Marketing Assignment II

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Statement of Originality

Damith Danushka Siriwardana

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Accounting for Decision Makers I hereby Confirm that the work presented here in this report and in all other associated material; is wholly my own work. And I agree to assessment for plagiarism

Signature:

Date:........

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Acknowledgement

I am heartily thankful to the lecturers of the Marketing module, Mr. Chris Kariyawasam and Mr. Ravi Liyanage and Mr. Ravi Jayawardana whose encouragement, supervision and support from the preliminary to the concluding level enabled me to develop an understanding of the subject. Next my heartfelt gratitude goes out to my parents for giving their hearts out and for staying with me whenever I needed a hand to make this Report a successful one. Last, but not least, I would like to offer my regards and blessings to all of those who supported me in any respect during the completion of the report. Thank you!!!...

Danushka Siriwardana.

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Executive Summary
"Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value."-Philip Kotler As the International Marketing Manager of Dilmah PLC. Of Sri Lanka; while the Managing Director is also concerned about the limited growth potential of the market; hence the company has decided to move a step to the international market in order to expand and grow its market. The main task as the marketing manager of Dilmah, with the instructions given by the Managing Director, is to propose an International marketing plan to enter the most potential market which is the Chinese tea market which would offer the greatest growth potential in the next two years. In order to enter to the Chinese tea market, Dilmah has come with a strategic marketing plan to introduce the Dilmah Freshleaf Ready to Drink Iced tea to the consumers in the segment of age between 10 years and 29 years old who would fall mostly to the Generation Y and Millennium Generation category. The report will developed by assessing the companys current situation by carrying out a situational analysis and by analyzing the market growth of the Tea industry. And then the report will give the analysis of the Segmenting, Targeting and positioning strategies which the company has developed for the new product. At the next part of the report, the writer will illustrate the marketing mix strategies for the product while giving its Financial Projections & Evaluation Measures with Projected Budget for Dilmah Freshleaf Iced Tea for the years 2013 2015. The Export Potential will be analyzed for the product and the companys implementation plan for the new product which is to be launched will be illustrated and finally the writer will give its conclusion.

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Table of Contents
Background ............................................................................................................................................. 6 Dilmah Freshleaf Ready-To-Drink Iced Tea .......................................................................................... 6 Situational Analysis of Dilmah ............................................................................................................... 7 SWOT Analysis: ...................................................................................................................................... 7 PEST Analysis ........................................................................................................................................ 9 Competitor Analysis for Dilmah Porters Five Force Model Analysis ............................................. 11 Market Growth of the Industry ............................................................................................................. 14 STP Analysis for Dilmah Freshleaf Ice Tea Segmenting, Targeting, Positioning ............................. 16 Marketing Mix Strategies ..................................................................................................................... 18 Financial Projections & Evaluation Measures ...................................................................................... 20 Projected Budget for Dilmah Freshleaf Iced Tea (2013 2015) ......................................................... 20 Export Potential .................................................................................................................................... 21 Implementation Plan ............................................................................................................................. 21 Conclusion ............................................................................................................................................ 22 Appendices............................................................................................................................................ 23 Reference List ....................................................................................................................................... 24

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Background
The MJF Groups origins date back to the 1950s just after Sri Lanka, then Ceylon, became independent from British colonial rule. Founder of the Group, Merrill J. Fernando has devoted a lifetime to tea, the core business of the Group. Merrill heads the family managed Group to this day, with his two sons and a dedicated team of professionals. The Group retains Merrills early emphasis on his vision for bringing quality back to tea and his commitment to integrity, tradition and personalized customer service. The Groups Dilmah brand, coined by the Founder from the names of his two sons, Dilhan and Malik, is known for its quality in almost 90 countries around the world. Dilmah has revitalized a category in decline through genuine innovation, quality and freshness and is widely credited with halting the trend towards commoditization in tea. (Dilmah, 2013)

Dilmah Freshleaf Ready-To-Drink Iced Tea

The state-of-the-art RTD plant gradually took shape, culminating in completion and official launch in August 2007. The product is determined by the conservation of the health benefits of tea, while keeping significant concentration taste of the tea, and ultimately invented the formula which certainly met these aspirations. Dilmah Freshleaf Iced Tea is made from fresh leaf that is handpicked on-site and only the tender shoots are selected, sanctioning for a fresh as enabling utilization of tea in the manufacture of Dilmah Freshleaf RTD Iced Tea by converting the tea leaf to a tea concentrate will be finished within 24 hours. This seals the rapid production of time in the healthy properties of the product and ensures freshness that no substitute brand could match. (Pressroom-Dilmah, 2012)

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Individual Assignment Freshleaf Iced Tea will be a bottled beverage and positioned as the only fresh ready to drink tea product offered to the market. The drink is. The beverage is offered to the consumers with enhanced fruit flavors such as Lemmon, Berry and Peach flavors which will bring an absolutely unique drinking experience to its consumers. It will be placed as an alternative to traditional tea by making consumers feel funky and unusual great taste of even a real fruit juice in a convenient and attractive packaging. Dilmahs Freshleaf Iced Tea will play a strategic role by focusing on four main objectives: To expand its core business in the Fresh Tea market by creating high value toward customers. To be at the forefront as the market leader in the Tea

industry, by offering innovative products and launching successful products to the market. To reinforce and satisfy the expectations of the more audacious Millennium Generation and Generation Y consumers with a new eye-catching product which functions towards relaxation; To become the market leader in the Fresh Tea segment by entering to touch the functional drinks segment with an increased market share

Situational Analysis of Dilmah SWOT Analysis:

Strengths: Strong Brand Image in the Global Tea Industry The levels of anti-oxidants in Dilmah Freshleaf are far higher than most brands in the market No preservatives are added and Freshleaf uses only natural flavors and contains no chemicals. Its healthfulness when compared to popular colas due to its reduced sweetness.

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The Ready-To-Drink tea market is presently the fastest growing segment of the tea industry, monopolized by multinationals. Most Ready-To-Drink teas in the market have little or no tea character. At best the tea in them is but a natural colorant. The Dilmah project on the other hand offers a better quality RTD, produced from freshly picked tea leaf, from their own tea gardens, retaining the quintessential characteristics of Ceylon Tea.

Weaknesses: Raw material source supplied depends on many factors, such as weather, natural disasters, increasing in fertilizer price, etc. Dilmah as an imported product competing against brands packed in that country makes the product very expensive. Brand dilution

Opportunities: In the long run there is going to be a lucrative market for Ice-Tea and flavored tea. Market tea products to the Young population The living standard is increasing very sharply Expansion in other countries Introducing of more flavors

Threats: Strong competition in the Market Internationally increasing tea prices Political conditions in the country may be obstacle to exports High inflation in the country can negatively affect the brand Substitute Products such as Soft drinks can be a threat to the market

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Marketing Assignment II SWOT Matrix: Strength Weakness Opportunity - Threats

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Backed up by a strong brand name, easier to develop its market. Based on the existing distribution networks, expand its market easily. Do market research to set the suitable price for the living standard of people. Deal out the product more widely to tourism cities. Create more flavors to attract a large number of populations, especially the youth, who are willing to try something new. Take the innovation in some features of the product to attract more customers. Reduce the production cost such as transportation cost by cooperating with other SBUs. Create new flavors, which are suitable for each segment, Have plans to store material enough in the case of bad weather and natural disasters.

PEST Analysis
Before entering the new market, Dilmah also have to understand the four main factors that impact on entering to the new market externally by countrys politics, economic situation, social and technological impact. Since it needs to ensure that the new target market is the right market for Dilmahs product and marketing strategies must be appropriate, effective and efficient, with new target market.

Political & Legal Environment So far, China has been under the communist party, therefore its political situation is very stable. Stabilities of the political situation of the country could facilitate and lead to augment direct foreign investment. When the foreign direct investment of the country increase the country's GDP and employment opportunities also would automatically increase. Therefore, there will be reduction in unemployment rate and decline in inflation. Here's a thing we have to consider; the rules and regulations are not very transparent and absolute in China. In this business, Sri Lanka and China having free trade agreement between each other is one of the

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biggest advantages of our product. Consequently, no high trade there are barriers such as taxes, traffic, licensing and customs fees not be too high in this business. It is important to understand the laws of copyright and licensing in planning market entry in an emerging market. Dilmah needs to use intellectual protection laws to protect its business model and the brand from being illegally copied in China.

Economic Environment: We can see in the economic factors as China is the largest producer of tea and a world's largest recipient of foreign capital. In China joined the WTO since 2001 and has contributed to a rapid increase in exports, imports and foreign direct investment. But when we studied their domestic competitors, the possibility that we can see is our product has even 70,000 thousand Chinese tea companies are operating in the country; there is no known global brand in the international tea industry. Besides China although not a traditional way to serve tea, iced tea has increased its popularity in even rural areas since the 1980s with canned or bottled tea. Many varieties of tea, comprising green tea are available, packaged and sold in stores. Based on these factors can be assumed, as the Chinese market will be a great demand for Freshleaf Iced tea.

Social & Cultural Environment: China is the country that has the world's largest population and has more than 13 million people. One of the most important social and cultural factor have supported us is entering the Chinese tea market, representing almost 95% of Chinese people have the habit of drinking tea. Dilmah Freshleaf Iced tea is also rich in nutrients and has many health benefits, especially which helps prevents diabetes, cancer, and many other diseases; the iced tea also makes relax and fulfills your thrust at any time . Dilmah Freshleaf Iced tea is not only for both gender, ranging all ages and also for daily consumption.

Technological Environment: Nowadays china become transform from manufacture country to innovation country. As a consequence, Chinas economy also shifts from labor intensive economy to capital intensive economy. Being highly labor intensive technological factors is least affecting the tea industry MBA-7003 -02-UWIC-MBA-MT-10005717

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and also the Technological factors of China might not affect much to Dilmah Freshleaf Iced Tea whereas the product will be manufactured in Sri Lanka and exported to China. Incorporating the highest technological standards in its production of tea In Sri Lanka, Dilmah is a symbol of excellence giving a perfect bland of quality and care in every product it offers. Besides Using cutting edge technology and state-of-the- art equipment, Dilmah produces the Ready-To-Drink tea of the highest tea character, using freshly picked tea leaf from their own tea gardens, rich in antioxidants, with no chemicals used in manufacture.

Competitor Analysis for Dilmah Porters Five Force Model Analysis

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Marketing Assignment II Threat of Substitutes MODERATE

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Even though tea is consumed the number one drink in China, soft drinks, coffees, health drinks are main rivals, cola spends on advertising facilitates its penetration into the lifestyles of consumers in China, especially among the younger groups . Recent emphasis on coffee outlets can also increase coffee consumption.

Bargaining Power of Suppliers MEDIUM Labor is the biggest cost element. While the job is unionized, the non-availability of other employment opportunities in areas where the tea plantations maintained possess their bargaining power in check.

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Marketing Assignment II Inter-firm Rivalry INTENSE

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The low growth in local demand regional fragmentation, aggressive competition in export markets together largely fixed cost structure with the intensity of competition in the industry competition bought leaf tea producers local brands is another factor that affects the Player of the Century.

Bargaining Power of Buyers - LOW The demand instigates from millions of household where consumption is widely distributed while Dilmah being a consumer product; subsequent in low bargaining power in the hands of any single customer.

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Marketing Assignment II Barriers to Entry - MEDIUM

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Very along the value chain of the industry and high in the production of the tea leaf, it is low when it comes to retailing processing and distribution. As trade and distribution is driving demand. The strength of competition in this segment is driving the whole competitive force of the industry.

Market Growth of the Industry

Canadean's, "Iced/RTD Tea Drinks Market in Asia to 2017: Market Guide" provides in-depth details on the trends and drivers of the RTD Iced tea market in Asia. The research shows that the RTD tea is often gaining popularity due to quick and busy lifestyle, and as a substitute for carbonated drinks. RTD tea is especially sought after consumers in the East as a health drink and it makes the consumer more alert. Knowing more about the health benefits of drinking tea as an antioxidant, growing population makes busy lifestyles and increase of disposable income where consumers are opting for RTD tea. The negative effects of carbonated drinks are another factor for the shift in demand towards the RTD tea products. The winning imperative of the industry is the distribution alliances which is helpful in developing the untapped market, but also to upsurge product visibility. The old custom of drinking hot tea and higher prices for RTD tea are the inhibiting factors. The global market for RTD tea in terms of revenue is valued to be worth approximately $ 69 billion in 2011 and projected to reach $ 125 billion in 2017, budding at a compound annual MBA-7003 -02-UWIC-MBA-MT-10005717

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growth rate estimated up to 10.9% from 2012 to 2017. The largest has being the Asia-Pacific region. The demand for RTD tea market is expected to increase in the North America due to increase of health awareness and the harmful effects of carbonated drinks. According to Euromonitor International, RTD tea has been identified as one of the categories most likely to show resilience over 2009-2012. RTD Tea perhaps relishes the largest health claim over all soft drinks, with the natural antioxidant health benefits of tea provided are well communicated by the manufacturer and is gradually understood by the consumers. Health and Price are the two important factors when it comes to purchase decision.

Source: Euromonitor International

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STP Analysis for Dilmah Freshleaf Ice Tea Segmenting, Targeting, Positioning
Market Segmentation Segment identification: Dilmah Freshleaf Ready to Drink Iced Tea will be established within the Ready to Drink Tea sector. Segment needs: The product will accommodate to both social needs (perception of a social, fun drink with a sense of belonging within peer consumer groups) and physiological needs of the consumers (hydrating and nutritional value). Segment Trends: Current trends include the abandonment of junk foods and carbonated drinks; the emerging interest in healthier products / benefit also for "body and mind", the trend is the availability of on-the-go products for the consumption for people with an active lifestyle, along with the trend towards personalization by adapting (or for drinks which seeks a variety in a wide introduction of flavors).

Segmentation Variables and Breakdowns for China Consumer Market of Dilmah Freshleaf Iced Tea
Main Dimensions Geographic Segmentation Variables Region Breakdowns Nationwide (all provinces and territories) with emphasis on urban areas and adapted

strategies for all geographical groups Density Climate Demographic Segmentation Age Urban, suburban All (East, West) 10-29 years old (teenagers, studying age and young adults) Gender Income Occupation Male and Female All under $30000 Students; new graduated; new workers; young professionals

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Marketing Assignment II
Race All:

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Asian, Black, White,

Native; other; with adapted strategy for Asian consumers already familiar with Tea Psychographic Segmentation Personality Brand conscious, anchored in popular culture, inclined for differentiation sophistication, very and tolerant

towards multiculturalism and internationalism (open-minded), quick maturation with modern products Lifestyle Most of them dependent on parents, responsibilities, influenced active life, by peer no major highly groups, of

importance

school, work and social life Behavioral Segmentation Benefit sought COMMUNICATION BENEFITS -Nutritional information -Informational text on history of product FUNCTIONAL BENEFITS -Healthier than soft drinks -Convenient, easy to take out PERCEPTUAL BENEFITS -Quality/Premium price -Social standing/good-looking Usage Rate Seasonal (peak in summer), daily-basis, weekly basis Usage Status Non-user, regular user (current user through existing bar-shops) Loyalty Status None, medium, strong

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Marketing Assignment II Positioning strategy

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The only Dilmah Freshleaf Ready to Drink Iced tea available. Funky & eye-catching bottle, functional packaging, premium-priced, cool, new and unusual, unique drinking experience, aspects of play (Berry, Lemon, Peach), variety of flavors, sweet, refreshing, for hip & young people, healthier alternative to heavy-sugar drinks.

Marketing Mix Strategies

Product Core benefit: Scientific researchers have attested tea is an essential and healthy drink. Customers buy Tea to not only satisfy their thirsty; but also hope to find a healthy body in the bottle. Brand name: Dilmah needs find clients to sponsor the product in order to catch up the market initially, and a good image in the customers mind before. Packing: Tea has four types of packet, which are 500ml, and 1000ml, and 500ml Plastic Bottle (on process). A Dazzling Orange color and the natural green color of tealeaves and the eye-catching fruit colors are chosen to decorate for every packaging. Quality level: No preservatives are added and Freshleaf uses only natural flavors and contains no chemicals. Dilmah tea is produced from freshly picked tea leaf, from their own tea gardens, retaining the quintessential characteristics of Ceylon Tea. So the quality of the product is highly guarantied and goes beyond the customers expectations.

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Marketing Assignment II Flavors: At present, Dilmah Freshleaf Tea has introduced three varieties of flavor: Berry, Lemon and Peach flavored Iced Tea. Dilmah will look into more flavors as soon as they catch the China market. These three flavors will offer the consumers the best taste of fresh tea along with the

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mouthwatering fruity flavors. Features: Tea has reflected the first mover in the readyto-drink tea industry in China, so it is a huge competitive advantage for the product itself.

Price "The delivery of a product worthy of 'budget' customer Dilmah is the message sent to customers. The price of the product will be higher than other soft drinks, since the imperative high quality of the product involved. Price - demand relationship approach can be applied Most of the consumers ponder that tea is a health conscious beverage; consequently the price of the product appears to be a less influential factor in its application. When the launch of the product, a promotion price is will be applied in order to entice customers attention in the particular area. Place Dilmah has its own distribution channels; they will use the intensive distribution strategy for the product in order to make it widely available. For instance, in countries such as Australia, USA, and European countries Dilmah uses its own distribution channels where the customers believe in manufacturer own brand and distribution. In certain countries such as Jordan, UAE, etc. it uses a native goods distributor to distribute their tea since these customers buy the products which comes from their own distributors. Dilmah has its own outlets named as Dilmah Tea Boutique.

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Marketing Assignment II Promotion

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In order to get the recognition of customers quickly, Dilmah need to invest significantly in advertising for Dilmah Freshleaf RTD Iced Tea. A combination of Push and Pull promotion mix could be practiced. On one side, consumer advertising is directly applied to entice consumers attention. Moreover, Push the product through distribution channels to final customers is also will be used effectively. There will be many methods Dilmah will be using to promote its product. Advertising the product will be advertised by many TV commercials Magazines and newspapers Internet - Internet is a useful tool to advertising; the product will be advertised in the Dilmah Facebook fan page and Twitter. Public relations Dilmah will be sponsoring many events such as sports events, musical shows and concerts and also sponsoring many airlines.

Financial Projections & Evaluation Measures

Selling Price for Dilmah Freshleaf Iced tea will set as at an average Bottle for CH 9.00. As in USD, the selling price will be UD $1.45. So the company has decided to contribute by 10% of its total export revenue of US $5,835,114 whereas the company will gain a US $583.52 Million annually for the 1st two years.

Projected Budget for Dilmah Freshleaf Iced Tea (2013 2015)

Plans Division Time Frame (June 2013 May 2015) Budget Promotion: (Trial drink in public areas) Sales promotion - US $100 million Advertising: Advertising on News Paper and Magazine, including E-news webpages - US $150 Million Public Relations: Co-Sponsor for 2014 Second Youth Olympic Games, 17 Aug 2014 - 28 Aug 2014, Nanjing, China - US $20 Million

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Sponsor for the new drama, Bodyguard which will be available on Viki Channel - US $80 million Monthly scholarship for poor students - US $120 million Product and Market Research: Consumer Feedback Analysis Marketing and Sales Department US $50 million Developing new flavor Marketing and Production Division US $150 million Quarterly Market research Marketing Department US $150 million Distribution channel: Seeking and contracting with wholesalers - Sales Department US $150 million Seeking and contracting with important retailers Sales Department US $80 million TOTAL US $1.05Billion

Export Potential
With a total population of 1,351,657,890 in the end of 2012 and 327,714,000 in our target market (age 10 to 29 years old). So there definitely is a great potential worth to work on. Absolute expenditure on food and non-alcoholic beverages is expected to increase from 1,777 billion in 2005 to 2,154 billion in 2010 (though the proportion of consumer expenditure on this part is decreasing from 28.39% to 25.75% ) Soft drinks industry and the Tea industry is the fast growing industries in China, especially fruit/vegetable juice, RTD tea, and Asian specialty drinks and bottled water have shown a sharp increase during 2000 to 2012. Dilmah RTD tea was first introduced to USA. Soon after its introduction in USA, it became one of the most popular beverages sold Dilmah tea stores on the streets due to the taste and health consciousness. So, it is a good chance for us to enter into the Asian market where the climate of the Asian region itself seems to be mostly warm in most of time throughout the year.

Implementation Plan
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Conclusion
Based on the above-mentioned analysis, Dilmah Freshleaf Ready to Drink Iced tea appears to be a profitable and innovative product with a resilient outlook for market share presence and segment growth opportunity. Upon implementation of the marketing plan, the Dilmah Company will regain increased market shares and claim its targeted situational position of market leader in the Ready to Drink Tea segment as well as keeping its long-standing consumer recognition for innovative and successful product launches in diversified markets.

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Appendices

Dilmah Advertising

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Reference List
Michael Czinkota, R. and Ilkka Ronkainen, A., 2008. International Marketing. 8th ed. New Delhi: Cengage Learning India Private Limited. Kotler, P. and Armstrong, G., 2008. Principles of Marketing (Pearson International Edition). 12th Edition. Pearson Education International. Afaqs, 2013. News Company Briefs Dilmah launches naturally flavoured fruit teas in India. [ONLINE] Available at: http://www.afaqs.com/news/company_briefs/index.html?id=2156_Dilmah+launches+ naturally+flavoured+fruit+teas+in+India. [Accessed 2nd March 2013]. Financial Times, 2013. Sri Lankan iced tea product tastes success in US market. [ONLINE] Available at: http://www.sundaytimes.lk/050410/ft/6.html. [Accessed 3rd March 2013]. Dilmah, 2013. Welcome to Dilmah - the Freshest & Finest Tea. [ONLINE] Available at: http://www.dilmahtea.com/. [Accessed 3rd March 2013]. World Population Review, 2013. Population of China 2012. [ONLINE] Available at: http://worldpopulationreview.com/population-of-china-2012/. [Accessed 4thMarch 2013].

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