New Zealand beverage industry has undergone a significant revolution. This has resulted from emergence of new categories of beverages specifically energy drinks. The transformation has culminated into a high rate of growth witnessed in the functional drinks market segment. Upon introduction of energy drinks in New Zealand, consumers were apprehensive. This resulted from lack of sufficient knowledge regarding the energy drink.
Over the past few years, New Zealand has witnessed a significant social change with regard to consumer purchasing patterns. The consumers are increasingly incorporating energy drinks in their consumption patterns. A large number of consumers are considering consumption of energy drink being fashionable.
As a result, New Zealand is ranked amongst the countries with the highest energy drink consumption rate. For example, in 1999, the country’s energy drink market grew with a margin of $35 million. V is one of the energy drinks which have witnessed an increment in the consumption rate. As a result, the energy drink has managed to attain a market share of 60% in New Zealand (Frucor, 2010, para. 13).
The largest percentage of energy drink consumers are aged between 15 to 30 years. In marketing the energy drink, the firm targets professional, workers and students living in sub-urban and urban areas. On average, 70% of students in tertiary institution are aged between 18 and 23 years. The total number of students in tertiary population is 319, 100.
On the other hand, the total number of secondary school students aged between 13 and 18 years is 245, 196. Thirty five percent of the total 508,900 individuals aged between 24 and 30 years are fulltime professionals. In addition, these customer categories easily incorporate change in their consumption through consumption of a variety and new products.
Approximately 67.3% of the country’s total population is aged between 15 to 64 years. This indicates that there is a high probability of V energy drink attaining a high market share. However, a research conducted indicates that demand for energy drinks reduce as customers attain an age of 30 years and above. This is due to the fact that the energy requirement of these customers is low. This represents a market opportunity which the firm can exploit.
Consumers are loyal to a particular energy drink. This is evident in the frequent repurchase patterns developed by the customer’s. In addition, the rate of customer turnover is relatively low. This means that the rate at which customer’s can shift to another product is relatively low.
Type of Market Demand to Be Stimulated
In marketing a product or service, a firm’s management team has to make a decision regarding the demand strategy to adopt. The two main strategies entail primary demand and selective demand strategies. Primary demand strategy involves a firm’s effort to increase its market share within its relevant market (Pride, Hughes & Kapoor, 2009, p.85).
This type of demand arises when potential customers portray interest in consuming a particular product or service. In addition, this type of demand is also evident if there is a gap in the firm’s marketing communication strategy. The resultant effect is lack of sufficient knowledge regarding the product. On the other hand, selective demand strategy involves a firm stimulating market demand for its products and services. This type of demand is usually present if consumers appreciate the need to consume a particular product.
From the analysis above, the New Zealand energy drink market presents both selective and primary demand. A significant proportion of consumers in New Zealand do not consume the energy drink. Currently, the firm’s core target market entails consumers aged between 15 to 30 years. This is a small proportion of the country’s total population. This means that there is a substantial primary demand which has not been exploited.
Competition Analysis and Likelihood of Competitive Reaction
New Zealand energy drink industry is characterized by intense competition. This arises from the presence of both domestic and multinational companies. This has culminated into an increment in the degree of rivalry. Some of the firm’s core competitors include Red Bull GmbH Company and Lift Plus which is owned by Coca-Cola Company. These companies are effective in marketing their energy drink. Red Bull GmbH markets Red Bull energy drink while Coca Cola Company markets Lift Plus.
Red Bull GmbH has effectively established itself in the market and is considered as market leader. Its success is also associated with its effectiveness in its marketing practices. The firm has also managed to develop a strong brand image. On the other hand, Coca Cola Company is a well established multinational company. The firm also faces competition from smaller firms entering the industry.
The large number of entrants arises from the profit characteristic of the industry. From the above analysis, there is a high probability of an increment in the degree of intensity of competition in the next 3 years. This presents a threat in the firm’s effort to attain a high market share by marketing V energy drink. Entry of new firms into the industry will culminate into a large number of substitutes hence a reduction in the industry’s profitability.
Currently, some of the substitute products which pose a threat to V include e2, Powerade and G-force. In addition, development of other categories of beverages such as sports drinks, soft drinks and other varieties of carbonated energy drinks also pose a threat to V energy drink.
Over the past few years, there has been an increment in popularity of sports drinks. To position themselves in the market, firms operating in the industry are incorporating the concept of new product development. In addition, intense product innovation is also being undertaken.
To ensure that V energy drink succeeds for the next three years, Frucor’s management team must integrate effective strategies. The firm can attain this by putting into consideration primary demand strategies. The management team should integrate the concept of continuous product innovation. By improving the ingredients used in producing the energy drink, there is a high probability of the energy drink appealing potential customers. In addition, the firm will be able to develop and retain brand loyalty.
Resource and Capabilities
Pursuing primary demand strategies is challenging. Therefore, a firm must have the necessary resources and capabilities. Over the years it has been in operation, the firm has managed to develop a number of strengths. One of the major sources of its strength relates to integration of research and development.
The firm produces and markets a variety of V energy drink. Integration of research and development arose from realization of the fact that consumers are dynamic in their consumption patterns. This is due to variation with regard to consumer’s tastes and preferences. The firm has a strong human capital. This enables the firm to be effective in its product innovation process. The firm’s strength with regard to research and development has enabled the firm to attain a high competitive edge.
Frucor has managed to develop an effective distribution strategy. The firm distributes V energy drink through convenience stored, restaurants, cafes, dairies, supermarkets and university campuses. In addition, the energy drink can also be accessed in over 500 BP service stations.
Through effective distribution, V has managed to attain a market share of 60% in New Zealand. Effective distribution means that there is a high probability of the firm reaching a large number of potential customers through incorporation of primary market demand strategies.
The firm’s capabilities are also associated with its effectiveness in marketing communication. In its operation, the firm has integrated a comprehensive promotion strategy. This is attained through incorporation of advertisement through television. In addition, the firm brand awareness through incorporation of online marketing.
This is attained through developing a website in which it markets the website. The website is targeted at reaching and interacting with a large number of teenagers. The resultant effect is creation of strong brand awareness. According to Shimp (2008, p.288), a firm can attain a strong competitive advantage through integration of effective market awareness.
From the above analysis, it is evident that the firm can succeed in marketing V energy drink by pursuing primary demand marketing strategy. In addition, the firm should also consider pursuing selective demand marketing strategy. This arises from the fact that the two strategies are interrelated.
Developing Consumer Brand Equity
According to Elliot and Percy (2007, p.82), brand equity is defined as everything which has a meaning to a consumer. By developing brand equity, a firm is able to deliver value to its customers. In an effort to develop consumer brand equity, the firm has incorporated the concept of value addition. This is achieved by ensuring effective production process. For example, the firm ensures that V has all the necessary ingredients. In addition, it is ensured that the energy drink does not have negative effects upon consumption.
Elliot and Percy (2007, p.86) are of the opinion that consumer brand equity can be developed through brand awareness. In its operation, the firm has managed to attain this by ensuring that the consumers are aware of everything associated with the energy drink.
Primary Demand Strategies
Increasing Willingness to Purchase
Energy drinks are considered as a recent product in New Zealand. As a result, most of the consumers are apprehensive with regard to consuming the product. In addition, there is some health risks associated with consumption of energy drinks by some consumer categories such as pregnant women. In order to stimulate demand, the firm’s management team should ensure that consumers understand the benefits associated with consuming the energy drink.
Increasing Consumer’s Purchasing Ability
Energy drinks are considered to be more expensive compared to soft drinks. This can have a negative effect in stimulating primary demand. The firm should consider implementing an effective pricing strategy. In addition, energy drinks are not easily accessible in New Zealand compared to other soft drinks. To solve this challenge, the firm should improve its distribution strategy. One of the ways through which this can be attained is by expanding its distribution channels.
Acquiring Competitors’ Customers
The firm should also consider acquiring its competitor’s customers. One of the ways through which the firm can achieve this is by conducting product innovation. As a result, there is a high probability of the firm increasing its market share.
Marketing Mix Strategies
In order to improve its market competiveness, the firm should conduct product innovation of the energy drink. One of the ways through which the firm can achieve this is by not only considering energy benefits but also health benefits. The firm should improve the energy drink’s health benefits.
This arises from the fact that consumers are increasingly becoming health conscious (Plunkett, 2007, p.46). The resultant effect is that the firm will be able to expand its relevant market. For example, by incorporating more health benefits, V energy drink will be consumed by consumers aged more than 30 years.
Considering the fact that consumers are price conscious, the firm should integrate the concept of penetration pricing (Pecotich & Schultz, 2006, p.634). This will entail setting the price of the energy drink at a relatively low price compared to other competing product. In addition, psychological pricing strategy should also be incorporated. This can be attained by setting the price of a V energy drink can at $ 0.35. Through adoption of penetration and psychological pricing strategies, consumers will consider V energy drink to be fair.
The firm should improve the promotion strategy adopted in marketing the energy drink. One of the ways through which the firm can attain this is by adopting Integrated Marketing Communication. As a result, the firm should adopt various market communication methods such as use of sales promotion, public relation, advertising and also integration of internet marketing.
Some of the internet marketing tools which the firm should consider include use of social communication tools such as facebook, twitter, Myspace and YouTube. This will increase the firm’s marketing efficiency by reaching to a large number of consumers.
Accessibility of energy drink in New Zealand is relatively low compared to soft drinks. To deal with this challenge, the firm should expand its distribution strategy by integrating both direct and indirect distribution strategies. For example, the firm should establish outlets in all the regions in New Zealand. To ensure that the energy drink is stocked by retailers, the management team should establish as strong relationship with the various parties in its supply chain.
Elliot, R. & Percy, L. (2007). Strategic brand management. London: Oxford University Press.
Frucor. (2010). Frucor Beverages. Web.
Pecotich, A. & Schultz, C. (2006). Handbook of markets and economies: East Asia, South East Asia, Australia, New Zealand. New York: ME Sharpe.
Plunkett, J. (2007). Plunketts food industry Almanac 2007: food industry market research, statistics, trends and leading companies. Chicago: Plunkett Research.
Pride, W., Hughes, R. & Kapoor, J. (2009). Business. New York: Cengage Learning.
Shimp, T. (2008). Advertising promotion and other aspects of integrated marketing communication. New York: Cengage Learning.