The soup market in Germany- Maggi vs. Knorr

Table of Content

1.  The Company  

  a Business Definition  

  p  4

  Theory of Abell  

  b Business Mission  

  p  4

  Purpose  

  Value  

  Scope Strategy and Standards  

  c Company Goals p  5

  d Marketing Goals  

  p  6

  e Marketing Philosophy p  6

  f Organization Chart p  7

  g Market characteristics  

  p  7

  Market Structure and Competitors  

  Type of products  

2.  Internal Analysis  

  a Internal Developments  

  p  8

  b Assortment Analysis p  8

  c Market Position p  9

  d Portfolio Analysis p  9

  e Cost Analysis  

  p 1  0

  f 7 S Model McKinsey p  10

  g Liquidity ratios Rate of Return p  12

  h Managerial Grid Blake Mouton Model p  12

  i Balanced Score Card p  13

  j Value Chain p  13

  Linking Value Chain Analysis to Competitive Advantage  

3.  External Analysis  

  a Developments in the macro environment (DEPEST-analysis) p  16

  b 5 forces of Porter p  18

  c Market (e g size growth structure) p  18

  d Competitor analysis (e g C4 index characteristics) p  19

  e Buying behavior p  19

  f Structure of demand p  20

  g Product life cycle p  20

  h Distribution channel p  21

4.  SWOT Analysis  

  Confrontation matrix p  22

  Central problem p  22

5.  Strategic Direction  

  a (Generic) competitive strategies by Kotler and Porter p  23

  b Portfolio analysis (e g MABA matrix or BCG-matrix) p  23

  c Growth strategies (e g Ansoff) p  23

  d Selection criteria (FOETSIE-model) p  23

  2  

6. Marketing Plan

a. Marketing goal p. 26

b. Target Group c. Marketing Target Group d. Positioning e. Assortment f. Price/Margin g. Distribution h. Promotion

7. Communication Plan

a. Communication goal p. 28

b. Communication target group c. Message/Proposition d. Communication Mix e. Media f. Budget g. Timing

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Chapter 1. The company

a. Business Definition

Maggi and Knorr are both in the instant food market. They offer soups, sauces, convenience food, enclosures, and condiments. Additionally to that Knorr offers as well frozen foods.

Both companies serve their customers a variety in their products. So nearly every taste is covered.

Theory of Abell 1

Purpose

The purpose of Maggi and Knorr is to offer their customer an attractive alternative to the ‘home-made-soups’. Both companies are realizing this through constant product development leading to new offerings and tastes. Thus the important purposes of making profit and increasing market share are to be attained.

Values

Maggi and Knorr seem to be similar, but they do have differing key values:

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Strategy, Scope and Standards Both companies use the differentiation strategy to be competitive in their field of business. They focus on quality and customer service, so that their clients are satisfied and provided with useful information. People, who consciously subsist, can find information about the right nourishment as well as the table of products for allergic persons on the websites of both companies. The nutritious value of the soups is listed on the package. Through the company’s website customers also find useful information about products and the right nourishment. There are also e-mail and hotline numbers provided to get in contact with the companies.

This interaction offers extras to both sides. On the company’s side increased sales are reached as well as reactions to products are provided. 2

c. Company Goals

The goals of both companies are to make profit, grow and survive. To do so they are both implementing strategies.

Knorr strives to expand following Unilevers “Path to growth” strategy, which was implemented in 2000. From then on the concentration within the company is laid upon the core brands, specifically Knorr. The goal is to increase profits. By Knorr this is done through a new brand vision and visual identity. 3

By now in 2006, this path to growth showed success, since Knorr sales products in twice as many countries, namely 80 countries. Further emphasis is now laid upon sales in countries in Latin America, Africa, the Middle East and Asia. In 2005 the Unilever Group Profit in the segment “Savory & Dressings”, which include soups, was € 396 mio. or 4.7% of the turnover. One year before in 2003 the profit was € 475 mio or 5.6% of the turnover, while it was € 399 mio. or 4.3% of the turnover in 2002.

Maggi on the other hand also sets the goal to grow geographically; beyond the 100 countries, where they are selling their products to right now. At the same time Maggi wants to strengthen its competitiveness. Thereby Maggi reaches the customers through product development and a bride product portfolio. In the past Nestlé’s segment “Prepared dishes & cooking” reached sales of € 15834 mio. in 2004, € 16068 mio. in 2003 and € 15878 mio. in 2002. Specific operating profits for the different segments are not listed, only the EBITA (earning before tax, interest and amortization). The overall operating profit of Nestle was 8.8% of sales in 2004, 7.8% in 2003, and 7.1% in 2002.

2003 was a very good year for both companies, in regard to their turnovers. But discounters try to enlarge their revenues by offering soups at low prices. Knorr and Maggi surely recognize the highly-competitive market. To keep their position in the supermarket shelves, Knorr and Maggi stress the high quality of their products through their marketing goals:

1 Appendix 1

2 Appendix 2 3 Appendix 3

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d. Marketing Goals

To reach company goals, supportive marketing goals are set. One marketing goal of Maggi and Knorr is to increase sales. To catch the attention of the customer, they offer a wide variety of products. Thereby both sensitively respond to the tastes and life-style of their customers. 4

The information about products needs to be provided to the target audience. Knorr and Maggi want to reach their customers to build up a long-term relationship. Both companies offer good product quality at medium prices. The high-value strategy with a fair price/quality ratio is stressed. Knorr does so by stating their soups make you have enough (“Macht Satt”) while Maggi stress the richness of their soups.

In 2002 the total savory market was worth € 47 bio. Then Unilever Bestfoods had a market share of 10.9%, while Nestle had 5.2%. Since the savory market of Unilever Bestfoods and Nestle consist of other brands than Knorr and Maggi it is better to compare the rakings per segment. Unilever Bestfood was number one in the segment bouillon, followed by Nestle as the key competitor. Also in the segment soups Unilever, specifically Knorr was and is the leader followed by Maggi. 5

e. Marketing Philosophy

Maggi and Knorr are following a marketing philosophy. Their key concept is to focus on the customers and to provide value to them. So the customers’ and potential customers’ needs and wants drive the firm’s strategic decisions. The products are produced accordingly. To be able to know what the needs and wants are, the right information needs to be found by interacting with the market. Both companies Maggi and Knorr have websites where requests and opinions can be sent to the companies. Field Studies and Questionnaires help companies to get the right information. 6 Maggi reaches such information and inspiration through its “Maggi Kochstudio” and its presence in great supermarkets. Maggi as well as Knorr do not focus on just one market segment. Because of their variety and package sizes, they are able to serve customers of all segments.

When products are launched it is a matter of making that information available in the right way so that the right people will find it. Thereby the marketing concept is no longer to convince people to buy, but more to educate, inform and connect with the marketplace. Therefore the Maggi and Knorr packages stress that the soups are nutritious and easy to prepare, rather than aggressively force on buying the product.

Both companies built up an image of a company that produces high-quality products and many customers are willing to pay the high price for it. Otherwise the supermarket shelves would not be dominated by Maggi and Knorr soups.

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5 Appendix 5 6 Appendix 6

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f. Organization Chart 7

Knorr is organized in five corporate divisions: Logistics, Marketing, Finance, Research and Development and Human Resource.

Maggi is organized in four corporate divisions; Distribution, Marketing, Merchandising and Technical Culinary.

g. Market Characteristics

Market Structure and Competitors

Knorr is the market leader in the instant food market in Germany, while Knorr is the second. They dominate the market they are operating in, which is an oligopoly structure with heterogeneous products offered. They are both their main competitors and yet at this point, other producers are of absolutely no danger to Knorr’s and Maggi’s market position. Maggi and Knorr products are also available in discount stores, so are no name soup brands. But those face difficulties to establish their products, even with a lower price strategy. Knorr as the market leader charges mostly some cents more for their products, while Maggi follows the discount pricing strategy of being a bit cheaper than Knorr

It is essential for Maggi as well as Knorr to carefully watch each other actions. It is obvious, how Maggi and Knorr are very similar in their product range, since they could not afford losing customers to their competitor.

Type of products

The types of products that are available on the market are heterogeneous, although Knorr and Maggi are very similar in their product portfolio. They do have similar ingredients, yet customers can clearly distinguish Knorr and Maggi products by means of the colors and layouts of the packages.

Maggi offers one highly heterogeneous product, which is much different from the other portfolio. This product has made the company successful. It is the unique ‘Maggi Würze’ Maggi Spice, which has been around for over 100 years and became an ‘every household’ product and still is. There is no other brand in Germany that offers that sort of spice to the mass customers.

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Chapter 2. Internal Analysis

a. Internal developments

Maggi

Two major developments Nestlé and therefore Maggi are implementing just recently are the Corporate Wellness Units 8 and the so called ‘Cluster’, which is a term to describe the practice of Business Executive Managers (BEMs) of the individual strategic business units who meet on a regular and scheduled base to discuss developments, exchange experience and develop strategies in order to accelerate and safe costs in product development and introduction.

In 2005 Nestlé followed Unilever by starting the ‘Nestlé Nutritional Compass’, which indicates relevant facts on the package concerning nutrition in general, nutrition content and information about customer complaints or questions.

Knorr

In the past five years Unilever tightened its portfolio and optimizing production processes, as well as improved their understanding for customer needs, new trends and quick ways to response to them. The “Path-to-Growth” strategy was clearly linked to a number of goals, most of which achieved, yet some missed the objective. Therefore in 2004 another program was launched, called the global ‘One Unilever Program’. Its goal is to eradicate duplication, leverage Unilever’s scale and help employees to focus on their consumers, customers and the marketplace. This program is still in action.

b. Assortment analysis

Maggi

Maggi’s assortment dimension is wide and deep. 300 products from simple bouillons to prepared dishes carry the Maggi brand, Maggi Ltd. offers another 150 products under the brand name Thomy, known in Germany for a number of dressings, oils and others, Buitoni (pasta snacks) and Libby’s which produces tinned fruits and vegetables. Maggi supplies convenience foods; in ten commodity groups, a large number of article groups are offered. 14 article groups in the soup commodity group, with a total of 78 soups offered to the market.

In the past years, Maggi recognized that it will have to reorganize its assortment and only keep those products that use store shelf space efficiently. This is an ongoing process. Maggi wants to retain profitable products which also deliver a specific benefit, especially health benefits to the customer and profit benefits to the company.

Knorr

The assortment dimension can be described as being narrow and deep. Within the assortment structure Knorr offers eight commodity groups, all in production line of convenience food and soups being one kind of them. In nine different article groups, the company offers 58 different kinds of soups.

Knorr is Unilever’s most profitable brand and therefore a number of new Products have been introduced recently. Besides dry instant food, Knorr only offers a few frozen convenience meals and salad dressings. However, within the commodity groups a wide range of products are made available.

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