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Kraft Foods, Inc. (Kraft) is one of the largest beverage and food companies in the US. It is ranked the second largest company in the world. It was under the management of Philip Morris known as Altria Group, which owns 84% of Kraft. It operates in a span of two subsidiaries Kraft Foods International and Kraft Foods North America(Kraft Inc 2010).
Kraft's business deals with manufacturing products of five different sectors namely. Beverages, snacks, cheese, as well as grocery and convenient meals. These meals include some of the country’s familiar trademarks including Oscar Mayar meat, and Kraft cheese, coffee. The power of these brands gives the company a strong hold. The company focuses on how it can efficiently and affectively develop products that are currently in the market and at the same time develop others. This is an important strategy as it enables the organization to retain a profitable bottom line. It is hard to prioritize new products and develop them in the process of retaining emphasis on the core brands. However, there is evidence that Kraft could walk over that tight rope by a close examination (Kraft General Foods 2009). The company has amounted an aggressive attitude towards the development of new products. This aggressiveness also pursues improvements in existing products and core brands. Apart from the already discussed issues, the company has done a lot in gaining a large target market. They also focus on acquiring the strong customer relation by offering quality products in the market.
The company’s focus is through its vision and mission statements on ensuring that the customer satisfaction is attained and that customers are fully satisfied with what they provide in the market. In its mission statement, the company has done a market survey and is in line with all the customers’ needs. Therefore, they strive hard to ensure that they inspire trust, keep their products simple, and make sure that they deliver.
Globalization in the food industry has led to the revolution in the processing and foods products in such of way that brings forth a distinction between the food consumption and food production processes. These circumstances clearly show a strong bond between food production and consumption where they are heterogeneous and have a consistence of technological elements as well as diversified social economic producers, consumers, and suppliers. Food industry and associated systems remain a complicated environment today that are rooted in cross cutting affiliations, informal relations, strong and loose connections, which empower the disempowered and bind people tightly together. In the 1990's, there was a global expansion in the food market prompting local organization producers search for new markets for their products. They also went out in search of acquiring new resources, influencing the scale of economics, outsmarting competitors, and at the same time obtaining new markets or establishing a market niche for their products as well as a competitive advantage.
Conversely, currently food companies may need to be in line with and come up with market strategies across all their affiliates in the global market. However, the conducted research shows that these companies as well as some international firms aim at creating homogeneous buyers and sellers in the market, which fosters globalization in turn. As one of the key producers of food products, Kraft Foods Inc. deserves an assessment as well as a clear evaluation of its customer relations and market strategy management. Kraft has been able to grow internationally and is currently serving a billion consumers in 150 countries with around 98000 employees. The company sales produced outside of the United States range from 25 % in a fast growing food business.
Kraft Food Inc. manufactures and markets packaged retail food products such as coffee, confectionary, powdered beverages, juices, cheese, cheese products, processed meats and convenient meals. These products focus on main consumer sectors such as convenient meals, snacks, beverages under major brands like Kraft. The company’s key focus is on the production of foods that fit consumers in terms of health. These products are sold through several different distribution channels such as the distribution of cold storage facilities, which are company and public operated, deports, and other facilities.
A continuous and sustained market research and evaluation is necessary for Kraft as it enables the company to maintain its market structure status and presence. Kraft performed a market research in various countries with the objective of determining the best product promotion method to adopt in order to reach its target market. The outcome showed that the combination of both print ads and television provided a compelling and robust customer set in the communication grounds. In addition, the research provided evidence that mixed media were the best as they delivered more value for Kraft than a singular advert campaign.
The organization deals in different types of products that are classified under several different categories. In such a case, the focus goes to the Kraft coffee brands. The company is the world largest leader in the coffee sales owning 15% of the world’s global market. Kraft Maxwell house in Canada is the number one selling retail brand while Nabob is the leader in the western Canada and a number two position among the nation. These two coffee brands hold a 32% market share covering the mainstream and coffee premium markets. Single serve coffee pod that has recently been in Europe has led to the Kraft US launch within a month. Furthermore, it is noteworthy that once there is a product launch, a suitable branding, price, and distribution strategies need to be determined.
Target Customers and Target Market for the Product
In the process of launching the coffee pods, Kraft’s main objective was to enable the company to reach a larger market than it had been with ordinary coffee brands. The main operational objectives include a superior brand value, product demand enhancement, aligning consumers with brand portfolios, and increasing the international business. In the process of developing new products, the company has been able to grab an effective distribution network and a good reputation. Such innovative products include the coffee pods that can be able to brew a cup of coffee at a time, which was conceived first in 1978 with the target market being the office users. Out of the office users as the key target group, Kraft has managed to redesign the product with an aim of targeting home users. For example, in 2003, the company managed to introduce these new products in 10 countries in Europe recording 15% coffee makers sales with an expectation of a boost in the sales of the product.
The product has been picked in the market where it makes a 10% sale in the European coffee makers market. In the process of expanding its market, the company aims at distributing its goods in the North American market. A market strategy is needed to help the enterprise make a big profit. The company has a 15% of the market control globally. It owns coffee brands of Maxwell and Nabob. When combined, it constitutes to 32% share in the Canadian market. Although the company’s coffee brands seem to have penetrated so much into the market, they also face competition, especially in Europe. Their main competitor is Senseo that managed to introduce its coffee pods in the market back in 2004. Another major competitor is the German company Melitta that has managed to introduce its six-flavor java pod in Canada. Home café has a strong plan of releasing its pods in the market. In this market segment, there are many competitors rallying. The race is for these companies to introduce new products quickly in the market and take as much preliminary market as possible.
Geoff Herzog is the product manager for Kraft Foods Canada. As a manger, he has learned that Kraft Foods North America has been planning to launch coffee pods in the United States. Kraft owns two coffee brands that are Maxwell House and Nabob as branding strategies. The company aims at the wholesale and retail price for the coffee pods and their flavors to decide whether to use traditional distribution and direct store delivery in order to meet and reach the target market. These brands of coffee selected and developed by the company are based on an effective adverting and promotion strategy with a limited budget (Kraft General Foods 1991).
There are four major coffee brands in Kraft. The first one is One-To-One, a Germany’s Melitta that has joined Salton, the maker of the George Foreman Grill. Together they have made the Melitta One-on-One SSP Machine. The company can brew two sizes of coffee using a filtered system and they can offer a coffee-bar value at home. In the process of fully satisfying the target market, the company aims at changing its spout of the coffee machine in order to make hot or cold tea and coffee. This type of machine is available in Kraft Canada and it has six flavor java pods for sampling (Kraft General Foods 1991).
The Coffee brand is sold in packages of 16 seals of oxygen free foil and weighs 7 grams. They are in the form of three flavors, namely the Arabica medium roast going for 100% each and light roast. Kraft sells its products for home café systems. These cafes use the pressured brewing form of technology delivering a single serving of fresh coffee brewing and in a minute bringing out coffee flavors.
Appropriate Market Entry Strategy
In 2004, the company came up with a strategy of entering a single service coffee pods market and at the same time launching its products in the United States. Being a world leader in the sale and production of coffee on the global market enabled Kraft to secure both 15 and 32% market share globally and in the Canadian market (Dunlap 1953). The aim of the strategy was based on achieving leadership in the markets that it served. Therefore, it pursued it by forecasting innovation, keeping a close eye on the profit margins, and achieving the high product quality. This strategy was to be achieved through the clear performance of a consumer analysis. The key focus of the consumer analysis was on trying to find out the following: who are the consumers, what Kraft knows about them, and what they do not know about them (Kraft General Foods 1989).
Demographically, it is clear that single service coffee pods are bought by consumers from a wide range of socioeconomic backgrounds. Canadians have a world record concerning the known number of coffee drinkers. In addition, coffee is the most popular daily beverage among Canadian adults after water. Among coffee drinkers in the country, 63 % of them drink at least a cup of coffee daily and occasional drinkers of coffee make a clear 83 % of all coffee drinkers (Plutt 1996).
In the process of trying to define who the coffee drinkers were, it was clear to the company that these consumers varied across Canada. The highest number of these consumers was based in Quebec and 53 percent were in the Atlantic region. Coffee sales were high among the Canadians with middle to upper incomes between the age of 25 – 40 years and middle-aged couples. It was also very clear that most of the consumed coffee was at home, thus making the households major coffee buyers. Having analyzed the target market, the company was able to decide whether to introduce the brand in the market or no. The key competitor acquired the competitive advantage in the Canadian market (Kraft General Foods 1990). The company was able to come up with well-defined strategies to remain a hit in the new market entry.
This strategy was achieved through a SWOT analysis. The strength was that the company was recognized globally as a leader in the coffee sales. It was clear that two of its coffee brands led the Canadian retail sales. In addition, there existed a well-established distribution of coffee brands in Canada (Kraft General Foods 2008).
In the launch of coffee pods in the Canadian market, the key weaknesses that Kraft faced concerned the financial constraint with an inadequate financial plan for a promotion strategy for the launch of the product. The target market for the newly launched coffee brand comprised consumers between the ages of 25 to 54 years, but the Canadian coffee existing consumers were over the age of 45 years. Another weakness was that the single serve coffee pods were not compatible with the ones that were in the market (Food selection 1988).
In terms of opportunities, the company had an advantage as there was a market for the products with two thirds of the Canadians that prepared their coffee at home. Through a joint with store delivery programs, the company was able to lower its distribution costs. An immediate launch of coffee pods in the Canadian market would make Kraft the second company entering the market, which is connected with a suggested target market with potential demographics outside the current Kraft’s market (Kraft General Foods 1991).
In any new market the company aims at, there are threats the company faces, for instance, a competitive challenge when other competitors enter the market in a span of three months before the Kraft’s potential launch. Competition from coffee shops and cafes has already existed in the market. There is a time constraint prior to Kraft Foods securing a competitive advantage before other competitors enter the market (Kraft Inc 1980).
As one of its key market entrance strategies, Kraft has a large market share in the Canadian coffee market sale. It has also launched a pod system for Nabob with the recommended US launch. An early launch will defiantly help the company maintain a market share and at the same time penetrate into market segments that are not currently a part of its market. Launching a premium brand will appear in the current SSP target market (Kraft Kitchens 1992).
The target market consists of coffee lovers between the ages of 25 and 54 years with a significant amount of income. On such a basis, there is a narrow market and a limited budget. In such a case, the company needs to utilize the combination of print media and exhibitions through road shows in stores merchandise as a way of promoting the product. Given that these products are new in the Canadian market, tradeshows play a key role in educating consumers on how to use the product. This approach gives an ultimate purchase of products direct from the manufacturer because of thetradeshow timings and the expected competitors’ launch dates (National Institute for Occupational Safety and Health 2009).
Print advertising could allow Kraft to reach its potential customers in the region before the launch of the competitors’ products. This move will also enable the company target well-educated individuals with high incomes as well as households mostly in English and French speaking markets. Prior to the competition launching, store merchandise is another important method to help the company reach its target market. While maintaining a fresh and proper way of presenting Kraft's products to its customers, the company needs to ensure that it has gained control and clear product displays. The above-discussed points are important to Kraft and it is recommended that it adopts them in order to maintain a strong hold in the market (Kraft General Foods, 1988).
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