Marketing planning and management - Marketing Essay Example
essay sample on "Marketing planning and management"? - Marketing planning and management introduction.? We will write a cheap essay sample on "Marketing planning and management" specifically for you for only $12.90/page
More Marketing Essay Topics.
Beit Binzagr (House of Binzagr) is a Saudi Arabian business group with diversified business interests. Binzagr Company, a subsidiary of Beit Binzagr, is a marketing and distribution company in the FMCG business. Beit Binzagr has been a pioneer in the development of local manufacturing of FMCG products. Currently they have five local manufacturing ventures:
– Binzagr Lever (Collaboration with Unilever, PLC, UK) for the manufacture of soaps, detergents and toiletries.
– Binzagr Lipton (Also in collaboration with Unilever, PLC, UK) for the production of Teabags.
– Binzagr Coro (In collaboration with Coro Foods AS, Denmark) for the production of fruit juice drinks and squashes.
– Best Foods Saudi Arabia (Also in collaboration with Unilever, PLC, and UK) for the production and refining of corn oil and corn oil based food products like mayonnaise and margarine.
– Binzagr Match Factory
Binzagr Company distributes products manufactured by the above Joint Ventures as well as products of foreign principals that it imports with sole distribution rights for Saudi Arabia. (Heinz, Kellogg’s, Kraft, Hershey, and United Biscuits, to name a few.)
The company has 17 branches spread across the length and breadth of Saudi Arabia. Its distribution infrastructure gives the company enormous distribution muscle and a distribution capacity not matched by any other FMCG distributor in the country.
1.2 Binzagr Company’s Soft Drinks’ Business
Soft Drinks account for just under a quarter of the company’s sales turnover. Its soft drinks’ portfolio consists of the following brands:
a. Suntop and Suncola – Produced locally by Binzagr Coro. Suntop is a Fruit Juice product and Suncola is a non-carbonated cola both packed in 125ml and 250ml Tetra Pak brik. These two brands account for a combined share of 43% of the carton juice drinks sector.
b. Sunquick – A concentrated fruit squash in glass bottles also produced locally by Binzagr Coro. Sunquick has a 57% share of the dilute drinks segment.
c. Moussy – A non-alcoholic beer. (Referred to as malt beverage) Moussy is imported from Switzerland and accounts for over 50% share of the malt beverage market segment.
While Binzagr Company’s Carton Juice Drinks’ business is a “Star” with a high relative market share and high sector growth rate, the Malt Beverage and Dilute Drinks businesses are “Cows” with high relative market share but a low segment growth rates and the Carbonates business is a “Question Mark” with a very low relative market share in a high volume segment.
(Note: In this section on Industry Structure and Competitive Analysis, the terms ‘Binzagr’, ‘Binzagr Company’ and ‘Binzagr Coro’ are used interchangeably as referring to the same competitive entity.)
2. Trade Structure and Channels of Distribution
2.1 Trade Structure
At the top-end of the market there are 330 supermarkets, each with a selling area of over 500 M2. Approximately 259 are located in the main cities of Jeddah, Riyadh, Alkhobar and Dammam. The rest are spread over smaller towns.
Multiples like Azizia-Panda United, Geant, Carrefour, etc. have started dominating the hyper market segment with selling areas of over 10,000 M2 and between 30 and 50 check-out counters.
In the next stratum are 3,000 large (mostly self-service) groceries often referred to as mini markets? These range in size from 150 M2 to 500 M2 some with more than one checkout.
There are approximately 10,000 medium-sized grocers, generally with a store area of 40 M2 to 100 M2 and another 19,000 small grocers with shop areas as little as 20 M2.
While supermarkets and most mini markets receive direct service from distributors, approximately 1,600 wholesalers and semi-wholesalers mostly service the small and medium grocers.
There are also approximately 4000 catering outlets, large and small, all catering for immediate consumption and handling major brands of carbonates, juice drinks, malt beverages and bottled water.
2.2 Channels of Distribution
Distributors, some on a national basis and some on a local basis, handle most imported grocery brands. Most brands have exclusive distributorships, a few go through non-exclusive importers.
Local producers mostly have their own distribution set-up, though some go through distributors. Distributors’ capabilities to directly reach the retail trade varies a great deal. The wholesale trade plays a key role as a conduit to down-market retail distribution.
3. Industry Structure and Competitive Analysis – Fruit Juice Products
As discussed earlier in this report, the Fruit Juice Products’ Industry in Saudi Arabia can be segmented into three distinct segments by packaging type:
Share (By volume) Share
(2004 Estimates) (By value)
Carton Drinks 71% 63%
Cans 8% 6%
Bottles (PET and Glass) 21% 31%
(2004 IMES Soft Drinks Market Studies)
This section discusses competitors and market shares and examines the Industry Structure of the Fruit Juice Products’ segment. It also looks at the Strengths, Weaknesses, Opportunities and Threats for Binzagr Company brands in this segment and examines the competitive position within this segment.
3.1.1 Local Producers
Capacity to can fruit juices is available with five local producers. All five also have the capacity to produce juice drinks in Tetrabrik cartons.
In addition to fruit juice products’ canners who also produce Tetrabrik carton drinks, there are four other producers who are focused on the carton juices segment. There are also dairy companies that produce juice drinks in cartons. The bulk of their business and therefore their primary commitment is to milk and milk based products, for them producing juice based products is an extension of their milk business aimed at utilising spare filling capacity and making fuller use of their distribution capabilities.
There are two local producers of juices / nectars in bottles. Both are primarily in the carbonates business and have diversified into the bottling of fruit juice products.
Details of some of the important players in the fruit juice products is given below:
i. Al Aujan Beverages, Dammam (Cans, Bottles and Tetrabrik Cartons)
Al Aujan produce juice drinks in 250ml Tetrabrik cartons as well as juices, nectars and floats in 185ml and 240ml cans.
In the carton category, their brand Vimto has an estimated combined market share of 8% by volume. (2004 estimates) This brand is in good distribution nationally and is well represented in supermarkets and larger groceries. However, distribution is weak in small groceries and the important wholesale trade.
In the cans category, their brands Three Diamonds, Rani and Pom have a combined market share of 40% by volume of the canned juice products market. Three Diamond and Rani have good national distribution across all categories of grocery outlets. Pom has a relatively weaker distribution.
Al Aujan have 3 Tetrabrik carton packing line giving them an annual production capacity of 2.5 million cases (27x250ml) of juice drinks in Tetrabrik cartons. At current sales level of approximately 2.3 million cartons per year, they are producing at close to full capacity. Exact details of their canning capacity were not available but it is believed that they are producing at approximately 70% of installed capacity.
ii. Al Rabie Dairy and Fruit Juice Company, (Saudi Irish Dairy) Riyadh
Al Rabie is basically a dairy products company (recombined milk and milk based products including ice-cream.) and has extended its range to fruit juice products. Currently sales of this segment have overtaken sales of milk and milk products. They produce fruit juice drinks in 250ml, 330ml Prisma Tetrabriks, pure juices in 1 Litre Tetrapak cartons and 2 Litres PET Cans all under the Al Rabie brand.
Al Rabie’s fruit juice products are in good distribution throughout the kingdom and their presence is very excellent in supermarkets, small to medium groceries and the wholesale trade. Al Rabie fruit juice products have a market share of 8%. (by volume)
Al Rabie have 7 TBA Tetra Lines giving them an annual capacity of 8 million cases of 27x250ml, 30% of the capacity is used to fill milk products and the remaining on juice products. They have additional capacity to fill 1 Litre packs and 2 Litre PET Bottles.
iii. SADAFCO (Saudi Danish Foods Company)
SADAFCO mainly produces recombined milk, yoghurt, cream, cottage cheese with plants in Jeddah, Riyadh, Dammam and Medina. They have extended their business to fruit juice products in 250ml Tetrabrik cartons under the Saudia and Chillz brand as well as pure juices in 500ml and 1 Litre Tetra Rex Packs under the same brand.
They have an estimated market share of 2% by volume in the impulse size carton pack category. Their products have a very limited distribution and can hardly be noticed in small groceries. Almost all the capacity is used up in producing milk and milk products while only a small 2% is allocated to producing fruit juice products.
iv. Binzagr Coro
Binzagr Coro is the largest and most successful producer of fruit juice drinks in Tetrabrik cartons. Its brands Suntop and Suncola are market leaders in the carton category with a 43% combined share of the (by volume) – 2004 estimates. Sun Fruit Junior (Pure Fruit Juice aimed at children) is the latest entrant in this segment. The Binzagr Coro plant is located in Jeddah and its products are in excellent national distribution across all trade channels.
Binzagr Coro have 10 TBA3 lines and 3 TBA9 lines giving them an annual production capacity of 11 million cases. (27x250ml) At current sales volumes, they have an almost 100% capacity utilisation.
3.2 Market Shares (Source: AC Nielsen Retail Audit 2005)
3.2.1 Juice Drinks in Impulse Size Cartons
Cases Sales (000’s) (27x250ml)
Suntop / Suncola
Saudia / Chillz (Sadafco)
* Caesar (AbulJadayel), Jamjoom Foremost, Danya, Al Othman and Al Rai are the leading brands in the others category.
Note: Take-home size cartons (+350ml) constitute only 3.5% of the total carton juice drinks market and have been excluded from the above figures.
3.3 Five Forces Analysis
This section analyses the Industry Structure of the fruit juice product segment of the Saudi Soft Drinks’ industry using the Porter Five Forces Framework.
3.3.1 Barriers to Entry
i. Economies of Scale
In the carton juice drinks’ sector, there are economies of scale in the purchase of Tetrapak paper due to volume discounts. Economies in automation of palletising machines and in the mixing of batches – because automated mixing eliminates waste. There are also economies of scale due to spreading of overheads in production and distribution.
Similar economies also exist for the producers of juices in cans or bottles. However, given the high variable cost component of the products, the effect of these economies on total costs is not dramatic.
Therefore, while scale economies do benefit the large volume producers such as Binzagr Coro, the magnitude of such benefit is not so large as to squeeze the small volume producers out of the industry by rendering them totally uncompetitive. Therefore, low volume producers also manage to stay in business and the requirements of scale have not proved effective in deterring entrants.
ii. Capital Requirements
These will vary considerably depending on whether a new player sets up from scratch as opposed to a player in the adjacent segment or market diversifying into the juice products segment. For example, the cost to a carbonate product producer to set up a Tetra carton filling line and associated packaging machinery using existing building and support facilities could be only SR. 5 million. The additional cost to a dairy company already filling milk in cartons could be much less because spare capacity on the carton filling lines could be used to fill juice drinks in cartons. As opposed to this, a Greenfield project could cost SR. 15-20 million to set up. Therefore, capital requirements are not a significant deterrent to entry and pose weak mobility barriers to an existing player wishing to diversify or position in a different segment.
iii. Product Differentiation
Given standardised packaging options whether in cartons, cans or bottles, there are few available options for packaging differentiation.
The product is essentially based upon dilution of fruit juice concentrates and therefore limits the possibilities of product differentiation. One significant product differentiation, however, has been the introduction of orange floats – orange sacs floating in an orange juice drink. (This product innovation gave the first mover Al Aujan, a very significant share gain through their brand Rani.)
Successful introduction by Binzagr Coro of a non-carbonated cola and Al Amoudi Beverages of tropical fruit juices are other examples of product differentiation, though these have been easy to copy. With the above exceptions, there is hardly any differentiation in existing products, which look alike for the most part taste alike. Product differentiation per se is, therefore, not a significant barrier.
iv. Brand Identity
Differentiation achieved through the establishment of brand identity and loyalty is a potent entry barrier.
In the cartons category, Binzagr brands Suntop, Sun Fruit Junior and Suncola, through heavy TV advertising and innovative consumer promotions, have established a strong brand identity and consumer loyalty resulting in a 43% market share in the fruit juice products segment. Al Aujan is attempting to do the same for Vimto.
In the cans category, Rani has established a strong brand identity based upon an innovative product and supported by advertising.
In the bottles category, even though Delta has gained an advantage exploiting a market niche – tropical fruit based juices, AbulJadayel’s Caesar brand fruit juices in glass bottles is heavily advertised on TV and significantly supported resulting in a strong brand identity.
Therefore, brand identity is a strong barrier to entry in some of the juice segments.
v. Access to Distribution
Access to distribution is another significant barrier to entry. Access to supermarkets is limited by the finite number of brands supermarkets are prepared to stock. Obtaining supermarket listing is therefore difficult for a new entrant. The large number of small groceries and their wide geographic dispersion makes it difficult and expensive to reach a significant number directly. The wholesalers who service these small groceries are an efficient and cost effective way of reaching widely dispersed small outlets. The wholesale trade works on small margins and a quick turn-around of stocks. Wholesalers are therefore interested to stock only fast moving products and typically would stock only two or three leading brands in each product category. Therefore, a new entrant virtually finds that he is unable to penetrate the wholesale market. Without penetration in the wholesale trade, a competitor is unable to achieve significant down market distribution unless he has an elaborate direct retail coverage which is very expensive and difficult to set up.
vi. Government Policy
A manufacturing license is required for industrial production. Government may withhold additional licenses if there is substantial excess capacity, although in practice it has rarely done so. Foreign firms can set up manufacturing operations only with a local partner. Therefore, government policy poses some entry barriers but these are not significant enough to deter entry.
vii. Expected Retaliation
There is no history of strong retaliation by entrenched players to deter the entry of a new comer in the fruit juice products’ segment. Expected retaliation is, therefore, not a potent entry barrier in this segment.
Therefore, the main entry barriers are brand identities built up by the leading brands and access to distribution both in supermarkets and to the wholesale trade.
The large number of players in the fruit juice products’ category several being only marginal players, suggests that barriers to entry have not been significant enough to deter entry. However, the strength of brand identities and access to distribution has meant that several competitors who entered the segment faced significant barriers to growing their market shares limiting their status to that of marginal players.
SWOT Analysis of Binzagr Company’s current position
· Binzagr Company is positioned as the market leader in the more attractive and the largest sector (carton juices) of the fruit juice products’ segment of the Saudi Soft Drinks’ Industry.
· Binzagr Company brands Suntop and Suncola may enjoy almost universal consumer awareness and strong consumer loyalty in Saudi Arabia.
· Suntop was the first carton juice drink introduced in the kingdom and is known as “Al Asli” or the real one in Arabic. The trade as well as consumers as Suntop copies commonly perceive other brands.
· Suncola was the first non-carbonated Cola on the Saudi market and gained good consumer awareness and acceptance (6% share of the cartons’ sector) as the non-carbonated alternative to Pepsi Cola and Coca-Cola.
· Suntop and Suncola are in national distribution across all categories of grocery outlets. They are among the few brands in the juice products’ segment that are stocked and sold by the wholesale trade.
· Binzagr Company’s market share in the carton juice drinks’ sector (43%) is more than 3.5 times that of its nearest competitor. This confers upon it advantages of the experience curve (accumulated learning) as well as scale economies, far in excess of its competitors.
· As a result of strong brand loyalty, Binzagr Company is able to charge a price premium on its price to the trade. This allows the company to realise better profit margins in a sector where most brands compete on price. (All carton juice drinks retail at SR. 1 per brik, thereby marking consumer price of a single pack the same for all brands.)
· Reliance for the sourcing of carton packaging on a monopoly supplier (Tetra Pak) further aggravated by the fact that over 40% of the cost of the product is accounted for by the Tetra carton alone.
· Ability to raise prices is restricted both by cheaper competition and the availability of substitutes.
· Saudi Arabia has a very young population (50% of the population is below 15 years of age) and a high population growth rate (over 3.5%). The growing pool of children is an opportunity for Suntop and Suncola that are strongly positioned as children’s drinks.
· Several small players who compete only on price and therefore, have low profitability may be squeezed out cleaning up the industry of marginal players and providing an opportunity for growth in market share of more established competitors.
· The perception of cans as ‘ageing’ and less hygienic pack type presents opportunities for the launch of juices and nectars in slim line Tetrabriks (200 ml) with pull tabs (as opposed to straws on existing 250ml cartons.) This type of a container is a good functional substitute for cans and is perceived to be modern, more hygienic and easier to dispose. It also has the potential to cut into the market for locally produced bottled juices.
· Non-carbonated Suncola can chip into the larger market for carbonated cola without direct confrontation with the giants in the carbonated segment.
· Dairy companies apart from taking the share of the carton juice drinks’ market, are also promoting flavoured milk and milk/juice products in the 200/250ml-carton packaging as healthy alternatives to soft drinks. While this appeals more to parents than to children, it nevertheless poses an additional threat of substitution, particularly in the child’s lunch box where Suntop/Suncola currently have the pride of place.
· With the retail shelf price of carton juice drinks not being able to move above the SR. 1 retail level, Binzagr Company’s attempt to raise trade prices of its products to counter the effect of increasing costs, trade margins on Suntop/Suncola are getting squeezed. This endangers trade loyalty to these brands.
· Religious and social attitudes are a constant source of threats and the recent Danish Cartoon episode resulted in the boycott of all Danish products in Saudi Arabia. Binzagr Company was compelled to not only withdraw products from the market but also had to stop production of juice products from October 2005 to May 2006.
3.5 Competitors’ Positions
· Binzagr Company: Market Leadership with strong brands and national distribution make for high company strength. The ability to charge higher prices to the trade as compared with competition and scale economies resulting from volumes substantially higher than any other competitor makes this sector inherently more attractive to the company than to the competition.
· Al Aujan: Strength of brands and strength of distribution less than Binzagr, resulting in a relatively less strong company position. Trade prices of Aujan brands are less than Binzagr brands and Aujan’s relatively smaller volumes do not allow the scale economies of its rival. Hence segment attractiveness is inherently lower than Binzagr Company is.
· Dairy Companies: Strong retail distribution but on a regional basis (Except Al Rabie), weak wholesale distribution and relatively weaker brands in the segment are factors contributing to lesser company strength than Binzagr or Aujan. Segment attractiveness is enhanced because it provides an opportunity to utilise spare filling capacity and existing distribution systems set up for milk distribution. It is this sharing of activities that makes this sector attractive to dairy companies.
· Other Juice Drink Producers (Al Rai, Danah, Hope, Jumbo, etcetera):
Regional distribution and weak brand identity make for low company strength. Low volumes and discounted prices make the sector attractiveness low.
COMPANY STRENGTH/SEGMENT ATTRACTIVENESS MATRIX- IMPULSE SIZE CARTON JUICE DRINKS
S E G M E N T
* AUJAN SUNCOLA)
DAIRY COS. (VIMTO)
Al Safi Danone, *
LOW LOW HIGH
Binzagr Company’s firm infrastructure is a major source of sustainable competitive advantage. Investments in building infrastructure must continue to keep up the company’s competitive edge.
More attention should be paid to Human Resource Management, a support activity that can be leveraged to provide competitive advantage. Considerable scope for improvement exists in the areas of sales force recruitment and training as well as in monitoring and co-ordination of the work force indigenisation (Saudiisation) programme.
Binzagr Company has already acquired considerable expertise in the application of Information Technology to its business. It is recommended that the scope of applications is enhanced to provide vertical linkages both with the value chains of suppliers and key customers. Such applications can provide sources of both cost and differentiation advantage.
A detailed study should be undertaken of the company’s inbound logistics, costs related to which are a sizeable component of operating costs. The use of Operations Research techniques and a careful review of the design of the operating system could reduce costs and enhance differentiation in the conduct of organisational routines. Similar benefits could also apply to warehousing operations and out-bound logistics.
Value Chain analysis should also be used a basis for determining organisational structure by providing a logical and systematic way of grouping activities.
References & Readings
1. IMES Soft Drinks Market Studies – Saudi Arabia 2005
2. AC Nielsen – Saudi Arabian Beverage Market – Retail Audit 2003 to 2005
3. Grant, Robert M. (2000) – “Contemporary Strategic Analysis” (Third Edition), Blackwell Publishers
4. Kotler, Philip, – Marketing Management, Eleventh Edition, Prentice Hall, International
5. Doyle, Peter (1998) – Marketing Management and Strategy, (Second Edition), Prentice Hall, Europe
6. De Wit, Bob and Meyer, Ron, (2002) – Strategy Process, Content, Context, (2nd. Edition)
7. Thompson, Arthur, A. and Strickland, A.J. (2001) – Crafting and executing Strategy, (Twelfth Edition), McGraw-Hill Irwin
8. University .. ………, Strategic Analysis and Choice, Module 2, (2002) Edition 12
1. Erik Hoelgaard – General Manager (Binzagr Coro Limited)
2. Azhar P. Akhtar – Commercial Manager (Binzagr Coro Limited)
3. Abdullah S. Binzagr – President (Binzagr Company)
4. Peter J. Fountain – Deputy President (Binzagr Company)
5. Kevin Baxter – Senior Vice President Sales (Binzagr Company)
6. Hasan Ghias – Senior Vice President Marketing (Binzagr Company)
7. Jafar Ghias – Product Manager Drinks (Binzagr Company)
8. Khalid A. Aujan – President & CEO (Al Aujan Beverages)
9. Ahmed I. AbulJadayel – President (AbulJadayel Beverages Inc.)
10. Len Whittle – Production Manager (Saudi Irish Dairy – Al Rabie)
11. Fahim Sheikh – Vice President Marketing (Saudi Danish Dairy Company)
12. Sheriff Abbas – Technical Sales Manager (Tetra Pak Saudi Arabia)
13. Charles A. Goff – Sales & Marketing Director (Continental Cans of Saudi Arabia)
14. Sandeep Prabhu – Business Unit Head – ACNielsen Saudi Arabia