- Consumer demand drives everything they do.
- They will serve consumers a broad selection of the nonalcoholic ready-to-drink beverages they want to drink throughout the day.
- They will be the best marketers in the world.
- They will think and act locally.
- 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 objectives
Fortunately, 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.
Resources
Our 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 Nestlé 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 Needs
Secondary research
Using secondary research procedures, the group found the current market share of our competition, as stated above under the Competition heading.
Primary research
In 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.
Product
Since 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!
Place
Placing 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.
Promotion
Overall objective
Our overall objective of the promotion blend is threefold:
-
Since this is a new product the group needs to inform the consumer, (Our new product is healthier with added vitamins!).
- Increase market share in the ready to drink ice tea market.
- Create demand. To create demand the group must combine both the “push and pull” promotions.
The team decided upon the name Nestea Plus! The group anticipated triggering the curiosity of the consumer by adding “Plus” to the existing product “Nestea”. The group decided the label of the soft drink will have “Added Vitamins” and “New” printed on it strategically, this will differentiate Nestea Plus! from the existing product “Nestea”, and other ice-tea beverage competitors. We chose the name because it gives customers a name they are familiar with in an ice tea and let them know that we have added something new to it.
Promotion blend
In order to “push” the product down the channel we will use our current channels of personal sales, promotions, sales contest, trade shows and distribution of merchandising aids. We will need to train all of our current sales force on the features and benefits of our new product so they can relay that information to our customers. It will be the job of this sales force to help to educate and train our customer’s sales force so that they can become experts on the new product and relay the information to their customers.
We will accomplish the “pull” part of the mix through advertising channels, free samples and information at events and a website, for consumers to learn about the new product.
The copy thrust team has decided upon; “It’s a hot muggy day in mid July but you feel refreshed and full of energy!” Do you know why? Because you just drank a refreshing bottle of Nestea Plus! So keep that feeling, have some more Nestea Plus! We will use this copy thrust to develop a television commercial, radio copy, and all print copy to keep a consistent message in front of the consumer.
The selected networks to broadcast the commercial will be NBC, ABC, HBO, and the Food Network. After an in depth analysis from the Marketing Development Group, it was determined that the commercial will be shown in the morning at 6 a.m. through 10 a.m., Monday through Friday. We will air it in the evenings at 5 p.m. through 10 p.m., Monday through Friday. We will show the commercial throughout the day on the weekends. We will broadcast the commercial on every major television show during the hours stated (on the stations stated) above. We will contract with every major radio station, throughout each region of the United States, to broadcast the commercial in the mornings from 6 a.m. through 11 a.m., and in the early evening from 4 p.m. through 7 p.m. Monday through Friday. We will broadcast the commercial throughout the day on the weekends. The commercial will run for six months, and evaluate sales after each month. If at the end of six months, the new product has not generated at least $8,625,000.00 in sales, we will terminate it and use the rest of the airtime for other Nestle products.
Price
The Nestle Company granted the group $15 million to introduce the new product. The task given to the group is to generate a 15% gross profit ($2.25 million) or a gross income of $17,250,000.00 in twelve months. The $15 million is for creating, manufacturing, packaging, marketing, and distributing the new product. The group decided to use $11 million for marketing the new product. The group will give $2 million of the $11 million to the Marketing Development Group to develop and produce a catchy commercial that will influence and educate the targeted age group (both television and radio). We will spend $7 million of the $11 million on contracts for broadcasting on television. In addition, we will spend $1 million of the $11 million on radio commercials. Finally, we will spend the last $1 million of the $10 million on posters, billboards, ads, and coupons.
Nestle/Coca-Cola’s fixed cost to produce a case (total 24) of 16 oz bottles is $4.00. The total variable cost is $1.00. The combined total is $5.00. The mark-up to the bottlers is 50%. They will sell each case for $7.50.
The group has determined that $4 million of the $15 million will be earmarked for the production stages. Five Hundred Thousand on the development of the ingredients; $3.5 million on the manufacturing process (which will include all the fixed costs of running the plant, brewing of the tea, adding the vitamins, salaries, utilities, and the packaging of the product.).
Based on the $15 million dollar budget, to generate the return set by the company, the group has taken a conservative approach and has strategically planned to produce approximately 2,400,000 (cases), sold at $7.50 each to the wholesalers, as stated above. By selling a case at $7.50, each would generate a twelve-month gross income of $18 million, a $3 million twelve-month gross profit (20% gross profit). This exceeds the Nestle/Coca-Cola venture’s stringent requirements given to the group by $750k, or 5% gross profit in addition to the 15% gross profit set by the company. This will allow for unforeseen variables such as delays in formula R&D, production delays, and distribution delays. As stated above, the survey analysis showed that the average consumer in the age group (being marketed) is willing to pay $0.90 per bottle. The team will pass this information onto the retailers.
Control
In order to track the progress of this campaign we will use our current system of information resources, such as, scanning systems to track sales by region, and demographic information on the final consumer. We will also have our sales people turning in a weekly report for their area with any concerns, which they feel need to be addressed to reach our goals. This will allow us to monitor the marketing mix weekly to see if any changes are necessary.
Nestle has given the group 12 months to generate a 15% gross profit on top of the $15 million invested in the new product and to increase market share by 3 points within 18 months. The group is already looking into a product, which includes a sweetener, in addition to the vitamins for the Generation X to expand the product, further differentiating it. We will divide the remaining airtime (both television and radio) strategically amongst other products offered by the Nestle Company if the product is a complete failure at the end of six months.
Forecasts
Nestea Plus!
Timing
The team was assembled on October 5, 2003 and at that time created a schedule (Exhibit C) for the new product. Resources were allocated for all aspects of the product from the initial questionnaire design, to product delivery to the shelves. A schedule update (Exhibit D) was performed on November 14, 2003 and the update shows the project is ahead of schedule by about three weeks.
Exhibit A
Survey
Current Use
Do you currently use any soft drink?
Yes
No
Not Sure
Type
What type of soft drink are you currently using?
Soda Pop
Juice
Ice Tea
Sports Drink
Bottled Water
Other_______________________
Features
Are there features that this product does not have that you would want out of a soft drink?
Yes
No
Not Sure
Which Features
What features does your soft drink not have that you wish it did?
Cost
How much do you pay for your soft drink?
Satisfaction
How satisfied are you with your soft drink?
Very Satisfied
Somewhat Satisfied
Somewhat Dissatisfied
Very Dissatisfied
Our Features
Of the following list of features, please select the top three that would be of interest to you.
Added Vitamins
Sweetened
Non-Sweetened
Carbonated
Non-carbonated
Rank Features
Of the three features you just listed, please rank them first, second and third in importance to you.
Essential Feature
Are there particular features that a product must have for you to purchase it? What are they? Please list them in order of importance.
Price Features
How much would you be willing to pay for a product with these features?
Price Percentage
If the product were priced at $1.50 per 20 oz. how likely, on a percentage basis, how likely would you be to buy it? (0% = Not at all likely to buy, 100% = Completely likely to buy)
Priced Right
Do you think a price of $1.50 for this is product is Extremely High, Somewhat High, Just Right, Somewhat Low, or Extremely Low?
Extremely High
Somewhat High
Just Right
Somewhat Low
Extremely Low
Means Most
Through what means would you be most likely to purchase this product?
Convenience Market
Super Market
Restaurant
Vending Machine
Drug Store
Create Name
What do you think would be a good name for such a product?
Container
Which type of container do you prefer for your soft drink?
Glass Bottle
Plastic Bottle
Can
Age
What is your current age?
20-29
30-39
40-49
50-59
60-69
Thank you for taking the time to complete this survey. Select Submit Survey now to send your responses to us.
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Exhibit B
Survey responses