Home Delivery Meals Market Analysis

Date of Submission: SEPTEMBER 16, 2015

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1. Introduction

The Information age has brought fourth many changes to modern day business. It has
created an ever developing and improving landscape where customer’s preferences and
interests are far more available and increasingly being catered to. This concept presents
the notion that the consumer opinion or preference is what matters and it is businesses job
to market to that consumer. This era of marketing, sometimes called the relationship
marketing or Collaboration era began in the mid 90’s and is very much customer oriented,
where marketers need to develop and change strategies to fit new markets or reach new
target customers. This focus is fuelled by the notion that customers are in the driving seat,
if they do not like what is offered then they will change brands.

This report will analyse the home delivery meals market, by discussing the primary
demand within the market, the competitive situation within the market and also potential
target markets thereafter.

This report also aims to bring to light how the market could develop and change over the
next ten years, and the opportunities and threats that could occur.

2. Discussion

2.1 Home Delivery Meals Market

There are many reasons to enter new markets, to expand business, realise new revenue
streams, reaction to competition or to gain competitive advantage could all be potential
reasons to enter new markets. The purpose of this expansion should be determined and
examined to identify whether entering this market would be advantageous.

Capturing new markets is an effective way to grow, but if these potential markets were
simple to enter, they would not possess such high potential profits, by using strategies
appropriate for this specific market, businesses can greatly improve the chances of
successfully entering them. According to (Wunker, 2011) the greatest business successes
in history from Standard Oil to Facebook have come from the company’s ability to
capture new markets. Tapping into fresh types of consumption such new products,
customers, or occasions can create lucrative investments and long-term growth for
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companies in old and new industries alike. These markets can generate additional sources
of profit, bolster the position of firms’ related businesses, and keep competitors one step
behind.
The first step to entering a new market is to define the potential market, this process may
seem simple but it is vital (Leboff, n.d.).

The intended customer must be determined and an understanding of the customers’ needs
and what problem is going to be solved should be realised. The potential target customer
is one that prefers the delivery of food to their home, this customer sees the benefit of
home delivery and for them it outweighs the cost of it. The problem that is being
addressed is the customer’s unwillingness to pick up food, this is the basis of the target
market. The reason for the customer’s unwillingness is undetermined, it could be from
lack of enough time to pick up food or it could be that the opportunity cost of that
customers time that could be spent on something else.

With the rise in individual meal plans in New Zealand the target market is segmented into
groups of customers who prefer more specific meals for them, some prefer and need
meals with fat free options or meals that are specially made for children in mind, others
need gluten free options for health reasons or meals that provide them with adequate
amounts of protein and high carb diets still others just want a quick meal that tastes nice.
All these different segments form the market of food delivery. There are those who do not
order home deliveries, these potential customers could be targeted as well to gain market
share. These are varied target markets.

Because this market is willing to pay for home delivery, it could be potentially profitable
to enter it. Providing home delivery meals is an innovative and lucrative business
concept, it is a way to target and benefit customers that would not otherwise purchase the
brand.

The New Zealand home delivery meals market (HDMM) is a market controlled by large
players such as Pizza Hut and Domino’s pizza restaurant. These players can provide there
services at very low prices and some offer ease of purchase with available card machines
on hand at every delivery. The market itself is very lucrative as NZ has a high demand for
fast food and home delivery options. This provides an excellent market to enter as it will
be very profitable if successful. The key will be to differentiate from competition and
gain market share.
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2.2 Primary Demand Within The Market

Primary demand is Consumer interest in purchasing an entire class of products, this is

demand but at the product category level, as opposed to interest in purchasing a single
brand that falls within a product class, it is the consumers interest in the product of home
delivery meals but not from the specific brand, Secondary Demand or selective demand is
demand for alternative brands within product category.
Primary demand is a useful tool in determining the potential profitability of entering a
new market, it is the measure of overall demand for the entire class of products offered by
all brands in the category.

New Zealand (HDMM) has a high primary demand, which boasts well for potential new
comers in the market. Some reasons for Nz’s high demand for quick easy meals could be
the age of our work force, with a large proportion of our working force being considered
quite old, according to (Statistics New Zealand, 2012) The older working-
age population (aged 40–64 years) made up 32 percent (1,430,900) of New Zealand's
population, up from 30 percent in 2002. The population aged 65 years and over (aged
65+) accounted for 14 percent (605,800) of New Zealand's population, up from 12
percent in 2002. These age groups are more likely to have children and have limited time
to prepare home cooked meals every night after work.

Another reason for the very lucrative potential market of (HDMM) is the increase in fast
food consumption among New Zealanders. families are spending more on fast food than
most other things, according to (Auckland Now, 2012) The days of home cooked meals
could be numbered as more New Zealanders turn towards big name burger brands such as
Mc Donald’s, Pizza Hut and Dominos. Each week, the average New Zealander eats the
equivalent of two Big Macs with fries, industry sales figures show that a family of four
spends an average $2000 a year on fast food which is enough for a large plasma TV or
holiday in Sydney. You could also wipe a month's worth of mortgage repayments for an
average $360,000 home loan.
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The figures paint a picture of our increasing reliance on convenience food, which means
home meal delivery is becoming more and more necessary to satisfy consumer demand.
Brands who do not cater for consumer preference are losing sales, and fast. These meals
can also be made healthier to help improve health issues in NZ.

Auckland University population health associate professor (Mhurchu) said. “I think it's
typical of what's happening overseas, people are working more outside the home."
Studies in the United States and Britain show households are increasing the portion of
income they spend on fast food and New Zealand is following suit. “It’s clearly a
concern," (Mhurchu) said. "Research shows fast foods and ready to eat foods tend to be
higher in sodium and more energy dense than those foods we prepare at home. “The
university's National Institute for Health Innovation found New Zealand's fast foods are
saltier than their European counterparts. New Zealanders' average salt intake was found to
be 9g a day, compared with the recommended 5g. Though these figures may be
staggering and quite concerning,

This all presents and very appealing market to capitalise on and with a successful
marketing strategy, a proportion of the expanding market could be capitalised on.

2.3 Competitive Situation

According to (Wells, 2012) A competitive environment is the dynamic external system in
which a business competes and functions. The more sellers of a similar product or
service, the more competitive the environment in which you compete.
“Look at fast food restaurants there are so many to choose from; the competition is high”.

There are two types of competitors that would need to be evaluated and analysed before
entering the market. Direct competitors are businesses that are selling the same type of
product or service as the business. In this context, Pizza Hut would be a direct competitor
because the offering of to-your-door delivery is the same. Indirect competitors are
businesses that still compete even though they sell a different service or product. The
products or services offered by indirect competitors tend to be those that can be
substituted for one another. For instance in New Zealand, one might opt for a sit down
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restaurant meal with family at Cobb and Co instead of ordering a meal over the phone.
Both of these competitors possess potential risks for entry into the market.

The competitive situation or competitive environment of the New Zealand (HDMM) as

stated earlier is a very clustered and saturated market. There are a number of huge players
that control prices and maintain market share. These members could create large barriers
to entry and could price new comers out of business so entering this market could be
potentially disastrous.

The competitive situation of the market is a high risk and very high reward situation,
there are potentially barriers to entry and also great promise and huge upside potential of
increased market share as more and more New Zealanders are eating convenient and easy
to order meals on the internet or phone, after all, everyone has a smart phone these days.

Gaining Competitive advantage

To enter this market, there must be a clear competitive advantage that the other
competitors do not have

According to (Wikipedia Business, 2002) Competitive advantage is a business concept

describing attributes that allow an organization to outperform its competitors. These
attributes may include access to natural resources, such as high grade ores or inexpensive
power, highly skilled personnel, geographic location, high entry barriers, etc. New
technologies, such as robotics and information technology, can also provide competitive
advantage, whether as a part of the product itself, as an advantage to the making of the
product, or as a competitive aid in the business process (for example, better identification
and understanding of customers).

Basically a competitive advantage is the advantage over competitors gained by offering

consumers greater value, either by means of lower prices or by providing greater benefits
and service that justifies higher prices. Porter suggested four business strategies that could
be adopted in order to gain this competitive advantage. The strategies relate to the extent
to which the scope of a business' activities are narrow versus broad and the extent to
which a business seeks to differentiate its products. These strategies are cost leadership,
Cost Focus, differentiation focus and differentiation leadership. Two strategies that are
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applicable to the entering of the NZ home delivery meals market are cost leadership
strategy, and differentiation focus strategy. Cost leadership strategy sets the objective to
become the lowest-cost producer in the industry. The traditional method to achieve this
objective is to produce on a large scale which enables the business to exploit economies
of scale (Riley, 2015).
With differentiation leadership, the business targets much larger markets and aims to
achieve competitive advantage across the whole of an industry. This strategy involves
selecting one or more criteria used by buyers in a market and then positioning the
business uniquely to meet those criteria. This strategy is usually associated with charging
a premium price for the product often to reflect the higher production costs and extra
value-added features provided for the consumer. Differentiation is about charging a
premium price that more than covers the additional production costs, and about giving
customers clear reasons to prefer the product over other, less differentiated products.

This strategy of price leadership may be particularly difficult to implement because when
entering a new market such as this with large players already dominating, brands like
Pizza Hut will already have cost leadership and the channels of supply and distribution to
back that up. The differentiation leadership is a strategy that could provide a competitive
advantage. As there would be no need to keep prices as low as competitors can, there can
be differentiating the product to meet different customers preferences, healthy options or
gluten fat free versions of the meals could be provided so the extra cost can be warranted
and competitive advantage could be gained in product quality or variation and not price.

2.4 Potential Target markets

As much as business owners like to think so, the product or service a company offers
cannot be all things to all people. If you are marketing a product or service, understanding
who the ideal customers are, or the customers who are most likely to benefit from and
buy your product or service is the key to successful sales. The customers who fall into
this group of people most likely to benefit from and buy what you are selling is the
potential target market (Lorette & Media;, n.d.).

There are many different aspects or segments that affect demand and separate consumer
preference, including culture and religion. One important potential target market is
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religious speciality meals, with the emerging Indian economy, traveling customers or
Hindu customers living in New Zealand could represent an opportunity for a potential
target market, halal and kosher markets can also be potentially targeted in future,
especially with global issues causing many Muslim immigrants to seek refuge in New
Zealand. Providing these cultures with certified food that is fit and proper with their
religious beliefs could create the image of catering to everyone and also of specialty
premiere food deliveries.

Another potential target market is the catering and ceremony food delivery, many
customers want meals delivered to events and parties such as weddings and birthday
parties, this could be quite a lucrative market as these customers would be willing to
spend a good amount of money for quality healthy meals. Venturing into the holiday
catering market could also provide other streams of income in times of the year such as
Christmas and Easter here profits aren’t always obtained.

2.5 Market Development Over Ten Years

Last Ten to Fifteen years

Over the last ten to fifteen years, New Zealand seen the rise of globalisation and
unparalleled growth in communication systems and the internet, these days everything is
online, from businesses security systems, private and shared mail service, to web servers
are all online. Most companies in NZ have their own web presence where you can obtain
information, contact information and even book flights and hotels straight from the
website. These types of services are making it easier and easier to do business. People are
closer than ever and are collaborating and working together sometimes from different
time zones through skype and other collaboration systems. New Zealand is an ever
expanding business landscape and its reach grows as the technology advances.
The development in the home delivery meals market is unravelled as ten years ago there
was no home delivery meals market, through all these technological and social
improvements customers have become busier and have less time to spend cooking all day
for a meal, women are now being empowered in work and less than ever are just staying
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home to look after the house. All of these improvements and factors created the home
delivery meals market.

Next Ten Years

As technology is improving at a rate that it has never been before, the next ten years will
show huge advantages to the home delivery meals market, such as the potential
mobilization of the booking a meal process, the streamline of booking and paying straight
from an application on a smartphone. This process will ensure that everyone can order
home delivered meals straight to the address saved to their device. Other developments
could be the ability to transport food much further away without fear of it cooling. We are
already seeing applications of drones to transport Amazon products right to your door,
these developments could be introduced into the home delivery market as well. Other
developments include that the global trend of customers wanting convenience and their
willing ness to pay for it is also increasing as people are looking for an easy solution to
their hunger in their busy lifestyles. We also have an aging population in NZ that will
only get older and these people will potentially be customers of home delivery meals as
they are easy to manage for the elderly. We also have an obesity crisis in NZ that would
create opportunities for low fat choices that can be ordered straight to your door.

Not all developments affecting the home delivery meals market may be advantageous,
some potential developments in the market like a shift away from fast food altogether by
the government to help Kiwis eat healthier, could also come about.

To overcome problems like these and also seize opportunities in technology, one must be
ever ready to evolve and change at a moment notice, as technology is moving so fast, so
must businesses adapt

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4. Conclusion
The home delivery market like most markets is a living organism, it evolves as customers
perceptions and expectations change, to stay economically viable and maintain
competitive advantage, business must target these segmented customers based on their
eating habits, personal beliefs and religious orientation and offer specific marketing
strategies to each.

5. References

REFERENCES

Auckland Now. (2012). Kiwis eating the easy option. 1.

Leboff, G. (n.d.). Defining Your Target Market. Retrieved from Marketing Donut: Resources
for Your Business: http://www.marketingdonut.co.uk/marketing/marketing-
strategy/your-target-market/six-steps-to-defining-your-target-market

Lorette, K., & Media;, D. (n.d.). What Is Potential Target Market? Retrieved from Chron:
http://smallbusiness.chron.com/potential-target-market-1695.html

Mhurchu, C. N. (n.d.). New Zeland Fast Food Demand.

Riley, J. (2015, April 22). Competitive Advantage. Retrieved 2015, from Tutor2u:
http://beta.tutor2u.net/business/reference/competitive-advantage

Statistics New Zealand. (2012, May 14). National Population Estimates. 1.

Wells, K. (2012). Competitive Advantage.

Wikipedia Business. (2002). Competitive advantage. Retrieved from Wikipedia:

https://en.wikipedia.org/wiki/Competitive_advantage

Wunker, S. (2011, November). Achieving growth by setting new strategies for new markets.
Ivey Business Journal, 1.