Expansion into Organic Food Market by CA Foods Limited
B2B Marketing Assignment
Expansion into Organic Food Market by CA Foods (UK) Limited
Marketing from different contexts plays a significant role in growth and expansion of business organisations. Irrespective of its different types, marketing is important given the rise in global competition, continuous changes in business environments and rapid shifts in consumer demands and preferences. In the context of B2B marketing, products or services are marketed to other organisations for their use in production, general business operations or resale to other consumers. B2C marketing, on the other hand, indicates marketing transactions between a company and its consumers, who are known as the end-users of the particular goods or services (Iankova et al., 2018). In this report, the concept of marketing analysis and approaches is explored using the business to business marketing consultation to CP Foods (UK) Limited, a popular British manufacturer and retailer of added value foods. Managing director of the company seeks to expand its business in the organic food segment in UK due to its growing value throughout the global consumer markets. Therefore, the overall report is divided into two parts, market analysis of the proposed segment and marketing strategy, comprising of recommended actions to maximise the chances of success in penetrating the newly identified market by CP Foods.
Organic food refers to the food items, prepared by specific methods, which comply with the standards of organic farming. These standards may vary from one country to another but the practices adopted involving the farming feature recycling of resources for promoting ecological balance and conserving biodiversity (Huang et al. 2017). Even though the lack of recognition a few decades back, the terms ‘sustainable’ and ‘organic’ have received substantial prominence throughout the menus of restaurants and food stores across the UK. Although the organic products still serve as a small proportion to the overall food and beverage market in the country, it is undeniable that the particular market will grow in the coming timeframe, given the increasing awareness among population regarding the need for health, safety and environmental protection. However, organic industry is yet to become mainstream given the expensive prices of most of the organic products, limiting mass appeal from consumers of the country.
As proposed by Smithers (2018), sale of organic food and drink in UK experienced a significant rise throughout 2017 by 6 percent to record revenues worth £2.2 billion. Such a significant growth was majorly fuelled by increase in independent outlets and home delivery services, which noticeably outperformed the sales of rival supermarkets. As reported by Soil Association, the trade body providing permissions for organic products and fostering organic farming, almost 30 percent of all organic sales are conducted by online selling platforms, as well as the high street outlets. Although the overall food and drink sector is still dwarfing the organic market, non-organic sales had only managed to grow by 2 percent over the same period, i.e. 2017 (Smithers 2018). The growth of organic sales is majorly characterised by the increasing intentions of consumers to buy more items in the non-food categories, ranging from beauty products (rise by 24 percent) to textiles (rise by 25 percent).
The continuous growth in organic food sales is essentially driven by the proliferation of independent suppliers, supported by the Soil Association, the main organic certifying body. The idea of delivering organic vegetables, which once was seemed to be a fad, has now become a reality due to the involvement of an increased number of independent suppliers, driving the sales within the whisker of pre-recession levels. The independent suppliers, which may have a significant role to play in the expanding the market share of organic sales, have created surpluses for organic products, shifting those from the broader retail channels towards more local and online platforms (Daneshkhu 2016). Consumers, with their intention to search for a broader range of organic products, are increasingly finding them online, especially due to the impact of strict competition in the food and beverage industry leading grocers to downsize existing product ranges to hold down operational costs. Expansion of online retailers has become one of the significant trends in the current competitive environment in UK, which essentially contributes to the quarter-to-quarter increase in organic range. Sales of organic products of Tesco in 2015 were decreased significantly, whereas the organic sales of Ocado jumped substantially by 19 percent due to its priority on expanding the online retailing process (Hemmerling, Asioli and Spiller 2016). Regardless of their marginal share in the increasing market share, discount retailers, such as Aldi and Lidl continue to grow their sales with increase ranges of organic products.
Apart from organic cotton clothes and beauty products, grocery items, such as oils, tea and jam are experiencing increased demand, whereas the sales of fruits and vegetables have been strong throughout the previous years. UK is one of the top-five nations in terms of biggest organic market worldwide, suggesting the intensity of competition throughout the marketplace. It is important for producers to avoid supply and demand imbalances, which have always harmed the sector, before committing to organic farming.
Organic products, also referred to as green products, are perceived as costlier than their traditional alternatives, indicating the importance of price as one of the key factors for making purchasing decisions. While high prices continue to serve as a major barrier to eco-friendly purchases, constant efforts from discount managers in acquiring products temporarily lower prices while involving sales promotion, coupons and discounts have proved to be a worthy determinant in creating promising consumer segments in recent time. Aslihan Nasir and Karakaya (2014) have performed the cluster analysis to report the availability of three consumer segments based on consumer attitudes towards organic foods, namely favourable, neutral and unfavourable. Compared to other segments, consumers from favourable segment in the country exerts a more favourable attitude to exhibit higher levels of health orientation and socially responsible consumption behaviour. Based on the particular assumption, it is important for marketers to develop a proper understanding of organic food market segments for targeting right consumers with appropriate marketing mix.
In order to analyse the heterogeneity of organic food buyers, a latent class model can be used. Such a model includes four distinct classes, i.e. segments to identify buyers of organic food buyers, namely enthusiastic social moralists, enthusiastic social-seekers, hostile heavy shoppers and hostile seldom shoppers (Peštek, Agic and Cinjarevic 2018). As the organic food industry going through the phase of continued development, exploring such segments of organic food buyers helps to enhance knowledge of diverse characteristics of organic food buyers.
The global growth of organic product markets is accelerated by the increasing willingness among consumers to buy and consume organic foods. Preference towards buying organic foods among consumers is ever-increasing due to the priority of these food products in promoting not only the producers, government and consumers but also responding accordingly to social desire for high food quality and food production, often characterised for less damage to the environmental systems and improvement of quality of life. The research of Mervin and Ramaswamy (2013) principally find out that age, gender, occupation, monthly income, level of health and environmental engagement, family status and degree of awareness are closely associated with the consumer behaviours towards organic products, thereby influencing their purchasing patterns. Green consumers are more likely to prefer organic foods, suggesting the need for government and social organisations to promote organic farming at the households among the common population while taking required regulatory steps to authenticate organic certification and labelling to enhance trust and confidence of consuming organic food items. By recollecting ideas from various studies conducted in different countries, Rana and Paul (2017) have analysed some of the key factors to suggest that health-conscious consumers, driven by the increasing incidents of lifestyle diseases, such as depression and heart disorders, are likely to exhibit a growing preference for consuming organic food over conventionally produced food. Their increased concern towards improving quality of life is not only influencing spending patterns but also providing significant implications on retailing, distribution and marketing functions of business.
Industry Distribution Channels and Structure
Product distribution related to organic products is chiefly influenced by production methods and operations size among other available factors in the market. Whereas economies of scale help to sustain large-scale farming, small-scale farming leads towards higher prices for products due to the need for covering additional costs of not using antibiotics and fertilisers. The overall scenario essentially gives rise to two distinct distribution systems throughout UK, such as long channels and short channels. Long channels include retail chains using price and high distribution intensity to promote value, whereas short channel refers to direct producers adding value based on their individual production methods and sustainable practices (Hamzaoui-Essoussi and Zahaf 2012). As a result, discrepancies can be observed in terms of the value chain, market realities and value delivery system, creating a challenge for the overall organic food sector.
In case of the conventional food systems, the presence of a series of intermediaries, ranging from handlers to suppliers, can be observed between producers and consumers. Since organic food (OF) has increasingly gained an entry in the mainstream market, the requirement of developing a similar value chain has become necessary, necessitating the sale of OF through conventional outlets across the country. Such a scenario leads traditional retail outlets in the country, with their focus on expanding profitability, seeks to enable consistent supply of these products, which subsequently has attracted imports from warmer climates to match the consistency requirements (Rana and Paul 2017). Due to the emergence of OF as one of the important segments of food retailing within the span of few years, the particular industry steadily moved from niche markets, i.e. small speciality stores to mainstream markets, i.e. a wide range of supermarket chains. Recently the evolution in the form of distribution channel can be clearly observed as bulks of OF ten years ago were mostly (95 percent) found on speciality stores while the remaining (5 percent) could be sourced from mainstream stores. Direct link between producers and consumers uses and characterises farmers’ markets among other alternative distribution channels. Additionally, distributors in some countries can also be seen promoting their own line of OF using certain brand names.
Based on the scholarly work of Atănăsoaie (2011), small farmers are advised to develop a closer link with final consumers using direct distribution channels, supported by systems, such as community supported agriculture (CSA) and peasant markets. In case of large-scale producers, they require producing crops that require special storage conditions, leading to the use of indirect distribution channels to reach a wide range of consumers and sell large quantities of goods. Supermarkets, specialised organic shops, processors and other intermediaries are some of the notable examples of indirect distribution channels in the country.
It is hard to visualise the general landscape of organic consumers because of their variance, ranging from die-hard advocates to sceptical individuals who are often likely to switch gears. A survey conducted by the Organic Trade Association observes that US families are increasingly embracing organic products in a wide range of categories, suggesting more likeliness of households with kids preferring to purchase organic products at least sometimes. The survey also disclosed that preference towards better health and the intention to avoid toxic and persistent pesticides and fertilisers are the important factors leading parents to opt for the purchase of OF (Grubor and Djokic 2016).CP Foods (UK) Limited should target these group of audience, i.e. families with parents and kids to achieve the desired objective of penetrating in the new market. The modern population, on the other hand, driven by increase awareness about health and fitness are not only changing their attitudes but also adjusting their habits to buy organic products. Mid-level consumers, i.e. the age group of 20-35 years are mostly characterised by this habit, indicating CP Foods to target such an audience base to increase the chances of maximising business profitability (Janssen 2018). Mid-level organic consumers make up almost 65 percent of UK the population.
The markets for organic products are fast-growing, where each category is becoming saturated in no time. A firm, entered the market ten years ago, might left with depending on consumers only who are looking for switching to organic products. Increasing competition means the importance of differentiation in product offerings to support business survival, leading the organisation to offer unique value that no other competitors can match. In this case, CP Foods, with the help of developing an in-depth understanding of important points of differentiation, needs to focus on complexity in product manufacturing and packaging that competitors find hard to copy (Rahmann et al. 2017). More specifically, the company can continuously add varieties to provide more options to target markets while satisfying their diverse needs and specifications. The company can also change the packaging of different products to suit customer needs while modifying the approach to branding to address preferences and expectations of selected groups of consumers. Linking with other delivery partners, on the other hand, can allow the firm to extend seasons for specific offerings, thereby contributing to advanced product differentiation.
Competitive Positioning and Benefits
According to Reganold and Wachter (2016), telling stories about the brand is one of the great ways for an organisation to paint the desired image of the business that ultimately contributes to captivate an audience. In terms of interpretation, stories differ from normal marketing approaches, as they broadcast core ideas of the business while humanising the brand to connect with more audience in a new and personised manner. Story-based marketing, therefore, is one of the important techniques for CP Foods to enhance its competitive position across the OF industry in UK by connecting with the mind-sets of consumers in a real way and drawing them closer to the brand. This ultimately results in increasing revenues for the business, thereby enhancing the chances of success regarding penetration into the new market.
The company, with the help of appropriate distribution channels, must provide important attention on organic spices, essential oils alongside fresh fruits, vegetables, medicinal and aromatic plants. To sum up all, CP Foods must use a positive advertising and promotional strategy to create increased customer awareness for its differentiated product ranges, thereby prolonging the brand value and benefits.
Proposed Marketing Mix
Product – A study conducted by the Soil Association Research comes with the finding that consumers of organic products are most likely to opt for fruits and vegetables initially among different categories, followed by eggs and dairy products (Jolink and Niesten 2015). Similar to the approach of Tesco to market its organic lines of grocery products using leaflets in the packaging of fruits and vegetables, CA Foods must think of a suitable approach to encourage customers to shop for its products as per their primary choices. Additionally, the company must ensure product diversity in production of organic fruits and vegetables to ensure proper control in production standard and regular delivery. Packaging and logo, on the other hand, should need to be attractive, easy to recognise and adhere to the organic identity of both products and company.
Price – Due to increased costs associated with the production and distribution of organic products, it is recommended that CP Foods should fix slightly higher prices for its wide range of organic offerings. According to Liang (2016), high prices of organic products are principally driven by two major factors, such as high cost of production and fair trade rules. At the initial stage, the organisation needs to produce organic products by farming, which although does not require the use of chemicals and pesticides, essentially demand more time and labour to look after organic produces, thereby increasing costs for the business. Such products not only help consumers to satisfy their demands regarding consumption of health food but also contribute to the social causes though fair trade guidelines. Therefore, the requirement of six-step pricing policy is important for a food retailer like CA Foods, indicating the importance of selecting pricing objective, followed by estimating demand curve, quantities sold at each price point, change of costs at different output levels, pricing technique and final price.
Promotion – Marketers of CA Foods, in this case, must understand the importance of marketing communications, which help to inform, persuade and remind consumers directly and indirectly about their products and brands. Advertisements are the primary option for the company, as most organic retailers post advertisements in local newspapers around the shop area. Placing banners and billboards in strategic locations near the shop or within the city, for example, would be a good idea for the company to gain appeal of local consumers and encourage them to shop for their products. Furthermore, social media plays a strong role in informing potential consumers about added values of organic offerings, necessitating the business to use such a prominent channel to exchange information, develop connections and carry out profitable transactions (Rihn et al. 2016).
Distribution – In UK, most organic consumers tend to shop in their nearest large department stores, possibly due to increased convenience in terms of transportation and distance from home. CA Foods has a significant presence in UK, leading the retailer to produce and distribute its organic food products through numerous retail stores and outlets located in popular locations in the country. The company can develop partnerships with certain supermarkets to sell fresh and reliable products at lower prices. As part of the B2B approach to conventional marketing channel, CA Foods can distribute its produces to wholesalers along with using e-marketing channels to maximise its advantage in the particular marketplace.
Implications of differences between consumer and B2B marketing
Consumers around the world are exhibiting increased consciousness regarding damaging consequences of edible products ever since environmentalists and activities raised their concerns related to ill-effects of increased used to chemicals in farming processes. Such an increase in consumer awareness, which has contributed to the shift in their tastes and preferences, pave the way for escalating demands for OF in the domestic, as well as global markets. To capitalise on this opportunity, CP Foods needs to develop a highly competent B2C marketing model by identifying some of promising organic products offering an increased competitive edge in the identified marketplace (Hamzaoui-Essoussi and Zahaf 2012). The concept of B2C marketing, in this case, lies in attracting consumers and addressing their requirements in line with changing lifestyle choices and preferences.
However, the particular marketing approach is different from B2B marketing. Marketers of CP Foods must develop an in-depth understanding about the diversity of processes required in the two separate approaches to marketing. Where B2C involves generating promising value to customers, leading to the development of competitive advantage, B2B requires the company to offer substantial return on investment (ROI) to the clients upon their purchases. The lack of emotion in B2B marketing is also an important implication for marketing managers of CP Foods in creation of effective marketing strategy for the chosen market.
The idea of producing and distributing organic food is highly profitable for CA Foods (UK) Limited as part of its intention to penetrate into a new market and expand business profitability. Given the growing concern among population regarding health and fitness alongside the desire for contributing to the environment positively, the particular market of organic food provides a worthwhile opportunity for the business to growth effectively. However, the organisation needs to come up with a tailored marketing approach by identifying appropriate target consumers and developing proper positioning strategy to ensure proper achievement of marketing objectives.