- Pan India Coverage by 2014
- Gross margin of atleast 45% by 2014
- Net after tax profit above 15% of the sales by 2014
- Market share of 30%
EXTERNAL ENVIRONMENT ANALYSIS
Soft Drinks have become world’s leading beverage sector. The Indian soft drink industry stands at around 175000 billion liters per annum and is likely to surpass 350000 billion liters by 2015. Indian non-alcoholic market is expected to grow by 20% per annum by 2013, according to report by The Associated chamber of Commerce &Industry of India. The leading players in the Indian soft drinks market include coca-cola co., PepsiCo. Parle-agro, Dabur and Godrej.
India has proved to be perhaps the toughest battle ground for Coca-cola and Pepsi. Coca-cola was the first international brand to enter India in early 1970s. Until 1990s, domestic players like Parle Group (Thumps up, Limca, Gold spot) dominated the soft drink market in India. However MNC players like Pepsi (1991) and Coke re-entered in 1993 shift the control towards them.
The market of Soft drinks can be segmented on the basis of types of products – Cola products and Non-cola products.
Cola products account for nearly 61-62% of the total soft drinks market. The brand fall under this category is Pepsi, Coca-cola, Thumps-up, Diet-coke, Diet-Pepsi.
Non-cola products which constitute 36% can be divided into different flavors such as Orange, Cloudy lime, Clear lime, Mango.
Political factors:-
The beverage industry in largely affected by the Political factors prevailing in the country. The sales tax & central sales tax affect the rates for soft drinks form region to region.But , Vijay Mallya and Roy are famed for their skills in managing relationships with governments. Those skills come handy for their diversified businesses sprawling different states with different tax rules and when they come head-to-head with rivals.
Economic factors:-
The rising per capita income has lead to an increasing consumption of soft drinks. Soft drink business provides attractive profit margins due to the consolidated nature of the industry. The Nation Council of Applied Economic Research has projected that India’s ‘very rich’, ‘consuming’ & climbers classes are growing at a CAGR of 15%, 10%, 2% respectively. Thus, there is huge potential for growth of the ‘Refresh’ in India.
Social factors:-
The changing lifestyle, social habits, eating habits has all led to an increase in the growth of the beverage industry. With increasing urbanization, this acceptance of soft drink is only going to rise. Also a large proportion of Indian population is the age group of 20-35 years, which comprises of the age group where soft drinks are found to be most popular. Thus, the changing demographics and social trends are favorable for ‘Refresh’.
Technological:-
The beverage industry is not very technological specific. Technology is mainly used for developing new packaging, to reduce costs and curtail counterfeiting etc.UB group has huge financial muscle power, it can use its finance to procure latest technology, and necessary R&D.
- PORTER’S FIVE FORCES ANALYSIS OF AERATED DRINK INDUSTRY:
Threat of Existing Competitors:
A fierce competition exists among the very few dominating players of this Industry. There is a duopoly in the industry and intense rivalry can be seen amongst Pepsi and Coke.
Threat of Substitute Products:
There is threat of substitutes, as there are many alternative beverages present in the market like juices and teas proven to be healthier options.
Bargaining Power of Suppliers:
The Suppliers have less bargaining power as the company has achieved a strong hold on its raw material and packaging suppliers over the years. The company has established good relations with suppliers for raw materials such as sugar corn syrup, sweeteners etc.
Bargaining Power of Buyers:
The buyers exercise a high bargaining power as the switching cost for the product is almost nil and they have many options to select from when it comes to the beverage industry.
Threat of New Entrants:
Even though the aerated market is growing fast pace, but still there are strong barriers for new entrants in the soft drink industry as amount of capital investment required is high and also exclusive territorization is required for distribution channel which makes its in whole a cumbersome and difficult process. A new brand would need a huge muscle power to compete with the existing big players Coca Cola & Pepsi, but UB group is expected to doing well in this segment as it has already established itself in the beverage industry.
The soft drink Industry is dominated by Coca-Cola whose market share is 42.7 % (2011) across the globe. Pepsi and Rc Cola together have a market share of 34.8 % (2011). Hence Refresh has to face stiff competition from Coca-Cola who is the market leader at this point of time.
INTERNAL ENVIRONMENT
QUESTION MARK (OR PROBLEM CHILD)
Here, business unit has a small market share in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. UB fertilizers come in this quadrant.
STAR
In this quadrant, business unit has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures.
CASH COW
In this quadrant, a business unit has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units. Kingfisher Breweries falls under this quadrant.
DOG
Here, business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share. Kingfisher airlines fall under this quadrant.
GE MATRIX FOR UB GROUP
(+) high
(-) low
Based on the analysis of the GE Matrix we can say that UB group is high in industry strength and high in market attractiveness in the breweries segment (as it has maximum + in this segment). They lie in the green section of the matrix, in the ‘grow penetrate’ section. The company’s decision to invest in this segment is correct. Thus, the company’s new venture to enter into soft drink segment has great growth potential.
The Ansoff’s matrix provides four different growth strategies:-
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Market Penetration
- Product Development
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Market Development
- Diversification
The new product “Refresh” features in the second quadrant of the Ansoff’s matrix where UB group is offering a new low Calorie soft drink product in an existing the market. The strategy for growth that they have used is the Product Development Strategy, where they have come up with a new product which they offer to a market who is already consuming soft drinks. This strategy would help them differentiate their product from other competitors.
FINANCIAL PAY OFF
Profitability Analysis Of Refresh:
We have analyzed the projection of Refresh Brand by the following:
- Expenses in the production to the sales
- Revenues
- Profit
- Expenses in the production to the sales:
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Manufacturing Costs- Their manufacturing cost is divided into two:
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Variable Cost: They have the expenses incurred in the purchasing the raw materials, manufacturing the bottles, making the soft drink.
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Fixed Cost: Buying the machineries to make the soft drinks and bottles
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Administrative Cost: Hiring of the employees, providing the salaries to them
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Selling Cost: Variable Cost and the fixed cost. Salary to the sales people, incentives (variable)
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Advertising and marketing Budget: There will be the fixed cost in which we will decide how much budget to spend on TV advertisement, print media and the online media, hoardings etc.
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Revenues for Refreshing Brand: The revenues of the products can be achieved by 300 ml bottles targeting the whole India and the cans specifically in the tier-1 and Tier-2 cities. The market for the soft drinks or the carbonated drinks are approximately Rs 8000 crore and recent data shows that Pepsi has earned 56% market share of this market. So, we have planned to get at least 3- 4% of the share to start, then we grow according to that.
Projection Analysis In detail
We have analyzed that our 2013 would be the breakeven year for us and payback period is the mid of the year of 2014.
Our Assumptions:
MARKETING MIX
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PRODUCT-
The UB GROUP has a variety of products available in their kitty. They have a wide range of product line to attract the customers and to have a major share of the market. So the new product line of “Refresh” would be available in the following flavors:-
Refresh Cola: This beverage would be in regular cola flavor, but with a strong fizz, black color, available in 335 ml for its Can and Plastic bottle sizes 250ml, 600ml , 2 Lt & 200ml in glass bottles.
Refresh Lemonie: This thirst-quenching beverage features a fresh, light lemon-lime taste, cloudy white color, available in sizes 335 ml for its Can and Plastic bottle sizes 250ml, 600ml, 2 Lt & 200ml in glass bottles.
Refresh Orange: This beverage is driven by the brand's fun and playful personality, which goes hand in hand with its bright orange colour, bold fruit taste and tingly carbonation, bright orange color, available in sizes 335 ml for its Can and Plastic bottle sizes 250ml, 600ml, 2 Lt & 200ml in glass bottles.
Refresh Mango: This beverage would be mango flavored, available in golden yellow color, in sizes 335 ml for its Can and Plastic bottle sizes 250ml, 600ml, 2 Lt & 200ml in glass bottles.
Refresh Apple: This beverage would be apple flavored, in reddish brown color, in sizes 335 ml for its Can and Plastic bottle sizes 250ml, 600ml, 2 Lt & 200ml in glass bottles.
Main USP of the product is that it has calories as low as 8.0 kcal. These drinks are for people who want no calories, but plenty of taste. It’s a healthy beverage for weight conscious people, which has calories as low found in a cup of tea
Main USP of the product is that it has calories as low as 8.0 kcal. These drinks are for people who want no calories, but taste like the carbonated drinks. It’s a healthy beverage for weight conscious people, which has calories as low found in a cup of tea.
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PLACE- distribution channel, institutional sales,
DISTRIBUTION CHANNEL IN URBAN AREAS:
The UB group can adopted a model DSD that is Direct Store Distribution. In this company directly supplies its product to the retailers which helps them to save the margin, which they give to the wholesalers and it also ensures quick availability of the product to the retailer. Also, it can generate the sale by distributing to the various cafes and youth restaurants where most of the youth can come and get the taste of it.
Based on various distribution models they can offer its products and services to customers in other countries also. But in the initial year they should focus on Indian population. They can use Direct Store Delivery (DSD), Broker Warehouse Distribution (BWD) and Vending & Food service (V&FS) systems.
Distributors: 3 to 5 % is the profit margin
Retailers: 10 % to 16 % is the profit margin
Thus, we i.e. the UB Group can have two ways of hierarchy:
- Direct to the retailers:
- Distribution to the wholesalers first:
- PRICE-
PRICE STRATEGY:
The pricing strategy of our product would be different from the other carbonated drinks. There are two reasons behind it:
- To differentiate the product from other soft drinks
- Making it a high range product because our product has a same flavor like Pepsi, fanta etc but it is a healthy drink.
As we have categorized the drink as per the sizes of the bottles and cans. So, we have different pricing for different bottles. For bottles, we are taking the price of Rs. 13 for 200 ml and Rs. 25 for cans.
Trade Promotions:
Incentives to the retailers: We will provide the special margins and discounts to our retailers so that they can show case our products in front in their store and people can view and buy our product via impulse buying.
Also we will provide the discounts to our distributors as well.
- PROMOTIONS:
Promotion Strategy
Since the product is new the following promotional strategies would be followed by UBS:
- Push & Pull promotion strategy
Extensive distribution:
Push Strategy:
Refresh of UB Group would use this strategy by using its sales force and promotion money to induce intermediaries to carry, promote and sell it to end customers.
Pull Strategy:
Example for the pull strategy: UB/ Refresh cooling tools like fridge and deep freezer in super market and hyper markets
- Create attractiveness from advertising
- Placing adds on bill boards/ hoardings:
- TV Advertisements:
- Press Releases:
- Cost- Effective Promotion:
As UB Group is a much known brand, so we believe that there should be a press conference after the launch and should spread in all over the news channels.
Free trial of the drink in shopping malls /local shops
Sponsor too many events such as cricket matches award functions trade fairs.
Social media marketing: They should make the separate official on Facebook etc for Refreshing brand.
Internet Marketing: Spreading the awareness through various websites search engines etc.
Other strategies
Getting Shelves: They get or purchase shelves in big departmental stores and display their products in the front side of shelves so that to attract the customers.
Eye Catchy Position: Salesman of Refresh Company positions their freezers and their products in eye-catching positions. Normally they keep their freezers near the entrance of the stores.
Sale Promotion: Company can also do sponsorships with different college and school's cafes and sponsors their sports events and other extra curriculum activities for getting market share.
B2B promotions
Hosting many functions
The group can have tie-ups with schools, offices and restaurants to adhere to its target audience.
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PEOPLE-
The organization Structure will be a vertical hierarchical one, since almost equal number of personnel is involved in production and in management.
There are 5 main functioning groups within this SBU of UB group: Production, Sales and Marketing, HR and finance.
Production involves the actual manufacturing of the drink & bottling and packaging it. Sales and Marketing will handle the promotion and scheduling of drink newly launched Refresh drink under the UB banner .Hr would cater and manage facilities like recruitments payroll training & development and other HR functions. Finance / accounts will manage functions like profit calculation , investment needed, preparing balance sheets and profit n loss account to know where does the unit stand today and where will it go in future.
Organization Structure:
ORGANIZATION STRUCTURE OF THE SALES DEPARTMENT
REFERENCE
