Competition in the Uk Ice Cream Market

Competition in the UK nut Cream Market epitome The UK spyglass plectrum commercialise has undergone something of a transformation over the last fifteen years. It used to be dominated by Walls Ice Cream and Lyons Maid, and was perceived to be a mature and relatively dull grocery. Substantial changes to the market have occurred as a result of broad environmental changes, and the entry of new competition. A demographic shift (fewer children) left ice cream marketers searching for new growth segments they responded by developing premium products targeted at adult consumers.The market grew faster in value terms than in volume terms as the unit price increased. However, aggressive new competition, from damage in particular, has brought about the demise of Lyons Maid and caused a substantial strategic rethink at Walls. Walls has tried to maintain its topographic point in the impulse market by preventing retailers from stocking other companies products in the freezer cabinets that ar e supplied by Walls. vitiate has challenged this policy on legal grounds, line of reasoning that it is anti-competitive. LEARNING OBJECTIVES Rejuvenation of an industry, and a product, which was perceived to be mature and stable Marketers facing an environmental challenge respond by identifying and developing new market opportunities New entry competition radically alters the rules of the competitive game Brand extension by confectionery manufacturers, taking much-loved confectionery products and converting them into successful ice cream brands Legal and regulatory action can form a key part of a marketing strategy designed to undermine the position of a key rival Application of simple breakeven analysis to a marketing problem. QUESTIONS FOR DISCUSSION 1. The case study contains examples of strategic marketing. List as many examples as you can find of this type of decision. 2. Imagine that you are a strategic analyst working for Nestle SA in Switzerland. You have been asked to prepare a truncated summary of competitive conditions in the UK ice cream market for the next board meeting. 3. Suppose that one board director has argued that Nestle should sell its ice cream interest in the UK and withdraw from the market. Thats one strategic option.What other options does Nestle have, and how do they compare with a strategic withdrawal? SUGGESTED ANSWERS 1. A very wide range of strategic marketing decisions is mentioned in the case study. Examples include New product development and brand extension decisions by Mars Product line and brand extension decisions by all study competitors Extensive market segmentation, targeting and positioning by all competitors Response to ever-changing consumer tastes and changing demographic conditions (for example development of premium and super-premium products targeted at adults, with consequent repositioning required) Withdrawal of the Lyons Maid brand and replacement with the Nestle brand Response to changing competi tive conditions, for example Birds spirit Walls response to new entry competition from Mars. 2. Nestle has lost market share in the UK, and is firm in the number three position behind Birds Eye Walls and Mars. The overall UK market showed 5. 6 per cent volume growth from 1994 to 1998, however only 3. 3 per cent value growth. Hence the unit value of ice cream products declined during this period, indicating a high degree of competition.Both Birds Eye Walls and Mars have demonstrated considerable commitment to the UK market, in terms of brand building, product development, investment in distribution channels and so on. hence Nestle holds a minority share in a relatively slow-growing market, in which two well-entrenched competitive rivals seem determined to defend or bring up their own positions within the market. This situation is made rather worse by the fact that Nestle has done particularly badly (lost greatest market share) in the impulse sector, which is the sector with the highest profit margins, in which branded products are most successful.It is worth noting that the Birds Eye Walls parent company, Unilever, uses acquisition as a component of its corporate strategy. The freezer cabinet dispute is worthy of mention as a component of competitive conditions, since it gives Birds Eye Walls discriminative access to a large number of outlets for impulse ice cream. 3. For this question we would recommend that students are encouraged to identify two or three alternatives to the strategic withdrawal option, and that lists of pros and cons for each option should be drawn up before a recommendation is made for the preferred strategy.An aggressive assault on the UK market in order to win market share from the rivals is clearly an option that should be considered. This would probably involve further new product development, repositioning, supported by extensive spending on advertising and promotions. Broadly speaking, a full frontal assault on a well-entrenched competitor with no obvious major weaknesses is deemed unlikely to succeed but the option should be considered. It would probably make more sense to adopt a differentiation focus strategy, that is, to identify a segment of the market in which Nestle can offer some meaningful differentiation to customers.The obvious segment in which Nestle has a latent advantage is the childrens segment, where it has a number of valuable brands with child appeal. Both of the major rivals have powerfully entrenched brands aimed at the adult market, but meagerly less powerful childrens brands. However, one would have to assess the likely profitability of a strategy targeted at children, noting in passing the adverse demographics. Nevertheless, on that point is evidence both that children personally have growing spending power, and that they have increasing influence on parental spending patterns (so called pester power).