DE LA SALLE UNIVERSITY
Ramon V. del Rosario College of Business
Master of Business Administration
1st Term, A.Y. 2015-2016

Go Nuts Donuts

Submitted in Partial Fulfillment of the Requirements in Marketing Management

Submitted to:
Professor Regina C. Dy

Submitted by:
Marco Carlo S. Sana

13 OCTOber 2015

I. Statement of the Problem
How can Go Nuts Donuts replicate and sustain its early success in the Philippines? How can Highland Coffee be incorporated to contribute to this success?

II. Objectives
Through this case analysis, the researcher aims to: * Identify the strengths and weaknesses of the brands and also its possible opportunities and threats; * Examine Go Nuts Donuts’ and Highland Coffee’s target market and its environment * Identify the needs of the target market and the brand’s growth potential * Formulate a strategic plan that will strengthen the brand’s market share; and * Offer recommendations that will help improve Go Nuts Donuts’ and Highland Coffee’s position in the market.

III. SEGMENT, TARGET, POSITION

Segment
Go Nuts Donuts and Highland Coffee plans to keep to the broad B market. This market composes a good portion of the population that has had the opportunity to taste high-end donuts and coffee, but without the financial means to consistently avail of them on a day-to-day basis.

Target
Go Nuts Donuts and Highland Coffee were made to be affordable food items because most of its customers are price sensitive. Go Nuts Donuts are made in a similar style as those from its competitor, Krispy Kreme, but are less sweet, but larger and last a longer period. Highland Coffee is made from the best robusta coffee from Vietnam; it is at least P10 cheaper than rivals. Clearly, the two food products seek to cater to groups who want quality donuts and coffee that rival those of high-end brands, for an affordable price.

Moreover, some of the donut product lines are fun and colorful. This makes it attractive to young kids who can select specifically decorated donuts, like the Christmas product lines, and different flavors for kids. Most adults also appreciate the donuts that are neatly prepared and decorated.

Position
Go Nuts Donuts offers its products in population centers in order to cater to a vast majority of consumers. These include stalls and stores in super/mega malls, outlets in streets with a lot of foot traffic, and other points of target consumer convergence. Aside from the Krispy Kreme-like donuts, they also offer a variety of food products such as Cro-Nuts, Spreads, and Pocket Pies. Undoubtedly, the company is in business to provide what is perceived as “luxurious” baked goods to the masses.

IV. Competitor analysis

Dunkin’ Donuts: the world’s largest coffee and baked goods chain, serving more than 3 million customers per day. Dunkin’ Donuts sells 52 varieties of donuts and more than a dozen coffee beverages, as well as an array of breakfast sandwiches and other baked goods. Since coming to the country in 1981, it is the largest donut chain in terms of sales, with over 700 outlets. It maintains its market share with their low price and store presence with an outlet always within reach.

Mister Donut: Formerly Dunkin’ Donuts’ main competitor, but has been acquired by the latter’s paren company. Most of it’s North American stores have changed the name to Dunkin’; however, Mister Donut as a brand still maintain a strong presence in Asian markets. It is the second largest donut chain in the country, including concession inside convenience stores and KFC branches. In addition to donuts, the stores also sell croissants and meat buns, as well as coffee, spaghetti, sandwiches and rice meals.

Krispy Kreme: It is an international donut brand established in 1937, Nashville, Tennessee. It has a little over a dozen stores since it came to the country in November 2006. It is Go Nuts Donuts’ rival in terms of market and reach. It sells original glazed and flavored donuts, as well as other products like coffee, muffins, shakes, fruit juices and novelty items. Priced in the upper range, it has a more limited consumer bases than Dunkin Donuts and Mr. Donuts.

V. Areas of Consideration & Major Assumptions

Clients or consumers
Go Nuts Donuts specifically caters to a portion of the masses who can afford some leisure spending on certain food treats like donuts. Most Filipinos also find donuts to be a comfort food and is commonly given as a “pasalubong” to family members. On the other hand, most consumers of “to-go” or “brewed coffee” are those who are in the workforce who seek out a pick-me up for their day. Coffee is also a social tool that is consumed by a majority of people over get-togethers and hangouts.

Product Quality
The donut was made to emulate its high-priced competitor, Krispy Kreme. Quality-wise it is in a much better position than those who sell donuts bottom of the barrel prices. At the same time, the pricing of the donuts is not as expensive as the more luxurious baked goods. Coffee-wise, Highland is made from coffee of the second largest producer in the world. Vietnamese coffee rivals that of Brazil without costing as much.

Competitors
In the donut industry, the market is pretty stagnant. Although there are no new major entrants in the market since J.Co., the current players must compete for the existing market and play a tug-o-war for customers, who are price and taste sensitive. The coffee industry, on the other hand, is riddled with a plethora of competitors, from high-end and international brands like Strabucks to local shops like Kopi Roti and stand alone shops at certain street corners. Moreover, the donut industry also serves coffee to compliment their baked goods making them a one-stop-shop.

Marketing Initiatives
Go Nuts Donuts seems to be little active on the promotional front. The group has seen little advertising, except their webpage and their immediate outlets (in Makati and Robinsons Manila). Their employees execute orders but are reactive, not proactive, offer little sales-promoting advices or salesmanship. This leaves a major part of functional marketing to “word of mouth” which is a highly uncontrollable and non-dependable marketing channel.

VI. Theoretical Framework

SWot analysis STRENGTHS | OPPORTUNITIES | * Household brand name * Affordable * Long shelf life of donuts * “fresh donuts” * coffee beans are imported from an ASEAN member country * Consistent and coherent products * Sister company is an internet shop (Netopia) | * Larger working class * Growing expendable income of individuals * Cheaper importation of coffee * New donut making techniques | WEAKNESSES | THREATS | * Lack of originality * Low and/or ineffective advertising * Fewer outlets compared to bigger competitors * New coffee brand in the market * Some products are fad motivated * Undifferentiated products * Consumer loyalty dwindling | * Changing taste preference of consumers * Healthy living lifestyle * Stability of flour prices * Growth of 3-in-1 coffee mix * Growth of other caffeine drinks |

Porters 5 Forces

1. Industry Rivals: Competition in the donut and coffee industry is high. Due to the limited number of customers, especially in the higher-end of the industry, an action which tries to attract more customers to one player in the industry, elicits response from the other companies.
2. Consumer Buying Power: because of the limited number of buyers, they pose a credible backward integration threat by buying from a rival company, which means lost profit. Also, they have a strong influence on price. The lower the price, the more they buy. That is why Dunkin Donuts and Mister Donuts have maintained a large share due to their low prices, and the same motivation is involved with Go Nuts trying to maintain prices.
3. Supplier Power: Beans and flour make up the product that is sold. Any change in cost of supply or materials used to create the product will hamper the capability to sell.
4. Threat of Substitutes: A major concern for the donut industry because of the move towards healthy living, especially since the product has been associated with obesity. Threats of substitutes to donuts should be highly considered. Moreover, coffee stands on the same footing, not only from alternative products but from other caffeine products as well.
5. Threat of Entry: As stated earlier, coffee is a saturated market. On the otherhand, donuts aren’t hard to make. New entrants should be kept in mind, and a need to stand out should be developed.

VII. Alternative Courses of Action

ACA 1: Maintain status quo.
Advantages
* Maintain current pricing and product strategy * No new marketing campaigns
Disadvantages
* Competitors may get ahead of Tata Nano in terms of market share. * Consumers may lose interest with the same old marketing strategies. * Inability to target a broader range of consumers.

ACA 2: Integrate into a one stop-shop for baked goods, coffee, and Internet open 24/7.
Advantages
* Heighten the interest of a broader and newer set of consumers. * Heightens foot traffic, due to number of items offered. * Heightens customer loyalty by providing them a store for all their needs.

Disadvantages * New marketing strategy to position the integration. * Remodeling and rebuilding current stores.

ACA 3: Have different stores, and just add more items sold.
Advantages
* No new costs in upgrading current stores. * No new costs in current product lines.
Disadvantages
* More funds for research and development.

VIII. Recommendations Criteria | Weights | ACA 1 | ACA 2 | ACA 3 | Develop brand identity | 30% | 20% | 30% | 20% | Expand target market | 25% | 15% | 25% | 15% | Cost Savings | 20% | 20% | 15% | 20% | Favorability of market response | 15% | 10% | 15% | 10% | Feasibility of idea | 10% | 10% | 7% | 10% | Total | 100% | 75% | 92% | 75% |

The best idea would be Alternative Course of Action 2. It answers all the current needs of the market. This is the same model that is being adopted by current coffee market leaders like Stabucks. They seek to provide more than just coffee, but have also included baked goods, and a place to loiter legally and for free, with access to the internet. This is the same reasonwhy Mcdonalds has adopted the McCafe in their stores. To replicate the high-end coffee choice while still being able to provide breakfast and other foods. Adopting this plan may entail some cost in refurnishing and remodeling existing shops. However, the idea presents itself as a great repositioning plan for the company in order to bring back its relevance in the market.

IX. REFERENCES * https://prezi.com/rjwfgv_d-ldg/gonuts-donut/ * http://www.gonutsdonuts.com * Kotler, P. and Keller, K.L. (2012). Marketing Management. 14th Ed. Prentice Hall: New Jersey