Value Proposition of O-Dairy
Innovation is the key to success in the current business scenario due to the reason that innovation can only help in meeting the changing trends of customer requirements. Consumer goods sector is one of those sectors, which is witnessing rapid change in the taste and preference pattern of the customers (Jay 2016). Fonterra is operating in this sector and offering different dairy based products. However, they are also witnessing the growth of veganism trend worldwide and people are more avoiding animal based products. In view to this situation, they are about to launch a plant fiber based dairy brand named O-Dairy.
With the growth in the veganism trend in the recent time, demand for the conventional dairy based products is reducing. Thus, it is also getting important for Fonterra to offer an alternative solution to the vegan population and in this case, O-Dairy will be an effective option. This is due to the fact that O-Dairy will be made from plant fiber and thus animal milk will not be in use (Makinen et al. 2016). In addition, different products including pasteurized milk, cheese, yoghurt and ice creams will be promoted under this brand and all will be based on plant fiber. Thus, the vegan customers will have the options for availing the taste and nutritional benefits of the conventional dairy based products. The products under O-Dairy will be made similar to the conventional ones in terms of taste and nutritional value if not more. Thus, the value proposition for the vegan customers will be in similar to the conventional dairy based products (Tuso et al. 22013). In terms of pricing, the price will be slightly in higher side compared to the dairy based products due to the huge investment involved in the research and development process. However, in the due course, price level will be similar to the conventional products.
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Political |
· Fonterra is mainly operating in Australia and New Zealand and political scenario for businesses is favorable in both the countries. · Political issues will be less relevant for promoting ethical products for the vegan population (Sabate and Soret 2014). · This information will enable Fonterra in planning their future investment program in the said area properly. |
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Economical |
· Competition will be less due to the promotion of completely new products in the market and thus the competitiveness will be high. · Offering in the same price level of the conventional dairy based products will help in tapping the larger customer bases (Westhoek et al. 2014). · This data is useful due to the reason that future business potentialities of Fonterra will be depended on this. |
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Social |
· Percentage for vegan population is increasing in Australia with being reported that currently more than 2 million Australians are vegan. Thus the social business opportunities are also increasing. · Promotion of O-Dairy will create favorable image in the market due to the reason that it will be perceived as an ethical product for the vegan people (Kumar, Vijayendra and Reddy 2015). This will also help Fonterra in pushing the sales of their existing products. |
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Technological |
· Technology is the key in ensuring the success for O-Dairy due to the reason the effectiveness of the research and development will determine the value proposition of the new products. · Fonterra is already a leading name in terms of technological development due to their years of experience in the dairy sector (Vigne et al. 2013). · This will be beneficial for Fonterra for initiating the technological development and expertise in developing plant based dairy products. |
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Legal |
· Strict legal standards are to be maintained in the case of dairy products in terms of hygiene and product quality. · Fonterra is already following and adhering to all these standards with their existing products and thus it will be easier for them to adhere to the same for O-Dairy (Jeske, Zannini and Arendt 2018). · This will also ensure that the quality standards being maintained by Fonterra till now will be carry forward for O-Dairy also. |
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Environmental |
· Probability of environmental degradation is there due to the reason that plant fiber will be used. However, sustainable production process will be promoted to have the least impact (Lee, Clark and Roche 2013). · It is also important for Fonterra to ensure that they are having renewable sources of plant fiber without damaging the ecosystem. |
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Bargaining power of the buyers |
· Bargaining power of the buyers will be low. · Vegan population is having limited options in terms dairy products. · The brand value of Fonterra in the dairy sector is huge and this will also retain a number of customers. |
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Bargaining power of the suppliers |
· Bargaining power of the suppliers will also be low. · They are having fewer alternatives in selling materials related to plant based dairy products. · Fonterra will have own backward integration process to supply their materials. |
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Threat of new entrants |
· Threat of new entrant is moderate due to the reason that number of big brands are operating in the dairy sector. · With the growth in the vegan market, these brands will enter in the plant based dairy product market. · However, the research and development required will cause incurrence of huge capital. This will stop some entities to enter in this market. |
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Threat of substitutes |
· Threat of substitute is less for Fonterra due to the reason that no other firms are offering the same product in the market. · Barriers in entry will also cause fewer substitutes in the market. · However, entry of the existing brands will pose some sort of threat of substitute to Fonterra. |
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Competitive rivalry |
· Competitive rivalry is low due to the less competition in the market. · Moreover, dairy products are marketed mainly in the market determined price, which further reduces the intensity of competitive rivalry. · The brand value and identity of Fonterra in the Australian market will further help in fending off the competitive rivalry in the long term. |
In terms of demographic variables, customers between the age groups of 16 and 35 will be segmented as the primary target segments. This is due to the reason that this group is having the major trend of veganism. In addition, the age groups below 16 will also be targeted as the secondary target segments (Venter, Wright and Dibb 2015). Value creation will be more for this age group due to the reason that this middle age group is more aware about the characteristics of veganism. In terms of geographic segmentation, tier I cities will be segmented in the initial stage due to the reason that customers from tier I cities are more aware about these urban trends and they are also having higher purchasing power for plant fiber based dairy products. Moreover, in terms of behavioral segmentation, customers following vegan diet will be targeted along with the customers who are having preferences for sustainable products (Sair 2014). Targeting these segments will help in meeting their expectations effectively and thus their value will be enhanced. Millennial will also be targeted due to the reason that they are more aware about the veganism trend and the concept of sustainable consumption.
Analysis of Macro-environment Factors
The more effective will be the targeting and positioning strategies, the more will be the loyalty level of the targeted customers. This is due to the reason that different customer segments are having different sets of expectations that can be met by different targeting approaches. The segmented customers should be targeted based on the cost leadership strategy and market focus strategy (van der Zanden et al. 2014). This is due to the fact that customers will be loyal to the certain brand only when their expectations and needs will be met properly. Moreover, with the help of the cost leadership strategy, the loyalty of the customers will further get increased by getting the maximum value for the cost. With the help of the market focus strategy, Fonterra will be able to target the specific market of vegan customers and determine their taste and preference pattern (Khan 2013). Accordingly, they will be able to offer the products. This will ensure that all the requirements of the targeted customers will be met and will also increase the loyalty level. It should also be noted that with gaining economies of scale, the cost of operation will also come down and this will enable Fonterra to promote cost leadership strategy. Hence, initiation of the market focus strategy coupled with the cost leadership strategy will ensure that major of the customers targeted remain loyal to the brand.
Fonterra should initiate positioning strategy based on the price, features and benefits of the products. This is due to the reason that positioning on the basis of price will help in aware the customers about the competitive pricing. Thus, the new entrants will find it difficult in offering the same price and majority of the customers can be retained (Siu, Zhang and Yau 2013). In addition, positioning on the basis of features and benefits will help Fonterra in aware the customers regarding the distinctive value. Thus, the more will be the distinctive values, the more will be the retention level of the customers to the brand.
From the above analysis, it is identified that age group between 16 and 35 with having the preferences for sustainable consumption will be the most desirable segment. This is due to the reason that this age group will be self sufficient and will have purchasing power. Moreover, this age group will also have the larger set of awareness among the customers regarding veganism. Moreover, the customers with having the preferences for the sustainable consumption will be desirable due to the reason that their requirements can be met effectively.
- To generate 15 percent of total revenue of Fonterra from O-Dairy in the next 1 year based on the huge market opportunities and potentialities
- To cover the diverse market sections among the vegan population by introducing minimum 6 variants under the O-Dairy brand within the next 1 year
- To have the maximum level of market penetration by offering most competitive pricing in the market and will be the least priced vegan dairy product in the market
- To maintain the loyalty and retention level of the existing customers by minimum 20 percent for the next 5 years
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Objectives |
Specific |
Measurable |
Assignable |
Relevant |
Time-based |
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To cover more than 70 percent of the target market with brand awareness |
70 percent of the target market |
Measuring the market areas covered |
It can be achieved provided the expertise of Fonterra |
It will help in pushing the sales of new products |
Within 1 year |
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To have two was communication system for higher customer retention |
Online portals for the customers |
Determining the satisfaction rate of the customers |
It can initiated aside the conventional marketing activities |
It will help in generating positive word of mouth |
Within 1 year |
Customer Segmentation, Targeting and Positioning Strategies
From the above viability analysis, it is identified that Fonterra is having huge market potentialities in the vegan dairy product market due to the less intensity of competition. Moreover, it is also identified that offering larger product variants under the newly formed O-Dairy brand will help in meeting the different and diverse requirements of the customers from the vegan population. Porter five forces also identified that due to the less intensity of competition, pricing will not be a major factor for Fonterra and thus the profitability can be maintained for the long term. Fonterra is effective enough in terms of expertise and infrastructure to develop the plant fiber based dairy products, which will help in gaining economies of scale in shorter time period. Moreover, it is should also be noted that as vegan population is limited, thus market focus strategy should be initiated to offer products according to taste and preference pattern of the targeted customers. This will help in effective solidification of the leadership position of Fonterra in the newly evolved market.
Conclusion
This can be concluded that Fonterra is having huge opportunities in promoting their new brand O-Dairy for the vegan customers. In this report, viability analysis is being done based on PESTLE analysis and porter five forces analysis. This helped in identifying the key trends and factors to be considered. It is also being concluded that the stated objectives in this report will help Fonterra in tapping the growing opportunities of offering vegan products and can increase their revenue to the next level.
Reference
Jay, M., 2016. Farmer Innovations in Environmental Management: New Approaches to Agricultural Sustainability?. Agri-Food Commodity Chains and Globalising Networks, p.147.
Jeske, S., Zannini, E. and Arendt, E.K., 2018. Past, present and future: The strength of plant-based dairy substitutes based on gluten-free raw materials. Food research international, 110, pp.42-51.
Khan, T., 2013. STP strategy for New Product Launch-a Work in Progress. International Journal of Business and Management Invention, 2(3), pp.56-65.
Kumar, B.V., Vijayendra, S.V.N. and Reddy, O.V.S., 2015. Trends in dairy and non-dairy probiotic products-a review. Journal of food science and technology, 52(10), pp.6112-6124.
Lee, J.M., Clark, A.J. and Roche, J.R., 2013. Climate?change effects and adaptation options for temperate pasture?based dairy farming systems: a review. Grass and Forage Science, 68(4), pp.485-503.
Mäkinen, O.E., Wanhalinna, V., Zannini, E. and Arendt, E.K., 2016. Foods for special dietary needs: Non-dairy plant-based milk substitutes and fermented dairy-type products. Critical reviews in food science and nutrition, 56(3), pp.339-349.
Sabate, J. and Soret, S., 2014. Sustainability of plant-based diets: back to the future–. The American journal of clinical nutrition, 100(suppl_1), pp.476S-482S.
Sair, S.A., 2014. Measuring the effectiveness of brand positioning strategies perceived by consumers. Science International, 26(1).
Siu, N.Y.M., Zhang, T.J.F. and Yau, C.Y.J., 2013. The roles of justice and customer satisfaction in customer retention: A lesson from service recovery. Journal of Business Ethics, 114(4), pp.675-686.
Tuso, P.J., Ismail, M.H., Ha, B.P. and Bartolotto, C., 2013. Nutritional update for physicians: plant-based diets. The Permanente Journal, 17(2), p.61.
van der Zanden, L.D., van Kleef, E., de Wijk, R.A. and van Trijp, H.C., 2014. Understanding heterogeneity among elderly consumers: an evaluation of segmentation approaches in the functional food market. Nutrition research reviews, 27(1), pp.159-171.
Venter, P., Wright, A. and Dibb, S., 2015. Performing market segmentation: a performative perspective. Journal of Marketing Management, 31(1-2), pp.62-83.
Vigne, M., Peyraud, J.L., Lecomte, P., Corson, M.S. and Wilfart, A., 2013. Emergy evaluation of contrasting dairy systems at multiple levels. Journal of environmental management, 129, pp.44-53.
Westhoek, H., Lesschen, J.P., Rood, T., Wagner, S., De Marco, A., Murphy-Bokern, D., Leip, A., van Grinsven, H., Sutton, M.A. and Oenema, O., 2014. Food choices, health and environment: effects of cutting Europe’s meat and dairy intake. Global Environmental Change, 26, pp.196-205.
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