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Transcript of Andrew Mihelakis Case Study.pdf
FACULTY OF BUSINESS AND ECONOMICS
ASSIGNMENT COVER SHEET
Student’s name (Family name)
Mihelakis
(Given names)
Andrew Anthony
ID number 22619364 Phone 0415 147 717
Unit name Marketing Issues in packaging Design Unit code MKF 2401
Title of assignment Assignment 1 – Case Study
Lecturer/tutor Ms Narelle Pittard
Is this an authorised group assignment? Yes No
If this submission is a group assignment, each student must attach their own signed cover sheet to the assignment.
Has any part of this assignment been previously submitted as part of another unit/course? Yes No
Tutorial/laboratory day & time Wednesday 10am
Due date 19/08/2015 Date submitted 19/08/2015
All work must be submitted by the due date. If an extension of time to submit work is required, a Special Consideration
Application (In-semester Assessment Task) must be submitted.
Has an extension been approved? Yes No If yes, please give the new submission date ….…/..…./…….
Please note that it is your responsibility to retain copies of your assessments.
Intentional plagiarism or collusion amounts to cheating under Part 7 of the Monash University (Council) Regulations.
Plagiarism: means taking and using another person’s ideas or manner of expressing them and passing them off as one’s
own. For example, by failing to give appropriate acknowledgement. The material used can be from any source (staff,
students or the internet, published or unpublished works).
Collusion: means unauthorised collaboration with another person on assessable written, oral or practical work and
includes paying another person to complete all or part of the work.
Where there are reasonable grounds for believing that intentional plagiarism or collusion has occurred, this will be
reported to the Chief Examiner, who may disallow the work concerned by prohibiting assessment or refer the matter to
the Associate Dean Teaching and Learning.
Student Statement:
• I have read the University’s Student Academic Integrity Policy and the University’s Student Academic Integrity: Managing
Plagiarism and Collusion Procedures.
• I understand the consequences of engaging in plagiarism and collusion as described in Part 7 of the Monash University
(Council) Regulations.
• I have taken proper care of safeguarding this work and made all reasonable effort to ensure it could not be copied.
• I acknowledge that the assessor of this assignment may for the purposes of assessment, reproduce the assignment and:
i. provide to another member of faculty; and/or
ii. submit it to a plagiarism checking service; and/or
iii. submit it to a plagiarism checking service which may then retain a copy of the assignment on its database
for the purpose of future plagiarism checking.
• I certify that I have not plagiarised the work of others or participated in unauthorised collaboration when preparing this
assignment.
Signature ...............Andrew Anthony Mihelakis........................................ Date…………19/08/2015…………
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Nescafe Instant Coffee – Case Study Andrew Mihelakis (22619364): Wednesday 10am Tutorial
(Nescafe)
Strengths Weaknesses
S1 – Organisational innovation
• First Instant Coffee to hit the market
(Nestle, 2013)
• Quality Coffee Vending Machines (Oh &
Rhee, 2010)
S2 – Strong parent company Nestle
• USD $15.7 billion net profit for Nestle in
2014 (Nestle, 2014)
• Strong distribution channels (Sotto,
1991)
W1 – Not appealing to younger consumers
• 77 year old brand needs revitalising
(Revill, 2014)
W2 – Potentially confusing range of coffee
• 10 different instant coffee products and
their packaging (Nestle, 2008)
Opportunities Threats
O1 – Financial crisis
• Low impact on coffee consumption
(International Coffee Organisation,
2009)
O2 – Fairtrade agreements
• Consumer ‘Fairtrade’ segment (Murphy
& Jenner-Leuthart, 2011)
T1 – Declining coffee consumption in youths
• ‘Café Culture’/Energy drinks (Lewis,
2002)
SWOT Analysis With origins dating back to the year 1930, when their existed a surplus of coffee in Brazil, the need
arose to preserve coffee and simplify its consumption. Stemming from these needs, Nescafe was
born and the world was introduced to instant coffee (Nestle, 2013). Since then, coffee has become
one of the world’s most popular beverages, being consumed by nearly half of the Australian
population (Australian Bureau of Statistics, 2014). Nescafe’s development of instant coffee
demonstrates its organisational strength of innovation [S1], and the creation of the new
instantaneous coffee market, saw Nescafe achieve a first mover advantage, which has paid off in
terms of a 47% market share (Revill, 2014). This strong market position is reflected on Nescafe’s
supermarket shelf positioning [see Appendix A], where the Nescafe branded products not only take
center eye-level positioning, but across four shelfs. The Nescafe brand is easily distinguished
amongst competitors through the use of a bold logo and primary packaging design. The package
outlines pride in Nescafe’s product, through use of transparent glass container. However the
different products in the Nescafe range can be confusing [W2], which will be addressed further into
this case study.
Further tying in with the organisation’s strength of innovation, is its ability to think outside the box
for coffee consumption. The introduction of Nescafe vending machines is a prime example of this.
Parent company Nestle formed an alliance with the Coca-Cola Company, in order to leverage on
Coca-Cola’s vending machine developmental strength (Oh & Rhee, 2010). The result was a vending
machine which dispensed freshly made Nescafe coffee for the busy consumer segment. This placed
Nescafe coffee in locations where consumers would go to seek beverages, but there wouldn’t have
otherwise been either any hot coffee beverages or any of Nescafe’s direct competitors. Vending
machines could also provide advertisement in the form of signage which stood out for Nescafe.
The final strength for Nescafe lies in its parent company Nestle [S2], which sees annual sales of
almost $100 billion USD and annual profits of $15.7 billion (Nestle, 2014). With a portfolio of many
different brands under its belt, learning effects of packaging design, marketing and distribution can
be maximised and applied to any the brands in its portfolio. What this means for Nescafe is that it
has the financial and managerial backing to accomplish any of its set objectives. The strength of
Nestle as a parent company also directly benefits Nescafe’s distribution network. As one of the
largest global distributors, Nestle allows the Nescafe product range to appear in retailers all around
the globe, from massive 700,000 square foot distribution centres to supply the US market, to the
supply of coffee to rural India (Sotto, 1991).
As the Nescafe brand turns 77 years old, it outlines a weakness that Nescafe needs to address. Over
its lifespan, many new trends and new ways for consumers to consume their coffee has been
created [W1]. This is only amplified with the fact that the 180 countries where Nescafe is sold are
vastly different geographical markets, which each view instant coffee very differently. An example of
this is instant coffee still being a luxury in developing countries. Nescafe has slipped behind the eight
ball due to the rise of new and younger competitors, coffee shop chains and new methods of
consumption such as coffee pods. This has caused Nescafe to drop its share to 44.3% of the instant
coffee market, from its peak in 2004 (Revill, 2014).
In the Nescafe product range, there exists 10 different instant coffee products (Nestle, 2008). There
also exists the weakness where potentially consumers will not be able to distinguish between the
different products during the decision-making/purchase process. By looking at a typical store shelf
showcasing Nescafe products [Appendix A], it is easy to distinguish the Nescafe brand as well as the
different products in the range (separated mostly by colour). However it is not possible to obtain
more information by simply glancing over the product range. This complicates the decision making
process for consumers, potentially driving consumers away from Nescafe and to other brands.
In 2009 we observed the global economy follow the US and plummet into a state of economic crisis.
This affected the way consumers spent their money, ultimately having to be more careful during the
decision making process and watching what they spent their hard earned money on. While the
Australian market performed well during the original crisis (Perlich, 2009), there also was the other
179 geographic markets where Nescafe didn’t necessarily perform as well. However despite this,
while global coffee prices initially fell, they were quick to recover as food and beverage sales fared
well compared to non-food and beverage products during the crisis (International Coffee
Organisation, 2009). The report by the International Coffee Organisations (2009) also looked at
different geographical markets, noting that the decrease of coffee prices in some countries
stimulated its consumption to levels greater than before the crisis. This presents a unique
opportunity for Nescafe, as it has not only the potential to be “GFC proof”, but gain new customers
[O1].
The second opportunity to present itself from the external environment to Nescafe, is the Fairtrade
certified movement of coffee. Fairtrade refers to the coffee beans being sourced ethically, such as in
environmentally sustainable farms, where workers are paid a minimum wage (Murphy & Jenner-
Leuthart, 2011). Fairtrade certified coffee is a niche category, gaining in popularity. Research
performed by Murphy & Jenner-Leuthart (2011) concluded that cafes where Fairtrade coffee was
sold and promoted had higher levels of customer satisfaction. These finding could be applied to
instant coffee, as Nescafe has no notable Fairtrade promoted and labelled product [O2].
Whilst opportunities exists in the external environment, there too also exist threats for instant
coffee companies. The largest threat stemming from the decline in the average consumer
consumption of cups of instant coffee, from 1.5 cups a day to 1.3 cups (Lewis, 2002). This is also tied
in with the ‘café culture’ trend of consuming coffee at coffee bars such as Starbucks, who have more
than 19,767 stores globally (Starbucks, 2013). The youth of today simply are drinking other
caffeinated beverages such as energy drinks and consuming coffee in Cafes rather than at home [T1]
(Lewis, 2002). This is also tied closely with Nescafe’s [W1], older brand that needs revitalising to
appeal to youths.
Recommendations The first recommendation I can provide to Nescafe, is to address the opportunity that Fairtrade
certification has on consumers [O2]. This can be achieved by leveraging Nescafe’s parent company
Nestle, to back a new product line and associated marketing and promotional activities for a
Fairtrade certified blend of instant coffee, directed towards the consumer segments who are
younger [W1] yet passionate about global ethical issues. The packaging of this new product will
ultimately reflect first and foremost its dedication to Fairtrade and being ethically sourced, and
stand out from the existing product range from Nescafe [W2]. This new product should stand out
using a different container with light green tint to the glass and bright green lid, whilst maintain the
traditional look of a Nescafe package to maintain common branding between products in the
Nescafe range.
Whilst this new product will need to be priced higher than current Nescafe offerings to supplement
the cost of being Fairtrade, Nescafe is currently not the most expensive instant coffee brand on the
shelf [Appendix A], meaning that it can justify a more expensive product. Distribution channels of
Nestle [S2] are able to ensure that this product hits the markets where it is most likely to sell, such as
developed nations, whilst avoiding releasing the product into developing markets as the premium is
less likely to turnover.
The second, and last recommendation that I can provide for Nescafe, stems from the need to appeal
to the youths of today [W1]. Whilst the brand is old, the need to appeal to the younger customer
segment is undeniably important for the company. The threat of the ‘café culture’ and rise of energy
drinks [T1] can be combatted in several different ways. Firstly leveraging the strength of parent
company Nestle [S2] to help promote Nescafe directly to younger generations. But Nescafe should
also consider either expanding outside the instant coffee category to a Nescafe branded cold coffee
based energy drink, or by forming an alliance with a café chain and providing a Nescafe branded
coffee product which can be ordered and consumed in store. By aiming at the consumption methods
of youths, an emotional connection to the Nescafe brand can be formed, later allowing for the
potential to more easily move them onto a Nescafe instant coffee product.
Appendix
Appendix A – Photo of product on supermarket shelf with competitors
Photo by Andrew Mihelakis – No reference required.
References Australian Bureau of Statistics. (2014, July 2). Non-alcoholic Beverages. Retrieved August 14, 2015,
from Australian Health Survey: Nutrition First Results - Foods and Nutrients, 2011-12:
http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/4364.0.55.007~2011-
12~Main%20Features~Non-alcoholic%20beverages~701
International Coffee Organisation. (2009). The world economic crisis and the coffee sector. London:
International Coffee Organisation.
Lewis, E. (2002). Grinding profits from beans. Brand Stratergy(166), 18-21.
Murphy, A., & Jenner-Leuthart, B. (2011). Fairly sold? Adding value with fair trade coffee in cafes.
Journal of Consumer, 28(7), 508-515.
Nescafe. (n.d.). Photograph of Nescafe Classic product. Retrieved August 14, 2015, from
http://www.nescafe.com/product_details_en_com.axcms?Id=72
Nestle. (2008). Nescafe. Retrieved August 14, 2015, from Coffee Products:
https://www.nescafe.com/products_flash_en_com.axcms
Nestle. (2013). Coffee History. Retrieved August 13, 2015, from Nescafe:
http://www.nescafe.com/coffee_history_en_com.axcms
Nestle. (2014). Nestle Publications. Retrieved from Nestlé Annual Report 2014:
http://www.nestle.com/asset-library/documents/library/documents/annual_reports/2014-
annual-report-en.pdf
Oh, J., & Rhee, S.-K. (2010). Influences of supplier capabilities and collaboration in new car
development on competitive advantage of carmakers. Management Decision, 48(5), 756-
774.
Perlich, H. (2009). The impact of the GFC on Australia as a 'dual economy'. Journal of Australian
Political Economy, 64, 65.
Revill, J. (2014, June 16). The Wall Street Journal. Retrieved from Nestlé Seeks to Revitalize Nescafé
Brand: http://www.wsj.com/articles/nestle-seeks-to-revitalize-nescafe-brand-1402932845
Sotto, C. M. (1991). Nestle building big complex here. Atlanta Business Chronicle, 14(26).
Starbucks. (2013). Annual Report 2013. Retrieved August 14, 2015, from Starbucks News:
https://news.starbucks.com/uploads/documents/Starbucks_Fiscal_2013_Annual_Report_-
_FINAL.PDF