Opportunities and Challenges in the Breakfast Cereal Market in Australia
There are many opportunities for breakfast cereal industry in Australia and this industry has grown in the past few years. Many Australians have healthy issues concerned with cholesterol and they prefer a diet that will reduce cholesterol; hence reducing cases of heart diseases. The stable economy of Australia has greatly influenced the sales of the breakfast cereals in Australia. However, the fluctuation of the dollar in the market affected the demand for the breakfast cereals in the last five years in Australia. There is a high rivalry in Australia where there are leading producers in the cereal and convenience food marketplaces. Major changes in the snack, as well as cereal food markets are propelled primarily by changing demographics, that is, aging baby boomers and their decreasing metabolisms, beside change of lifestyle, and dietary behaviours necessitating quick and easy meals. The mounting purchasing power of the middle-class in Australia and the pattern of consumption from basic staples towards more appetizing, nourishing, as well as safe food have increased the current demand of breakfast cereals. The new company will purchase an existing restaurant.
PESTEL Analysis
Political/Legal Factor
The political factors imply the manner and the quantity where the state affects the economy plus some business. Australia has stable political environment and laws that promote businesses. Australian producers in addition to distributors of food products are all exposed to laws crafted by federal, state, as well as local governments. Thus, at the federal point, the largely well-known regulatory agency is Food Standards Australia New Zealand (FSANZ) that, in law, coordinates plus manages food law all through Australia, as well as New Zealand (NZ) (Farmar-bowers, Millar & Higgins, 2013, pp. 46). Local government in New South Wales works in collaboration with NSW Food Authority on regulation of food. Other political pressures emanates from non-government sources like interest groups; the Australian Consumers Association (Gregory, 2012, pp. 17).
Economic Factor
The economic environment is concerned with the accessible purchasing power in the economy. Breakfast cereal with low cholesterol has become an important breakfast meal among Australians. The purchasing power for breakfast cereals has greatly increased in Australia where families have disposable income that enables them to purchase the breakfast cereals for their consumption. The revenue for breakfast cereals segment amounted to AU$508 million in middle of 2018. The breakfast cereal market in Australia is expected to increase by 3.9 per cent on annual basis. In global comparison, most revenue is generated in China (AU$17,737 million in 2018). The stable economy of Australia has greatly influenced the sales of the breakfast cereals in Australia. However, the fluctuation of the dollar in the market affected the demand for the breakfast cereals in the last five years in Australia (Panesar, Kaur, Panesar & Bera, 2009).
Political Factors
Social Factor
The company will be located in the main cities including Melbourne that will see high demand for the product. The current trend where many customers have become health-conscious that has allowed them to prefer and look for foods that have low cholesterol given the prevalence of diseases such as cardiovascular disease among the population. Many patients have been recommended to consume food with low levels of cholesterol to improve their health. The growing purchasing power of the middle-class in Australia and the pattern of consumption from basic staples towards more appetizing, nourishing, as well as safe food have increased the current demand of breakfast cereals (Wrigley, 2017, pp. 25).
Technological Factor
Technological advancements in the manufacture of the breakfast cereals have been fundamental in Australia where companies are using modern technologies to manufacture products with low cholesterol levels. The research and development (R&D) has been the hallmark in producing SSH products where the extraction of sterols and stanols to incorporate it as the main ingredients of SHH. The extraction process has been key in the extraction of the ingredients. The research and development has seen an increasing efficiency in delivering products that are acceptable to customers that have high levels of cholesterol in their bodies. The technology that is used in the production of SSH is the ring circulation process.
Environmental Factor
Natural environment is fundamental for the production of breakfast cereal. The major emerging trends that is lowering the environmental impact of food production systems; considerably impacts natural, economic and cultural forces have been used in the food industry in Australia. The process of producing breakfast cereals lies on the process that is designed to reduce wastage of water where the process ensures that water used is very little.
Porters’ Five Forces
Internal Rivalry
There is a high rivalry in Australia where there are leading producers in the cereal and convenience food marketplaces. Major changes in the snack, as well as cereal food markets are propelled primarily by changing demographics, that is, aging baby boomers and their decreasing metabolisms, beside change of lifestyle, and dietary behaviours necessitating quick and easy meals. Nearly 70 per cent of the revenues will be generated from the Australian market where the company will be located in major cities. Some of the top rival companies will include Asda and Weetabix. These are top rival companies that are well-established in the Australian market selling breakfast cereals. However, SSH product will be unique because of the sterols and stanols as key ingredients that will reduce cholesterol levels (Fullen, 2005, pp. 49).
Economic Environment
Threat of Substitutes
Though breakfast cereal consumption within Australia is high, there exists an augmented danger of substitutes from rivals in the sector. This can be attributed to new, similar, and cheaper breakfast products penetrating the marketplace. Other food types, like fruits, bread, plus yoghurts may be believed to be more expedient plus less costly for the average customer. The launch of individual brand ranges would have an impact on the breakfast cereal sector as entire, as client lifestyles plus expenditure habits have shifted radically (Heredia, Wesley& Garci?a, 2009, pp. 35).
The Bargaining Power of Buyers
The consumers of breakfast cereals comprise grocery stores beside supermarkets across Australia. These consumers maintain the influence as the price is set based on their terms. Consequently, the buyers bargaining power would be significantly greater if there were only a few leading buyers in the industry and many sellers within the industry (Stutely, 2007, pp. 57). Though there are many buyers in Australia looking for products that will reduce the level of cholesterol. Because of the production of breakfast cereal by supermarkets own brand cereals, there is a higher bargaining power, like Asda.
The Bargaining Power of Suppliers
The bargaining power of suppliers in the industry is rather low. The bulkiness of raw materials SSH needs into produce breakfast cereal are items, like grains, as well as wheat and sterols and stanols available to the company via a huge number of large and small distributors. In addition, packaging firms have modest influence over SHH because there are several firms that SSH may seek to fill their packaging requirements at the smallest transfer cost if the company’s suppliers make the decision to raise their prices (Elleuch et al., 412).
Threat of New Entrants
Brand allegiance has offered a noteworthy blockade to entry for prospective entrants. Clients in the industry traditionally have been demonstrated to have inelastic demand for well-known breakfast cereal brands. Kids and patients are a primary consumer of the breakfast cereal. Clients are willing to pay premium prices for reputable brands because of the brand allegiance developed. The initial costs needed to efficiently endorse plus launch new brand into the marketplace is quite huge. The biggest obstacle to entrance to the marketplace is the large start-up costs linked to establishing a new factory and developing brand distribution channels (Brownlee, 2009, pp. 240).
Target Market
The target market for SSH that has lower cholesterol level is designed for those individuals that need to reduce their level of cholesterol. Patients on cholesterol lowering drug may too consumer SSH products, but must consult their healthcare provider first. The product is not recommended for children, pregnant and breastfeeding women. Consumers are in need of convenient, functional food products, which are proven to lower cholesterol (Stutely, 2007, pp. 60).
Location and Target Market
Key People and Skills
Technical Skills
Technical skills are crucial during the preparation of the breakfast cereals, especially when the ingredients needed include sterols and stanols. The employees should have skills that will enable them to extract sterols and stanols that are key components in the production of the breakfast cereals as they are innovative ingredients in reducing cholesterol. The chef and kitchen staff should have skills that are entailed in the preparation of the cereals using the modern technologies and packaging of the products to appeal to the clients. The chef and kitchen staff should be competent on how to operate ovens, toasters and ring circulators used to product the product (Heredia, Wesley& Garci?a, 2009, pp. 37).
Money Management Skills
Money management and planning skills will be paramount for SSH because the accountant will be responsible for handling different transactions on everyday basis. The accountant should be knowledgeable in accounting skills that will enable better management of finances. The financial skills will be important towards helping the accountant make proper planning and decision-making regarding financial aspects of the new business (Somers, Cain & Jeffery, 2011, 72). The first five years will be crucial and will require the manager and the accountant to have excellent managerial and planning skills that will ensure better use of finances for the company.
Negotiation Skills
Negotiation skills play a leading role towards ensuring that customers and suppliers are convinced towards the success of the business. The manager should ensure that they have the necessary negotiation skills to persuade clients to purchase the company’s products and also negotiate with suppliers to supply the needed raw materials needed in the production of breakfast cereal products. Suppliers are important stakeholders to the new business and the restaurant manager should ensure that the negotiation skills are used to benefit the company by convincing suppliers and customers towards promoting the goals through their contribution.
Marketing Skills
Marketing plays a leading role in ensuring that the business reaches the target market through the innovative products that are produced. The market information will be through rivals and information in the website. The manager and waiters should have outstanding marketing skills that will be employed to explore the different markets that the company targets. The restaurant manager is a marketing and business administration graduate (Westwood & Institute Of Directors, 2002, pp. 29). The manager will be responsible to developing the necessary marketing messages that will be distributed through well-designed leaflets, newspapers, production stickers and the company’s website. This will require strong marketing skills that will permit better designing of messages to the target market. Since the waiters do not have basic marketing skills, they will be trained on the basics of marketing so that they market the company’s products while they serve the customers (Kurtz & Boone, 2010, pp. 57). This kind of training will be undertaken one month before the launch of the company towards equipping them with the necessary skills. In addition, after six months in business, the company will employ sales representatives that will be responsible for marketing of the products that will entail recruitment of graduates in marketing (Stutely, 2007, pp. 61).
Technological Advancements
The new business will require starting capital that will be used to finance the SSH business where there are several options that will be available for the business. The following are one option that we will considered while opening the new business:
The option for the business is to purchase an existing breakfast cereal restaurant. Thus, by choosing this option it will be important because the business will not pay rent, but on the side, this is the biggest initial capital from all the two alternatives. The purchase of the already existing functional restaurant could also reduce costs of equipment and would need only minor changes.
The estimated volume of daily menu sold in this case will be 200. The director had recommended a volume of 350 dishes, but because SHH is a new firm at the market, this figure was included to allow better prediction on actual demand as close as possible and avoid overestimation of future sales. The volume of drinks will be averaged at 15 per cent of the dishes sold over the lunch and in the evening service will be estimated at 50 per cent (Porter & Norton, 2009, pp. 12).
The marketing costs are AU$100 on monthly basis and it comprises of payments for adverts in newspapers, production of stickers, as well as leaflets, plus maintenance of firm’s website. The firm has leasing for purchase of technology will amount to AU$15,000 with a maturity of 5 years plus interest of 15 per cent. Monthly payment will be AU$480. There are two additional loans that should be paid by the company: AU$100,000 for the purchase of the restaurant and AU$65,000 overdraft (Dlabay & Burrow, J2007, pp. 79). The interest rate will be 15 per cent in both instances. Monthly payment of both loans together will be AU$3,220 and maturity will be five years
The SSH will have ten personnel. They will include one chef, two kitchen staff members, two waiters, one accountant and one restaurant manager. The chef and manager’s salary will be AU$1,750 and other staff members will get AU$1,100 per month. These figures are calculated prior to paying any payments. The software, telephone and transportation expenses and payment for economist are projected on AU$3,000 (Porter & Norton, 2009, pp. 29).
Conclusions
The SSH business plan will be successfully provided all elements of the business will be successfully implemented. There is the need to ensure that the needed capital is obtained through a loan facility to enable the success of the business. The purchase of the existing restaurant is important in ensuring that rent is avoided and that the profits are used to expand the business. The business plan will run for three years and changes will be made based on the emerging needs.
References
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Dlabay, R.L. & Burrow, J. 2007. ‘Business Finance’. Mason, Ohio : South Western.
Elleuch M, Bedigian D, Roiseux O, Besbes S, Blecker C & Attia H. 2010. “Dietary fibre and fibre-rich by-products of food processing : Characterization, technological functionality and commercial applications: A Review”. Food Chemistry. 24(2) 411-421.
Farmar-bowers, Q., Millar, J. & Higgins, V. 2013. ‘Food security in Australia : challenges and prospects for the future’. New York : Springer Verlag.
Fullen, S. L. 2005. Opening a Restaurant Or Other Food Business Starter Kit. s.l.:Atlantic Publishing Company.
Gregory, D. 2012. ‘It’s all about Australia, mate’. Sydney, N.S.W.: ReadHowYouWant.
Havrlentova, M., Potrilakova, Z., Burgarova, A., Gago, F., Hlinkova, A., & Sturdik, E. 2011. “Cereal beta-glucan and their significance for the preparation of functional foods – A Review”, Czech Journal of Food Science. 29 (1): 1-14.
Heredia, N., Wesley, I., & Garci?a, S. 2009. ‘Microbiologically safe foods’. Hoboken, N.J: John Wiley & Sons.
Kurtz, D.L. & Boone, E.L. 2010. ‘Contemporary Marketing’. Mason, OH : South-Western Cengage Learning.
Panesar, P.S., Kaur, G., Panesar, R. & Bera, M.B. (2009). Symbiotics: potential dietary supplements in functional foods. Trends in Food Science and Technology 6(1): 241-245.
Porter, G.A. & Norton, C.L. 2009. ‘Financial accounting : The impact on decision makers’, Mason, Ohio : South Western.
Porter, G.A. & Norton, C.L. 2009. ‘Using financial accounting information : the alternative to debits and credits’, Mason, OH : Thomson/South-Western.
Somers, G., Cain, J., & Jeffery, M. 2011. ‘Essential VCE business management: Units 1 and 2’. Cambridge: Cambridge University Press.
Stutely, R. 2007. The Definitive Business Plan: The Fast-track to Intelligent Business Planning for Executives and Entrepreneurs. s.l.:Pearson Education.
Westwood, J., & Institute Of Directors. IOD. 2002. ‘The marketing plan: A step-by-step guide’. London: Kogan Page.
Wrigley, C. 2017. ‘Cereal Grains: Assessing and Managing Quality’. San Diego, CA, USA : Elsevier Science
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