry Report, Passport, 2015. 2). Consumer Lifestyles in the US. Industry Report, Passport, 2015
- Maximizing Opportunities and Strengths: Consistent Innovation: Butterfinger falls under an organization that has an established research and development resource. The brand should make use of these facilities and keep innovating and renovating the brand. Innovation is a phenomenon that can be applied to the packaging, pricing and distribution of the product. By innovating in all these areas, Butterfinger can maintain consumer interest in the brand by providing them with new consumption options. Leverage on Financial Backing: Since Nestle is a company with a strong financial backing, such a resource should be put to efficient use. As the spread industry’s target market’s health awareness has increased, Butterfinger should use financial resources to further educate the consumer base. The consumers should be made aware about Nestle’s history as the provider of a healthy life to its consumers. In addition, peanut butter should be furthered as an excellent source of protein and nutrition for children as well as the whole household. Introduce Experimentation: As mentioned earlier, peanut butter consumers are increasingly demanding new ways to consume the product. In this area, Butterfinger needs to adopt a ‘thinking out of the box’ approach. In order to do so, providing the ultimate experimentation power to the consumer could be an ideal remedy. Butterfinger must introduce the first Peanut Butter store (explained in detail later). Here, consumers must be given the opportunity to consume their peanut butter just the way they want. They should be provided with chocolate and chocolate/peanut butter spread with other foodstuffs and should be allowed to make their own custom meals. This will be the most different experience for the consumer. Minimizing Threats and Weaknesses: Develop Business Analytics to Counter Competition: As the spreads industry is one filled with different companies competing for market share, the best possible solution is to stay one step ahead of the competition. This can be done by developing business analytics intelligence for the Butterfinger brand before its launch. By analyzing consumer generated data, Butterfinger can become aware of consumption trends pertinent in the industry and how these trends would alter in the future. Additionally, by being analytically savvy, the brand can be aware of strategies being adopted by its competitors. Product innovation can also be done accordingly and big companies as well as the private labels can be dealt with. International Expansion: Another strategy to stay ahead of the competition is to expand business operations outside the U.S. In this regard, emerging economies experiencing an increase in their disposable incomes should be targeted. China, with its population’s lifestyles getting better is a perfect example of such a market. Additionally, research shows an increased acceptance for peanut butter. Butterfinger should therefore begin working on the possibility of introducing its peanut butter in China after setting up business in the U.S. Check on Government Regulations: Butterfinger should keep a self check on the ingredients that are being used for production. In addition, all processes should be made certified by the food authorities of the U.S. By doing so, the business can function smoothly.
- Financial Perspective: Review of change in sales per region Review profits from investments in new projects Review the profitability of the brand Review revenue being generated by retailers in different segments Review the cost being incurred for every trade promotion Consumer Perspective: Review number of customers become regular customers through watching repeat purchases Review number of people willing to switch to other brands Review how much each wallet is spending on our products Review how many customers are coming back to purchase Innovation Perspective: Review the profits being generated on innovation procedures Review how much time the brand takes to get new products in the market Review how much customer data is being gathered for future innovations Review how often consumers are suggesting the brand to innovate Operational Perspective: Review how many times the product needs to be revised before getting a perfect batch. Review how efficient the processing quality is. Review how many times the batch is made right the first time Review the ratio of stocks to inventory levels
- Adjusted Customer Pyramid: Entering into an industry that already has a number of big players with powerful businesses setup can often be challenging for a new brand. Nevertheless, it is not an impossible task, where accurate consumer as well as retail segmentation can propel a new industry player towards success. Thus, Butterfinger aims to distribute its customers and retailers into platinum, gold and iron sections. Interestingly, the brand will not cater to the lead segments, where the intention is to spend the saved communication costs on turning gold consumers to platinum ones (explained below). Platinum Consumers: Primarily, Butterfinger will target Generation Y and Millennial married families with at least one child. 93% parents in a study agreed that their children had an influence on their purchasing behavior. Also, tweens account for $43 billion sending annually. These families would be ones having parents aged between 28 to 40 years old, earning more than $55,000 and living in apartments/houses located in semi-upper, upper tier neighborhoods or above. This target market is very conscious about the well being of the whole family, especially the children. Therefore, they look forward to buying products that are natural, nutritious and without added sugar. Furthermore, these families regularly use social media platforms such as Facebook, Twitter and Instagram where they try to share their family experiences with friends and family. For grocery shopping, these households prefer to buy from premium stores such as Trader Joe’s, Wholefoods, Vons and the like. Moreover, they regularly consume social media to look for healthy diet solutions for their children. Therefore, Butterfinger can address its platinum consumers by upholding Nestle’s core values of providing a healthy and pure life to its consumers. Additionally, social media can be utilized to make platinum consumers part of Nestle’s health initiatives such as ‘Healthy Steps for Healthy Lives’. Gold Consumers: The Gold consumers for Butterfinger are financially less affluent that the premium consumers due to which their consumption patterns are different. Gold consumers are households that have an income of $45,000 or less. They would include generation Y as well as generation X consumers for having high peanut butter consumption. They live in an apartment or a small house in mid tier neighborhoods. The parents in these households are 30+ years old and consume peanut butter approximately 4 times a week. The rationale for including old consumers in the gold segment is that these individuals have a high consumption of peanut butter but it gradually decreases as health problems related to cholesterol start springing up. Additionally, they prefer mid tier grocery stores such as Ralphs for doing their shopping. Similar to the platinum segment, gold customers also aspires to provide a healthy lifestyle to their children, however they try to do so in their financial limits. Furthermore, the family as a whole is exposed to social media and utilizes platforms such as Facebook, Instagram and Twitter on a regular basis. Therefore, Butterfinger can provide a financially viable option to these households. It must be noted that gold consumers have the potential to become platinum ones. For this purpose, Butterfinger can launch special consumer promotions in the mid tier retail segment in order to boost consumption. Moreover, diet variants of Butterfinger with additional nutrients for old consumers can make the older segment more enthusiastic about peanut butter. Iron Consumers: Iron consumers for Butterfingers would include two segments of consumers: Snackers: An important iron consumer segment for Butterfinger spreads can be called ‘The Snackers’. This segment consists of students ranging from 18 years to 25 years old. These students have an earning of $500 to $800, which they earn through student jobs. Additionally, they are the new generation of the U.S, which according to research is very health conscious. With being demanding about a healthy lifestyle, these students have strict budgets that they have to stick to. Therefore, peanut butter comes across as a snack that is nutritious, affordable and filling at the same time and they usually buy such products from lower end stores such as Walmart to take advantage of weekly specials. Furthermore, they are tech savvy, use Intagram frequently and like to explore experimental food on the internet through YouTube. Although the Snackers have a high consumption of peanut butter, the frequency of purchase is lower as they are the single consumers. Therefore, these consumers are important as they will be the Gold and Platinum consumers after acquiring full-time jobs. Butterfinger should save resources from Lead consumers and invest them in the Iron segment so that they can be loyal consumers in the future. Households: Another iron segment would be households that earn lesser than $40,000. These households live in lower mid and lower tier neighborhoods and have limited financial independence. These families go to lower end retail stores such as Walmart and Smart and Final, where they can take advantage of weekly and daily special prices. Still, these consumers look forward to provide a healthy products to their children. Source: 1). Topper, Amanda. Nut-based Spreads and Sweet Spreads . Industry Report, Passport, Euro Monitor, 2015. 2). Consumer Lifestyles in the US. Industry Report, Passport, 2015. 3). Income and Expenditures in the US. Industry Report, Passport, 2015.
- Since Butterfinger peanut butter and chocolate/peanut butter spreads are new product launches, the brand needs to develop a very strong value chain so that it can be successful in an industry with strong competition. It must be noticed that certain changes to the industry value chain explained earlier are necessary so that Butterfinger spreads can be differentiated from competitor products. In order to differentiate its products from competitors, Butterfinger needs to ensure the incorporation of the procurement, research & development and marketing departments to have a significant influence on the brand’s value chain. By doing so, Butterfinger will be able to ensure high quality ingredients for its spreads, develop packaging procedures that can ensure products made according to customer convenience and ensure enhanced marketing measures being applied to the retail landscape and communication with consumers. 1. Suppliers: a). Peanuts: The suppliers for the Butterfinger spreads would include raw material providers such as peanut processing companies. Butterfinger candy division already has its set suppliers for the provision of high quality peanuts which are roasted at the brand’s own facilities and then filled into candy bars. For the spreads division, Butterfinger will be using the same suppliers that supply peanuts for the candy division. In this regard, the procurement division at Nestle will ensure to maintain diversity amongst its suppliers and not rely on a single one. The reason for doing so is to avoid supplier monopoly and uphold brand’s core value of creating opportunities for other suppliers. Moreover, an increased number of suppliers will ensure competition, thus keeping raw material prices low which can be translated into an affordable product. b). Packaging Material: Another supplier for Butterfinger would be its packaging partner. In this regard, the spreads division of the brand would consumer the packaging partner for the candy division. Again, procurement will play a vital role in securing the best quality packaging material for the Butterfinger spreads. Moreover, supplier number will be kept more than one to fulfill Nestle’s core value of maintaining supplier diversity and avoid any kind of supplier monopoly. c). Cocoa: For making the chocolate and peanut butter spread, Butterfinger will require cocoa supplies for the manufacturing of the chocolate. In order to do so, chocolate being processed by the candy facility will be used, however, the spreads division would separately deal with its suppliers for this matter. The cocoa will be obtained from the cocoa fields that fall under the Nestle Cocoa Plan. Since the program aspires to uplift the economic conditions of cocoa farmers that fall under the plan, Butterfinger will stay aligned to this cause. d). Machinery and maintenance: Although the Butterfinger candy division produces peanut butter at its own facility, the brand does not have the appropriate machinery for filling the peanut butter into jars. Therefore, supplies for machinery companies will have to be secured along with regular maintenance plans. The procurement department will ensure that all machinery being used is according to government standards and is one that can produce high quality spreads for the consumers. 2. Manufacturer: a). Peanut Butter and Chocolate: Since the candy division of the brand already has facilities installed for the production of peanut butter and chocolate, the spreads division will utilize these resources only. b). Packaging: As far as the packaging of the Butterfinger spreads is concerned, the brand will have to make added efforts. At the present time, Butterfinger does not have the facility to fill the produced peanut butter into jars. Therefore, the brand will acquire machinery along with repairing plans for machinery that can do so. Additionally, Butterfinger will have to purchase machinery that can prepare a mixture of chocolate and peanut butter for its mixed variant. Therefore, Butterfinger will set up its own facility for the production and packaging of the Butterfinger spreads. 3. Distributor: Since the spread industry landscape has a number of big players competing for market share, it is imperative for Butterfinger to set up a distribution network that is efficient and ensures the availability of the product to all consumers. Simultaneously, it has to consider keeping costs minimal in order to have resources to invest in the brand’s communication. In order to do so, the distribution would be handled by Nestle’s national distributor Acosta. Acosta distributes all Nestle brands in the U.S so there might be a possibility to secure lower Acosta margins. To ensure the most efficient distribution, Nestle’s Sales and Retail teams will watch over the distribution process and set metrics of success accordingly. Acosta’s role would be of an execution agency. The distribution strategies and promotions will be handled by Butterfinger sales teams. 4.Retailer: With peanut butter being a significant part of an American’s grocery trolley, Butterfinger needs to keep its retail strategy at an optimal level. In order to do so, retailers will be divided according to the consumer segments in the customer pyramid. For the platinum customers, premium retailers such as Trader Joe’s, Costco and Wholefoods will be included. Retailers such as Wholefoods will be chosen to promote the spreads as nutritious. In-store branding will be done to communicate Butterfinger spread’s nutritional value (in an exciting tone). Likewise, sub premium retailers such as Ralph’s will be designated. This does not mean the exclusion of gold consumers from the premium stores. For the household category of the iron segment, lower end retailers such as Walmart will be designated. These stores would also attract the snackers. However, for snackers there will be an additional retail channel. 5. Butterfinger Stores: It must be understood that the snackers segment of the customer pyramid is of prime value to Butterfinger. This can be understood as a long term strategy to turn iron customers into loyal gold and premium customers when they have entered professional life. In order to do so, a very unique retail channel in the shape of Butterfinger stores will be opened for the student consumers. These stores will be opened at university campuses, where students will be provided the chance to make custom peanut butter and chocolate/peanut butter meals. It must be noted that Butterfinger does not categorize itself as a high end product, therefore a youthful and exciting brand message will be conveyed to the student segment. Students will be provided with spreads and foodstuffs such as bread, waffles and pancakes (on order) to make their custom meals. Additionally, other products made from the spreads will also be available in the store’s product portfolio. Moreover, prices will be ket student profile. The intention here is to gain future wallet share of the student. (Store design, branding etc. explained later) 6. Customer: Customers for Butterfinger will be divided into three according to the consumer segments described in the customer pyramid. These segments would be Platinum, Gold and Iron consumers.
- Marketing Mix: 1. Product: Product Objectives: Introduce four variants of Butterfinger peanut butter for the four different taste preferences of the consumer segments for launch. These variants would be Creamy, Chunky, Old School and Diet. Percentage inclination towards these flavors are 84%, 45%, 20% and 16%, respectively. Introduce the chocolate and peanut butter swirl for chocolate peanut butter enthusiasts after three months of launch. This will add variety to the brand and will communicate it as one that like to experiment. Provide consumers with a variety of pack sizes so that each consumer segment can afford the nutrition rich experience of Butterfinger spreads. Product Strategies: Extensive qualitative and quantitative consumer research to be conducted. The intent will be to explore consumer eating habits, ingredient preferences and flavor inclinations. Using the conducted consumer research, lifestyles, daily routines and habits should be explored for the platinum, gold as well as the iron customers. Production focus to be given according to mentioned percentage inclination of the consumer. Therefore, Creamy flavor will be produced the most followed by chunky, Old School and Diet. Different pack sizes to be launched. These would contain mini packs for students, regular jars for mid level to high frequency users and squeezable jars for consumers looking for convenience. Mini packs would be made available in bundle forms to so that they come across as affordable to students and office going gold customers. The brand will introduce unique SKUs which will be in the shape of Bartman and also other Simpson characters. These jars would be such that they can be used after usage as mugs, penholders etc. The sales and marketing teams should be educated regarding the different variants of the Butterfinger spreads. Sales team education would mean better distribution and selling of the product, while marketing team can proactively work on communicating Butterfinger’s new generation to the consumers. Place: Place Objectives: The mentioned Butterfinger spreads to be launched in January 2017. The month of November has been chosen because of being the National Peanut Butter Month in the U.S. Such a strategy would communicate the brand’s enthusiasm towards peanut butter. Online retail channels to be developed for high frequency users but will be launched 3 months later to send out an innovative image. Place Strategies: Nielsen retail subscription for the spreads category should be obtained. By doing so, Butterfinger can analyze the category’s current condition, future prospects and leading trends. Moreover, most profitable retail regions can be identified and location for pilot phase can also be selected. For the identified consumer segments, shopping behaviors should be studied so that product placement in stores can be done appropriately. For high frequency consumers, an online facility should be made available upon subscription. In order to do so, Butterfinger can either partner with Amazon Fresh which can provide bi-monthly supplies of peanut butter to the Butterfinger enthusiasts. 3. Price: Price Objectives: Competitive pricing according to the market should be maintained with a range of being 2% above or below the market. This will be to account for any price changes in raw material costs so that the brand does not have to fluctuate prices later. Provide consumers with a greater amount nutrition and proteins for the same price. Price Strategies: Pricing studies should be conducted in order to understand price preferences of the consumer segments. Region and consumer segment wise price sensitivity should be studied so that prices can be tailored according to the market being addressed. Prices should be kept competitive according to the market. Additionally, a buffer of 2% above and below the market price should be kept. This should be done to account for any peanut price fluctuation so that later prices are not changed significantly. 4. Promotion: Promotion Objectives: The 2013 Butterfinger and Simpsons partnership should be revived in order to leverage on the already present awareness of the brand. Still being a very popular show amongst Americans, Butterfinger must leverage on the available channel. Moreover, ventures such as Simpson Movie 2 can be launched with Butterfinger partnership for the future. This would give longevity to the brand. Communication of the Butterfinger spreads’ launch by using the already present Butterfinger mediums. New content creation will be done for the spreads. Create an immense buzz in the market through campaigns on social media and Out of House advertising. Engage maximum number of consumers before the launch. Promotion Strategies: A campaign called ‘Bartman’s Secret’ will be launched on print and social media. This campaign would revisit the connection between Bart Simpson and Butterfinger. However, the marketing mediums would contain Bartman (when Bart turns into a super hero) and would question consumers what his secret power source was. Just before the launch Butterfinger peanut butter will be launched as the answer. The intention is to portray Bartman as an exciting, healthy and joyous super hero. Butterfinger spreads will be integrated in a selected number of episodes of the year’s Simpson season. Moreover, Elvis Pressley will be featured in the episodes, who will make Bart explore the secret ingredient to become Bartman. (Elvis Pressley is known for his love for peanut butter). Billboard advertising in major cities. Social media account of Bartman to be made, where he converses with fans. In store advertising to be done to promote the spreads as the best source for nutrients for children. $20 million will be dedicated for brand communication through mediums such as television, print and in-store advertising. $5 million will be dedicated for social media.
- Marketing Mix for Butterfinger Stores: Initially, $5 million in the marketing budget will be allocated for developing two Butterfinger stores in the Mid West for example Chicago and one on the east side example New Jersey City. After the success of stores, an estimation of store costs will be made and expansion would be done after two years of operation. Product: Product Objectives: Introduce the opportunity for consumers to experiment with their staple food i.e. peanut butter. Experimental products such as pancakes, waffles and shakes made with peanut butter and peanut butter/chocolate to be introduced. Provide consumers with a chance to create their own peanut butter meals. Introduce in-store preparation techniques by professionals for visiting consumers. Product Strategies: Consumer research studies to be conducted in order to find out how consumers like to experiment with peanut butter. It is essential to find out consumer preferences for foodstuffs that they can consume with their favorite spreads. Consumer data to be generated through in depth interviews, focus groups and surveys. Pilot phase for the products to be run in order to gauge what kind of a product portfolio will be the most successful amongst consumers. 2. Place: Place Objectives: Launch 3 Butterfinger stores in Mid-Western, Western and Southern parts of the U.S by April 2017. The particular time gap will be taken to establish Butterfinger peanut butter in the market after which stores will be opened with greater impact. Target busy consumer locations such as shopping malls. Expand operations after one year. Place Strategies: Nielsen data to be purchased regarding the traffic that different shopping malls attract and what kind of restaurants to consumers like to visit after a hectic shopping excursion. Nielsen research can also be used to gain insights about what kind of store aesthetics are most preferred by consumers. Qualitative consumer research will be conducted in this regard. While stores are launched, homework will be started for the future expansion of stores in different regions of the country. 3. Price: Price Objectives: Provide a consumer experience that is affordable and does not seem too high end. New pricing strategies to be experimented by introducing new products in the product portfolio. Set a pricing system where consumption by the consumer determines the total bill for meals. Price Strategies: Prices for other dessert restaurants should be monitored. It must be ensured that Butterfinger stores should try and provide products at prices lower than competition. A minimum base price for foodstuffs such as bread, waffles, pancakes etc. should be kept with a specific quantity of free spread. After that the consumer should be charged for extra spread and toppings. 4. Promotion: Promotion Objectives: Communicate store launch between January 2016 and April 2016. Communicate launch by utilizing Butterfinger marketing mediums. Create an immense buzz on social media platforms and make consumers anticipate a revolution in the spreads’ industry. Promotion Strategy: Make Bartman the official store ambassador for Butterfinger stores, where he tries to communicate through social media that something revolutionary is about to open. Social media platforms such as Twitter, Facebook and Instagram to be used with #TheNextGeneration. Thi will create a buzz in the market. Additionally, customers mentioning the hash tag can be analyzed by the business analytics department. Just before the launch, invitations to be sent to select platinum customers by Bartman to visit the store. Videos of the whole procedure to be made and made viral on social media platforms. Source: 1. Consumer Lifestyles in the US. Industry Report, Passport, 2015. 2. Income and Expenditures in the US. Industry Report, Passport, 2015.
- The above chart depicts the implementation plan for the launch of Butterfinger peanut butter and chocolate/peanut butter spreads. For the implementation, the Butterfinger marketing, consumer insights and R&D teams will take leading positions with help from sales and operations teams. Expected Revenue at the end of Financial Year 2016 is $144m, while the Expected Net Income is $17m. Initially, $5 million in the marketing budget will be allocated for developing two Butterfinger stores in the Mid West for example Chicago and one on the east side example New Jersey City. After the success of stores, an estimation of store costs will be made and expansion would be done after two years of operation.
- Most Likely Scenario: Profit and Loss – 2016-2020 Estimated (E) First Year Revenue : $144m The following assumptions were made in devising the statement: Annual revenue growth of 10% from year to year (2016-2020) which is the forecasted industry growth according to Mintel. Cost of Goods Sold – were calculated at 26% of the revenue for the item (Nestle COGS is 23% for 2013) Research and development expense calculated at 18% (company average is 16%) Distribution expense calculated at 11% of sales (company average is 9%) Trading expense calculated at 2% (company average is 1%) Marketing and Administrative expenses calculated at 18% of total revenue (company average is 21%) Financial expenses calculated at 3% (company average is 1%) Taxes calculated at 5% (company average is 3.5%)
- If Objectives are Exceeded: Conduct further consumer research: If Butterfinger spreads are able to perform better than expectation, further consumer studies should be carried out to find about new flavors and varieties that can be added to the product portfolio. Also, number of SKUs should also be increased in order to become more accessible to consumers. Profits reinvested in communications: In the case of better than expected performance, the exceeding profits should be reinvested in communication measures. The future goals of launching a Bartman mobile phone game should be launched. Moreover, better consumer engagement forums should also be developed. Reinvest Profits in Retail: In the case of better than expected performance, retail partners should be appreciated for their cooperation. In oder to do so, retailers should be incentivized. Moreover, better retail spacing should be rented from the retailers along with added in-store advertising. Additionally, more retail partners should be secured by using the additional profits so that the consumer segments can be reached even more efficiently. Increase store locations: If Butterfinger is able to do better than expected, the experience of the consumers should be enhanced further. This will be done by increasing store locations so that a greater number of consumers can become a part of the peanut butter experimentation. Moreover, existing stores will be enhanced by extending product portfolio and services that are made available to the consumers. If Objectives Are Not Met: More Consumer Research: Advertising resources should be cut down and invested in further researching consumer insights. The unfortunate poor performance of the brand means miscommunication. In this case, Butterfinger needs to develop an understanding regarding what the brand did not do correctly. Consumer complaints should be noticed, product testing should be conducted again and a revamped strategy should be prepared. Sales Data Analysis: Sales data should be analyzed in order to study loopholes in the retail structure. The intention here should be to analyze Butterfinger’s outreach to the customers. Moreover, strong retail regions should be marked and sales volumes should be boosted in these regions through better retail promotions. Simultaneously, retail channels with poor performance should also be analyzed in order to identify whether utilizing the specific channel is worthwhile or not. If it is, then better consumer promotions with bundling products should be launched. Revisit Value Chain: In order to improve the brand’s performance in the future, the value chain should be revisited. It must be seen that the specified departments are aiding their part of the value chain correctly. Most importantly, it must be analyzed whether a part of the value chain is consuming more resources than its adding. Such parts of the value chain should be finished off and more efficient methods should be devised urgently. Reinvest in Consumers: Advertising expenditures should be trimmed, where the money pulled back should be invested directly in the consumer. As part of this strategy, consumer focused promotions should be launched. Additionally, more cost efficient communication mediums should be devised on social media, where customer interaction is much more than television or print media.
- Best Case Scenario: Profit and Loss – 2016-2020 Estimated (E) First Year Revenue : $144m The following assumptions were made in devising the statement: Annual revenue growth of 10% from year to year (2016-2020) which is the forecasted industry growth according to Mintel. Cost of Goods Sold – were calculated at 26% of the revenue for the item (Nestle COGS is 23% for 2013) Research and development expense calculated at 18% (company average is 16%) Distribution expense calculated at 11% of sales (company average is 9%) Trading expense calculated at 2% (company average is 1%) Marketing and Administrative expenses calculated at 18% of total revenue (company average is 21%) Financial expenses calculated at 3% (company average is 1%) Taxes calculated at 5% (company average is 3.5%)
- Worst Case Scenario: Profit and Loss – 2016-2020 Estimated (E) First Year Revenue : $144m The following assumptions were made in devising the statement: Annual revenue growth of 10% from year to year (2016-2020) which is the forecasted industry growth according to Mintel. Cost of Goods Sold – were calculated at 26% of the revenue for the item (Nestle COGS is 23% for 2013) Research and development expense calculated at 18% (company average is 16%) Distribution expense calculated at 11% of sales (company average is 9%) Trading expense calculated at 2% (company average is 1%) Marketing and Administrative expenses reduced to $15 million Financial expenses calculated at 3% (company average is 1%) Taxes calculated at 5% (company average is 3.5%)