DOC

Case Study Lipton and Kai Shii

By Bertha Martin,2014-05-16 18:02
6 views 0
Theoretical Framework and Methodology: The analysis of this case study is based on the marketing theories of: I) Strategic Planning with SWOT analysis

    Case Study: Lipton and Kai Shii Competitors in the iced-tea market

Author: Parag Agarwal

    Date: 25/11/2002

Tutorial Group: 7

    Tutor: Ms Gillian Scott

     0

    1. EXECUTIVE SUMMARY

Unilever Bestfoods, USA and Shin Shii, Taiwan are competitors in the rapidly

    growing iced-tea market with their brands Lipton (in alliance with Pepsi) and Kai Shii

    respectively. Unilever has also introduced an instant hot-tea can by the name of

    Brooke Bond‟s PG Tips. Kai Shii is about to be launched in the US market. The

    following study evaluates various market segmentation strategies, potential consumer

    target segments, and factors to forecast demand that were used or could have been

    used by these two companies. The main reference for this report was Chapter 3 of the

    textbook „Principles of Marketing‟ by Kotler et al.

    The main results of the analysis are as follows:

    ? Both companies‟ SWOT analysis reveals that they are dominant and

    successful in their home markets.

    ? Kai Shii would require a great amount of effort to market itself and bridge the

    cultural divide and varying tastes and perceptions between Taiwanese and

    American consumers.

    ? Behavioural (seeking convenience, health conscious), demographic (age

    groups) and geographic factors largely influence the market segmentation.

    ? Pricing amongst competitors in the same product category plays a vital role

    compared to pricing amongst for example, carbonated soft drinks etc.

    ? Future demand for the iced tea market or any other segment is based on the

    growth rate of current market segment bases such as age, income and

    nationality.

    Both companies require different approaches to their marketing strategies. The

    following are the recommendations:

     1

    ? Lipton and Pepsi should expand their market reach across other segments to

    ward off emerging competitors and increase product visibility.

    ? Lipton iced teas should be made available in various packaging sizes and

    prices.

    ? Brooke Bond‟s ready-to-drink hot tea cans should capitalise on the parent

    company‟s objective of increased customer convenience and the advantage of

    having developed a unique technology. Thus, it can be priced higher.

    ? Shin Shii‟s entry into the American market should focus on selecting a

    distributor based on mutual trust and initially conducting trials and pilot

    schemes in cinemas, fun-fairs etc. to gauge general consumer response.

    ? Shin Shii should change the name of its product to suit the American market

    and sell at lower prices than Lipton unless it feels that Kai Shii‟s demand is

    based on or is increasing due to its unique flavour or product quality.

CONTENTS

     Page Number 1. Executive Summary 1

    2. Introduction 3

    3. Analysis and Interpretation 5

    4. Conclusions 9

    5. Recommendations 9

    6. Further Study 12

    7. References 12

    8. Appendix 12

     2

    2. INTRODUCTION The following report focuses on the growing canned iced-tea beverage market, with

    an emphasis on the Western market. This development led to opportunities for

    Unilever Bestfoods, USA (herein referred to as „Unilever‟) and Shin Shii, Taiwan to

    exploit them further through efficient marketing with their brands Lipton and Kai Shii

    respectively. A study was conducted to evaluate effective strategies for market

    segmentation and identify suitable and potential markets for iced-tea manufacturers to

    enter. In addition, factors that could be used to forecast future demand were described.

    The main aims and objectives of this study are outlined as follows:

    1) Understand what kind of markets drive a high demand for iced tea and the

    reasons behind them.

    2) Recommend market coverage strategies and market entry strategies for

    Unilever and Shin Shii respectively.

    3) Recommend brand-positioning strategies for Lipton and Kai Shii and an

    alternative hot ready to drink tea beverage by Unilever.

Background: The Unilever Group is one of the world‟s leading suppliers of fast-

    moving consumer goods. Their Lipton brand is a leader in the US market, besides

    having a significant global presence. They have also developed a ready to drink hot

    canned tea product under the name of Brook Bond‟s PG Tips (herein referred to as

    Brooke Bond). Shin Shii is a small company based in Taiwan, and already successful

    with its oolong iced tea beverages drink in Taiwan. It now wants to target the Western

    markets.

     3

Assumptions: 1) The market for iced-teas has not undergone any permanent steep

    changes either on the demand side or supply side, whether positive or negative.

    2) However, it is a steadily growing market with a long way to go before saturation.

    3) Lipton‟s iced tea and Kai Shii‟s oolong iced tea are fundamentally very close or

    similar and fall under the same product category.

    4) „Western‟ markets refer to the North American market.

Limitations: The main reference (Kotler et al text, 2001) is slightly outdated, that

    may thus fail to include changes in the company‟s profile or business portfolio. For

    example, Lipton‟s alliance with Pepsi may no longer exist. Also, relatively lesser

    information could be obtained about Shin Shii, as it is still a very obscure and less

    known company internationally.

    Theoretical Framework and Methodology: The analysis of this case study is based on the marketing theories of: I) Strategic Planning with SWOT analysis

     II) Marketing Planning

    Both theories are described in the marketing textbook by Kotler et al and each contain

    several other components that would be defined and discussed. Some additional

    research was also carried out, especially pertaining to demand forecasting. Non-

    numerical data was largely sufficient to support or be used for recommending

    marketing strategies except when market share had to be discussed.

Report structure: The report began with an executive summary and a brief

    introduction. It will be followed by an analysis and interpretation of the case and a

     4

short conclusion. It will end with a set of recommendations, links for further study,

    references and an appendix.

3. ANALYSIS AND INTERPRETATION

    Strategic Planning: The fast moving consumer goods (FMCG) market is highly

    volatile and trends in market demand or supply oscillate frequently. In such

    circumstances, companies entering this market must be clear of their objectives and

    purpose to ensure sustainability. For example, Unilever wants to “meet everyday

    needs of people everywhere…and to respond creatively and competitively with

    branded products and services which raise the quality of life.” Once these are laid out,

    it is essential to do a SWOT (strengths, weaknesses, opportunities and threats)

    analysis for the company before attempting to plan marketing strategies and

    evaluating in detail factors such as brand positioning.

     Lipton Kai Shii

    i) Already a market leader and a i) Market leader in Taiwan with Strengths

    well-known and reputed brand. 70% market share in oolong

     sector.

    ii) Extensive knowledge of local

    culture and tastes. ii) Extensive experience in

     successful advertising.

    iii) Wider product range with

    technological superiority, e.g.

    Brooke Bond‟s hot tea can.

    i) Having too many brand i) Totally unknown to Western Weaknesses

    extensions can dilute and confuse consumers.

    consumer perception and give

    fresh and new competitors to seize ii) Limited experience of Western

    market share. consumers

    i) Alliance with Pepsi to access i) Introduce new type of tea- Opportunities

    massive distribution network. oolong iced-tea. Create curiosity

    Presence of big, well known and be the first to bring it to

    partners drives demand further. mainstream.

    ii) Declining markets for other ii) Declining markets for other

     5

    beverages such as soft drinks. beverages such as soft drinks.

    iii) Greater awareness of health iii) Greater awareness of health

    benefits of tea. benefits of tea.

    i) Overcrowded and small market i) Major competition from market Threats

    with about 200 other brands leader Lipton and other big

    which might cause significant manufacturers.

    demand reduction.

     ii) Prospect of rejection in finding

    ii) Presence of other major players distribution partner or retailer

    such as Coca-Cola and Nestle unwilling to take on new product

    leading to tough competition.

    Table 1- SWOT analysis of Lipton and Kai Shii

Marketing Planning: The first step in marketing planning is to determine what kind of

    factors or bases are to be used to segment the market. Segmentation includes dividing

    buyers into distinct groups, each with different needs, characteristics or behaviour,

    who might require separate products or marketing mixes. The iced-tea market also has

    several groups or segments where consumers perceive or buy a product in a similar

    way in each of these segments. Their bases can be classified as follows:

    I) Behavioural- consumers seeking convenient and hassle free refreshments.

    II) Demographic- age groups.

    III) Geographic- urban centres, city suburbs, villages and towns or all mentioned.

    Price cannot be considered a major factor influencing buyer perception as canned

    iced-teas are more or less equally priced with similar products such as soft drinks or

    iced coffee. However, pricing amongst competitors in the same product category

    plays a vital role.

    The next step involves targeting specific segments with potential for the company in

    which the company has a differential advantage over its competitors. The choice of

    market segments should enable the company to generate the greatest customer value

    and sustain it over time. The choice of segments also varies according to its size and

     6

    the resources it has. For example, Shin Shii, with lesser resources might want to target a few segments initially in contrast to Unilever that would want to cover a bigger market by targeting several segments.

    However, Shin Shii, in its domestic Taiwanese market was an exception because it had to use aggressive advertising methods to create a totally new market for oolong iced-tea, which was virtually non-existent. In such a case, it targeted all age groups, even the tradition bound older generation who were very much used to drinking hot tea and were least likely to give up this habit. It‟s selling point of Kai Shii drinkers being a „new breed of people‟ in a „new world‟ along with it‟s natural ingredients and health benefits appealed to everyone, including the elderly who tend to be more health conscious in the Far East. The concept of being unique and different appealed to the younger generation, while the therapeutic benefits of iced-tea attracted the stressed middle- aged working class besides providing them with the convenience of a canned drink to complement their busy lifestyles. Other segments such as geographical locations were also collectively considered although the level of penetration might not have been the same for rural markets.

    Unilever‟s target segments for Lipton were broadly based on similar factors as far as the health benefits of iced tea are concerned. However, it could further narrow down to focus on athletes and industry workers involved in large amounts of physical activity and mental exhaustion. Geographically, most of America‟s population are in urban centres or towns that are well connected. Thus, it made sense for Lipton to not restrict itself to purely urban centres only. However, busy cities like New York, Boston and Chicago hold great potential for the working class to be the targeted consumers as Lipton iced teas could be a quick refreshment between snacks or lunch.

     7

    For Unilever, it is essential to note that it would be unfeasible for it to modify its Lipton iced-teas to serve different parts of the country, as America is largely a homogenous market with hardly any diverse tastes for beverages. Shin Shii, however, might want to modify Kai Shii oolong iced-teas to suit the tastes of the American consumer and also to counter competition by claiming to be exclusive and better.

Forecasting Demand: Current demand for iced-tea in America is so huge, that it

    forms 80% of all tea consumed in America. It has become a uniquely American habit, despite having a relatively shorter history of participation in the tea trade. As the convenience of ready-to-drink iced teas lure new tea drinkers, a roll-over effect should occur in the demand for other types of more specialised teas, such as herbal iced-tea to increase. Several other factors can be utilised to forecast the demand of iced teas or for any other market segment. Most of them largely relate to the growth rate of current market segment bases such as age, income, and certain nationality groups. Changes in lifestyle, or in the socio-economic condition are amongst the larger developments that might influence demand especially in the long run. Specific to the iced-tea market for example, a decrease in the proportion of working class due to a rapidly ageing population might hinder demand in urban centres especially in commercial areas.

    Overall, however, the outlook for iced-tea beverages is still very much positive with instant tea becoming more important in certain markets. According to a study by Goradia (mentioned in „Commodity Supply Management by Producing Countries‟), the global consumption of liquid tea rose by 145% while that of tea leaves rose by only 92% between 1951 and 1970. Such rapid growth is expected to continue into the near future.

     8

4. CONCLUSION

    As Lipton and Kai Shii both serve and cater to the same market, they use similar

    marketing strategies but with different approaches to achieve their company‟s

    objectives. Both companies differ largely in size in terms of financial and human

    resource capital. This affects the way they implement their strategies. Lipton, being a

    global brand has a slight edge in terms of expertise in the tastes and culture of its

    target group of consumers. It also has wider product range and technological

    superiority and is planning to launch a radical new product- Brooke Bond‟s hot tea

    can. However, although Shin Shii would be a new player with Kai Shii in the

    American market with no international experience, Unilever should be wary of its

    past achievements of revolutionising a new type of product very successfully in the

    Taiwanese market. Despite successfully facing domestic competitors in the

    overcrowded iced-tea market, it might want to review its marketing policy to be better

    prepared to face a small but unpredictable competitor. Both companies can look

    forward to competition in an encouraging and growing market with demand expected

    to rise steadily in the immediate long run.

    5. RECOMMENDATIONS The following lists the recommendations for Lipton and Pepsi with regard to:

    i) Market coverage strategy: As Lipton and Pepsi are already well established across

    several segments, they should use an undifferentiated marketing strategy spanning the

    entire market. As the number of competitors exploiting the demands of each segment

    increases, it is essential to remain clearly ahead in the consumer‟s mind. This can be achieved by increasing visibility across other segments such as tourist places. Pepsi‟s

     9

Report this document

For any questions or suggestions please email
cust-service@docsford.com