Integrated Marketing Strategy for Coconut Virgin Oil Analysis

Integrated Marketing Strategy for Coconut Virgin Oil
 

Executive Summary

Using different marketing tools for analysis, developing an integrated global brand for CVO will be successful due to its organic benefits, social value and cheap method of production. The Marketing Matrix shown here will give a brief overview of the many forms and use of the CVO showing its versatility as a marketable product and health advocate.

Profits will be earned through proper management of sourcing of raw materials. Processed and bottled can be bought at an average of $ 3.00 per 500 ml. Prevailing retail price without shipping costs is $17.00 per 500 ml on the average. Retail is more than five times the cost which makes it viable for product development.

I.                   Introduction

a.       Chemical Description

One of the definitions of “virgin” in the Merriam-Webster pocket dictionary is: “fresh, unspoiled; especially: not altered by human activity.” Virgin coconut oil (VCO or VCNO) is produced from fresh coconut meat (non-copra) This does not pass through RBD processes. It is produced without the use of chemical and heat and does not contain aflatoxin/PAH’s. It retains its vitamin content, especially Vitamin E, an antioxidant, after undergoing the natural process of producing the virgin coconut oil. It is rich in lauric acid, an acid naturally found in mothers milk that helps develop and strengthen the immune system of newborn           babies. It contains medium chain fatty acids that is easily digested by the body and converted to energy.  The virgin coconut oil is a truly unrefined coconut oil made from organic coconuts. Testing done in independent laboratories reveals a 50% – 53% content of lauric acid. No chemical or high-heat treatment is used, and this oil contains no trans fatty acids. The virgin coconut oil has been extracted in an old-fashioned traditional method that has been used for hundreds of years. The coconut trees where the coconuts are sourced by producers are certified organic according to strict USDA standards. This high-grade virgin coconut oil has a long shelf life due to coconut oil’s natural anti-oxidant properties. It has the longest shelf life of any plant oil (Tropical Traditions Virgin coconut Oil, 2005).

Table 1. Typical Analysis of CVO

;

Parameters
Typical Values
Methods of Analysis
% FFA (as lauric acid)
;0.02%
AOCS Official Method Ca 5a 40
Iodine Value
4.6
AOCS Official Method Cd 4d 92
53
% Moisture
0.04% – 0.11%
AOCS Official Method Ca 26-25/3a-46
Saponification Value
341
AOCS Official Method Cd-3-25
Peroxide Value
0
AOCS Official Method Cd 8 53
Iron (Fe) ppm
1.2 ppm
Atomic Absorption Spectrophotometry
Total Plate Count
None Detected
AOAC
Pathogens
None Detected
AOAC
Yeast and Molds
None Detected
AOAC
Source: http://www.wildernessfamilynaturals.com/virgin_coconut_oil_traditional.htm

;

Table 2. Typical Fatty Acid Profile

;

Fatty Acid,
Carbon Chain %
Typical %Value

Method
C6
0.22
Caprolic Acid
Gas Chromatography (CRL 10.004)
C8
6.09
Caprylic Acid
C10
5.8%
Capric Acid
C12
49.16
Lauric Acid
C14
19.42
Myristic Acid
C16
9.12
Palmitic Acid
C18:0
3.3
Stearic Acid
C18:1
5.87
Oleic Acid
C18:2N6
.86
Linoleic Acid
C20
0.1
Arachidic Acid
C24
0.03
Lignoceric Acid
Source: http://www.wildernessfamilynaturals.com/virgin_coconut_oil_traditional.htm

;

;

;

;

b.         How the Virgin Coconut Oil is Made?

;

Figure 1. Process Flow of Procedure

The virgin coconut oil is pure hand-pressed raw virgin coconut oil extracted from organic coconuts that are used fresh (within 24 hours of harvest). The process is labor intensive. The produce virgin coconut oil, first the coconuts are gathered and brought to a shed for further processing. The white coconut meat is ground out of the hard shell. This fresh coconut meat is shredded (wet milled), The moist coconut meat is then subjected to gentle heating under the sun where moisture is driven out of the fresh coconut meat. The sun heat applied is very low. The meat is then tested by hand periodically during the drying period to determine if there is still moisture present. If there is still moisture present, when squeezed, the water and oil will be evident. When the moisture is gone, only oil is evident upon the “Squeeze Test”. When all the moisture has been driven out from the fresh coconut meat, it is ready to be loaded into the press cylinder. The packed cylinder is then placed in the press, and the gentle pressing begins. The process is called cold-pressed to make coconut milk. The milk is then fermented for 24-36 hours, and the oil is then separated and filtered from the curds.

The extracted oil is then filtered and captured in a covered container. After pressing the spent coconut cake is removed from the press. It takes between 20 and 25 coconuts to make 3.5kg of fresh coconut meat. After pressing, each 3.5 kg of meat will yield between .7 and 1 kg of virgin coconut oil Jamaican Gold: Raw Handpressed Coconut Oil, 2006).

Figure 2. Grating of Coconut

;

;

HOW OUR CENTRIFUGED COCONUT OIL IS MADE

Centrifuged coconut oil is made from fresh coconuts opened less than 48 hours after they are picked from the trees. They first shell the coconuts and then chop the flesh, placing it in an expeller press. The temperatures of the coconut flesh and the resulting coconut milk emulsion do not exceed 25° C or 78.8° F (room temperature). Once the coconut is shelled, it takes less than 45 minutes to produce the milk. The resulting coconut milk emulsion is then chilled slightly to 10° C (50° F) so that the oil will “pull out of solution.” In other words, the chilling helps to break the protein emulsion that holds the oils in solution. Next, the cooled milk, by use of a large centrifuge, is separated into the pure oil that we sell here and a “skim” coconut milk. This method of extraction requires no heat at all. It works like a cream separator that is used for separating cream from cow’s milk. It requires quite a few passes through this chilled centrifuge to obtain pure oil, but the resulting oil is excellent.

http://www.wildernessfamilynaturals.com/virgin_coconut_oil_centrifuged.htm

;

;

;

;

II.                Importance of the Product

A. Health Benefits

VCO can provide instant energy to the body. According to experts the medium chain ( C8 – C12)  fats in VCO is similar to the fats in mother’s milk, that gives babies immunity from diseases. The medium chain fatty acids have antiviral, antimicrobial, antifungal and antiprotozoal properties. It was found out that the most potent is the lauric acid (C12) and its monoglyceride form monolaurin being mentioned as the most potent against lipid coated microorganisms which are not normally cured by ordinary antibiotics. Among the vegetable oils traded in the world, coconut oil is the richest source of MCFA (64%) and lauric acid (48-53%). The numerous health benefits of coconut oil are finally again reaching the mainstream. These benefits are reducing risk of heart disease, promoting weight loss when and if needed, supporting immune system health, reducing your risk of cancer and degenerative diseases, supporting a healthy metabolism, providing an immediate energy source, helping to keep skin healthy and prevent age-related damage, supporting the proper functioning of the thyroid gland, and preventing infections due to harmful bacteria, viruses, yeasts and other micro-organisms.

These unique health benefits of coconut oil are directly related to its chemical structure, or more precisely, the length of its fatty acid chains. That is, coconut oil is comprised of medium-chain fatty acids (MCFAs), also called medium-chain triglycerides or MCTs. Coconut oil is nature’s richest source of these healthy MCFAs. By contrast, most common vegetable or seed oils are comprised of long chain fatty acids (LCFAs), also known as long-chain triglycerides or LCTs.

There are several reasons to explain why long-chain fatty acids are not as healthy as the MCFAs in coconut oil. For one, LCFAs are difficult for the body to break down. They must be packaged with lipoproteins or carrier proteins and require special enzymes for digestion. Also, LCFAs put more strain on the pancreas, the liver and the entire digestive system. These LCFAs are predominantly stored in the body as fat. (That’s why most people buy into the myth that fats are automatically “fattening”). LCFAs can be deposited within arteries in lipid forms such as cholesterol. On the other hand, however, the MCFAs in coconut oil are healthier, because MCFAs are smaller. They permeate cell membranes easily, and do not require lipoproteins or special enzymes to be utilized effectively by your body. MCFAs are easily digested, thus putting less strain the digestive system. This is especially important for those of with digestive or metabolic problems. MCFAs are sent directly to your liver, where they are immediately converted into energy rather than being stored as fat. MCFAs in coconut oil can actually stimulate your body’s metabolism, leading to weight loss (Mercola, 2006).

Figure 3. Metabolisms

B.                 Social Benefits

A noteworthy social benefit of the virgin coconut oil is in positive impact of the virgin coconut oil in obesity. When virgin coconut oil is used by people suffering from obesity, immediate response of the body can be observed. The metabolism of the person who took in virgin coconut oil in their system is chronically inhibited by something that was easily alleviated by “dilution” or molecular competition. Putting a tablespoonful of coconut oil on some rice during meals and half an hour later will result to normal breathing. The skin become pink and pulse may become normal. Over the next few months, the weight will be slowly and consistently decreasing. Eating more coconut oil lowered weight for some pounds. The anti-obesity effect of coconut oil is clear in the animal studies (Peat, 2004).

C. Environmental Benefits

There are a number of environmental benefits of virgin coconut oil. Farmers who attempted to use virgin coconut oil for fattening their animals found out that the virgin coconut oil made the animals healthy and active. The waste products excreted by these animals are not hazardous to the environment due to its organic and safe to the environment nature (Peat, 2004).

An important thing to note in the production of the virgin coconut oil is that none of the products from this process are wasted. The ground outer shells of the coconut are used for matting and packing fresh plants and flowers. The empty coconut shells are burned for fuel to supply heat for drying the meat. Other uses of the empty coconut shell is in cooking or heating for fuel for a variety of purpose. The exhausted meat as the waste product in the production of virgin coconut oil is often fed to livestock as a nutrient rich meal (Jamaican Gold: Raw Handpressed Coconut Oil, 2006).

III.             Establishing Legal  Entity

a.       Different Ways of Branding the Product

Almost no product is perfect forever. And when the patent runs out, there is always someone who can make it cheaper. But even before the patent ends, there will likely be those who attempt an end run on your process. Most successful ingredient brands have continually refined their products to make them easier to use in manufacturing, or make them cheaper, or to perform better. This way, you will discover any opportunity to improve your product before someone else does. Ingredient Branding is a different approach to building brand equity. This concept is a way to successfully introduce and market a radically new product (Ingredient Branding is a Different Approach to Building Brand Equity, 2006).

The usual way existing markets name the coconut oil is Virgin Coconut Oil. But this product being proposed here will have the name Coconut Virgin Oil or CVO for short. The CVO will be applied for trade marking that makes the logo come out as CVOTM.

Branding the product as such will eliminate the basic idea that the product is of coconut virgin oil. This type of branding is called logo type branding. Marlboro didn’t name themselves Cigarettes or Pepsi naming their company as SoftdrinksTM. CVOTM   as a corporate id will carry different types and forms of virgin coconut oil products. Each of these forms will have their own sub branding. For example:

Product for medicinal benefits will be branded CVOTM  Medicinal.

Product for beauty benefits will be branded CVOTM  Beauty.

Product for culinary benefits will be branded CVOTM  Kitchen.

Once the brands are decided and set, personalities will be chosen to partner these brands. A coconut tree will not be used to promote the product. A coconut tree may be developed as a mascot but personalities that can claim the benefits of the product will be more effective. These personalities will be chosen according to their credentials that are palatable and appealing to the target markets.

IV.             Threat of Substitutes

Threats of substitutes are virgin olive oil, virgin pine oil, red palm oil, grapeseed oil, flaxseed oil and many others. Virgin olive oil is obtained only from the olive, the fruit of the olive tree, using solely mechanical or other physical means in conditions, particularly thermal conditions, which do not alter the oil in any way. It has not undergone any treatment other than washing, decanting, centrifuging and filtering. It excludes oils obtained by the use of solvents or re-esterification methods, and those mixed with oils from other sources. It can be qualified as a natural product, and virgin olive oil can have a designation of origin when it meets the specific characteristics associated with a particular region. Virgin olive oils can have the following designations and classifications depending on their organoleptic (taste and aroma) and analytic characteristics. Tthe degree of acidity refers to the proportion of free fatty acids, not to the taste (Olive Oils Definition, 2006).

Virgin pine nut oil (VPO) is the first and only natural and effective appetite suppressant currently known to man. When ingested – either in its pure form or as part of delicious foods – this tasty oil stimulates the abundant release of cholecystokinin (CCK). CCK is a substance naturally produced in the duodenum in the presence of fats and proteins. When delivered to the brain, it tells us to stop eating, thereby reducing the amount of food we consume, as well as our overall intake of calories (Organic Oils, Butters, and Nut Butters, 2006).

Red Palm Oil is produced from the fruit of the oil palm, Elaeis guineensis. It is a vegetable oil, not from an animal or dairy product and therefore does not contain any cholesterol (Organic Oils, Butters, and Nut Butters, 2006).

Grapeseed Oils Infused with all-natural, fresh herbs, our Salute Sante! Infused Grapeseed Oils shine with delicious flavor and have a light texture and mouthfeel. A tasty substitute for butter, margarine and other saturated fats, use these oils as a delicious dip for bread, drizzle over salads and fresh vegetables, or use as a “liquid spice” in your favorite recipes (Organic Oils, Butters, and Nut Butters, 2006).

Flaxseed oil contains linoleic acid, an essential fatty acid needed for survival (Thompson,  et al., 1996). According to the authors, unlike most oils, it also contains significant amounts of another essential fatty acid, alpha linolenic acid (ALA). They further mentioned that the effect of ALA as an isolated substance, and of flaxseed oil on the risk of cancer in humans remains unclear, with most animal and test tube studies suggesting protection, and some preliminary human trials suggesting cause for concern. They have stressed, however, that it is premature to suggest that ALA and flaxseed oil will either cause or protect against human cancer at this time (Thompson, et al., 1996). Flaxseed oil is not suitable for cooking and should be stored in an opaque, airtight container in the refrigerator or freezer. If the oil has a noticeable odor it is probably rancid and should be discarded (Flaxseed and Flaxseed Oil. Health Notes, 2006).

V.                Competitive Rivalry

Despite the numerous organic oils that are available in the market, competitive rivalry is existing in the market. Since the introduction of the virgin coconut oil in the market, there is an observe potential and competitiveness of the virgin coconut oil in the international market (Virgin Coconut Oil, 2006).

VI.      Product Uniqueness

CVO is a the brand that values and sells integration. The integration of all three benefits of the coconut virgin oil will spell originality of this product. Many sellers of virgin oil are in the market but all their existing brand marketing remains like the back yard type. CVO will be striking because it will project a global brand bringing all the benefits of CVO that can be accessed by different local and internation markets, single consumers or bulk buyers that use the CVO in their businesses.

The vision of CVO is to project a global brand that promotes the coconut and its organic benefits to human kind.

Marketers should understand that when global brands are desirable, it is not simply because they are global, but rather because their globalness implies other traits, such as quality and prestige. ‘There’s a certain cachet of quality that comes with being available around the world, but it’s not automatic,’ says third co-author, Dana L. Alden, a professor of marketing at the University of Hawaii. ‘The brands that tend to be successful around the world tend to be of higher quality and are promoted as such. http://sloanreview.mit.edu/smr/issue/2003/spring/1g/

The mission of the product is to earn from promoting a healthy lifestyle using the coconut virgin oil. The goals of the product is to sell through distributors and retail outlets the many forms of CVO packed in a variety of ways suited for different uses.

;

;

;

;

VII. Product Life Cycle

The CVO will go through its product life cycle with speed.

Introduction Stage is marked by activities such as product branding, pricing, distribution and promotion. The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Activities during the Introduction Stage will be as follows:

1.      Product branding and launching

Leading companies know that strong global brands are the key to winning in international markets. But creating effective brands across the complex barriers of nationality, geography, language and culture often proves a daunting task. Companies flounder in their attempts to craft global brands for a myriad of reasons. But experience has convinced us that many firms that struggle with global branding do so because of the same fundamental flaw: They attempt to analyze their brand from a global perspective without first analyzing their consumers from a global perspective.

2. Product pricing which is precedent to market research

3.      Distribution of product according to planned structure of sales and market organization

4.      Promotion as elaborated in the Marketing Mix

Growth Stage is marked by the effects of initial interaction of the product with the market. Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

Active and collaborative product monitoring and evaluation will happen during this stage. While monitoring and evaluation is being contientously done, product development will lead the sales and marketing group. It is important to get essential feed backs during this stage.

It is during this stage that market share will be monitored as well. Where there is low penetration, promotion will be at best. Where there is good feedback and high sales reaction, promotion will also be at best in term of sustaining the product momentum.

A strategy during the growth stage will be looking into markets and collaborating with these industries to help move the product. Whether through bulk or through individual sales, CVO can further sales and promotion by selling the brand and the values behind it.

Maturity Stage is marked by peak sales and achievement of optimum market penetration. Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

Maturity Stage of CVO though would signify the peak or saturation of the market signifies the start of the promotion of the by-products. For example, the CVO can evolve from massage oils to oils for aroma theraphy. Continues promotion will center on social marketing where CVO will be promoted not as product but as a value. There may be CVO living tours where living museum of the technology can invite profit from tourists.

Decline Stage. At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

During the decline stage of the product, innovations will be introduced. The product will still be CVO but it will be marketed in more varied forms that will help the consumer be at ease in taking it such as using capsules to easily swallow the CVO. Salad dressings made from CVO may be packaged. Shampoos with CVO will further the beautification line to making it get to main stream consumer products. These are everyday products with CVO content which won’t have as much skepticism or criticism involved. At minute levels, CVO can be a trademarked ingredient just like Lycra is a trade mark incredient of versatile apparels.

;

VIII. Stages of New Product Development

Product development is done before, during and after sales. It is a part of the product cycle. Illustrated here are the stages of product development of the CVO that will lead towards new products either as another form or as an element that is part of a new product.

Product development gives a competitive advantage which this business strategy will employ. “Speed is an important factor underlying competitive advantage — not only the rapid delivery of current products to the customer, but also the ability to develop, design, manufacture, and ship new products quickly. Product development plays a critical role in responding to customer demand. The effective management of development teams is fundamental to implementing this strategy successfully.” (Jurkus, 2001)

;

Stage 1. Sourcing

Sourcing product raw materials can be found in tropical countries. The coconut has been cultivated since before the nineteenth century. Table 1 shows copra export of Netherland Indies to the world market in the early 1900’s. Coconut for coconut producing communities was as important as rice and it was also one of the barter goods. They exchanged coconuts with cotton and corn. It can be noted that all of these exports continue to increase from 1909 to 1937. This data indicate that world market consumption are realizing the benefits of copra.

TABLE 3

SHARE OF COPRA EXPORT FROM NETHERLANDS INDIES ON THE WORLD MARKET: 1909-1937

Year          World    Neth. Indies    Philippines    Br. Malaya    Ceylon

1909-1913      7.25        2.38            1.30           0.72        0.42
1924-1928     11.28        3.64            1.82           1.67        1.06
1929-1933     12.25        4.32            1.94           2.01        0.80
1934-1937     13.42        4.77            2.81           2.04        0.70

Notes: This table only indicates export of copra flesh in million quintals,

not included is the export of copra oil.

Source: Bacon and Schloemer, World Trade, p. 294.

“The indigenous way of coconut cultivation, like that of many other cash crops on ladangs, required a very low energy input because the natives did not strive for an optimization of output. After the initial planting phase when the fragile palms received relatively more attention, the labour input could be minimized, freeing time for other activities. This explains why Europeans scornfully called coconuts a lazy man’s crop. In their eyes profit in the coconut trade depended on the market mechanism and could not be determined by efficient cultivation” (Heersink, 1994)

Sourcing for the raw materials for this product will not be difficult. It’s a matter of keeping the prices of these materials at best. One of the strategies for sourcing will be forming coconut farmer cooperatives, owning coconut tree farm lots whenever possible and contract growing. Although a lot of coconut trees are cut for coco lumber, it is important that sourcing activities manage the continous planting of new trees so that supply will not fall too sharp.

Figure 4. Photo of CVO raw material

Stage 2. Production

Producing the oil from coconut can be done in many ways. The product will be produced using the cold pressed method of extracting coconut oil from the coconut meat. Cold pressing is reducing the moisture content of the coconut meat into 0.1% or less. At this moisture content, the oil is kept from becoming rancid.

There are three extraction methods that will be used since the quality of products mentioned here have varying degrees of market needs.

Traditional Hand Pressed/Home Made. In this process, fresh coconut meat is grated and pressed to produce a coconut milk which is a mixture of oil, water, proteins, etc. This mixture is allowed to ferment for approximately 48 hours which causes the solids and water content to separate from the oil. The oil is then heated to remove the remaining moisture. The oil must be heated at a high enough temperature and for a long enough time to reduce the moisture content to a point which will prevent rancidity. The fact that this oil is produced in small batches by many different individuals may result in considerable variation from one batch to another. The texture of this oil is medium to thick.

DME (Direct Micro Expeller). Like the oil described above, this is a village process, but rather than extracting the oil from coconut milk, the fresh coconut meat is dried and then pressed.

Virgin Oil. This process produces oil with the least amount of processing so that the natural vitamin E, antioxidants and fresh coconut “essence” are retained. Fresh coconut meat is grated and expeller pressed to produce coconut milk (like the process above). The coconut milk is then centrifuged using a proprietary process to separate the oil from the other components. This oil has a very light texture and since no heat at all is applied it retains all the flavor and scent of fresh coconut. http://www.coconutoil-online.com/

Stage 3. Distribution

Distrbution of the product is done through direct shipping of bulk orders to distributors and retailers. Distributors will be organized per country. Each distributor in the country will be in charge of their own retailers. A total of 3 distributors will be lumped into a region. The regions will be organized and managed online.

Production will be done at the source. A person in charge of quality control will be assigned to manage and facilitate operations of production at source. Orders will be shipped to the distributors from the nearest source.

Although centralizing production will make costs more viable, dealing with this kind of product needs freshness and speed in turning raw materials into sellable form. With proper training and evaluation procedures, quality control will be ensured. Centralized production entails the same amount of quality control anyway. Distributing the production nearest the source will help isolate strengths and weaknesses that management can learn from, should conflict arise such as contamination or sabotage.

Stage 4. Feedback

Feedback is a regular activity once the first shipment of products has started. Feedback will be done in a conscious and organized manner facilitated with the product development team. Feedback will come from consumers, retailers, distributors, region managers, public reaction, private sectors, media reaction, the scientific community and private corporations that use the product.

Feedback topics will center on both product and service of delivering the product. Feedback on product will focus on quality of product in terms of health benefits, cooking integrity and beautifying effects. Service will center on effeciency of delivery, quality of customer care relations and effectivity of support.

Stage 5. Research

Feedback will be processed by research. Research is as much a full time activity of product development. Without research, the product will be stagnant and will be lost to competitors. Research will focus on strengthening good feedback and finding solutions to weaknesses of product and service.

Research laboratories for product development will be set up at all levels of production from sourcing to consumer use and feedback. The product may not undergo scientific procedures like stem cell research but it’s always important to be on the cutting edge when dealing with human health focused products and services. Consciousness to high moral and ethical standards must be considered and become part of the business’ culture.

Market research will also be done to help in product development.

Stage 6. Development – Product Segmentation

Segmentation of the market will help product development. Once the market research brings in data showing summary of feedback, strengths and weaknesses, product segmentation may be done. Samples of product segmentations are increase in product size availability.

Table 4.

CVO – 1
CVO – 2
CVO -3
For circulation diseases
Cooking meat
For hair beautification
For reproductive diseases
Cooking fish
For skin beautification
For excretion ailments
Cooking vegetables
For foot beautification
In today’s marketing world, segmentation is often treated as old hat. And it’s no wonder. With so many misconceptions and segmentation failures, marketing professionals are left with little more than survey statistics, textbook rhetoric, and wasted market research dollars. But all hope is not lost. Building segmentation that works requires a new approach to an old concept. And doing it well can revolutionize a market and create explosive growth. http://www.monitor.com/cgi-bin/iowa/ideas/index.html?record=25

Stage 7. Development – Product Diversification

Product Diversication leads to by products. Product development may enter this stage when market is ready for newer products. This can be explored when existing product has penetrated certain markets and can confidently develop the product into new forms instead of packages. CVO – 1 can be developed as a component of a medicine that could alleviate or cure a certain disease. CVO – 2 can be developed as fuel for. CVO – 3 can be developed as a component of make up, shampoo or soap.

IX. Marketing Mix Analysis

A. Product – “Defines the characteristics of your product or service that meets the needs of your customers”

“Marketing is packaging! That’s right, if you make a unique product that consumers need and package it correctly, it’s half sold. This holds especially true in retail, where numerous brands compete in the battlefield of the mind as shoppers wander the aisles and scan shelves looking for that benefit, image, or value communicated by each product’s design, packaging, price, and placement. As the consumer makes that big decision as to which brand to buy, all the advertising and sales promotions that money can buy go out the window if your product is not on the shelves, or is shelved inadequately, or is priced too high or low, or is unattractively or unclearly packaged or labeled. Think about that.” (Soares, 1991)

;

CVO will be packaged as a versatile product that will meet the varied needs of the customers that can easily blend into their cultural life. CVO is a product with the following characteristics.

1.      Virgin coconut oil is chemical stable.

;

“Coconut oil is so stable that when heated, it is 12 times more resistant to oxidation than canola oil, 16 times more resistant than soybean oil, and 300 times more resistant than flaxseed oil.”

2. Virgin coconut oil has long shelf life.

“According to Dr. Bruce Fife, the worlds leading expert on coconut and health: “Coconut oil is so chemically stable, it is one of the best (safest) oils to use for cooking and has a long shelf life. If processed properly, it can be stored for two or three years or more without going rancid. Because coconut oil is very stable, it does not need to be refrigerated. It will stay fresh for at least two or three years unrefrigerated.” (Wharton, 2004)

3. Virgin coconut oil is not synthetic, non corrosive.

Virgin coconut oil is made from fresh coconuts, not copra. No high temperature is used in virgin coconut oil. In fact, users of virgin coconut oil prefer the use of cold process. Meaning that no heat is applied during the process of extracting the oil.

4. Virgin coconut oil is edible and safe to put on skin.

5. Virgin coconut oil can be heat or cold pressed.

Figure 5. Samples of CVO packaging containers

for bulk orders                       for liquid oils

for CVO solid            for oil sprays

for CVO cooking       for CVO spa treatments

for CVO soaps                       for CVO perfumes

for CVO solid soaps

B. Price- “Decide on a pricing strategy – do not let it just happen! Even if you decide not to charge for a serive, you must realise that this is a conscious decision and forms part of the pricing strategy.”

Existing world market prices are illustrated below. The strategy for pricing for CVO is in getting as close to the buying power of its daily users. There are three existing users that have been identified according to the kind of CVO that will be produced and sold.

Users of CVO premium as a health agent. (CVO – A)

“Oil is very important,” explains Dr. Chris Meletis, a naturopathic physician and dean of the National College of Naturopathic Medicine. “Without oil, there’s increased inflammation, altered immunity and increased menstrual cramps.” Fats, he says, “are critical for the creation of every cell.” (Izakson, 2003)

Users of CVO special as a cooking material.(CVO – B)

“Some food-savvy environmentalists say that if you can afford to buy only one organic food item, it should be culinary oils. They base their assertions on several things, but at the top of the list is the fact that heavy metals (which can show up in sewage sludge used to treat some non-organic farms) and industrial chemicals such as pesticides tend to stick to fats. (Izakson, 2003)

Users of CVO regular as a beauty product.” (CVO – C)

The three types of packaging the product will lead to three tier of pricing. Although the cost of the product will be the same, differentiating one type of packaging from another will increase the sellability of the product.

CVO-A will be the most costly bearing the highest retail price. CVO – B will be the medium level cost while the CVO-C will approximate the cost of most usual regular cooking oils.

C. Promotion – “This includes all the weapons in the marketing armoury – advertising, selling, sales, promotions, public relations, etc.”

“Marketing is entertainment! There is one industry that America leads. That’s entertainment. That’s right folks, step this way. The line forms to the rear. Hurry, hurry. You ain’t seen nothin’ yet. The one, the only, really big show, the greatest show on earth. So let’s get on with the show. And away we go-o-o-o.”  p 49

CVO benefits to the body, lifestyle and environment will be used to promote the product. Promotion will be focused on the internet, health stores and grocery stores. Three promotional strategies are explained below.

1.      The plan will use personalities to promote the product. Using this strategy is still a cut above the rest using personal testimonies from man on the streets. The product must find people from different fields to help promote it. A deemed scientist will be found to endorse its chemical stability and safety. A super star will promote its beautifying effects. A known woman – mother advocate will be helpful in promoting its cooking and lifestyle benefits.

2.      Another plan for promotion will include giving away trial samples for free. Each time they buy a certain amount of product, the clients will be awarded a free pack that they can share to their friends who would like to try. Advocates who believe in the product can easily promote it. Giving them resources to help their own little promotion will have good future effects.

3.      A good promotional activity is advertisement in the various media such as newspapers, television, radio, and other events. The advertising arm must maximize events that center on alternative lifestyle and venues that promote environmental consciousness. Sponsorships in cash or in kind is also a good way to help promote the product. Users who can give the advertising arm information that can lead towards the promotion of the product in their communities will be awarded free products.

D. Place – “Some of the revolutions in the marketing have come about by changing this P. Think of telephone insurance and the internet! A bit of lateral thinking here might reap rewards for your business.”

Businesses in the global millennium cannot leave out selling the products in the cyber space. Though this is a forward looking strategy for “place” in the marketing mix, the internet or the site where people can buy the product is grounded in its role of sales or point of ordering. The internet must not be the sole place to sell this product.

The existing placement of ads on the internet websites also has costs. Although it is a fact that a million users are online, putting adverstising and marketing on websites entail costs as well. The strategy will be for the website of the product to be a 24/7 customer service for inquiries, sales and customer support. The website as a place of sales is good but it is better if it is constructed as a global access for second inquiries. People will hear about the product from other people who use it or from other source. The key is to make all advertising and marketing paraphernalia publish contact info and website address.

This product must be moved toward the customers where the possible users are. Skepticism envelopes the product and places that can help make customers see the product must be maximized. What people cannot see, they cannot covet. Therefore, another better strategy is to put the product where people do their activities on lifestyle and health. Places that would be helping the product move will be:

For the CVO – A, as health agent:

1.      Alternative traditional health centers

2.      Vegetarian market places

For the CVO – B, as a cooking material:

1.      stores and groceries

2.      big food corporations

For the CVO – C, as a beautification agent:

1.      Spas and salons

2.      Hair dressing industry

3.      Skin clinics

Figure 6. 4 P’s Marketing Mix Summary

Product

CVO – A (health agent)
CVO – B (cooking agent)
CVO – C (beauty agent)
Price

CVO – A (high end pricing)
CVO – B (medium end pricing)
CVO – C (lower end pricing)
Promotion

Media mileage
Personality promotions
Trial and sampling promotions

Place

health venues
groceries and consumer venues
salons and skin clinics
X. SWOT Analysis

;

“The SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) is one of the most popular, where you analyse the strengths and weaknesses of your business’ capabilities, and any opportunities and threats to your business. Once you’ve identified all of these, you can assess how to capitalise on your strengths, minimise the effects of your weaknesses, make the most of any opportunities and reduce the impact of any threats.”

;

Strength

;

The strength of the CVO lies in the simplicity of how it is produced. With this given, the cost of production is not as high as other competitor vegetable oils. The raw materials usually come from tropical Southeast Asian regions that have relatively low labor costs.

Another strength of the product lies in the issues that is can discuss by mere virtue of being what it is. Environmental issues are discussed. Heath concerns are elaborated. The product can even discuss social responsbility to degree.

“Coconut oil is a medium-chain saturated fatty acid that has numerous health benefits:

Antiviral, Antimicrobial, and Antifungal Properties
Coconut oil contains lauric acid and its derivative, monolaurin. Both are considered to have properties that destroy viruses, such as HIV, herpes, influenza (the “flu”), and cytomegalovirus, bacteria, such as H. pylori, and protozoa, such as giardia.

Increases Metabolic Rate
Coconut oil can be integrated into a healthy weight loss plan. It stimulates metabolism.

Other Possible Benefits of Coconut Oil
Coconut oil is also believed to help with cholesterol regulation by raising “good” HDL cholesterol. It also shows promise in tumor prevention.” (answers.com)

On the issue of the environment, more and more people are joining the band wagon of looking at lifestyle choices that has the least enviromental footprint possible. Vegetable oils have been scientifically supported alternatives to animal oils. For example, the killing of whales for their oil has stirred generations that make them open to alternatives.

Health in the information age has been as passionately debated upon. More and more, people, due to changing lifestyles that are stressful lead to 20th century diseases that continually find solutoin using chemials and knives. The awareness has been so heightened that alternative cures for these modern day diseases have been focused on the organic and less obtrusive such as the virgin oils.

Paradigm shifts towards social responsibility has penetrated the business sector. Wendy’s burger, for one, is an example of a multi national that has been actively developed their social responsibility campaigns. Recently, they have announced that they will be using non-hydrogenated oils for their fries. When multinational brands lead campaigns such as this, products and services that are bent on profitting at the same time being more socially responsible is at a positive light.

With coconut virgin oil being sourced from third world countries that give jobs and sustain livelihoods, corporate social responsibility is expressed. Corporate social responsibility is the activity of businesses that seeks to put into attention and appreciation community involvement, socially responsible products and ethical employee relations.

Weakness

;

An identified weakness of this product lie in it ability to transform from liquid to solid in varying temperatures. Due to this, the packaging of the product must be versatile to handle these form changes. Putting it in bottles will make it easy to dispense if it is liquid but when it solidifies at lower temperatures, there is need to heat the bottle over luke warm water which is truly cumbersome.

Putting it in wide mouth containers will be ideal for solid states but not for liquid states. Since we cannot fix the temperatures to where it will be shipped, this poses a big challenge in how to package the product. Packaging also takes note of how shipping will take place. Glass bottles will be harder to handle while plastic packaging is lighter.

Opportunity

;

The world population isn’t getting any smaller. More and more people will be needing cooking oil. More people will be banking on organic cures and alternative medicine.

;

“The course of alternative medicine in the twenty-first century is a matter of strongly differing opinions among physicians. In the public mind, however, there seems to be little doubt about the position of the second editorialist. There clearly is widespread receptivity to the message on the cover of the September 1996 issue of Life magazine, where the upper left quadrant of a patient is pictured with a stethoscope held to her chest by one physician’s hand and a bouquet of herbs extended toward her by another’s. This latest “Healing Revolution, ” the cover explains, is one in which “M.D.’s are mixing Ancient Medicine and New Science” and using the combination “to treat everything from the common cold to cancer.” The story that follows fairly bubbles over with assurances that “signs that allopathic and alternative medicine are happily wedded are everywhere.” (Whorton, 2004. p. 297)

Opportunities that exist for the CVO is wide. After it hurdles issues of stability, reliability and skepticisms, the opportunity of this product in becoming a formidable item in the world will generate thousands of users and advocates.

Opportunity for health needs markets.

The increasing needs to offer wider possibilities of prevention and cure is discussed around the globe daily. While human activities continue to stress men and women in order for them to be more productive, the need to incorporate items that will help protect and maintain good health is an opportunity that the CVO can seize.

Health markets include family, children and women. Opportunity in prevention is as much important as to opportunities for cure. For example, one in three adults in the US is obese and statistics on children is increasing as well. The alarm is causing people to look for more healthy alternatives. Alternatives are not only being sought for in the wellness industry. Cure for diseases have been widely researched at different kinds of approaches. One approach explores cures from non chemical and herbal perspective. These non obtrusive or what they term as non-surgical methods of cure gives big opportunity for products such as the CVO to penetrate.

Opportunity for culinary needs markets.

The household pantry shelf is not only the market to look at. Retailing is a big profit center but cooking oil is used by a lot of big industries in the food business. Tapping into these big markets will enable the company to get big bulk orders. Transnational food industries such the fast food chains or restaurants all use cooking oils. By packaging the CVO as a good industrial alternative will open up wider bulk users of the CVO. A news article illustrates this phenomenon and how big companies like Wendy’s are listening to their customers.

“For people like Themessia Fenceroy of Shreveport, having healthier options makes eating on the run easier. She changed her eating habits about 10 years ago and lost 92 pounds.  Fenceroy avoids fried foods as much as possible. “Whenever I do eat at fast-food places, I usually get a Wendy’s grilled chicken sandwich or a salad. “I think it’s very good that more places are offering these options because a lot of people have become aware and more conscious of their health and are wanting to make healthier choices.” In August, Wendy’s will start using a non-hydrogenated cooking oil that has zero grams of trans fats per serving for its fries and breaded chicken items. The company also plans to add more deli sandwiches and salad choices to its menu, Bertini said.” (Pea, 2006)

Opportunity for beauty needs markets.

The beauty market is a billion dollar market. The opportunity for CVO as a base oil for beauty products is a wide opportunity that can be explored. A press released reports of this growth on prestige beauty products sales and forecasts are increasing.

“Sales of prestige beauty products hit a new record of $8.2 billion last year, growing 4 percent from the year before thanks largely to soaring demand for new product launches, anti-aging products and celebrity endorsements. The NPD Group is also seeing changes in the landscape as new brands or niche brands grow throughout much of the industry. Since 2000, sales of prestige beauty products, products sold at U.S. department stores, have grown by over $1 billion.” (www.npd.com)

Threats

Competition from other products similar or auxiliary remains a threat. There are lots of vegetable and palm oil in the market that also has claims. More fearful is when learned persons write scholarly narratives that disenfranchise the product such as the one below.

An example of a threat.

Coconut oil is the newest miracle food promoted on the Internet and at health food stores for rejuvenation and cure of “whatever ails you.” Advocates of coconut oil claim this sensational food has anti-microbial, anti-heart disease, anti-cancer, and anti-obesity benefits.  Furthermore, this fat is sold as a cure for low thyroid function (hypothyroidism).  This is a huge turnaround for a substance that has traditionally been thought of as an artery-clogging saturated fat. Testimonials provide most of the evidence for the miraculous effects these oils have on people, rather than well thought out and carefully designed experiments.  Thus, most of these claims are based on a little truth overblown into a sales pitch for sellers of coconut oil. You and your family will not find salvation by buying these products.  A pint of extra virgin coconut oil costs $12 to $18 (US).

Another threat to the product is brought about by its newness. Being a new health product in the market, a lot of would be clients will look for long scientific studies that will prove the safetyness of the product. Newly produced product cannot offer scientifically measured claims unless they undergo testing that could last for fifty years.

Weather is a threat that is hard to combat. Places where coconut trees grow are also places dealt with typhoons and storms that can wipe out hundreds of trees.  When these disasters strike, news reports would read like the one below:

“Landslides in six provinces in central and southern Philippines, triggered by six days of heavy winds and pounding rains—the heaviest rainfall to hit the nation in 25 years—kill at least 209 people and leave many others missing. The majority of casualties and missing are in Leyte province in the central Philippines, located about 635 kilometers (395 miles) southeast of Manila, where at least 80 houses are buried; more than 250 people are rescued. In Punta, a mountainside village of 360 people, rescuers uncover 49 bodies, several of whom had sought shelter in a house and died when it was engulfed by mud flowing down a mountainside toward the ocean. At least 83 houses are destroyed or buried under mounds of debris and coconut trees.” (http://www.e11th-hour.org/resources/timelines/global.disasters.2003.html)

Table 5. SWOT Summary

Strength

Chemical composition is stable.
Cheap source of materials
Weakness

No scientific studies on health benefits claims
Weather may destroy source of raw materials
Opportunity

Big medicinal qualities.
Alternative source of wellness.
There is wide market untapped.
Threat

There are many vegetable source oils available.
Scientific community are skeptic and will warn about the dangers of the product that is not backed by clinical trials.
While opportunities can over weaknesss and strengths can overcome threats, the CVO remainas a formidable product with vast opportunities to be explored, studied and researched. The unique chemical composition of CVO that can address wellness or cure will be used to overcome threats of competition from other vegetable oils. To overcome its weakness on sourcing, advocating the opportunities in store for CVO will help increase planting of the crop in adequate places. It is a “a lazy man’s” crop anyway. If proven that the world market is in need of this raw material, then farmers will continue to plant and harvest.

The company must invest in the opportunity of the CVO as being medicinal by undertaking clinical trials. This endeavor will help counteract weakness of the CVO that is coming from the scientific community. With clinical trials and further research, the packaging of the CVO as either medicinal alternative, food supplement or beauty regimen technique will be more specific and will help in product development, marketing and advertising.

XI. The Boston Matrix

Cash Cow

“cash cow – The rather crude metaphor is based on the idea of ‘milking’ the returns from previous investments which established good distribution and market share for the product. Products in this quadrant need maintenance and protection activity, together with good cost management, not growth effort, because there is little or no additional growth available.”

Of the three type of proposed CVO products, the cash cow is the beauty oil market. Since the product won’t be ingested, more clients will be willing to try the product. Women tend to try beauty products in the mission of searching the best that will suit their lifestyle. CVO beauty line will surely be a cash cow.

As cash cow product, strengthening the line will entail producing more focused beauty products.

Hair products. CVO can become a hair treatment product from the regular to the professional type of user. Cash cow is seen as the CVO is developed into both the handy home based hot oil treatment tool to the special hair spa treatments of the salon. With effects immediate and staggering, frequent use of the product will lead to making it a good consumer candidate that will lead to its becoming a cash cow.

Skin care products. The development of the CVO as a skin care product needs to establish better fragrances that are acceptable to many cultures. Skin treatments can be packaged into both easy home and professional variations. The more one would use the product that is aromatic, the more it will be consumed. Especially on non humid areas where it is important to keep the skin from drying, the CVO is good companion like suncreen protectors. With frequent use, this consumable item will become a cash cow.

Dog

“dog – This is any product or service of yours which has low market presence in a mature or stagnant market. There is no point in developing products or services in this quadrant. Many organizations discontinue products/services that they consider fall into this category, in which case consider potential impact on overhead cost recovery. Businesses that have been starved or denied development find themselves with a high or entire proportion of their products or services in this quadrant, which is obviously not very funny at all, except to the competitors.”

Although there are no stagnant form of product in the CVO line, the most costly packaging involves delivery of fresh coconut. Selling fresh coconut will be considered a Dog since the cost of getting it to the markets exceeds the profits that it can take from selling the novelty of drinking coconut juice straight from the raw material.

Probem Child

“problem child – These are products which have a big and growing market potential, but existing low market share, normally because they are new products, or the application has not been spotted and acted upon yet. Gross profit margins are likely to be high, but overheads, in the form of costs of research, development, advertising, market education, and low economies of scale, are normally high, and can cause initial business development in this area to be loss-making until the product moves into the rising star category, which is by no means assured – many problem children products remain as such.”

The CVO as a medicinal cure for ailments such as AIDS, diabetes, hypertension and the like is considered as the Problem Child in the Boston Matrix. This product packaging is definitely big in market potential. But as of this time, it has still a low market share because of doctors must follow scientific procedures before they recommend their product. Ethical standards are at stake. In terms of medicinal cures for these sort of ailments, only testimonies exist. It’s still up to the user to be the one to try it himself and observer if it works or not with his particular lifestyle.

As a problem child, the development of this CVO package to tranform it into a rising star entails expense and costs. But it is a confident measure that the problem child once, backed with good studied investments will lead to making it become a rising star.

Rising Star

“rising star – Or ‘star’ products, are those which have good market share in a strong and growing market. As a product moves into this category it is commonly known as a ‘rising star’. When a market is strong and still growing, competition is not yet fully established. Demand is strong; saturation or over-supply do not exists, and so pricing is relatively unhindered. This all means that these products produce very good returns and profitability. The market is receptive and educated, which optimises selling efficiencies and margins. Production and manufacturing overheads are established and costs minimised due to high volumes and good economies of scale. These are great products and worthy of continuing investment provided good growth potential continues to exist. When it does not these products are likely to move down to cash cow status, and the company needs to have the next rising stars developing from its problem children.”

The CVO as food supplement taken in daily is the rising star. Right now, the market for this product is on a rise and continues to grow. Although the market is still being established, the product has slowly penetrated areas of interest. While market is growing, supply is growing as well. There is no oversupply seen and profitability is still evident. If conditions continue to become favorable, with adequate research and promotions, this rising star will definitely become a cash cow. For example, if research continues to find the optimum way of blending the CVO consumption with particular lifestyles in continents, carefully noting general weather conditions, results of the CVO consumption will be enhanced. As this effect is felt, actual users will become instant advertisers of the product.

Table 7. Summary of the Boston Matrix

Rising Star

Food supplement
PC

As medicinal cure
Cash Cow

As beauty product
Dog

As a tropical drink
 

XII. PESTEL Analysis

Outside forces affect product sales success. Knowing these factors and what their context are will help in figuring out the best way to market the product and develop it. The PESTEL format of product analysis is a good tool in covering outside forces that affect and will definitely affect the product.

Political Factors

The coconut is a political crop. Most of the coconuts are planted in regions that were once colonized. The colonizers were the once who asked the natives to plant this crop so that they can harvest it for its oil to be exported to Europe. Dilemma is still very much felt and observed in making this crop work as a formidable export product. However, despite political climate problems, multinationals appreciate the use of the coconut in the global market. An example of trading and political problem is the case found in the Philippines.

Marketing and trading. 925,000 Coconut farms are scattered in remote areas all over the Philippines. The relative non­perishability of coconut affords the Filipino farmers time to transport it. This is highly inefficient. According to Unilever (the Netherlands), the structure of coconut production and trading in the Philippines is not conducive to industrial use. Aside from the inefficiency of having to deal with thousands of small holders or several layers of domestic traders, there are periodic shortages of supply as farmers can simply sell their coconuts to local fresh markets. Despite inefficiency, commercial exporters of coconut derive multi­million profits. In fact most of the coconut exporters belong to the top 500 corporations in the Philippines.

Government taxes. Aside from trading, surplus is extracted from coconut farmers through explicit and implicit taxes. Although the Aquino government already abolished export tax, implicit taxes continue to penalize the farmers under the current Ramos government. Implicit tax through the overvaluation of the peso is estimated at 20­25 per cent, while implicit taxes on agricultural products such as coconuts (Value Added Tax on processing, transport taxes, miscellaneous fees, etc.), come to almost 30 per cent. (Gigi Manicad)

Environmental Factors

Government Actions

The CVO will have different governments reacting to the strength and weaknesses of the product. Protectionist governments will bann the product and highlight the bad effects of CVO while governments who can source the product will support it. Unfortunately, the country sources of the coconut are predominantly third world and are yet developing therefore has a tendency to affect support in a negative way such as access restriction will abound, price controls will be regulated and licensing requirements will be strict.

Demographic Changes

Changes in clientele demography will create impact on the product. While more and more people get educated and informed, they will be able to discern the health benefits from CVO to fit their lifestyle and health culture. Educations helps open the mind towards more sustainable consumerist attitudes.

CVO can be marketed to different age groups. A product therefore can be used by the whole family thereby increasing its potentialities. While families vary in income levels, this will affect the pricing of the CVO. Different income levels will be able to afford varying prices of the CVO. Therefore, to suit demographic factors, the CVO must be packaged in a way there is one product that can be brought by different buying capacities.

Emerging Technology

Advancing technologies are rapidly developing and setting standards. From the crude manual processes illustrated by lack of conscious safety and cleanliness protocols, the production of the CVO will have to face to the challenges of international standard certifications. As it is, the product is beset with clinical trial demands from different cultures that are well advanced in their processes and standards.

Though the technique employed in cold press procedure is really simple, technology can be improved in terms of other activities such as packaging and shipping. A lot of technology can be explored in the other markeing activities such as advertising and promotions. Packaging by itself is a technology that will affect the saleability of the product.

Increasing technology will also prove slowly that coconut oil is far better than its competitors as  this scholar clearly notes:

Surprisingly, Fallon offers evidence that tropical oils such as Palm kernel and Coconut are actually a healthier option to Canola and believes that the bad rap they have received is a result of intense lobbying by the vegetable oil industry. Extremely stable, they can be stored at room temperature for many months without turning rancid (and thereby carcinogenic). Although they contain between 80-90% saturated fat, over two-thirds of these are in the form of short- and medium-chain fatty acids (often called “medium-chain triglycerides”), including the notable “lauric acid.” Found in large quantities in both coconut and mother’s milk, it appears to have strong anti-fungal and anti-microbial properties and may safeguard us against bacteria and mold so prevalent in our food supply. She observes that, as one-third of the world’s nations in tropical areas have switched to polyunsaturated vegetable oils, the incidence of intestinal disorders and immune deficiency diseases has increased dramatically. (Allen, 2000)

Cultural Trends

The cultural trends are in favor of products such as the CVO. Coconut is a normal part of culture in the Asian sections of the world. Coconut is found in diet, soap industries and culinary styles across Asia. Interest on this crop by westerners are slowly gaining grounds that affect lifestyle and culture in general.

Existing trends in the global enviroment that help make CVO a favorable product is the paradigm shift to organics, and going back to non chemically based components. Another example is the emerging movements against genetically modified organisms that continue to debate their issues just like this news excerpt from Wired Magazine.

“But while producers have embraced GMOs, consumers have had a tougher time understanding the benefits. Environmentalists and foodies decry GMOs as unnatural creations bound to destroy traditional plants and harm our bodies. Europe has all but outlawed transgenic crops, prompting a global trade war that’s costing US farmers billions in lost exports. In March, voters in Mendocino County, California, banned GMO farming within county lines.” (Wired Magazine. Richard Manning. Issue 12.05 – May 2004. Super Organics.)

Social Factors

;

Social factors influence the movement of products. The decision to buy or not buy is based on motivations by the consumer that is basically founded on social factors.

“Culture is reflected in the prevalent core beliefs and values of people. These beliefs and values are declared in family and friendship relations, in social conventions and rites, in social institutions and in social order itself. They take a long time to change since they are inextricably linked to such things as family upbringing, the education system, national history, religion and a variety of other institutional phenomena.” ( p. 125. Strategic Marketing: An Introduction Book by Tony Proctor; Routledge, 2000)

What is favorable for the CVO is its capacity to affect families’ decision to try it out even just once in the goal of finding for better health and wellness possibilities for their family. With the health status of American today steadily deteriorating due to stress and other social factors such as the need to look like models coming off Cosmopolitan Magazines, the chance for the virgin oil to be tasted by the family is yet a positive stance.

Social factors are stronger than technological factors because these factors are the bottomline decision makers that tip the scale. These decisions are carried out by small nuclear families as much as they are also carried out by communities that hold similar social values. “Alternatives” which the virgin oil is subliminally labeled appeals to society’s increasing awareness of its role to look for solutions other than prevailing solutions that are obtrusive, repulsive and give dangerous after effects.

Technological Factors

;

Producing and packing the CVO proves to be a venture in higher levels of technological capabilities. Technology is not too favorable when the venue is found in developing nations. Compared to first world countries, third world nations still need to hurdle a hundred folds faster due to fast paced effeciency on how the first world has been trailblazing technological advancements. An example of non favorability of CVO is factors found at the source as mentioned in a study made in the Philippines.

Lack of research. Since income from coconut production is meager, research on coconut improvement is dependent on public funding. However, the Philippine government only spends 0.2 per cent of its Gross Domestic Product on its entire science and technology programme. On average, public investment in coconut research is only about 28 per cent of the research funding for sugarcane. Current conventional research in coconut involves agronomy, entomology, germplasm collection, breeding, intercropping and diversification of coconut oil uses. However, most of this research is fragmented, severely underfunded, and understaffed. This is unfortunate since conventional research could greatly take advantage of the rich germplasm of coconut varieties in the Philippines.

Processing. Coconut processing is also besieged with problems. Oil extraction is mainly done using the dry method or the copra­expeller system. The copra drying method in the Philippines is generally very backward. Copra is dried by smoking, resulting in the presence of toxic substances, such as aflatoxin, which is unsafe for human consumption.
Traditional copra production as practised in the Philippines is labour intensive and increasingly expensive. The oil extracted from copra requires drastic refining and deodorizing. For industries importing coconut oil, the reprocessing adds to the cost of the already expensive coconut oil. In fact, Philippine coconut oil is of such low quality that it sells at a discount of 2 per cent in the world market. This situation is estimated to cost the country about US$ 52 million a year in reduced export prices and physical losses. (Gigi Manicad, 1995)

Ecological Factors

Ecological factors such as environmental footprints, cultural preservation and heritage appreciation affect the movement of the product. CVO has characteristics that are favorable towards these ecological factors. For one, the raw materials for the product help poor farmers increase their livelihood capabilities that can help make their lives better. This kind of oil is fully renewable. Trees are not cut to harvest this crop and so, forests, even considered as tertiary will help maintain a certain level of watershed.

Ecological factors make product development look into the social marketing aspect and sometimes, this is called green marketing.

“Yet, while green marketing as practiced by industry has come in for criticism as being either insufficient given the magnitude and nature of the problem or even just a cynical self-preservation exercise, marketing holds out another promise in delivering change towards greater ecological sustainability. Social marketing means the use of marketing techniques to promote socially desirable behaviours (Kotler ; Zaltman, 1971; Andreasen, 1995), including environmental awareness and more sustainable behaviours.

CVO is easily programmed to fit social marketing activities. The fact that is geared toward promotion of good health and wellness and the return to herbal organics is plus points to its social value. Another fact is how buying CVO will eventually ripple effect towards farmer’s lives such as illustrated from this report on Fiji.

“Fiji’s other major cash crop is coconuts, which are grown on estates, as well as by smallholders. Over 40,000 households rely principally on coconut as a source of cash income, this mostly coming from the sale of copra, the dried coconut ‘meat’, from which edible oil is extracted. Coconut growers are hopeful that the expanding market for coconut oil skin creams will boost their earnings” http://www.new-agri.co.uk/02-2/countryp.html

Ecological events happening around the world such as the much debated upon global warming is bound to affect the CVO product. Most specially when weather strikes at source centers, coconut trees can be destroyed which will lead to changes in world market prices. Drastic changes in weather both towards very warm or cold temperatures are driving heavy typhoons as well as droughts in different regions where coconut trees are. Prices are therefore affected by these changes.

“The reason for these prices fluctuations lies in the aridity of south-east Asia, the region where most coconuts are farmed. The reduced rainfall in this region associated with an El Niño event causes the failure of the coconut crop, leading to climbing prices on the world market.”
http://www.mpimet.mpg.de/en/presse/faqs/das-el-nino-southern-oscillation-enso-phaenomen/oekologische-volkswirtschaftliche-gesundheitliche-auswirkungen.html

As world pollution condition worsens, the coconut is a crop that will be hit as well. However, there are some areas that are safer to plant. And even in countries at the path of 22 typhoons a year, growing coconut is still feasible because it just takes less than three years before the tree starts to grow fruits and its reproductive stage will be sustained for the next fifty years.

As for energy conservation as a factor in ecology, the product CVO is part of a zero waste management crop. The coconut and all its parts are useful in one way or another. Harvesting its meat do not make waste. The shell is made into different useful products. If the tree isn’t producing fruit anymore, the trunk is made into coconut lumber. Leaves of the trees can be used to make roofs. There are also parts of the tree that can be used to make vegetable viand.  Just recently, a scientist won the BBC contest for ecology for using coconut husk as an effective soil erosion protector.

Dr. Justino Arboleda, an agricultural engineer from the Albay in the Bicol Region, won first prize in the First World Challenge contest sponsored by BBC World television in London for his soil erosion control net or coconet. Coconet or geotextile, which is made from coconut husk, was adjudged the best environmental grass-roots project in the world, besting 456 entries from 90 countries. Dr. Arboleda received the award on November 17, 2005. He also received a cash prize of $20,000.

The winners of the contest will be featured by BBC in a special program on December 3 and 4, and by Newsweek magazine in its December 3 issue, Dr. Arboleda said. With the world recognition, he expressed optimism that it would now be very easy to promote Philippine cocofiber products throughout the world. Consequently, more jobs would be created as demand for coconet increase. Demand for more coconut materials for coconet production would also benefit the coconut farmers. http://www.ucap.org.ph/112405.htm. November 24, 2005

Legal Factors

The CVO will pass for safety and legal issues in those markets that are keen buying products fit for external consumption. As a food supplement, there may be possible legal issues. As for its medicinal qualities, at the least, advertising regulations will not allow unbacked claims. Each market has its own standard and the product has to abide by these. Natural health products can enter into countries depending on the laws that the country implements. For example, in Canda:

“Through the Natural Health Products Directorate, Health Canada ensures that all Canadians have ready access to natural health products that are safe, effective and of high quality, while respecting freedom of choice and philosophical and cultural diversity.” http://www.hc-sc.gc.ca/dhp-mps/prodnatur/index_e.html

The product will have to go through certification procedures in each market that it plans to go to. There are successful coconut virgin oil exports that are certified such as the African Pacific.

“Our Nui certified organic virgin coconut oil is sourced from the unpolluted islands of the South Pacific, bringing you a product of unrivaled taste and quality.  We can supply both USDA (USA) and Soil Association (UK) accreditation.  Furthermore, we offer the worlds first certified organic skin care range based on virgin coconut oil, including soaps, body wash, body scrubs, cleansing clays and moisturizing body butters.”

Legal laws that may affect the product include the laws that must be followed during the production of the product. Labor laws must be followed at the source. The CVO can easily address this and be most favorable to the labor laws existing at the source countries. As with labor laws, pricing laws in each place of market must be respected. Organized coconut farmers are not threats to the industry but rather a favorable ally. An example of how a cooperatie of coconut farmers helped push their possibilities is illustrated below.

The coalition of small coconut farmers and farmworkers (BUCO) is recognized as a major stakeholder in the reform of the coconut industry, particularly in the recovery of the coconut levy. The levy was imposed during the Marcos regime, and Marcos and his cronies used the funds (approximately $200 million) to acquire shares of major Philippine companies. This activity strengthened the coconut farmers’ capacity to focus on the issues and engage the government as an equal partner. Their capability was proven by their effective participation in top-level government negotiations. BUCO also demonstrated its ability to harness allies from non-farming sectors and the media. Very recently, the Arroyo administration issued an Executive Order declaring the coconut levy to be public funds. The President urged all stakeholders to come to a consensus on the best use and effective disposition of the coconut levy, including implementing mechanisms that will better serve the best interests of the coconut farmers and their families. http://www.usaid.gov/pubs/cbj2002/ane/ph/492-006.html

Although competition is healthy, price wars eventually destroy markets. Being competitive means not attacking good pricing systems. The competition will always tend toward after sales.

For the CVO to be favorable on pricing laws, the company will have a deeper and wider breath of possibilities that could blend into the allowable pricing systems, cost benefit analysis in each market.

XIII. Critical Success Factors

These factors are the elements that are critically measured in terms of how they affect success of the CVO business product. Below is a table illustrating success factors that affect a distribution area.

Critical Success Factor
Primary Measures and Targets
1. availability of raw materials that leads to efficient production
Diverse sources are available. Meet 99% of source availability.
2. availability of packaging materials
Ordering of packaging materials must be based on maximum possible sales forecast. Increase number of available suppliers by 50% each year.
3. efficiency of customer service for orders and complaints
Ensure 24 x 7 help desk for ordering and customer care. Maintain 90% of customer queries in less than 20 minutes.
4. efficiency of shipping
Have more than one shipping option. Maintain shipping of products at most three days.
5. effectiveness of feedback gathering
Daily feedback generation. Meet standards of addressing feedbacks not later than a day if necessary.
Scenario Planning

Three scenarios are seen as the CVO product penetrates a market. One, it is well accepted. Two, CVO is generally rejected. Three, CVO becomes unnoticed.

The first scenario is favorable. Promotions and marketing goes into the market, information is heard, the product is sampled, and the consumers love it. This will look and sound easy but the challenge in this scenario is how to make these CVO goers and users become advocates. A bigger challenge is how to sustain the quality of the product they liked. There will be times when a consumer who easily accepts a new product has also the tendency to easily change his mind when another product comes along. These consumers will always try something new and thereby one can describe their product loyalty at a minimum. Making these consumers loyal is the job of the company. Some of the tips are:

;

Make it easy.

If customers already know what they want, they should be able to find it and buy it with as few clicks as necessary. If customers want to browse, make it easy for them to navigate to any area of your store with a minimum of backing out and drilling down. When shopping, customers mostly care about where they are going, not where they’ve been.

Cross-sell and up-sell your products.

Sometimes you learn something valuable about the interests of your customers when they buy a particular item, and you should take advantage of that knowledge. For example, customers who buy a kayak from you may need additional gear, like a dry-bag, neoprene boots and gloves, etc. Offer a discount if the extra items are purchased immediately. Or, set up starter packages that discount a group of related items needed by the novice in a particular area of interest.

Offer coupons.

Normally you hear about using coupons to lure customers to your site. But why not give them a coupon for getting there as well? This is the same idea as grocery stores who put coupon flyers by the front door so customers can use them immediately. Customers appreciate the convenience and it gives them an immediate incentive to buy. By the way, always put an expiration date on a coupon to give it some urgency, even if you plan to reissue a new one the next day. Also, vary the amount of the coupon or restrict how it can be used so customers know it might be a while before they can get the same deal again.

Reward repeat customers.

You should periodically review your sales figures as a regular part of your marketing strategy. You should know who bought what from you, and how much they spent. If you have this information, you can approach your best customers with special offers. That may mean sending them a store coupon via e-mail, or perhaps allowing their account a permanent preferred customer discount.

Stay in contact.

Let your customers hear from you regularly. You should not send unsolicited e-mail, but you should give them plenty of opportunities to “opt-in.” If you don’t offer an e-mail newsletter with at least one article of information that is useful to your customers, you should. Your e-newsletter also lets you provide current news about your company, your web site, and your products. If you are out-of-stock on a particular product, your customers should be able to request e-mail notification for when it becomes available again. Even if these specific techniques aren’t appropriate for you, the idea here is to improve communications with your customers so you can minimize their frustrations with your site and maximize their opportunities to buy. (James H. Byrd, 2006)

The second scenario is when the market rejects it and articulates the rejection. This would seem a failure on the part of marketing and promotions however; these consumers who reject a product by sheer here say or impression when they get satisfied with their first trial will be loyal forever. They will be most loyal enough to advertise the product for free.

The important way to handle this scenario is not to irritate clients who have decided not to take the product. By patiently keeping up and about with promotions and marketing events that prove creative, attractive and too good to be ignored, these people who reject the product will soon find themselves in a situation where they will try the product out of curiosity. And when this happens, the product and company must be ready and open to have this clientele try out the product and hope that they change their minds.

Changing customer’s minds to go from one product to your product is no easy task. It is a process that can be implemented step by step. A possible customer needs reassurance. They need stability of the product. The objective with these clients is to just first get them to try one for free. If they are not satisfied with one trial, given them another one and another one until he ends up buying a product for his own consumption. If the agent is successful, he might even buy CVO and give it to family and friends who are ill.

If people are not noticing the product, there may be a problem in placing the products both literally and promotionally.

In January 2006, Advertising Age reported that “local TV news operations hungry for free content have intersected with brand brokers looking for product placement opportunities.” The segments “typically come in the form of four-minute lifestyle segments that are dedicated to one brand and feature a brand’s spokesperson chatting with the show’s host and delivering the product’s message to viewers. Third-party endorsements may also appear, as well as follow-up information about a product on a station’s Web site. The marketer controls how its brand will be presented, who the spokesperson will be, signage, scripting and what the segments will look like.” (Gillin, 2005)

The opportunity of markets that has the third scenario lies in the increase of sales when promotions are tweaked. These people are not buying not because they are against the product but due to mere unnoticeable qualities of the product. Besides product placement, another fixing will be the packaging of the product.

Conclusion

Coconut trees have been cultivated in many regions of the world since time immemorial. During the colonial eras, first world countries required their colonies to plant this crop. Their wide range of uses includes food, drink and use of their oils for soap and hygienic products. With the onset of paradigm shifts in health where going back to natural healing alternatives have taken much interest, the coconut as a versatile health crop is once again gaining peak. Tapping the market for consumers and suppliers, it is the objective and vision of this business plan to profit from inventing the product CVO which is based on virgin coconut oil.

CVO will the brand name used to market the invention as discussed here. Using the benefits derived from eating, drinking and using coconut virgin oils, marketing plans and product developments will help in selling and profiting from the distribution of CVO. Though threats on its stability and safety exist, CVO is a strong product that has immense potentialities. CVO as an integrated brand name will be distributed globally and help local suppliers, increasing its social value. With its social value increased, its marketability expands.

Marketing tools elaborated here prove that investing on CVO is viable and profitable. A big market awaits its various product packages. Promotion and advertising is essential and will help hasten the distribution and sales of the CVO.

With proper investment and management of vision and goals, CVO will be able to compete with bigger vegetable oil brands in the food trade, miracle cures in the health industry and lead organic alternatives in the beauty sector.

References:

Soares, Eric J. 1991. Promotional Feats: The Role of Planned Events in the Marketing Communications Mix. Quorum Books, 1991 p. 89

Gillin, Beth, “Product placement turns TV programs into commercials (http://www.sanluisobispo.com/mld/sanluisobispo/news/nation/10719529.htm)”, Knight-Ridder, January 24, 2005.

Villafuerte, Nelly – Favis. Export Action Line; All About Virgin Coconut Oil. Newspaper article; Manila Bulletin, July 23, 2005

Jurkus, A. F. and T. Hillman Willis. Product Development: An Essential Ingredient of Time-Based Competition Review of Business, Vol. 22, 2001. Journal article

Izakson, Orna. Oil Right: Choose Wisely for Heart-Healthy Cooking Vol. 14, March-April 2003. Magazine article

Heersink, Christiaan G. 1994. Selayar and the Green Gold: The Development of the Coconut Trade on an Indonesian Island. Journal of Southeast Asian Studies, Vol. 25, 1994

14 ARA, archief NHM 9468-No. 42 L.M.F. Plate over Makassar en Bandjermassing 1849, p. 37; A. Reyne, “De cocospalm” in De Landbouw in de Indische Archipel, 2a Voedingsgewassen en geneesmiddelen, ed. C.J.J. Van Hall and C. Van de Koppel (Den Haag: Van Hoeve, 1948), pp. 469, 470; L. De Bree, Nederlandsch-Indie in de Twintigste Eeuw (Batavia: Kolff, 1916), p. 111; C.J.J. van Hall, “De cocospalm”, Insulinde, de inheemse landbouw (Deventer: Van Hoeve, ca. 1939), p. 125. A more modern treatise on coconut palms as a flexible ecological crop is given by H.C. Brookfield and D. Hart, Melanesia, A Geographical Interpretation of an Island World (London: Methuen, 1971), pp. 135-50.

Whorton, James C. Nature Cures: The History of Alternative Medicine in America Oxford University Press, 2004

Manicad, G. (1995), “Technological Changes and the Perils of Commodity Production: Biotechnology and the Philippine coconut farmers.” Biotechnology and Development Monitor, No. 23, p. 6-10.

Pea, Donecia. Fast food industry providing healthier options. Gannett News Service July 26, 2006

Kotler, P. & Zaltman, G. (1971). Social marketing: an approach to planned social change. Journal of Marketing, 35 (3), 3-12.

Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001). Principles of marketing,  Third European edition, Harlow: Financial Times-Prentice Hall

Manning, Richard. Super Organics. Wired Magazine. Richard Manning. Issue 12.05 – May 2004.

Proctor, Tony. 2000. Strategic Marketing: An Introduction Book. Routledge. P. 125

Allen, Janet. 1997. Canola – Canada’s  Oil Spill Onto The American Market

;

Flaxseed and Flaxseed Oil. Health Notes, 2006. Health Notes, Inc.  http://www.vitacost.com/science/hn/Supp/Flaxseed.htm.

;

Ingredient Branding is a Different Approach to Building Brand Equity. http:/www.adelphiamediaservices.com/pages/libry/bma_brand2.pdf .

;

Jamaican Gold: Raw Handpressed Coconut Oil. 2006. Oregon: The Essential Oil Company. http://www.essentialoil.com/Jamaican%20Gold.html. http://www.msec.org/seminar/catalog/view.asp?id=1795.

;

Mercola, Joseph. “Pure Virgin Coconut Oil: The Healthy Fat That Ignites Weight Loss, Banishes Infection, And Heads Off Heart Disease” (Among Other Things … ). BBB Online.  http://www.mercola.com/products/coconut_oil.htm.

Olive Oils Definition. 2006. Greenbrae: The Olive Oil Source. http://www.oliveoilsource.com/definitions.htm.

Organic Oils, Butters, and Nut Butters. All Things Coconut. http://www.smartsupply.us/oil-butter.htm

Peat, Raymond. 2004. Coconut Oil. Virgin Coconut Oil Testimonials. Conuq, Inc. http://www.conuq.com/peat-art1.html

Thompson LU, Rickard SE, Orcheson LJ, Seidl MM. Flaxseed and its lignan and oil components reduce mammary tumor growth at a late stage of carcinogenesis. Carcinogenesis 1996;17:1373–6

Tropical Traditions Virgin coconut Oil. 2005. Hoilistic Beauty.  Natural Solutions-Holistic Beauty, Body & Bath. http://www.holisticbeauty.net/index.asp?PageAction=VIEWPROD&ProdID=280.

Virgin Coconut Oil Set to Enter U.S. Market. 2006. Alternative Medicine. Best Health Options. http://besthealthoptions.com/alternative-medicine/2006/06/05/virgin-coconut-oil-set-to-enter-us-market/.

http://www.hc-sc.gc.ca/dhp-mps/prodnatur/index_e.html

http://www.new-agri.co.uk/02-2/countryp.html

http://www.mpimet.mpg.de/en/presse/faqs/das-el-nino-southern-oscillation-enso-phaenomen/oekologische-volkswirtschaftliche-gesundheitliche-auswirkungen.html

http://www.ucap.org.ph/112405.htm. November 24, 2005