Nestle restaurants, and other institutional outlets, which had
Nestle Case Study Analysis: 1. What is the structure of the Italian coffee market? ? About 750 national or regional coffee rosters, and coffee roster coffee-houses.
They bought coffee directly from growers or through agents or importers. ? National Coffee Roasters normally bought beans from growers and sold their products to wholesalers on cash and carry basis; food channels such as supermarket, small stores or street vendors, coffee houses, restaurants, hotels, and coin operated machines ? Regional Coffee Roasters bought beans from importers or agents and sold their products to end-consumers through food channels Local Coffee Roasters bought beans from importers and sold to wholesalers. ? Coffee Roasters Coffee-Houses bought beans from importers and sell coffee to end consumers directly. ? Two segments: ? Family segments: They were end consumers, which had 80% of coffee dollar consumption and 31% of volume coffee consumption. ? CHR segment: They were coffee houses restaurants, and other institutional outlets, which had 20% of dollar coffee consumption and 70% of volume consumption.
? Types: ? Normal: Family segment consumed doubled of coffee than CHR segment (69% vs. 1%) ? Decafe: Family segment consumed slightly higher than CHR segment (58% vs. 42%) ? Instant: Family consumed 7 times higher than CHR segment (88% vs.
12%). ? The market had low entry barrier. ? The top four national coffee roasters dominated about 42% of the coffee market. The next four dominated about 10% of the market. 2. Assess Nescafe’s current market position in Italy.
? It had less than 1% of market share in Italian ground coffee market. (0. 836 tons vs.
137 tons of total market) ? Instant Coffee Market Share in Italy in 1988: Nestle had 77. % of market share in terms of volume, and it had about 80. 0% of market share in terms of dollar sales.
? Market Penetration: It had 100% penetration in all hypermarket, supermarkets, and convenience stores. ? Recently, the volume sales increased 25% due to Nestle had 14% price cut. However, the price cut was not a sustainable marketing strategy to gain market share. It often affected product image and led to a sales decline in the long run. ? Brand image was high in national level. How has Nescafe’s positioning evolved? ? In a survey of Nescafe Image Tracking Study: 1978-1988 ?Nescafe’ customers’ attitude towards the flavor and good taste of its instant coffee were stated from neutral in 1978 to slightly delight the taste in 1988. (2.
6 vs. 3. 6) ? Its image was less perceived as a sad product from 1978 to 1988.
However, the change in Italy users was below than change in all users. (2. 7 vs. 1. 7) ? Most of its consumers agree that the product was convenient.
However, in Italy, making coffee was not very inconvenient to most consumers so the rating about convenient in Italy was lower than average. (3. 2 vs. 4. 3) ? The convenient attribute of instant coffee created the image that the product was for lazy people.The rating didn’t change from 1978 to 1988.
(3. 5 vs 3. 6) ? Another research study in 1987 indicated that: ? Nescafe was not perceived as a “real coffee” because 43% of consumers considered the taste of Nescafe was lighter than normal coffee. ? Nescafe was easier to prepare than normal coffee so consumers used it only in emergencies.
However, for non-users, convenient was not an important issue, they indicated that “preparing a pot of coffee is not a waste of time. ” ? Young people were more healthy conscious and saw Nescafe as a health risk and a coffee for old people Another research conducted in 1988 indicated that 83% of people had heard of Nescafe, which was 10% higher than 1978. 44% of people had tried Nescafe in 1988, which was 10% higher than 10 years ago.
Users who rated themselves heavy users increased 7% from 10 years ago. 3. How do Italian consumers buy coffee? ? Italian consumers bought coffee from ? Food Channels: supermarkets, small stores, and street vendors.
? Coffee houses, restaurants, hotels, and vending machines. ? Coffee roster coffee-house. ? By 1988, 4 million Italian households made coffee at home with espresso machines. People believed that the coffee made in coffee house was better than that made at home.
Why do they buy Nescafe? ? Nescafe was easier to prepare than normal coffee. ? Nescafe has less caffeine than normal coffee. ? They like Nescafe’s less aggressive image. 4.
What strategic options could grow the Nescafe brand in Italy? ? Focus on older consumers. ? Extend product line to milk modifier to fit in the healthy trends. ? Target younger generation and position Nescafe as an international coffee beverage.
? Make more marketing efforts on CHR segment. . Nescafe is positioned as a new international beverage targeting young people.
What are the marketing program implications? ? Introduced a new and healthy oriented usage of using Nescafe Classic as a milk modifier that could eat in morning with milk. ? The suggested marketing programs: ? Sponsor sport events such as World Cup or Olympic. ? Change packaging to be attractive to young people ? Create an exotic new brand name. ? Spend heavily on promotion and advertising.
? Hire foreign movie stars or celebrities as the spokesperson for the products. 6.What are the economic of the proposed program? ? Nestle had experience on manufacturing the same product. The learning curve could be shorter.
Therefore, the manufacturing cost could be lower than formulating a brand new product. ? They could use the current excellent distribution channel to distribute the product. ? The product was health oriented that fitted in the modern lifestyle. ? 1/3 of consumers used Nescafe as a milk modifier.
It would take less time to teach customers the new usage. ? According to the result form focus group, Nescafe tasted well when mix with milk.