New Product Development

University Degree Business and Administrative studies

New Product Development

Bruce D. Hill

Ella Noel

Keren Shvarz

Patrina Stewart

Table of Contents

Exhibit A,

Exhibit C, Schedule………………………………...…….………………………………………………………...30

Exhibit D, Progress Update………………………………………………………………………………………...31

Product Market

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 Environment

We 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 Analysis

Our 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.

Competition

Our 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 Analysis

Overall objectives

In 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:

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 ...

New Product Development