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Channel and Pricing Strategies

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Channel and Pricing Strategies

MKT/571
November 22, 2011
Abstract
In week two’s learning team assignment, Team A discussed that Kudler Fine Foods (KFF) planned to bring Swiss chocolates to the Atlanta, Georgia market similar to the one currently in three California markets. This week’s team paper will introduce the product to the international market in the United Kingdom (UK) that include channel and pricing strategies and justify the selection of the market selected.
Why the United Kingdom?

The entire worth of the chocolate marketplace in Great Britain and the United Kingdom (UK) is presumed to be more than five billion dollars in 2010, as stated by a 2011 article in Marketing Week magazine titled “Appetite for Indulgence Will Sweeten Bitter Pill” (www.marketing.co.uk). Following that, data on the UK chocolate marketplace gets complex, specifically with owners and manufacturers. For instance, the UK natural chocolate marketplace is believed to be the biggest in Europe. Green and Black’s organic chocolate company maintains that they are the Britain’s top organic maker of chocolate. It was created in 1991 and acquired by Cadbury in 2005. Cadbury has been making chocolate since 1824, and was acquired by Kraft foods in the early part of 2010. Nestle, based in Switzerland, and Mars, a private United States company, also lead Great Britain’s massive chocolate marketplace. Other chocolate manufacturers’ products are also accessible in Britain, including Hershey, a US brand, and Nutella brand hazelnut-flavored spread. There is good news regarding concerns for the quality of chocolate. There is a wide variety from which Britons can choose. The UK is clearly a country filled with lovers of chocolate, irrespective of producer. The British are some of the world’s most prolific chocolate consumers (foodanddrinkeurope.com). The British eat roughly 24 pounds of chocolate annually, which is almost twice what other European countries consume. However, British chocolate addicts pay close to thirty percent more than their European counterparts. The UK chocolate marketplace will be worth 4.6 billion British pounds by 2013, and is dominated by three major players - Cadbury Schweppes, Masterfoods, and Nestlé. The chocolate bar subdivision is the major battleground for these businesses. Chocolate bars account for almost 45% of all chocolate sales by volume. The leaders in this market are Kit Kat, Twix, and Mars Bar.

Nonetheless, British expenditure is slowing down as consumers are becoming more health conscious. The point was driven home in 2004, when general chocolate sales only rose by less than one percent to 1.3 billion pounds. This tendency will probably continue until 2020.

To counteract this, Data monitor anticipates the major players will gradually launch new low carb and products without sugar in an effort to bring adult consumers back to the chocolate marketplace. This drift has already started in the United States. As the controversy regarding obese children continues, makers of food and beverages are continuing to market new product expansions toward grown-ups. In fact, Nestlé just introduced a low carb Kit Kat bar in the United Kingdom (www.justfood.com).

Channel and Pricing Strategies

United States Company KFF stays upbeat concerning its projections and self-assured in its line of attack in spite of reporting yearly losses this fiscal period. Previously this year, KFF retained a loss of more than nearly two million British pounds (2.75 million United States dollars) before taxes for the fiscal year ending June 30th, compared to a pre-tax profit of nearly seven million UK pounds from the identical fiscal time frame last year.

Kudler Fine Foods fell into debt because of expenses connected to a reorganizing package declared in June. The company arranged to shut down one hundred eighty stores due to shifting consumer behaviors and a besieged British stock market. Talking to the media after the declaration of KFF’s annual revenue, chief executive officer (CEO) Anne Kudler says that the changes are essential if the company is to remain prosperous. She says: "We will be undertaking this transformation in the face of economic headwinds but we believe our strategy is right for the company and, indeed, for the times we find ourselves in."

Kudler directed toward a development in manufacturing capacities as a gauge that the company is headed in the correct direction. She states: "We have grown volumes by 5% and maintained flat production costs. Our plan is to rebalance sales into our franchises but also into our commercial channels. Our customer can buy our products any way they want to without us compromising manufacturing capacity."

KFF augmented its profits by almost two percent to 218.3 million British pounds boosted by sales from its money-making network, which was up nearly 26% to 78.8 million British pounds. Kudler stated that the forthcoming holiday term so far had met "encouraging" advance demands. Kudler Fine Foods’ innovative goods include the smaller chocolate gifts costing less than three dollars apiece, which Anne Kudler says are perfect for juvenile customers seeking for a tasty yet inexpensive family or fiends’ gift.

Kudler Fine Foods is also presenting two-for-one campaigns and an ‘eager beaver’ offer, which incentivizes buyers to purchase ahead to beat the Christmas rush. "We have a strong Christmas seasonal offering which we have built upon for 2011," Kudler says.

Eyeing the future, Anne Kudler, KFF’s CEO, admits that the following fiscal period will more than likely face turbulent times, but says she thinks that the business is in a much better position to withstand an economic climate that is still struggling. "We have strong sales and a strong and trusted brand with excellent potential. I remain confident we have the right plan to keep sustainable growth in the future."

Government Input

In January 2006, David Cameron, Great Britain’s Tory leader attacked Britain’s chocolate vendors, saying that they have helped contribute to the UK’s growing obesity problem. Cameron, in a health speech stated that shops are using “irresponsible” marketing techniques to sell chocolate by cutting prices on the confection. Cameron asked: “As Britain faces an obesity crisis, why does W.H. Smith's promote half-price Chocolate Oranges at its checkouts instead of real oranges?”

A spokesperson for W.H. Smith, a leading British confectionary chain, stated that fruits and other products were sold in their outlets, alongside chocolate. The spokesperson said: “(The chocolate) is marketed at adults. It’s about choices you don’t have to purchase the products” (www.bbc.co.uk).

Cameron went on to say: “Obviously, we are unable to set policies in this respect, nonetheless we can point fingers, ask difficult questions, and we can pressure the retailers. I believe politicians … should do so” (www.bbc.co.uk).

Economic Considerations

The role of interest rates, exchange rates, and monetary or fiscal policies in the UK chocolate consumption is very important. Interest rates are the indicators of the fiscal policy all over the world. Interest rates also recognize the stability of the financial market. By taking on policies that influence the interest rate, the assumption is that the investment in the consumption of chocolate is negatively related to the interest rates.

KFF will use the factors that influence interest rate and fiscal policies to influence its role in the UK economy. Presently, the economy of the UK is struggling like other economies all over the world, but the desire for chocolate is ever growing (www.foodanddrinkeurope.com).

Innovation, Technology

Customers are progressively worried about well-being matters, while not willing to give up their indulgences. KFF can not only meet, but also exceed such emerging demands by offering chocolate products which can greatly help improve customers’ health and well-being. A few examples of this are products such as sugar-free chocolate, de-fatted cocoa powder, chocolate reduced in sugar, and fillings low in fatty acids.

In addition to just products, KFF offers much more. Their main tactic is to create familiar working collaborations with their clients, so that they can generate products which surpass the expectations of the customers (www.just-food.com). The know-how they have constructed over time means that more accurately than just comprehending the tendencies in the markets of their customers, they often can predict them. Research and Development has continuously remained one of KFF’s strengths, and they have presented plenty of groundbreaking products into a wide-ranging variability of marketplaces. The various markets are where Kudler Fine Foods’ approach to partnership specifically exhibits its advantages. KFF not only helps their customer bases by providing their selected constituents, but also can provide advice, support, and backing about flavor creations, processes of production, and the countless additional facets essential for effective development of products.
Social and Demographic The demographic breakdown of Britain’s chocolate consumer is as follows: • Nearly two-thirds of all chocolates are bought by female consumers, however, they devour a little more than a half of what they purchase • Males buy less than a third of all chocolate in the UK, and usually eat the most of what they purchase • Juveniles under 18 consume just under 40% of all chocolates, however, they only purchase 20% of what they consume (www.foodforum.org.uk) Based on these figures, it would suffice to say that marketing toward women is an easy and profitable decision. Marketing towards children may sound profitable, but could wind up backfiring, because of the UK’s increasing childhood obesity problem. An alternative could be to market the low carb, low sugar, or sugar-free chocolates to the children, but focus more on the taste, rather than the ingredients. While the healthy chocolate campaign may double advertising expenses, it may end up being a major success based on the overall consumption of chocolates by children.
Conclusion
After reviewing and researching the international market, Team A believes that the United Kingdom is the best choice in which to introduce the new Swiss chocolate products and confections. As stated before, the United Kingdom is Europe’s largest chocolate consumer by a wide margin. Expanding to the British market is a no-brainer for Kudler Fine Foods. Even though the price of chocolate in Europe is rising, so is the British persons’ taste for chocolate.

References
Kotler & Keller. (2007). A Framework for Marketing Management (3rd ed.). New Jersey: Pearson-Prentice Hall.
Kotler & Keller. (2006) Marketing Management (12th Ed.) New Jersey: Pearson-Prentice Hall. http://news.bbc.co.uk/2/hi/uk_news/politics/4580778.stm http://www.foodanddrinkeurope.com/Products-Marketing/Brits-top-European-chocolate- rankings http://www.foodforum.org.uk/ffiles/Divine_Chocolate-Inn Mat Man Pro Con- KS3 KS4.shtml http://www.just-food.com/analysis/thorntons-keeps-faith-in-multi-channel-strategy_id116567.aspx http://www.just-food.com/news/brits-top-chocolate-consumption-league-despite-higher-prices_id83432.

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