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Danone Dairy Turkey: Brand Portfolio StrategyKarthik YellapragadaIntroduction:
Danone Dairy Turkey brand portfolio strategy is being analyzed till the end of 2002 and the mission of reignite top line growth and deliver profit for the company” is been taken into consideration as a Marketing Director to drive marketing strategy and to make investment decisions. This report consists of two sections, Analysis” and Decisions”. The first section of analysis is carried out with all the historic data that is available in the case using a framework of MIT Sloan Management Review. Based upon the analysis, the relevant situation analysis and decisions are made and explained in the Decisions section.
Identifying and understanding brands:
Danone group has started its business in Turkey in July 1988 and later joint ventured with Sabanci Holding by acquiring first local brand Tikvesli. It took them a year to launch their own brand into the market, this has given an insight of their strategy that they are targeting on already established brands in the country. Over the next few years they have expanded their own brands with a different variety of yoghurts. These brands can be categorized into four segments in REF _Ref528871863 h * MERGEFORMAT Figure 1: Brand Segments Understood. The plain yoghurt accounts to 95 % of the total consumption. The special yoghurt was targeted for kids who are 30 % percent of the inhabitants and young people.
Figure SEQ Figure * ARABIC 1: Brand Segments Understood
Understanding Each Brand Contribution:Net Product Contribution is taken as a parameter to determine the profitability of each brand in this context. Each brand is compared against its individual Net Product Contribution to its total Net Product Contribution and a percentage is derived to know its significance in the market. All brands are ranked based on their individual NPC’s to understand which brands are contributing the most in terms of profitability. Petit Danone had the most profitability followed by Birtat plain yoghurt, Dane fruit yoghurt, Dannette and Tiksvesli Kaymakli plain yoghurt. This can be visualized in REF _Ref528889504 h * MERGEFORMAT Figure 2:Profit Contribution per BrandFigure SEQ Figure * ARABIC 2:Profit Contribution per BrandUnderstanding Market Position:Though the net sales have increased in global business trend there was a decline in Net Product Contribution and a sharp fall in Total Market Share from 24 to 17 between the year 2000 and 2002.This was due to the economic crisis in 2001 and 2002 where the management has decided to downsize the organization by 35%, closing unprofitable sales regions and by tightening the distribution control. Factors like volume and market share, competitive position and level of awareness have been analyzed for each brand.Volume and Market Share:Each company market share volume and market share value are compared against each other. Due to the economic crisis, Danone has fallen in both brand volume and share value from 2001 to 2002. Local Dairy companies K , S , A and international IDC survived the economic crises by representing their growth in both market volume and market share as shown in REF _Ref528885011 h * MERGEFORMAT Figure 4:Market Share and Market Value per company . These companies are not represented with their sales and expenses in the case to understand their strategy. Value share per segment has also been analyzed for each company where kids fruit yoghurt and adult fruit yoghurt had the highest value share in 2002. This is shown in Figure SEQ Figure * ARABIC 3:Value Share Per Segment . The volumes per brand for Danone is also considered and there is a decrease in trend of volumes from 2000 and 2002 as shown in REF _Ref528885918 h * MERGEFORMAT Figure 6:Volume Trend per Brand.Figure SEQ Figure * ARABIC 4:Market Share and Market Value per companyFigure SEQ Figure * ARABIC 5:Value Share Per Segment
Figure SEQ Figure * ARABIC 6:Volume Trend per BrandCompetitive Position and Levels of Awareness:Most of the brands in Danone have increased their prices by 60 % and due to inflation that rose to 70 % in 2001. This increase in prices trend continued over 2000 even though the inflation was reduced by 15 % this lead to a drop in the NPC and market share.Competitor activities were also closely observed where companies such as IDC, U and K were also planning to launch fruit yoghurt which is Danone’s key contributing segment. Company A is also planning to relaunch fruit yoghurt. All the competitors have started offering larger discounts and promotions. They are also taking measures to expand their distribution channels. In terms of awareness, only three out of eleven brands in its portfolio have been made into the study of brand awareness during 2002. Those brands are Danone, Tikvesli and Birtat. This is indicating that Danone must increase its foot print in terms of awareness in the households and markets. In terms of brand preference, Danone is constituting only around 15 to 16 % in the market. As Danone is doing good in adult fruit yoghurt, the decision of launching the same segment by other companies would give a competition to Danone in coming years.
Brand Overall Contribution
Danone Dogal Plain Yoghurt Medium
Ciftlik Plain Yoghurt Low
Food Services Low
Tiksvesli Kayamakli Plain Yoghurt High
Petit Danone High
Danone Fruit Yoghurt High
Danone Flavored Yoghurt Medium
Danette High
Tiksvesli AyranMedium
Birtat AyranMedium
Milk and others Low
Therefore, the analysis carried out for each brand in terms of contribution and market performance and rated from high to low considering its market volume, market value and awareness positions. This is represented in the below table with overall contribution..
Decisions:Situation Analysis:The economic down fall and high rise in inflation have made Danone management to raise their prices at an average of 60 % in 2001. The rise in prices continued in 2002 and this resulted in down fall of profitability and market shares. At the same time, since Turkey had lot of private labels in dairy business where products being offered at cheaper prices was jeopardizing Danone market growth and existence. The control measures that are introduced in distribution channels is throwing Danone into even more tricky situation as consumers are attracted towards lower prices. At this time Danone should not have increased prices at this extent and decided to close its distribution channels. This will stop Danone from being exposed to customers as there will be no support on expansion of business due to lack of people and channels. The strategy of Danone should have been in opening more channels to reach people across the country and try acquiring tiny non organized trading companies.
Portfolio Analysis:
Prioritization:As each brand in the portfolio has been divided among high contributor, medium contributor and high contributor as shown in REF _Ref528889504 h * MERGEFORMAT Figure 2:Profit Contribution per Brand. All high contributors Petit Danone, Danette, Tikvesli Kayamakli plain yoghurt, Birtat plain yoghurt are given with number 4 except Danone Fruit Yogurt to optimize and develop cost saving initiatives to make this brand sustainable in long term. Danone Fruit yoghurt is given number 1 (push to the limit) to prioritize in terms of marketing and pricing in making it blockbuster in long term. This is because other competitors like companies IDC, U and K are launching similar product. This may have competition in 2003. So, this brand is specially considered to be given as 1.
The medium contributors like Danone Flavored yoghurt, Tiksveli Ayran , Birtat Ayran , Danone Dogal Plain yoghurt are given 1 to make them the blockbusters.The low contributors Food Services, Citflix plain yoghurt and Milk & Others are decided to be given 5 and discarded as they are burden at this moment to the company. The new brands Actimel and Activa are decided not to be launched after the crisis as company needs to recover from the economic crises and expand its foot print in the market. So, this is considered not as right time to launch a new product in the market REF _Ref528894106 h * MERGEFORMAT Figure 7:Brand Prioritization.Figure SEQ Figure * ARABIC 7:Brand PrioritizationIndustrial Investment budget:Out of 11 million allocated budget, 6.75 million Local Currency is proposed to spent on Made in Turkey I” project for Danone Petit brand as it had the largest Net Product Contribution. If expenses over this brand can be reduced, this brand is expected to outperform in terms of profitability by cost saving. The benefit of this investment would give a leverage on tax and duty benefit by cutting them off as this will be made in Turkey. As new packaging hall expense of 2.25 million is inevitable, the remaining budget will be 2 million. The optimal way of using this 2 million can be on More” project in increasing capacity of Danone Dongal brand 15 million to 50 million. As this brand is given 1 (push to the limit) in portfolio strategy, increasing its capacity is expected to compliment the strategy. This representation can be seen in REF _Ref528894217 h * MERGEFORMAT Figure 8:Industrial Investment Proposal.
Figure SEQ Figure * ARABIC 8:Industrial Investment ProposalBrand Decisions:
Brand Pricing Proposal:Petit Danone, Birtat plain ,Tikvesli Kayamakli plain yoghurt and Danette are doing well in terms of contribution and market propositions. Hence these brands are decided to continue with same price by giving an option 5.Danone Fruit yoghurt is expected to face a competition with other brands as discussed earlier. So, this brand is decided to be reducing its price in the market to stand loud in the market. Danone Flavored yoghurt had 9 % increase from A1 to A2 which is relatively lower to other brands. So this brand is decided to increase its price by giving an option 3 in the strategy for the coming year. Danone Dogal, Tikvesli Ayran and Birtat Ayran are decided to increase its price in line with inflation giving an option 1 as these are medium contributors and these were given ‘push to limit’ in portfolio strategy which is expected to enable the brands in increasing customer consumption. Brands like Citflix, Food Services and Milk & Others are anyways expected to be discontinued and thus these are decided to be kept at same price. This representation can be seen in REF _Ref528895844 h * MERGEFORMAT Figure 9:Brand Pricing Proposal
Figure SEQ Figure * ARABIC 9:Brand Pricing ProposalMarketing Budget Proposal:Petit Danone, Birtat Plain and Birtat Ayran yoghurts are performing well in terms of contribution and market and are decided not to invest in their marketing budget. Danone fruit yoghurt, Dane flavored yoghurt, Tiksveli Kaymakli plain yoghurt are having good potential to raise as block buster brands and so these are decided to have 10 % budget investment in 2003. Danone Flavored yoghurt , Danone Dogal plain yoghurt and Tiksveli Ayran yoghurts are close to outperforming brands. These brands are decided to have 20% budget investment in 2003 to enable them as blockbuster brands. This is represented in REF _Ref528920456 h * MERGEFORMAT Figure 10:Marketing Budget Proposal.
Figure SEQ Figure * ARABIC 10:Marketing Budget Proposal

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