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Group leader: Florian Mathis FEDERSPIEL (UB# 06014992)
Yin Zhao TAN (UB# 06014872)
Xiang MA (UB# 06023522)
Yin Yu YE (UB# 05006882)
Nikki THAN (UB# 06022552)

Module: MAN0713M Marketing Management & Strategy

Module Leader: Keith HANNING

C.O.: Tutor: Helen PREECE
Tutorial Group 2: Cohort A

December 2007

NERSHEYs entry into the UK confectionery market 2


A major US confectionary manufacturer is considering entering the UK market with its
popular range of count line chocolate bars including, peanut, biscuit and toffee centre


Our company is called Nershey Company and is one of the biggest confectionery
manufacturers in the USA. We aim to expand into the UK market and start off by offering one
very exclusive product. Carnaval will tackle the premium confectionary market for adults, as
this currently represents one of the most attractive growth segments in the industry. Carnaval
will be uniquely positioned and promoted and by this we also aim to win over market share of
competitors and close substitute products. In the following report we will explain why we
choose to go this way and exactly how it will be executed in detail.

NERSHEYs entry into the UK confectionery market 3



i. Macro environment p. 4
ii. The market p. 6
iii. Competition p. 7


iv. Operating results p. 8
v. Strategic issues analysis p. 8
vi. Marketing structures and systems p. 8



vii. Strategic thrust p. 10
viii. Strategic objectives p. 10


ix. Target Market p. 10
x. Competitor targets p. 11
xi. Competitive advantage p. 11


xii. Product p. 12
xiii. Price p. 12
xiv. Place p. 13
xv. Promotion p. 13




NERSHEYs entry into the UK confectionery market 4


Our vision is to establish ourselves first as the preferred premium provider of chocolate
bars in the UK market. Starting off with one single product line, we choose to experience
the UK market firsthand before entering with our complete line of confectionery products.
In the future we aim to form alliances or partnerships with established UK manufacturers.
Finally we then envision nothing less than to dominate the broader UK confectionery
market. In order to realize our vision, we strive for customer satisfaction, strong brand
positioning and profitable growth.


i. Macro environment

A firm is a creature of its environment. Its resources, its income, its problems, its
opportunities and its very survival are generated and conditioned by the environment
(Ansoff, cited in Week 5 Lecture slides)

Politically/legally affecting the industry are two new legislations that came into force in
2003. Regulations concerning contaminants in food and organic products (Baxter 2006, p.
20) force firms to obey and perhaps react by changing their own practices. In 2006,
Cadbury was affected by traces of salmonella found in their products due to a leaking pipe
in the production site. It led to a products recall which resulted in a fall in sales and
lowered consumer confidence towards Cadbury. (BBC News UK 2006)
Economically affecting the industry is a slow growth in UK GDP since 2004, although it
is not that worrying as household disposable income has outpaced GDP growth in recent
years. (See tables below). This ongoing rise in household disposable income increased the
demand for premium products. Although these higher-priced products as yet form a
relatively small part of the market, the positive spending environment has been a key to its
growth. (Baxter 2006, p. 8)

UK Gross Domestic Product at Current and Annual Prices (), 2001-2005

2001 2002 2003 2004 2005
1,059,648 1,081,469 1,110,296 1,146,523 1,167,758

% change / 2.1 2.7 3.3 1.9

(National Statistics website, cited in Baxter 2006, p. 5)

NERSHEYs entry into the UK confectionery market 5
UK Household Disposable Income Per Capital (), 2001-2005
2001 2002 2003 2004 2005
disposable 11,643 11,952 12,433 12,796 13,324
Income ()

% change
year-on-year / 2.7 4.0 2.9 4.1

(National Statistics website, cited in Baxter 2006, p. 5)

Ecological/physical factors impacting marketing decisions are issues about combating
global warming, pollution control, conservation of energy, use of environmentally
friendly ingredients and components and the use of recyclable and non-wasteful
packaging. (Jobber 2007, p. 104). Manufacturing a product in an environmentally friendly
way and taking into account corporate social responsibility can prove to be very
beneficial. Making sure to communicate environmentally conscious credentials to
customers can effectively support fair trade and organic products.
Socially/culturally affecting the industry is the demographic change in the UK. It has an
ageing population combined with a decline in the younger population. As a consequence
the confectionary industry begins to concentrate more on certain product sectors such as
functional confectionery and the premium category. Functional confectionery, such as
health related products as well as the premium sector are targeted mainly at the older
market. (Baxter 2006, p. 67) Both segments seem the most lucrative, i.e. show the highest
growth or profitability. They can although differ greatly from one another. High quality
chocolate used in the premium segment carries wholesome antioxidants but is often
accompanied by other largely unhealthy ingredients. Another factor is the increase in
childrens weekly income. Although proportionately in decline, children are still
responsible for a high proportion of sales. The table shows levels of childrens pockets
money from, which have risen steadily.

Trends in childrens weekly income and the child population,2001-2006
Average weekly Child population Total weekly
Income (,000) 000 income (,000)
2001 5.82 7,865 50.6
2002 5.78 7,988 58.9
2003 6.23 8,697 65.3
2004 6.88 8.856 72.5
2005 7.45 9,201 80.8
2006 8.03 9,586 90.6

(Baxter 2006, p. 46)

Technological factors are the use of high-tech machineries and manufacturing
equipments, which improve efficiency and productivity. This potentially allows firms to
gain a competitive advantage over rivals.
NERSHEYs entry into the UK confectionery market 6

ii. The market

In 2006, total sales amounted to an estimated 4.41bn (see table below). Count lines
accounted for 41.5% of chocolate confectionery sales in 2002 and dominate impulse
purchases. The industry overall retains a relatively strong position, as confectionery is
regarded by many as an affordable treat and part of their everyday diet.
There exists a strong trend towards emphasizing positive nutritional benefits of products
and functional features in order to maintain or gain market share. (Baxter 2006, p. 4 & 36)

The Total UK Confectionery Market by Sector by Value at Current Price (m at
rsp), 2002-2006

2002 2003 2004 2005 2006
confectionary 2,975 3,051 3,147 3,173 3,190

confectionary 1,131 1,150 1,214 1,218 1,220

Total 4,106 4,201 4,361 4,391 4,410

% change
year-on-year / 2.3 3.8 0.7 0.4

(Baxter 2006, p. 8)

The Estimated UK Chocolate Confectionary Sector by Subsector by Value at
Current Prices (m at rsp and %), 2006
Value (m) % of Total
Count lines 941 29.5
Blocks and moulded bars 740 23.2
Boxed chocolates 676 21.2
Other chocolate confectionary 833 26.1

Total 3,190 100

(Baxter 2006, p. 10)

Approximately eight of ten adults are regularly purchasing chocolate bars, which makes
them the most popular kind of chocolate confectionery. Purchasing of other chocolate
items has declined very slightly since 2000 to a level of 78.9%. Boxed chocolate
assortments are slightly more popular among women and purchased mostly by people
aged between 35 and 64.

NERSHEYs entry into the UK confectionery market 7

iii. Competition

The confectionary sector is dominated by Cadbury Schweppes, Nestl and Mars.
Cadbury is the market leader and possesses 30.7% of the market compared with Mars and
Nestl, who possess 19.7% and 12.9% respectively. (Baxter 2007, p. 23)

The industry faces competitive forces from a number of sources. The major competitive
threat comes from competing sellers in the industry as well as firms in other industries
that offer substitute products.

Substitute products for the confectionary industry can be of very diverse nature.
Substitute products may include products purchased from the local shopping store, food
from sit-down restaurants, or other snacks from vending machines. Substitutes are readily
available to customers and customers often tend to view them as their better and healthier
choice than confectionery products.

The threats of potential new entrants and the bargaining power of customers is a
powerful competitive force in the industry. New entrants may come along and offer
substitute or completely new products to gain market share from existing firms.

The confectionery industry has begun to focus on the needs of customers. The buyers
possess much power due to the fact that if they are dissatisfied with one brand they can
easily switch or purchase from an alternative brand without any major sacrifice. The
confectionery firms have implemented strategies to improve the quality of customer
service and convenience of product location in order to please their customers and convert
them into repeat customers.

More vending machines appear on the streets and shops to offer more convenience to
customers. Confectionery companies will most likely rely increasingly on this fast-service

Market shares in the UK confectionery market
Cadbury Sch.
Other companies
NERSHEYs entry into the UK confectionery market 8


iv. Operating results

Nershey recorded revenues of $4.5bn during the 2006, an increase of 3.2% over 2005.
As our largest geographical market, the USA accounted for 83.3% of the total revenues.
Although the gross profit margin has slightly increased from 15.8% in 2005 to 18.5% in
2006, it was negatively affected by higher energy and commodity costs. An increasingly
unsuccessful marketing mix adds pressure to these trends.

v. Strategic issues analysis

Our marketing objectives are to accelerate growth for all our brands and invest in
innovative new products with the aim to expand globally within 2 to 3 years time. Our
long-term goal for sales growth is 4% - 5%. The expansion into the UK market is
perfectly in line with these objectives.

Our current segmentation is based on our diverse variety of iconic brands. These range
from peanut, toffee and biscuit bars to premium dark chocolate lines.

Our global competitive advantage is based on our strong brand portfolio, which has
strong brand equity and a wide customer base. This enables us to generate stable revenues
and makes entry into new markets easier. We invest heavily into consumer research and
product development which also gives us a competitive edge over other firms.

vi. Marketing structures and systems

The company devoted significant resources to product development, process technology
and researching consumer insights to develop consumer-preferred products with
innovative and distinctive features. Nershey has been continuously increasing expenditure
on information systems, spending $4m, $3m and $1.3m respectively over the years 2006,
2005 and 2004.

NERSHEYs entry into the UK confectionery market 9


Capital rich
Experienced in USA
Variety of product range
Strong innovative focus


Low brand awareness in
the UK
Dangerously high
expectations of global


New choices for customers
Increase in demand for
premium products
Increase in average
household disposable


Fierce competition
Growth of market is slow
Health and Diet issues
Loyalty of customers of
existing brands

As a big and successful confectionery manufacturer in the USA, a solid financial
background is given for an expansion into the UK market. Nershey can use its financial
strength for extensive advertisement on TV, radio, magazines and such. This will help to
create stronger brand awareness. Promotions such as free samples, BOGOF and discounts
can support the introduction of a new product. Local supermarkets and stores need to be
contacted in order to sell our products in an efficient way. Although Nershey is an
experienced manufacturer in the USA, it is still rather inexperienced concerning the UK
market. In order to tackle that problem, local people should be employed and
consultancies should be used. An attractive alternative would be to offer a competitive
salary to employees of existing competitors in order for them to switch and work for
Nershey. This strategy is quite common in the broader food industry.

Nershey will face very tough competition as a newcomer in the market. Nershey should
stress ethically responsible practices such as fair trade and organic standards in order to
gain a good reputation. Health and diet concerns can also be seen as opportunities and
products can be marketed especially to fulfil these demands.

There are many people preferring to buy boxed chocolates as presents for feasts, such as
Birthdays and Christmas. These customers can potentially be converted if they are
convinced of the superior quality and form of a chocolate bar. The existing brands may
have loyal customers, but years of the same taste, package and promotion can support the
decision to try out new, innovative products.

NERSHEYs entry into the UK confectionery market 10

vii. Strategic thrust

Nershey enters a new market given two basic possibilities. According to the Ansoff
Matrix, one possibility is to offer existing products in the new market, i.e. market
development. Another option is to introduce new products into the new market, which
leads to diversification. The latter holds the possibility of the highest profit accompanied
by the highest risk. (Jobber 2007, p. 405) As existing products are rather similar to what is
already on offer in the UK market, a new innovative product could prove to be a true

We believe we have such a product on hand and possess the necessary resources and
capabilities to execute its introduction into the UK market.

viii. Strategic objectives

As a newcomer in the market, the company will embark on a build objective. The
premium market shows moderate growth and a build objective is necessary to establish a
company in a new market. Because of moderate growth our strategic focus will lie on
winning over market share from competitors. We wish to achieve this by using our
corporate knowledge, skills, experiences and capital resources and exploit competitive
weaknesses. Product innovation plays a very important role bundled with promotional
innovation such as effective co-branding. (Jobber 2007, p. 827)


ix. Target market

Over the last years there have been substantial signs of demographic change occurring
in Britain. It has become a well covered topic and many studies have been carried out,
most of which are predicting significant changes. (The Economist 2007, no 8552) (Jobber
2007, p. 304) To ensure future success, it is vital to take these trends into account when
deciding upon which segments to target.

The most concerning observation in connection with the UK confectionery industry is
the decline of the younger population, especially the 0 to 14 year olds. (Baxter 2006, p.
66) Meanwhile the older population of 45 years upwards is growing fast as life
expectancy is on the rise.

After outweighing the potential risks, growth and profitability, the premium sector
seems very attractive. The health related segment is still underdeveloped and leaves much
room for profitable growth. (Baxter 2006, p. 49) But the inconsistency between offering a
truly healthy product in the confectionery industry relies either on a limited range of
possibilities or of deceiving the consumer. A nowadays popular small print used in
advertising of supposedly health beneficial products symbolizes the latter: Enjoy as part
of a balanced diet. (Office of Communications 2005, p. 67) This can easily be read as
NERSHEYs entry into the UK confectionery market 11
that the product will carry the least negative side effects if enjoyed as part of an otherwise
already healthy diet.

Our strategy is targeting the premium segment for older customers with a uniquely
differentiated product. We aim to deliver high quality with a sense of adventure, passion
and exotica while nevertheless supporting fair trade standards to allow the customers
delight without a troubled conscience.

The company possesses significant capital and resources to enter with full force and
many different product lines at once. Although due to bad experiences with too drastic
growth ambitions in the US, we chose to establish a position in the marked by first
focusing on a distinct segment. The company will follow a focused marketing strategy to
target the very specific segment of adult premium consumers. (Jobber 2007, p. 302) Our
consumer model for Carnaval is based around middle and upper class consumers from 26
years upwards. Trendsetters and sophisticates with an extroversive attitude who are
looking for quality, status and high corporate social responsibility. (Jobber 2007, p. 279)

x. Competitor targets

Chocolate bars possess a much higher consumer penetration percentage than boxed
chocolate assortments. At 87.3 per cent compared to 55.1 per cent the chocolate bar
market is much bigger. The unique ingredients and attributes of Carnaval leave it in a
tricky balancing act. Traditionally the supreme quality products in the premium market
were to be found in the boxed chocolate assortments in form of pralins or plain
chocolate. Among chocolate bars a high quality dark chocolate product coupled with high
corporate social responsibility is virtually nonexistent. In this case competitor targets
would be closely related products or qualitatively and ethically inferior products. With an
overall growth strategy based on winning over market share, prime targets would be
established companies such as Mars, Nestl and Cadbury Schweppes. Organic high
quality products such as Cadbury Schweppes Green & Blacks line would be targeted in
an effort to convince consumers of the practicality of an equally qualitative product in
form of a bar. Qualitatively inferior lines of competitors such as Mars Snickers form the
biggest targets. Consumers of those products might be drawn towards a higher quality
product, especially in connection with evoked moral attributes. The trends of fair trade,
environmentally friendly, natural, organic and ethically acceptable products produced in
a sustainable fashion are feeding the market.

xi. Competitive advantage

We hope to gain our competitive edge by several coordinated measures. We do not
aspire to achieve differentiation by trying to establish cost leadership but rather through
delivering superior quality combined with effective co-branding and eye-catching
advertisement. Rising commodity prices have hurt confectionery manufacturers. (The
Economist 2007, no. 8555) Although some have managed to avoid raising prices and still
turn out higher sales and profits, Nershey will not participate in heavy price competition in
the UK.

We anticipate demographic trends in Britain and align our strategy accordingly. The
market for luxury has lately shown significant growth. Even considering an overall
economic downturn, this trend is likely to continue. (The Economist 2007, no. 8554)

NERSHEYs entry into the UK confectionery market 12
We aim to establish our competitive advantage by offering a uniquely differentiated
chocolate bar. Carnaval will not only guarantee high quality but leave the customer with a
good conscience. Through exclusive co-branding with Batida de Coco, the consumer will
relate the brands with each other. Nershey follows a distinctive distribution strategy by
aiming to promote the product through the bar scene in connection with Batida de Coco.
Even given a slightly higher price, the product is also positioned as a superior alternative
to popular competitor brands such as Snickers. The remarkable features of Carnaval are
an unusual combination of intensive flavour together with attributes such as pure and
innocent. Amazingly, Carnaval combines a notion of adventure and exotica without
regressing to the usual associations of guilt and a troubled conscience.

Targeted at the adult premium segment, this differentiation strategy provides our clear
competitive advantage.


xii. Product

The product decision includes various dimensions. Basic factors such as taste, size,
shape, packaging and brand name are to be considered. Meanwhile, guarantees and other
services can complement the product.

Carnaval is a descriptive brand name which evokes associations with the carnival in
Brazil, partying, sunshine and holidays. It is easy to pronounce but quite unique and thus
easy to remember. The link to the country Brazil carries plenty of positive associations,
which further include beauty, passion and exotica. (Jobber 2007, p. 345) Potential
consumers that identify or merely wish to identify themselves with the before mentioned
attributes may well be attracted to the brand leaving other factors aside.
Carnaval is a medium sized bar made of dark 60% Brazilian chocolate, brazil nut
pieces, Batida de Cco, brown sugar, guaran
and damiana
. All ingredients except of
Batida de Cco comply with British organic food standards and sourcing is based on a
strict fair trade policy.

The decision to follow a co-branding strategy (Jobber 2007, p. 353) with Swiss based
Mangarocas Batida de Cco
liquor was taken in order to boost sales. By using an
already popular brand, instead of relying on unbranded liquor, helps to maintain the
exclusive, high quality notion of Carnaval. Batida de Cco is very popular across Europe
and a classic ingredient among various cocktails. Although it is imported by small
premium liquor stores and upmarket cocktail bars it is not yet broadly available in the UK
market. Following a co-branding strategy with Carnaval also enables Mangaroca to
benefit from broader awareness to stage a possible future entry.

xiii. Price

The pricing policy that a business chooses is often a reflection of the market at which it
is aiming. (Hall et al. 2004, p. 174)

Since the before described targeted segment is an older, affluent customer base,
Carnaval will be priced at a premium. A premium price also underpins the notion of
NERSHEYs entry into the UK confectionery market 13
exclusivity and the consumer may perceive the product to be of superior quality than
lower priced competitors. By positioning the product in the premium market we seek to
avoid the rather elastic demand for average priced confectionary and compete based on
quality rather than price. We perceive our competitive advantage based on quality to be
high enough to justify a premium price. A direction for an introductory retail price is
based on 2.49 GBP per bar.

xiv. Promotion

Carnaval will be promoted with the help of various initiatives. The co-branding with
Batida de Cco allows targeting a very specific market in connection with cocktails. If a
cocktail which includes Batida de Cco is ordered in a bar, lounge or hotel, a free
Carnaval sample will be handed out. This is very important during the introduction phase
of the product life cycle in order to create product awareness and build market share and
brand image. To be effective this strategy requires a participation agreement with as many
places as possible which serve these cocktails.
Additionally to this kind of sampling promotion, extensive TV advertising is planned to
create broad awareness. Advertisement is also planned in premium print media such as
The Economist, The Times and Food & Wine.

xv. Place

In order for the product to be at the right place, at the right time, a number of decisions
need to be made. The opportunity to distribute Carnaval through bars and lounges opens
up a new window of opportunity. Since this market is almost completely untapped it could
prove very profitable if it catches on.
Carnaval will also be distributed through organic and fair trade shops which is
appropriate in order to reach some of the targeted consumers. In addition to that it will be
distributed through the major retailers Tesco, Asda and Sainsbury and placed on the
appropriate fair trade, organic or premium chocolate shelf.


Nershey will create a lean organisation with high customer focus in the UK. The new
marketing department will be strongly supported from the USA. As a token of support,
one of Nersheys senior marketing executives will be transferred to the UK. Nershey will
also maintain a dedicated focus on innovation, research & development. Interdepartmental
harmony will be encouraged by stressing our shared vision of becoming the preferred
premium brand in the UK confectionery industry. A national values initiative and initial
teambuilding activities will further underpin that strategy.

The aim of expansion into the UK market is based on extensive research, a solid
strategy and a detailed plan of execution. Given the success of Carnaval, the UK will
soon represent a valued part of the Nershey Company.

NERSHEYs entry into the UK confectionery market 14


Guaran is a stimulating plant which seeds contain very high caffeine content. It is very
well known in South America. Originating from the Amazon region it has been used as
medicine for centuries. It is said to have a large list of positive effects and became
increasingly popular in North America and Europe over the last decade in the form of
energy drinks. (Raintree Nutrition 2007)

Damiana is used as a general tonic and has a reputation of a natural aphrodisiac. It is
commonly known in South America where its leaves are used to make tea. (Erowid.org

Batida de Cco is based on a Brazilian recipe and consists of milk, coconut and Cachaa. It
has an alcoholic strength of 16% vol. (Mangaroca International SA n.d.)

NERSHEYs entry into the UK confectionery market 15


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