Kids Delight

1.0 Introduction Sanitarium’s objective is to provide customers with healthy foods that actively improve their well-being. We are committed to create new, easier and healthier ways to meet the customer demand for healthy, tasty food, and this is the reason why we have introduced a new cereal known as KIDS DELIGHT for obesity kids to control their weight in a natural way and to enhance their development and growth in a healthy way. KIDS DELIGHT has been designed especially for kids between 5-16 years who are obese and who have the habit of eating all the time. KIDS DELIGHT is actually a new formula cereal which compared to other cereals have natural fibres and substances that will help kids to burn fat and preventing them to eat at all times. The retail price of KIDS DELIGHT has been set as $ 7.6, this is a relative competitive price as to encourage customers to buy and try this new innovative product. This marketing plan will first give a description of the product, following by an overview of current environment and the market tactics proposed, finally, market forecast, financial information and action plan will be provided.

1.1

KIDS DELIGHT’s Objectives •

Strengthen kid consumer base

•

Secure Sanitarium’s position in providing healthy food

•

Create a product that helps obese children to control their weight and at same support their health growth and brain development

•

Attract different target groups

2.0 Product Description KIDS DELIGHT is an all in one cereal designed to help obese kids to control weights in a natural way and to enhance their development and growth in a healthy way. This cereal is made from natural fibres and ingredients which have been tested and recommended by doctors therefore will have no side effect on children. One main benefit of this natural and innovative product is wonderful as it works by directly affecting the area of the brain that controls the appetite preventing kids to eat all the time while as the same time helps burn inner fat in a natural way. Kids can therefore have nutritious breakfast that stimulates

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energy. Secondly, the cereal helps them have all essential vitamins and minerals that kids require to support a healthy growth and brain development. KIDS DELIGHT compared to other cereals are produced by a mixture of the hottest fibre rich grains in the grain family known as Amaranth and Quinoa full of protein, calcium and iron and with fruits . Since it is very healthy, honey is added rather than sugar which enhances the touch of softness in the cereals. Three varieties will be introduced strawberry, blueberry and light chocolate. Another feature of KIDS DELIGHT is that it does not contain any artificial colours. The cereal will come in different cartoon shapes with colourful bowls inside to make it very attractive for kids

3.0 Environmental Scanning According to Boone and Kurtz (2002, p.41), environmental scanning is the process of collecting information about the external marketing environment in order to identify and interpret potential benefits. In other words, it about scanning of a firm’s environments for detecting early signs of opportunities and threats that may influence its current and future plans. Forces in the broad environment can have a tremendous impact on a firm and analyse of the broad environment can help managers identify both threats and opportunities (Harrison & St.John 2008).Hence, in this section, PEST analyse will be conducted to examine the current broad environment; while porter five forces will be used to examine the current competition environment.

3.1

Competition Environment

The breakfast cereal industry in Australia is characterized by oligopoly structure with five major brands dominating the cereal market, namely Kellogg’s, Uncle Toby’s, Sanitarium, Lowan and Nestle. Each brand is offering a variety of cereals, targeting to different group. In particular, there are many cereals that are targeted to kids (usually with a colourful cartoon character on the box), however, it is found that most are notably lacking in fibre and often with a lot of sugar or sodium thrown in and they are not giving the kind of nutrition that the kids need to have for a healthy growth (Choice 2009). Thus it giving a gap for Sanitarium to offer a product that are rich in nutrition and good in taste but low in sugar. Following will use the positioning map to illustrate the position of the various kids’ cereals (Figure 3.1).

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( Figure 3.1, information adopted from Choice 2009)

From the above positioning map, it is found that Sanitarium has establish a reputation and position in providing rich nutritious and tasty cereals, which has added a competitive advantage for Sanitarium to provide healthy food. When later launching the KIDS DELIGHT cereal, Santarium can also well use of this competitive advantage. In addition, it is noted that the obese kid’s breakfast cereal market have been neglected, and that there are great demand on it (please refers to 3. 4 social-cultural forces), thus Santarium will take this opportunity and advantage to target this niche market of weight-control and health development breakfast cereal product for obese kids. Following will use the Porter Five Forces to illustrate the competition environment of this particular product for obese kids.

1. Existing Competitors There is no existing direct competitor for this all –in-one breakfast cereal product. Although there are many companies that produce health conscious cereals but there is no one single product that offer both weight control and health development benefits to obese kid. The obese kid’s breakfast cereal market has been neglected by most players.

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2. Indirect Competitors ( Substitutes) The indirect competitors are those that offer low in fat, rich nutritious and high in fibre breakfast products, which can be considered as an alternative of weight control and health development product by obese children’s parents. Companies that offer low in fat, rich nutritious and high in fiber breakfast product includes: Uncle Toby’s; Kellogg’s; Lowan and EnviroKidz. Among the other competitors, Uncle Tobys and Lowan have established a healthy image of their product, which can post a threat to Sanitarium if later they launch a similar product to KIDS DELIGHT. Kellogg’s on the other hand, did not have a reputation for healthy food, and it is indicated from the above positioning map that the product they targeted to children are usually not low in fat (contain high level of sugar) and poor in giving the right nutrition. EnviroKidz compared the others, receive less brand awareness and share only small percentage of the breakfast product market share.

3. Potential Competitors ( Entry Barriers) There are high entry barriers to the breakfast cereal market. Firstly, it involved high capital costs for different types of equipment and plants; secondly, the marketing cost is very high as the new entry would need to compete against current brands that have been established through large advertising and promotional efforts; thirdly, distribution is becoming difficult as the majors player has already taken up the limited shelf space; finally, product development is also becoming difficult as it is easy for established manufacturers to duplicate products. Thus, the potential competitors are perceived to be low.

4. Customers Consumers do not have a powerful influence on the cereal industry (and therefore to KIDS DELIGHT cereal product) due to several reasons, first of all, there are only a few major players in the industry; secondly, consumers do not buy a large quantity of cereal at one time; and finally, there are large numbers of customers who demand health conscious cereals.

5. Suppliers Suppliers also do not have much power because there are many suppliers available in providing the main ingredients for most cereals, such as sugar, food grains, flour, and other 4

dehydrated food products. In addition, the cost to switching to another supplier is not high. Thus, suppliers do not have a great influence on the KIDS DELIGHT product.

3.2

Economic Environment

Economic variables such as unemployment rate, fluctuations in interest rates and change in disposable income for instance, could have important effects on Sanitarium’s marketing strategy. Some of the economic factors are outlined below: Economic index GNP

$ 51,000 per person

Rate of GDP growth

-0.1%

Interest rate

3.16% (monthly, 90 days deposits)

Unemployment rate

5.5% (2009)

Inflation rate

2.4661%(Mar, 2009), 3.6852%(Dec, 2008)

Customer price index

2.1% (mar, 2009)

(ABS, 2009) The unemployment rate has also increased from 4.0 in April 2008 to 5.5% in April 2009.Although there is a slow in the economic activity due to recession followed by unemployment, KID DELGHT would not be much affected with the economic factors as it is not a luxury product which involve high cost and risks.

3.3

Socio-cultural Environment

Just like child obesity in America and child obesity worldwide, child obesity in children has been increasing at an alarming rate in Australia. According to the Australian government, an estimated of 1.5 million people under the age 18 are considered overweight or obese and 20-25% of Australian children are overweight or obese (Better health Channel 2009). A study in Queensland showed that up to 30% of Australian children have low fitness levels while 60% have poor motor skills. Moreover, an intake of high energy foods, combined with a low level of exercise or a sedentary lifestyle is a cause of this energy imbalance linked to obesity. According to research, if child obesity continues, one third of the children will be overweight and obese. (Better health Channel 2009) Taking all those statistics in consideration, 5

Sanitarium, therefore is engaging itself in promoting KID DELIGHT to help those kids to have a better health.

3.4

Political Environment

Political forces, are significant determinants of organisation actions( Harrison & St. John 2008) Many regulatory procedures such as packaging and labelling regulations, tariffs, licensing rights, government restrictions and many others can influence the Sanitarium’s strategy. The new regulatory scheme in Australia regulates materials in contact with food in general terms. This new regulation states that “food-contact articles should not cause bodily harm or discomfort and that packaging must be safe and suitable for the intended use” ("Articles and Materials in Contact with Food") (Packaging Law, 2009). In addition, it states that the manufacturer needs to ensure that their products are safe and that they comply with all relevant legislations. Therefore, a safety assessment should include an evaluation of the packaging of the products as well as the products themselves. Sanitarium would be using” Environmentally Compatible Food Packaging" and would comply with all the packaging and safety measures.

3.5

Technological Environment

The ready –to-eat cereal industry has enjoyed a renaissance very recently due to an increase in consumer interest in nutrition and changing technology. The cereal industry is increasingly moving into an era in which its products are becoming more and more highly processed (Business Technology, 2009) Less traditional techniques are used and there a high adoption of new production techniques that use less energy, speed up processes that encourages computerized automation and allow cereal grains to be manipulated in sophisticated new ways. The “Twin-screw extruder” for instance is a new technology in the cereal industry (Business Technology, 2009) Sanitarium would also be using the modern technologies to made KID DELIGHT tasty and healthy.

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4.0 Market Research A survey has been conducted as to gauge market response to the product proposed. Specifically, the survey aims to get to know about: Who are the typical customers for this product (Demography information)? Their purchasing behaviour; Customer/prospective customer’s attitudes and their opinions towards the product proposed.

4.1

Method

The questionary were conducted outside the supermarket (Coles) at Runcorn shopping plaza, where the potential market would most likely to buy our product. A total of 50 questionary were given out randomly, and of that 45 have been received and analysed. Please refer to appendix 2 for the questionary sample.

4.2

Result

Please refer to appendix 1 for the summary of result

5.0 Market Segmentation, Targeting and Position 5.1

Market Segmentation

The KIDS DELIGHT product is in a niche market so there will only be a small number of identifiable segments. The market for KIDS DELIGHT was segmenting by demographics, behavioural and psychographics variables. Two segmented groups were identified.

Identified Segments Segmentation Variables

Parents of obese kids

Obese kids

Demographic

Ø Age: 25-60

Ø Age: 5-16

Ø Gender: both female and make

Ø Gender: both and make

Ø Have kids that are obese

Ø BMI: Over 25

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female

Behavioural

Ø Frequent buyer of cereals ( at least twice a week) Ø Looking for cereals that are nutritious and healthy

Ø Looking for cereals that are tasty and with colourful packaging

Ø Looking for natural, no-harm and convenient food product that can help manage their kid’s obese problem Psychographic

5.2

Ø Conscious about their kids’ health

Ø Conscious about the taste of the cereals

Targeting

The main target market is the parents of obese kids, who age between 25 to 60, have the conscious of their kid’s obese problem, and looking for natural, no-harm, convenience and healthy breakfast food product that can help manage their kid’s obese problem. They are the main target market because they are the final decision maker as well as the purchaser of the product. On the other hand, Sanitarium also has a secondary target market which is made up of obese kids who are age between 5 to 16 and are the final consumer of the product. 5.2.1

Size of the market

Since the product is targeted specially to obese children, its market size is defined by the number of obese children in Australia. Referring to social-cultural environmental scan (3. 4), it is found that there are estimated of 1.5 million people under the age 18 are considered overweight or obese. Thus the market size is 1.5 million people.

5.3

Positioning

Sanitarium’s KIDS DELIGHT will fill the gaps that are not currently positioned by the competitions (Please refer to 3.1 position map). Our cereal stands over and above all other breakfast cereals, because it is the first of its kind. Not only is it nutritious, taste good and beneficial for children’s growth and brain development, but it is also the only cereal that helps obese children to control their weight. Unlike many other kid targeted cereals, it 8

contains no sugar as it use honey instead to give it a sweet taste that kids will love. Overall, KIDS DELIGHT will position itself as natural, healthy weight-control and nutritious breakfast product that taste good.

6.0 Marketing Tactics 6.1

Product

6.1.1

Core Product

The primary benefits of KIDS DELIGHT is energy boost, health development and weight control

6.1.2

Actual Product

The actual product will attract kid’s attention as it is packaged in a fun and colorful box. In addition, the cereal will be sweet in taste and will come in different cartoon shapes with colourful bowls inside, which make it very attractive for kids. Furthermore, three varieties will be introduced strawberry, blueberry and light chocolate for different tastebuds.

6.1.3

Augmented product

Additional supporting features will be added to our cereals as to differentiate to other competitors. The supporting features will includes: customer care service, free nutrition service, product quality guarantee, and 100% satisfaction of product or refund.

6.1.4

Packaging Strategies and Brand Logo

An attractive and informative product package in the form of a cereal box will contain our cereal. The package will appear to both parent and kids. The cereal box will contains information that emphasis on how the cereal will benefits to the kids, and on the other hand, the box will also be colourful and contain various board card game ( Randomly) that will capture children attention. Our packaging strategy is to not only indicate and convey to parents (purchaser) what they are buying to their kids but to break down and describe the components in the cereal that makes it nutritious while also promoting health growth, brain 9

development and weight-control. In addition, the KIDS DELIGHT’s brand logo (figure 6.1) will be associated with Sanitarium, so it will provides easy brand recognition as well to help us to draw the reputation from Sanitarium of providing healthy food, which will adding the confidents for customer to buy KIDS DELIGHT for their kids.

Figure 6.1

6.2

Promotion

6.2.1

Promotional Strategy

Sanitarium aims to use pull strategy to simulate interested of the final consumer (kids) and final purchaser (Parents). Thus, promotional affords will be focus on both final consumer and final purchaser.

6.2.1

Promotional Mix

KIDS DELIGHT will use different promotional mix during the different life cycle stage. Firstly, during introduction stage, promotions will be emphasis on building awareness and encourage trail, so advertising will be heavily distribute on: woman magazine, TV and radio (as it is found that these medias are most appealing to the target market) to attract awareness. Sales promotion activities such as point of purchase displays and samples also play an important part in building interest during introduction stage. In addition, public relation activities and sponsorship of weight control related events will also be very heavy during this stage in order to enhance media exposure. While in the growth stage, promotional advertising will continues to distribute on various communication channels but it will be less heavy.

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6.3

Place

6.3.1

Distribution Channels

KIDS DELIGHT will be distributed mainly to grocery stores as it accounts up 99% of cereals sales (Vignali 2001). Sanitarium will use 2 types of channels for different distribution players. For the distribution players that Sanitarium have partnership with, namely Coles, Woolworth, IGA, ALDI and BILO, we will use the following channels:

While for the distributions players that we do not have partnership with such as convenience stores and gas stations, we will use the following channels:

6.3.2

•

Distribution Strategy

Sanitarium will use a vertical marketing system with the partnered distributors for a greater level of cooperation and efficiency in reaching the target market. Information will be shared and services will be provided between partners. For instance, information about the stock level will be shared on the computer system between partners, so fill up of stock can be more efficient and timely.

•

Intensive distribution of KIDS DELIGHT will be used in order to reach the maximum number of customers and on the other hand, this strategy is necessary for products such as cereals, because it is consumed quickly and must be replaced frequently, thus maximise market coverage is essential. 11

6.4

Pricing

Since KIDS DELIGHT is a new product to the market, a penetration pricing strategy will be use in order to build market share early in the products’ life cycle. Another advantage of using this strategy is that it will discourage competitors from entering the market, thus Sanitarium can maintain its profitability. After calculating the total cost of a KIDS DELIGHT, Sanitarium will set the selling price of this product as $ 7.8. This price will be relatively close to but slightly higher than the price of other cereals that Sanitarium offering, because this is a new product with so much added benefits, consumers will be willing to pay a little bit higher.

7.0 Market Forecasting The market forecasting would be done by market surveys where a specific form of primary market research would be conducted to asked customers to give an indication of their likelihood of purchasing the product. A scale of 1-10 would be used to give an idea of the purchases recorded. From our environmental analysis, it is found that many kids are suffering from obesity which can lead to an alarming situation. Many parents are very concerned regarding their children’s health. From that analysis, it could be anticipated that Sanitarium could have a significant share of the market although there is a high competition. Actually, from our sample market research (please refer to appendix 1 for survey result), it is estimated there are 65 % of the respondents are interesting in buying KIDS DELIGHT, thus, apply this estimation to the total market size ( 1.5 millions people), it is found that our potential customer size would be 97,5000 people ( Figure 7.1).

Figure 7.1

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Figure 7.2

Almost all cereal companies focus on low sugar and calories cereals. However, Sanitarium has a competitive advantage as KID DELIGHT help children to lose weight which as a result differentiate itself from its competitors. Sanitarium will also adopt a penetration pricing to encourage parents to purchase the product. The sales is forecasted to be 50000 the first month and increased up to 70000 in 12 months (14 % growth rate) depending on some factors like advertising (Figure 7.2).

8.0 Action Plans Following table will show the significant milestone of the product during the first year.

KIDS DELIGHT ACTION PLAN JUNE 09

Research and development finalization and Product testing for KIDS DELIGHT

JULY 09

Marketing plan developed

AUG 09

Market testing on consumers

SEP

Finalising marketing tactics for the first year of sales

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OCT 09

Organising and securing distributors

NOV 09

Product launch

DEC 09

Review of market response

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APR 10

Price changes

NOV 10

Promotional method changes and market evaluation of the first year

9.0 Financials 9.1

Break-even analysis

The annual total fixed cost include: marketing cost (radio 25,000; printing advertising $55,000, PR $60,000, sponsorship $25,000), research and development cost ($3,500) and labour cost - professional marketers ($60,000) ,which is a total of

$228,500, and the

variable cost is constant include the packaging and ingredients. Based on break-even analysis, the total costs (fixed cost plus variable costs) and total revenue will change according to the varying quantities. The selling price for the product is $7.8 per unit and the variable costs is about $3.8 per unit, so the contribution margin per unit is $4.

Using the break-even formulas we find out: Break-even point (in units) = total fixed cost/ contribution per unit to fixed costs= $228,500/ $4= 57125 units Break-even point (in dollars) = total fixed cost/ (1-variable cost per unit/ price) = $228,500 / (1-$3.8/$7.8) = $228,500/(1-0.49)= $448,039

According to the market forecast result, the first month sale is estimated as 5, 0000 cereals, so it is said that we be break even by the first and a half month of sales.

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10.0 Controls

Both feedforward and feedback control system has been implemented in Sanitarium. Review and evaluation of the market response will be conducted after the first month of product launch. Changes of the marketing tactics will be made according to the market response. Evaluations of the market will be made in every half year. In addition, sales audits will be conducted every month as to detect any need for changes of strategy. Finally, environmental scanning, both internally and externally will be monitored and controlled regularly by managers._________________________________________________________.

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Bibliography

ABC 2009, Fat Kids, view 23 MAY 2009, Australian Bureau of Statistics 2009, Australian Economic Indicators, Australia, May Quarter 2009, cat. no. 1350, ABS, Canberra. Better Health Channel 2009, Obesity in children – causes, viewed 15 May 2009, . Boone, LE & Kurtz, DL 2002, Contemporary marketing, South Western Thomson Learning: Australia Carter, M 2009, Top Ten Healthy Cereals for Kids, viewed 20 May 2009 . Child Obesity 2009, Child Obesity in Australia - Alarming Statistics, viewed 18 May 2009, . Choice 2009, Kids' cereals compared, Choice, viewed 18 May 2009, < http://www.choice.com.au/viewArticle.aspx?id=104654&catId=100515&tid=100008 &p=1&title=Kids'+cereals+compared>. Diet Channel 2009, The Healthiest Meals on Earth: A Guide Eating Well and Eating Healthy, viewed 14 May 2009, . Harrison, JS & St.John, CH 2008, Foundations in Strategic Management, Thomson Higher Education: USA. KH LAW 2009, Special focus, view 12 May 2009, . Stockton, W 2009, Business Technology: The Energized Cereal Industry, viewed 23 May 2009, . Vignali, C 2001, ‘Kellogg’s:international verse globalisation of the marketing mix’, British Food Journal, vol.103, iss.2, pp. 112-130.

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Appendix 1 - Summary of Research Result

Who Are the Buyers? Ø Parents, Older Adults How Often Do They Purchase? Ø Kids cereal are purchased roughly twice a week Where Do they Want to Buy? Ø Grocery Stores responsible for 99% of cereal sales Who Are the Influencers? Ø Kids Who consumes the goods? Ø Kids under 18 Who are KIDS DELIGHT’s Target Market? Ø Kids 5-12 years old Potential demand for KIDS DELIGHT Ø 65 % of the respondent were indicated interest to buy this product How much they are expected to pay for KIDS DELIGHT Ø $7-10 What are the attributes they are look for in choosing cereals for their kids Ø Nutrition, Tastes and Packaging Where do customers usually get the information about cereal/breakfast product? Ø Woman magazine 32 %, TV ads 52%, Poster 11%, website 5%

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Appendix 2- Questionary Sample

1. Please indicate you gender Male

Female

2. do you have kids under15? Yes

No

3. How old are you? < 18

18-25

26-35

36 -45

46>

4. How often do you buy cereal? Once a week

twice a week

once a month

others: __________

5. Do you buy separate cereal for your kid/s? Yes

No

6. What kind of attributes you are looking for in choosing cereals for you kids? ___________________________________________________________________________ 7. Where do you usually buy cereal? Supermarket

Grocery Stores

Convenient stores

Others: __________

8. How interested are you in buying weight control and health development cereal for your kid? Very interested

Interested

A little interested

Not interested

9. If you are interested, how much are expended to pay for this kind of product? $ 4-5

$ 6-7

$ 8-9

$10-12

$ 12-14

Others:_______________

10. Where do you usually get the information about cereal/breakfast product information? Woman magazine

TV ads

indicate):________________

posters

internet

website

(please

others (please indicate):_______________________

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