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External Analysis of the UK Biscuit Market

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External Analysis of the UK Biscuit Market 1. 1 Definition *and Growth *of the* UK Biscuit* Market Figure A: {draw:frame} Source: Data Monitor (2008, (a)) Furthermore, Mintel (2009, (a)) states how sales within the industry grew by 12. 4% between 2007 and 2009, with both sweet and non-sweet biscuits contributing to theses impressive figures. Indeed, they also point out that the UK biscuit market is worth around ? 2. 1 billion, so there is continuing evidence to suggest that the industry is consistently growing. *1. 2 – Key Drivers of* the UK Biscuit Market

Healthy eating is also an important issue for children because of the alarmingly high levels of obesity.

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Many schools have now banned vending machines and chocolate products in lunch boxes in an attempt to combat this problem, opening up opportunities for firms to develop healthier products. The Government has set targets to reduce the proportion of over-weight children, by introducing various schemes in schools to help parents and children develop a greater understanding of the risks associated with unhealthy eating (BBC, 2004).

1. 3 – Competition in the UK Biscuit Market

There are many competitors in the UK biscuit market, with the main being Burtons food, Nestle, United Biscuits, Kellogg’s, Go Ahead and Weightwatchers. Burtons food supplies biscuits which include Maryland cookies, Jammie dodgers and Wagon Wheels. They have reported yearly sales of ? 227. 6m and pre tax profits of ? 5. 3m, which has actually seen a decline from the previous year. (Mintel, 2009, (b)) Nestle is a widely based food group covering drinks, chocolate, biscuits and so on. Nestle are currently looking into healthier options, by reducing calories and fats in their bars. Nestle, 2009) Unite Biscuits supplies the market leading biscuit brand Mcvities. United Biscuits is another company which is focusing on healthy eating, recently having cut the amount of saturated fat in there biscuits by up to 50%. (United biscuits, 2009) An overview of the competition in the UK biscuit market can be found in appendix 1, and a list of each competitor’s brands can be found in appendix 2. *1. 3 – The UK Biscuit Market *Environment 1. 3*. 1 *Porter’s Five Forces Buyer Power Supplier Power Appendix 4 reviews the suppliers’ power within the market.

Data Monitor (2009) reports how suppliers possess power to a certain extent due to the switching costs involved for biscuit companies when changing supplier. However, the lack of differentiation in the raw materials and ingredients supplied means that their power is only “moderate” (Data Monitor, 2009). Threat of New Entrants Appendix 5 presents an analysis of the threat of new entrants in the UK biscuit market. Data Monitor (2009) claims that there are aspects of the market which are attractive to new entrants, such as the fact that most styles and shapes of biscuits are easily replicable.

However, the high fixed costs involved with production and the consumer brand loyalty which exists in the market both create significant barriers to entry for new entrants, meaning that their threat is only moderate (Data Monitor, 2009). Threat of Substitutes Appendix 6 shows the factors which influence the threat substitutes pose to the UK biscuit market. Data Monitor (2009) states how there are many possible substitutes for consumers and retailers, such as fruit and crisps, but that these may be inferior to biscuits. For example, fruits have a shorter shelf life and so may be more costly to store, and other snacks may take up more space.

Nevertheless, the threat of substitutes is still seen as moderate (Data Monitor, 2009). Rivalry Appendix 7 looks at the different factors which influence how fierce the competition is in the UK biscuit market. There are high fixed costs within the industry, and “capacity increases are relatively easy to implement” (Data Monitor, 2009: 20), both of which increase the intensity of the competition between firms. Differentiation is relatively low, and many of the players “remain dependent on the income from sales on biscuits” (Data Monitor, 2009: 20). Therefore, it is clear that there is a strong rivalry between firms in the market. . 3. 2 – SWOT Analysis A full SWOT analysis can be found in appendix 9, which brings together the findings of the report’s secondary research. 1. 4 – Primary Research 1. 4. 1 – Definition of the research problem Further research was required to add further value to the understanding of the UK biscuit market. A greater understanding of buyer’s behaviour is needed, and this will help to identify the segments that exist within the market. 1. 4. 2 – Information required Who buys? By identifying the key roles within the buying decision, this will help create a greater understanding of a typical buying process in the UK biscuit market.

Appendix 11 demonstrates the different roles involved in the buying process. What are their choice criteria? The various attributes a customer uses when evaluating products are known as choice criteria. It is a consumer’s choice criterion that provides the grounds for purchasing one brand over another. *When and Where* do they buy? Understanding when and where consumers buy, would ensure more accurate segmentation. For example, whether a customer purchase is based on habitual, or limited problem solving basis would help understand the buying process (Jobber & Fahy, 2006). An example of the questionnaire used can be found in appendix 12. . 4. 3 – Results 2. ) Segmentation of the UK Biscuit Market This section will now use the information obtained from both the primary and secondary research carried out in section 1 to segment the UK biscuit market. 2. 1 – Definition Hooley et al (2008) suggest that there are two approaches to market segmentation, these being a priori approach and a post-hoc or cluster-based approach. Both have advantages and disadvantages. The prior approach involves the use of an ‘off-the-peg’ segmentation scheme and can be performed successfully using single or multiple variables depending on the omplexity of the market. The advantage of this is that it can often be performed using secondary sources and can be directly related to advertising media and messages, but on the other hand schemes are in the public domain and therefore are known by competitors. Post-hoc segmentation is considered to be a more creative approach. It involves analysing the market structure with the aim to uncover naturally existing segments. This approach offers a unique view on the market but must be performed thoroughly as not to overlook any areas.

Also data can easily be misconceived, resulting in a false direction of efforts. 2. 2 – Sources of Information A post-hoc approach was implemented during the segmentation of the UK biscuit market for this project with primary and secondary sources being used. The primary source of information on the UK biscuit market came from the results of a questionnaire conducted on biscuit buyers in Plymouth city centre, as described in section 1. 4. Questions were based around the customer segmentation criteria (Appendix 12) highlighted by Heffernan (2009). An initial ‘brainstorm’ (Appendix ! was conducted to help develop initial ideas relating to segmentation, and this, combined with the research conducted, provided relevant information to help group the market’s consumers based on their behavioural, psychographic and profile characteristics. A secondary source of information used was Mintel’s report on the UK biscuit market (2009, (d)). This report segmented the market with a product focus which, although being an adequate means of segmentation from the views of a product launch, provided relevant information and sales figures to consider during positioning decisions.

It also provided a base to allow consumer groups segmented by their profiles to be coupled with a product that they would be most inclined to use. Information from both sources was drawn together and used to group customers into seven segments with similar characteristics and buying behaviour. Customer profiles where then drawn up for these segments to allow an assessment of their sought benefits, lifestyles, buying behaviour and other characteristics. Appendices 14 – 20 show the consumer profiles for each of the market segments. 2. 3 – Targeted Segment & Positioning

Mintel (2009) report that the healthier biscuit comes second in terms of growth in sales between 2006 and 2009 (23. 5% growth) and held the largest percentage share of the product market at 25%. The children’s biscuit market is relatively saturated however, with only 1. 4% growth in sales over the same period, but due to this lack of healthy biscuits, it was perceived that a combination of the two segments would be both successful and profitable. The target markets selected therefore were ‘the healthy living’ and ‘the child. ’ More here on positioning ie. We positioned product on benefits 2. 4 – Positioning Statement For ‘The C_hild,’ the biscuit provides a healthier option unlike Burton’s Jammie Dodgers, Fox’s Party Rings and Cadbury’s Animals and other children’s biscuits, which are all examples of high sugar and appearance based products. ”_ 3. New Product Development and Launch As identified in section 2, the new biscuit launch will be aimed at the children’s market, specifically focusing on being a healthy snack. This section will now explain how the position within this segment of the market will be achieved, by discussing each of the four aspects of the marketing mix; Product, Price, Place and Promotion. 3. – Product The new product will be a circular biscuit with oats as a primary ingredient for the base. The biscuit will also have small dried banana flakes and there will be no artificial colours or preservatives in the recipe, so that the biscuit is correctly positioned as a healthier alternative to our target market. The product will be called “Gonzo’s Banana Bites”, and is differentiated in the sense that no other biscuits contain dried banana flakes. To appeal to children, the product will have “Gonzo the Gorilla” as its animated character, and he will appear on the packaging as well as the advertising.

If successful, children will establish a positive association between the biscuit and Gonzo, meaning that they will become the ‘influencer’ (See appendix 11) within the buying process and consequently ask their parents to buy Gonzo’s Banana Bites. A gorilla was chosen as an animated character because there is a clear link between bananas (dried banana flakes in the biscuits) and gorillas, and this will further help children to recognize Gonzo and therefore the brand in general. Fawcett 2008) argues that animated characters should encourage children to adopt “healthy and balanced lifestyles”, as “no parent wants an unhealthy child”, and Gonzo will indeed be aiming to send out this message to them. As parents are both the ‘decider’ and ‘buyer’ within this particular buying process, the product will appeal to them also as the biscuit is positioned as a healthy snack for their children. The promotion of the product will also need to appeal to both children and parents, and this will be discussed in section 3. . As discussed earlier, it was found in the primary research (section 1. 4) that many consumers were supporters of Fair Trade, in the sense that workers abroad are treated fairly. The product will therefore show that it is a supporter of Fair Trade through its packaging. In addition, as gorillas are an endangered species, the brand will also show support for the charity ‘The Gorilla Organisation’, and this is also shown on the packaging. The packaging of the product can be seen in appendix (!! ). 3. 2 – Price

Price is the value which is placed on a product, and is therefore the only revenue generating ‘P’ of the marketing mix, which means that making the right pricing decision is very important (Jobber & Fahy, 2006). From a customer’s perspective, there are many benefits which they look for in a product, such as the quality, price and functionality compared to competitor’s brands. (Marketing Teacher, 2010) When deciding among a price, factors that should be taken into consideration include; what are the pricing objectives? Should we use profit maximisation pricing? What prices are competitors charging?

What image should the price to convey? How flexible does the current market allow the product’s price to be? (Brassington, 2010) There are four main pricing strategies which can be used include penetration, skimming, economy and premium pricing (Marketing Teacher, 2010). This is shown in Figure B: Figure B {draw:frame} (Marketing Teacher, 2010) Economy pricing should be used with a low quality product, when the cost of marketing and manufacturing are kept to a minimum. This is often used on value, basics and smart price products; and is therefore an area which Gonzo’s Banana Bites will avoid being associated with.

The product will also avoid using skimming pricing, as this strategy should only be used for established brands with a high market share. This strategy will also be avoided because the competition in the biscuit market is fierce and, with a high entry price, the product won’t attract the amount of consumers needed. Premium pricing should be used when there is a high price and uniqueness about the product, for example business class flights and hotel suits (Jobber, 2010). Again, introducing the product into the market at a high price will not be beneficial so this strategy will not be used.

Gonzo’s Banana Bites will use penetration pricing, which involves introducing the product to the market initially at a low price to attract customers, and then slowing increasing the price once a larger share of the market has been obtained and the brand is more established. The lower prices will discourage competitors and therefore act as a barrier to entry this strategy, which is important as is that it is likely that other firms will respond to the new product, and consequently introduce similar products in a bid to gain back any loss of sales and market share.

Overall, penetration pricing works on the theory that consumers will switch to a new product because of the lower price (Jobber, 2010), and this is important because one of the principal aims of the product is to raise awareness and encourage consumers to try the biscuit. Figure C shows the various prices which competitors in the market are charging for their similar products on the market, and range from 69p to ? 2. 18. However, “Goodie’s Bars” are the only product in the table which are specifically for children, so there is a sense of relative uniqueness for Gonzo’s Banana Bites.

Figure C: Source (ASDA, 2010) 3. 3 – Place As identified using Porter’s Five Forces in section 1. 3. 1, supermarkets are the main channel of distribution in the UK biscuit market, as they dominate the retail food industry. Indeed, the industry is a classic example of an oligopoly, in the sense that the five largest firms (Tesco, ASDA, Morrison’s, Waitrose and Sainsbury’s) have a combined market share of over 80% (Mintel, 2009 (c)). This means that for Gonzo’s biscuits to be successful in the market, it is essential to eventually distribute through hese supermarkets. However, due to the strong buyer power which these supermarkets have within the industry, it is not realistic to straight away sell the biscuit through them. This is because there are many established biscuit brands which are already taking up shelf space and are selling well due to the brand loyalty they have created, which means that the dominant supermarkets will most likely be reluctant to take a risk on a new product with little market experience.

Even if it were possible to negotiate a contract with the large food retailers, they would most likely exploit their bargaining power and general dominance, and drive down the price at which the product is sold to them. Therefore, it is necessary to consider an alternative distribution strategy to access the market. Gonzo’s will attempt to avoid the issues highlighted above by using a “pull” selling strategy (Jobber & Fahy, 2006). The product will initially only be launched in the South West of England; in the Devon, Cornwall and Somerset counties.

The product will be sold through smaller, regional supermarkets in Co-op, SPAR and Somerfield, by using a direct distribution strategy. In addition, it will be sold through local convenience stores, via wholesalers, so that the biscuit is available for consumers to purchase. McVities used a similar regional strategy for their launch of Hobnobs biscuits by only distributing in Scotland to begin with, and this proved to be a successful strategy for the brand. REFERENCE LECTURE) By distributing only in the South West, this will in turn create brand awareness for not only the residents of these areas, but also for tourists who visit the region during holidays. This, combined with the promotional strategy, will hopefully create “word of mouth” promotion from consumers which will then lead to national demand from our target market. Consequently, consumers will begin to ask the dominant supermarkets for Gonzo’s biscuits, and they will then approach the producers to request an order so that consumer demand is satisfied. 3. – Promotion The “Pull” strategy that is adopted for Gonzo’sBiscuit Bites is heavily reliant on the initial success of the launch within the south-west region. A marketing strategy of any kind is ultimately dependent on consumer awareness. This is where promotion of the product plays an imperative role, in order to create this awareness and consequent success. The promotion of a product involves balancing the seven main elements of the promotional mix (Jobber & Fahy, 2006), such as advertising and sales promotion, but it is important to consider the costs available.

The most significant reason for starting a regional sales campaign rather than a national campaign is the cost, and the cost of launching a regional campaign instead of a national one is far less meaning that it is a more realistic idea. For the launch of the product, Gonzo’s will use advertising and sponsorship. Television & Cinema Adverts The new product will be advertised regionally through television networks. Although it is expensive and hard to measure the success rate, television advertising is still one of the most effective ways to create brand awareness (Jober & Fahy, 2006). Gonzo the Gorilla” will appear in the advert, and a story-line for this is shown in appendix (!! ) The animated story-line will be enjoyable and humorous for both boys and girls, as both Gonzo and his wife are shown to be eating the biscuits at the end of the story. At the same time the healthy facts about the product at the end of the advert will encourage the parents to buy it for their kids. The same advert will be used in cinemas and will be shown before films with a U or PG rating, as this is a clear opportunity to directly target both children and the parents who are accompanying their children.

Posters Sponsorship and P. R In a world that is caring more and more about produce, it is essential that the consumer knows that the fruit produce in the biscuits are Fair Trade. The product will therefore show support for Fair Trade and, as mentioned in section 3. 1, will aim to develop an affiliation with The Gorilla Organisation. Both of these sponsorship developments will help to establish a positive relationship with the community, which will in turn create a good name for the brand.

Cite this External Analysis of the UK Biscuit Market

External Analysis of the UK Biscuit Market. (2018, Mar 09). Retrieved from https://graduateway.com/external-analysis-of-the-uk-biscuit-market/

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