Type: Process Essays
Sample donated: Rex Wolfe
Last updated: April 16, 2019
In developing a new product, there are several considerations, both qualitative and quantitative that the group will address at the initial stages of development. We have developed our product with the following parameters always in mind throughout this process. First, our task was to develop a new soft drink product, which would help us to increase our market share by 3 points, in our soft drink market, within the first 18 months after product launch. We also wanted to develop a product that would be consistent with the 1-year return on investment the company requires. Our products need to generate a 15 % gross profit, which is consistent with company policy. Furthermore, we need to keep the product consistent with other Nestle products in quality, value, and brand. We have a 15 million dollar budget to create, produce, and market the product.
External EnvironmentWe currently offer our products worldwide. Their reception in all societies is excellent. This means there are nearly six billion people in the world who are potential consumers of our Company’s products. Ultimately, our success in achieving our mission depends on our ability to satisfy more of their food and beverage consumption demands and our ability to add value for our customers. We achieve this when we place the right products in the right markets at the right time. The beverage category is a large, dynamic business that is growing solidly (+4.4% a year) as consumers continue to reduce their intake of tap water in favor of more flavorful and variety-based purchased beverages. In the non-alcoholic beverage category, which is $120 billion in sales, the Beverage Division participates in 30% of the category business.
Sales of coffee and tea are expected to rise 4.2% annually within the next two years and another 5.5% in 2003, with the overall market reaching $12.8 billion.
A primary factor contributing to the market’s expansion is the increase of the coffee/tea demographic population. Approximately 80% of U.S. adults drink coffee, women accounting for 53% of the consumers.
The majority of coffee and tea drinkers are between the ages of 45-64, and this population is increasing, as baby boomers get older. One segment of the coffee/tea market that has experienced spectacular growth within the past few years is the ready-to-drink tea segment, with sales increasing 73% during the four-year period 1994-1998.Customer AnalysisOur current relationship with our customers, both at the wholesale and retail level, is outstanding.
Our products are widely recognized as quality with benefit by the final consumer. All economic levels and age groups consume our current soft drink products. We need to find some distinct niche markets that our current products are not serving, which this new soft drink would fulfill.CompetitionOur competition will come from those that we currently compete with in the soft drink market. There likely response to a new product launch will be to develop a similar product, in a short time frame, and get into the market as quickly as possible. This being said, we need to differentiate our product quickly and brand the product in short order, so as put as much distance between the competition, and ourselves before they can get into the market. We estimate that should take approximately one year.
That should be sufficient time to achieve our goals. Who are the competitors to Nestea? The major competitors are Lipton Tea, Arizona Ice Tea, and Snapple in the ice-tea market. These producers control 9.5%, 10.
9%, and 14.6% of the market respectively.Company AnalysisOverall objectivesIn order to achieve this mission, we must create value for all the constituents we serve, including our consumers, our customers, our bottlers, and our communities. We shall do this through our current distribution agreement with the Coca-Cola Company. The Coca-Cola Company creates value by executing a comprehensive business strategy guided by six key beliefs:1. Consumer demand drives everything they do.
2. They will serve consumers a broad selection of the nonalcoholic ready-to-drink beverages they want to drink throughout the day.3. They will be the best marketers in the world.4.
They will think and act locally.5. They will lead as a model corporate citizen.The ultimate objectives of our business strategy are to increase volume, expand our share of worldwide nonalcoholic ready-to-drink beverage sales, maximize our long-term cash flows, and create economic-value-added by improving economic profit. All of these beliefs are consistent with our objective. We currently have more than 16 million customers around the world who sell or serve our products directly to consumers. We keenly focus on enhancing value for these customers and helping them grow their beverage businesses.
We strive to understand each customer’s business and needs, whether that customer is a sophisticated retailer in a developed market or a kiosk owner in an emerging market.Specific product objectivesFortunately, the profit generated from our other products makes it possible for the Nestle Company to enter multiple markets in the soft drink business. The ice-tea division of the Nestle Company accounts for a minimal percentage of the total sales generated for all soft drinks produced by the Nestle Company. Regardless, it is essential for the Nestle Company to differentiate in all aspects of the soft drink business.
Currently, as stated above, the Nestle Company has set a standard for its marketing divisions to expand growth, capturing additional shelf space in the market for soft drinks. When compared to other ice-tea producers, expanding the products in the ice-tea division is essential to stay in existence.Currently,”Nestea” has multiple lines, yet it lacks vitamins in a soft drink without a sweetener. We have developed “Nestea Plus!” strategically in all aspects, most importantly to generate additional shelf space for the Nestle Company. It is the group’s responsibility to generate the gross profit set by the Nestle Company. The group determined that “Nestea Plus” is the most logical decision, creating the product differentiation necessary to capture the additional shelf space the company wants to control.ResourcesOur current facilities are located strategically worldwide and have the capabilities to produce our new product without any capitol expenditures. The Nestle brand name and individual product names are recognized worldwide.
The Beverage Division crosses into more distribution channels than any other Nestlï¿½ division. The division sells direct, through wholesalers and distributors, through its own DSD trucks, through foodservice channels, and through alliances like our Coca-Cola joint venture. With the current joint venture with Coca Cola handling the Nestea line, the group feels it is in the best interest of Nestle to continue that venture with this Nestea Plus! This will allow us to utilize existing resources in place to handle all aspects of the product.
Marketing Information NeedsSecondary researchUsing secondary research procedures, the group found the current market share of our competition, as stated above under the Competition heading.Primary researchIn order to segment and carve out a niche market for a new soft drink product the team decided to design and distribute an email based survey (see exhibit A). We designed the survey questions to tell us several key items concerning the need for a new product. What products were consumers currently using, what they are currently paying, what needs are not being met, and what they would be willing to pay for those needs being satisfied. The team submitted the survey to over 100 consumers to fill out. Out of the 100 surveys distributed, we received 39 responses. The program tallied up the responses and created multiple charts for analysis purposes (see exhibit B).The age group that we targeted was the baby boomer generation, mid forties to the early sixties.
The survey results told us that 96.3% of the selected age group drinks some type a soft drink, 51.9% of the consumers said that they drink soda pop, and 22.2% said that they drink ice-tea. An ironic result showed that out of the 51.
9% that drank soda pop, 52.4% preferred a non-carbonated soft drink. Looking at the survey results, it shows 95.2% of the 39 consumers would like to see added vitamins to their soft drink, and 76.2% would like a non-sweetened product with vitamins. The results showed that the average of the consumers would pay $0.90 per can/bottle for added vitamins.
To market this group will involve multiple tactics to really influence and educate the age group. Based on the survey results, the group decided to go with a non-sweetened soft drink with added vitamins. Because 52.4% preferred a non-carbonated soft drink, we voted out the carbonated beverage.
The group decided to go with an ice-tea beverage.ProductSince we decided on an ice-tea beverage, it is in the company’s best interest to use the resources available through our joint venture with Coca-Cola Company. Since the Coca-Cola Company is a well-known company, has multiple distribution channels, a large cash flow, and currently handles our ice-tea beverage (Nestea), we decided the development of the product and marketing should be completed using current facilities and distribution channels already in place.The Nestle Company set a standard for its marketing divisions earlier this year to expand growth and capture additional shelf space in the market for soft drinks. It was the group’s decision to pursue product differentiation.
An analysis was done on Nestea and it was determined that Nestea does not have an ice-tea beverage with added vitamins, that is non-sweetened. The group decided to add vitamins to the beverage Nestea take out the sweetener and give it a new name, Nestea Plus!Since we have already established the name, and what ingredients will be taken out of the current product, as well as to what will be added, how will this product be marketed? Since the company has multiple factories, distributors, bottlers, 16.2% market share, and the majority of the shelf space in grocery stores channeling the product is not much of a concern to the group.
The main concern is marketing the product. As stated above the target market are the baby boomer generation, and the strategy of influencing the group will be through massive marketing strategies, and educating the target market about the necessity to have added vitamins in their soft drink Nestea Plus!PlacePlacing the new product is critical. To place the new product will require a strategic plan.
The plan will be the foundation on generating the gross profit set forth by the Nestle Company. Where will the product be placed at first? In what manner will the product expand to meet company goals? The group decided that the first region this product should be introduced is in the Western U.S. region. Strategically designed, the product will initiate its existence in the Western region for the first month. The second month it will expand to the Eastern region. The third month it will arrive in Midwest. The fifth month it will make its way into the rest of the U.
S. markets.As described below in the price strategy Nestle Company total sells goal of $8,625,000.00 in the first six months is the deciding factor for continuation of the program.
As long as the company’s goal is accomplished (in the first six months), Nestea Plus! will be distributed throughout the United States.