Ceylon Cold Stores Plc

Published Date: 02 Nov 2017

Introduction

Elephant House is the leading soft drink manufacturer in Sri Lanka and they are currently exporting a major portion of the product portfolio to various countries like, UK, USA, Switzerland, Emirates and various other countries.

Elephant House has identified a potential market demand for their products. They are already in Maldives doing greatly on the ice cream sector with a market share of 50% (source: internal) and also Ginger Beer is available in few resorts. These products are contributing a huge margin to their top-line and bottom-line. With this success they thought Maldives could be a great market for their other soft drinks. To initiate this strategy, they have decided to launch "Cream Soda", a local award winning brand, to Maldives, with the success of the product in the local market.

This is the marketing plan for launching and promoting "Cream Soda" in Maldives, which will include financial projections and advertising methods to be used.

Since Elephant House has already had a partner for distributing their ice creams (LILY Enterprise Pvt Ltd), Elephant House has decided to launch Cream Soda with an agreement of 7% commission on monthly sales to Lily Store. All other promotional activities and pricing will be controlled by parent company.

Ceylon Cold Stores Plc

With having Sri Lanka’s first ice manufacturing machine, Ceylon Cold Stores started initially as ‘The Ceylon Ice Company’ in 1866.

With the guidance of one of their managers along with ice, they started producing carbonated water with "Elephant" trademark. They had two major products, Soda and Lemonade, which participated in trade fairs in Calcutta and Melbourne.

In 1984, management change happened with the merger of a competitor and was renamed as "New Colombo Ice Company Limited". And in 1934, the pioneering company in importing frozen foods (Ceylon Ice and Cold Storage Company) was bought and finally in 1941, it was renamed to Ceylon Cold Stores. Within this period lot of changes happened like acquisition of Ceylon Creameries Limited in 1932 to distribute and produce ice cream and milk and also installing a carbonic acid gas plant to manufacture carbon dioxide and dry ice. It was brought under John Keels Group in 1991. After that huge investments were made to improve the production capacity of the company.

Elephant House is the trademark and brand used in all CCS products and is the market leader in manufacturing soft drinks. It has two major product categories which are Ice creams and soft drinks. Some of their well known products range from Cream Soda, Soda, Necto, Ginger Beer, Orange Crush, and Orange Barley to KIK Cola.

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Cream Soda

Cream Soda is one of the key products which contribute most to the revenue of the company. It was product introduced to Sri Lankan market to compete with Fanta Cream Soda by Coca Cola Company and has successfully beaten Fanta and other products and now holds a market share of over 48%. It has been known as the best drink among the Sri Lankan youths and has won 'FMCG Beverage Brand of the Year' Award for 6 consecutive years.

Key Performance Indicators

Elephant House claims to be the market leader in their entire portfolio among soft drinks, gained market volume of 15% in 2012 (source: internal). And also the revenue grew by 30% in the same year (source: internal).

The company has been growing significantly so far and expects to grow more since the total market of the country is also expanding with the massive growth of the economy.

Situational Analysis

PEST Analysis

Political

Since the introduction of Democracy to Maldives, the country’s politics is in a very unstable situation where protests and unrests have increased drastically, which could affect the product growth.

There are regulations that have implemented by the Maldivian government for imported products like Goods and Services Tax (GST) (6%) and Custom duties (15% for soft drinks).

Politically Maldives and Sri Lanka have a very mutual relationship with over 7000 Sri Lankans living in Maldives and over 10,000 Maldivians living in Sri Lanka.

Economical

The GDP of Maldives was $2.945 Bn (2012 est.) and maintained a growth of 6% per year for the last decade. Tourism remains to be the largest contributor to economy which accounts 30% for GDP. Due to shortage of domestic labor and land, manufacturing plays a very minor role to the economy. Almost all FMCG products are imported into the country. It also has an unemployment rate of 22.2% (2006 est.).

Maldives has an unemployment rate of 28% (2012 est.) and has an inflation rate of 12.8% (2011 est.) due to increase in demand than supply and the government printing more money. As of 2011 Maldives had $1.465 Bn (est.) of imports from Singapore (23.2%), China (7.1%), India (8.7%), Thailand (4.9%) and UAE (18%) and from various other countries including Sri Lanka as well.

Maldivians used to have a high disposable income mainly because the standard of living is high since the salaries paid are comparatively high when compared to the regional countries.

(Source: CIA World Factbook, last updated: 26th July 2012)

Social

Maldives has a population of 394,451 with 226,135 males and 168,316 females (2012 est.). Around 60% of the population is within the age group 14 – 35 years, which means the market opportunity for Elephant House is high. The major city of the country is capital Male’ with a population of 120,000 (2009 est) which is a good market to target the product initially.

It is common in Maldives to start a job as early as 18 years old. As Maldives is one of the highly salary paid among the South Asians which, people spent huge amount of money on leisure activities like visiting coffee shops, due to the higher living standard.

(Source: CIA World Factbook, last updated: 26th July 2012)

Technological

The world is growing drastically in technology and it affects a lot to developing countries like Maldives which has maturing markets. Today the use of social media is so common that almost every product or shop has a Facebook page open. Therefore internet also plays a very vital role in marketing.

Competitor Analysis

Maldives is a very import oriented country and Coca-Cola is the only company doing production in the country. There are various other branded soft drinks imported to the market from India, Sri Lanka, Middle East USA and other European countries.

The market leader in the CSD market is Coke (48% market share). Keeping Coke aside, since it belongs to Cola category, all other brands share an equal amount in the market. Famous other brands include Redbul (20% share), Pepsi (12% share), Holsten (3% share), 7-UP (3% share), Cheers (5% share), Fanta (5% share), Shweppers (9% share), Royalty (2% share), Sprite (2% share), 3-Choice (7% share), Sparkling Fruit Drinks (8% share), Hot Blood (3% share), Rock Guarana (5% share), etc. (Source: Coca-Cola Company, Maldives)

The biggest competitor to EH Cream Soda in the cream soda category will be Ice Cream Soda by F&N (12% share) which is very popular among youth. Since there is no marketing activity of this product, it is at a declining stage.

Strengths of F&N Ice Cream Soda:

No.1 brand among youth

Reputed brand from Malaysia

Weakness of F&N Ice Cream Soda:

No marketing activities

Brand key aspects of EH Cream Soda (Point-of-Difference):

Most preferred drink in Sri Lanka (market leader)

Product of the biggest soft drink manufacturer in Sri Lanka

Over 100 years of company heritage

Award winning brand

Porter’s 5-Forces Model

Bargaining Power of suppliers

In this industry there are relatively few suppliers. The final product is done with only few ingredients and they are largely merchandise. Even in Maldives, production is only done by Coca-Cola Company which also gets supply from the parent company. The other products in the CSD market of Maldives are all imported.

Therefore, with respect to the usage of few ingredients by soft drink manufacturers, the bargaining powers of suppliers are considered to be practically low.

Bargaining Power of Buyers

Bargaining Power level of buyers will differ among buyer groups. In this case they are the retailers, distributors and end users.

Retailers such as VB Mart, Agora, Red Wave, Giant Hypermarket, etc are the main players to distribute and deliver the end product to the consumers. These retailers play a very vital role since they are the middlemen between the wholesaler and consumer. They do have a high bargaining power since they can influence an end consumer by changing store display or refusing to keep a certain brand stock. This bargaining power can be reduced by creating a brand loyalty among consumers.

On the other hand, the power of end user can be considered medium. With the presence of many substitutes, the power of buyers can be mitigated by their brand loyalty.

Threat of substitutes

In this beverage industry, there are many substitutes. With the increase in awareness about health consciousness the trend is moving to tea, water, energy drinks, coffee, juices and smoothies. In Maldives there are various brand of water and sports drinks, which appears to be healthier than soft drinks. And also tea and coffee are becoming more popular since they provide caffeine. A soft drink consumer may switch to coffee if they want to reduce carbonation and sugar and increase caffeine.

With the increase in trendy coffee shops offering world famous flavors, the culture of drinking coffee among youth is becoming popular, which is also a threat to soft drink industry.

Therefore considering all the above, threats of substitutes for this industry is very high.

Competitive rivalry in CSD market

In Maldives CSD is a maturing market where the only way to grow market share is by stealing it from competitors.

The major competitor in CSD market will be Coke with 48% market share followed by 20% of Redbul and 12% of Pepsi. There are other players like Holsten (3% share), 7-UP (3% share), Cheers (5% share), Fanta (5% share), Shweppers (9% share), Royalty (2% share), Sprite (2% share), 3-Choice (7% share), Sparkling Fruit Drinks (8% share), Hot Blood (3% share), Rock Guarana (5% share), etc. (Source: Coca-Cola Company, Maldives).

Therefore the competitive rivalry is extremely high in this industry.

Threat of new entrants

For unknown companies to start competing with the existing players in the CSD market will be very difficult since the industry is saturated and the growth possibility is small. The new company has to invest hugely on marketing to increase the brand awareness and overcome the competition. Since no major cost is required, the threat of new companies entering to the market is high.

This industry doesn’t have any barriers to enter into the market which is another factor that makes the entry to the market easy.

Overall, the threat of new entrants is pretty high.

SWOT Analysis

Strengths

Over 100 years of company heritage

This will be a strength since so many years will positively reflect on the stability of the company and also reflects to the expertise of the company in the industry.

Huge customer base, Strong Brand Identity and No.1 soft drinks manufacturer

With so many product portfolio, the company managed to get the maximum market share in whatever category they are operating in. This is due to the fact that they do have a clear understanding of what exactly customers want and need.

Award winning brand

This proves the quality of the products. Even Cream Soda has won an award for 6 consecutive years which will increase the brand awareness among the people.

Exporting to other countries

It will be a great advantage and experience when they go to Maldives since they are familiar with European markets and understands their products specialty. Maldives is also a country which has many European soft drink brands. Having this experience will enhance their marketing activities.

Weakness

High sugar level

The sugar level of Elephant House products have been noted as very high which will be a concern for the health conscious consumers which could affect the market share, top-line and bottom-line.

Not immediately addressing to customer feedbacks

One of the very crucial factor since to run this kind of business, it is very important to hear the voice of customers on-time. Elephant House badly experienced this by immediate decline in KIK-Cola market share after launching. The consumers of KIK gave feedbacks of too much sugar level and less fizzy, but they fail to address these issues immediately which affected their KPIs.

Opportunities

High disposable income rate in Maldives

Maldivians have a high salary standard when compared to the region, which enables to spend more and more. Many people have the trend of going to trendy café’s for coffees and soft drinks. This will be a huge opportunity for the company.

High demand for cream soda flavor in Maldives

The biggest competitor for Cream Soda will be F&N Ice Cream Soda. When this product was introduced in Maldives there was a very high demand for this product which shows the huge demand for this flavor, which shows a huge opportunity for Cream Soda if they could do better promotional activities.

Elephant House holds 50% market share of ice cream

Since the brand is in Maldives, which is in very good situation (50% market share), it will easy for that Brand to market another product in the same market.

Threats

Consumers more health conscious and more substitute products available

Nowadays customers are more conscious about their health and they switch from carbonated drinks to energy drinks, juices and coffees. In Maldives there are several brands in these categories to substitute for soft drinks. This will be a threat for Elephant House.

Huge competition and emerging new brands

The competition is very high in this industry in Maldives and new brands are coming up day by day. To compete with these players, Elephant House needs to do lots of promotional activities.

Company Analysis

Vision – "Our passion is to deliver pleasure and nutrition throughout people’s lives, through exciting and superior products, whenever and wherever they choose to eat and drink"

Core Competencies

Award winning brands

Deliver soft drinks using effective distribution and manufacturing maintaining Elephant House quality and standards

Cover entire country while at distribution stage

Marketing Objectives

Short-term Objectives

To increase the brand awareness by second quarter

Make the product available island-wide by second quarter

Long-term Objectives

To grab 15% market share of CSD market of Maldives by 2015

To increase the revenue by 16% by 2015

To sell 600,000 cans by end of 2015

Marketing Strategy

Target Market

Segment recognition: Ready-to-drink bottle to be launched within the CSD market

Segment need: Cream Soda will be catered for social needs (fun drink)

Segment trends: youngsters spend more time in coffee shops and have a high trend in drinking a beverage than coffee

Segment size: 241,561 (Age group: 14 -34 years) (source: CIA World Factbook)

Even though Cream Soda is addressed to youth, the company targets the product to a mass market.

Market Segmentation

Geographic

Region

Entire nation

Area size

298 sq km

Demographic

Age

14 – 34 years old

(students, teenagers and young adults)

Gender

Male and Female

Salary

Rf. 3000/- onwards

Occupation

Students, young workforce, new alumnae

Psychographic

Lifestyle

Outdoor Coffee Drinking

Personality

Brand consciousness

Behavioral

Usage rate

Weekly and daily basis

User status

Regular user, non-user

Loyalty status

Non-use, Medium and strong

Benefits sought

PERCEPTUAL BENEFITS

social standing

Positioning

Cream Soda will be positioned as both, a youthful drink and a family drink. And also marketing activities will be done under this criterion.

Marketing Program (Marketing Mix)

Product Strategy

The core

Cream Soda packaged in cans

The Product

Brand: Award winning brand based on perception of many Sri Lankans

Trade name: Cream Soda by Elephant House

Brand Equity: Elephant House provides a reliable, handy, quality and pioneering soft drink reputation

Brand Personality: cool, funny, funky, youthful, etc

Marketing consideration

Product category: Cream Soda will come under soft drinks category of food and beverage industry

PLC: Cream Soda being a low-learning product, Elephant House need to do a strong marketing campaign and sales are expected to begin immediately.

Pricing Strategy

Three major aspects will be considered while determining the pricing:

Product Lifecycle (PLC)

Substitutes

Demand by customers

PLC

Even though Cream Soda is well known in Sri Lanka, it will be new to Maldivian market and will be in the earlier stages in the PLC which is a fact to keep the price at an average level to the market price, since lower price might affect the consumer’s thought about the quality of the product. In this way Elephant House can ensure greater profit margin and easily cover the establishing cost.

Substitute products

Cream Soda should not set a high price since competitors may put a lower price and may attract profit potentials.

There are two important approaches to consider while fixing pricing:

Competition based approach – it’s obvious that while setting pricing strategies, competitor’s prices should also be considered. By setting an average market price, consumers will think about the quality and other factors.

Targeted Profit – pricing should be set in such a way that it should cover the establishing expenses and can bring fantastic profits.

Promotional Strategy

The main message of the promotional activities will be to convey the youthfulness and the strong brand name of Cream Soda.

Objectives

To gain market shares over F&N Ice Cream Soda

To be the No.1 drink among the youth segment

To create a strong awareness among the youth about Cream Soda launch

Selection of Media

It is important to understand that youths give only gives a partial attention for the media. But there are various ways to reach them. "Multitasking" is very common in today’s youth. They tend to use more than one media at a time. Internet would definitely be one of the widely used Medias among the youth. Various other promotional tools also can be used to communicate with generation Y.

Advertising

Below table will show the methods to be used in advertising.

Method

Example

Reason

Television

VTV, DhiTv, TVM, SUN TV

A major percent of population watch TV programs (news, entertaining programs)

Magazines

Sports Magazines

Lot of youths reads sports magazines

Radio

Dhifm, 98.2 fm, 100.9fm

While driving cars, most people listen FM music

Publicity

Press Release, Live coverage of Launch program on TVM

To attract more customers and to feel them more special about the product

Internet

Facebook

Most youths are on Facebook

Outdoors

Banners and billboards in bus stations, educational institutes, Artificial Beach area

These are areas where people are more vibrant

Distribution (Place)

Cream Soda will be distributed through various supermarkets, small retail shops and will be made sure that the product is available in the major atolls of the country.

Implementation

Below is a Gantt chart to show the implementation of launching the product to Maldives.

Due to the high competition, the promotional activities will go on as a continuous process throughout the year.

Evaluation and Control

Elephant House plans to control the pricing and promotional activities of the product. One of the main reasons is to control the quality and understand the market thoroughly.

Risk Analysis

In a competitive market, when a new product enters, it is at a huge risk, whether it will be a success or not. Elephant House also understands this risk. Various market studies will be done to understand the customer feedback.

If the product is not successful at the start, change of marketing strategies will be done as a backup plan.

Marketing Audit

It is very common in Maldives that the retailers increase the price of products to increase their profit margin, which affects the sales of the product. To avoid this, Elephant House plans to do marketing audits by sending an observer from the company to Maldives without informing Lily Stores (agent) to visit the retail stores and check the prices.

Evaluation Analysis

The main objectives of Elephant House will be achieving sales and market share targets. Sales analysis will be done at the end of every month and based on that the budget for promotional activities will be adjusted.

Targeted KPI’s

Market Share - grab 15% market share of CSD market of Maldives by 2015

Revenue - 16% by 2015

Sales – 600,000 cans by end of 2015

Budgeting

Below are the projected sales for cream soda for the next two years. All figures are in USD.

Details of budgeting will be explained in Appendix A