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This report is based on the following case study -
This is a conventional case-study. You only work with the given case information. Please do not consult outside the case. If you have to make assumptions, these must be clearly stated in your report. Enjoy and good luck!
You are the ice-cream marketing manager for Neptune — a niche player in the supermarket “premium ice-cream” sector in Perth. The company, Neptune Perth, has seen its sales continue to grow during the 1990s and into 2000s, but the market may be on the edge of significant change and very aggressive competition. You are now responsible for Neptune’s ice-cream strategy planning for Perth.
Premium ice-cream sales growth in Australian supermarkets is slowing down, in part because of competition from other products, such as, lower calorie “healthier” frozen yogurts and other similar products loosely categorised as frozen desserts. Some producers' sales are continuing to grow at attractive rates — 10% to 50% a year, while others are reporting flat sales (including Neptune) or are going out of business.
There is some evidence, also, that the urge to indulge in frozen desserts may be giving way in Australia to diet and health concerns. Some Australians are reducing or even eliminating “super” desserts. And some “dessert junkies” who want to indulge without too much guilt are turning to frozen yogurt and low calorie ice-cream. This has encouraged some premium ice-cream competitors to offer these products too.
Most regular ice-cream products are priced at around $5.00 for a standard 2-litre tub. But the higher priced — and higher profit — premium products provided most of the growth in the ice-cream market in the past 5 years. Premium ice-cream, with as much as 16% milk fat (regular ice-cream has a minimum of 10%) is the ultimate ice-cream product — rich, indulgent and fashionable. It comes usually in 1-litre tubs and retails for up to $6.00 in almost all supermarkets and food stores.
The rapid growth of the premium market may be over, as more and more consumers become concerned about cholesterol (and ice-cream is high in cholesterol). Some of the premium ice-cream producers remain optimistic, however. Neptune, for example, feels that “because people like to make every calorie count — they want wonderful food”. But other competitors are more concerned because they see many close competitors going out of business. Frozen yogurt seems to be a big factor.
Many Australian ice-cream and dairy producers are turning to frozen yogurt for better growth prospect. Introduced in the 1980s, these products have been reformulated and are winning customers. The difference is that today's frozen yogurt tastes more like ice-cream but minus the calories and guilt. Yogurt makers are using aggressive promotion against ice-cream.
Neptune is the largest family-owned ice-cream producer in Perth — but pales in comparison with the multinational and national companies (Peters, Streets, Nestle, Sara Lee, etc.) which dominate the Australian ice-cream and frozen dessert markets. The company was founded in 1973 in Perth and is well known in the Perth for its very narrow range of premium or gourmet ice-cream under the Neptune Delight brand name. Its ice-cream comes in three sizes (500g, 1-litre and 2-litres) and
between 10 and 20 exotic flavours. The brand leads in Perth in the premium ice-cream sector which includes brands from Sara Lee, Peters and Streets.
Neptune’s factory, based in Osborne Park, is managed as a profit centre. It produces and sells at a profit to its own marketing division. The plant has a capacity of 500,000 litres of ice-cream per year. The plant has been operating at 50% capacity for the past four years. Therefore, it has excess capacity of 250,000 litres a year.
The marketing division would purchase the ice-cream from its factory for $1.50 a litre (known as ex-factory cost) packed-and-delivered to the supermarkets. It then markets directly to the supermarkets for around $3.00. A 1-litre tub carries an RRP (recommended retail price) of $6.00.
Currently the company’s range is sold in almost 150+ supermarkets in the Perth metropolitan area at an actual retail price of between $4.50 and $6.00.The Neptune brand is rarely advertised because the company feels that the brand is well established and recognised, especially amongst the connoisseurs. Moreover, "push" promotion to the supermarkets has been effective to maintain steady sales for the past 3 years. One sales representative is used to promote the range to new supermarkets while a sales team of 3 work as order-takers ensuring that the products are adequately stocked and displayed in each supermarket.
Chain stores (franchise)
Ice-cream shops are small take-away ice-cream outlets. They usually sell scooped or soft-serve ice-cream in cones and are located in high traffic areas such as shopping strips and shopping centres. The popular chainstores (all franchised) include Gelare (17 outlets), Gelatino (13), Il Gelato (8), Baskin-Robbins (7 outlets), New Zealand Natural Ice-Cream (7 outlets) and some smaller chains including Amano Gelato & Cold Rock Ice Creamery.
These chainstores sell their own branded ice-cream, and are positioned as premium. A standard 200g single-serve retails for about $3.50 - $4.50. Sales in this category are increasing mainly due to the increasing number of outlets (impulse purchase).
In addition to chain shops, there are an estimated 150+ independent ice-cream shops or kiosks. These independents are usually small family-run outlets usually selling unbranded regular ice-cream supplied by local ice-cream producers. A 200g serve retails for around $2.50. There are fifty standard 200g serves from a ten-litre tub, which can be purchased for $20.00 from the producer. The high gross margin is necessary to cover the high rental, staffing and other overheads.
There are also 200+ independent cafés (as opposed to chain/franchised ones like Aroma, Gloria Jeans, and Dome) operating in Perth. These sell mainly coffee and cakes. Ice-cream would complement the range but will require a $8,000 freezer unit to hold & display 12 ten-litre tubs of ice-cream. A scoop of a $3.50 ice-cream is more profitable than a similarly priced cappuccino/latte mainly because of labour saving. Since your appointment, you have always wondered whether Neptune’s premium ice-cream range could also be sold to these independent ice-cream shops and cafés as an exclusive brand.
During your university days, you worked part-time in three of these outlets and found them to be pretty unexciting — fancy premises but boring and parity products. Competition between the independents and with the more exciting premium ice-cream shops has resulted in many of the independents resorting to price discounting and other costly sales promotion activities. Profits have been affected as a result.
Purchases from ice-cream shops or café have little impact on supermarket sales since these are made on impulse and are consumed immediately. Moreover, it is possible to create a second brand for the new range to differentiate it from that currently sold in supermarkets (Neptune Delight) — although the actual product is the same!
You believe that this amount to a strong case to, at least, test market your proposed venture in selected regions in Perth.
This report is based on the following question – <br />Prepare a marketing plan report for the marketing of Neptune’s premium ice-cream to selected independent ice-cream shops and/or cafés where they will sell the ice-cream exclusively, with the appropriate signage (at least to the freezer units) to distinctly identify the brand.<br />
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