Kinder Surprise potentials

There are two approaches that can be used to measure sales potential: break-down and build-up approaches. In the former one develops an economic forecast for a specific area and then estimates market potential on the basis of the forecast. Sales potential is then derived from the general forecast and the estimate of market potential (Dibb, Simkin, Pride, & Ferrell, 2012, p. 685).

The latter one, there is an estimation made of how much a potential buyer will purchase during specific time in a specific area multiplied by the number of potential buyers (Dibb, Simkin, Pride, & Ferrell, 2012, p. 685). The totals of all the geographic areas are calculated to determine the market potential. To estimate the sales potential, marketing activities are taken into account and a proportion of the total market potential. In order to estimate market and sales potential of Kinder Surprise in the Netherlands in 2015 I decided to use build-up approach as it is easier in my opinion. However, the company does not provide any statistics or other databases, such as Central Bureau of Statistics, Eurostat, Euroline, Statline, WorldBank do not have any information regarding the average number of Kinder eggs bought. I also tried many variations in Google, but I only found information for Russia. There are different consumer panels (europanel, kantarworldpanel), but they only provide their service to those who pay for it. Due to the unavailability of information I decided to estimate market and sales potential in Russia in 2014. According to (Chan, 2014), the average number of Kinder Surprise bought by one person in a year is 7.8. Multiplying it by 99 301 which is a number of people in Russia in 2014 ranging from 10 till 60 years (GKS, 2016), we get 774 547,8 which is an estimated market potential. According to (Chan, 2014), there will be a 20% decrease in sales of Kinder surprise due to sanctions against Russian Federation. This means that the sales potential will be 154 909, 56 items.

It is necessary to write a marketing plan for Kinder Surprise sales in the Netherlands because in each country there are its market trends and customer issues (Dibb, Simkin, Pride, & Ferrell, 2012, p. 678). For example, the trends might had changed since 2008 the era of economic crisis (government of the netherlands, 2016).

So first, is that right goals can be set knowing the external influences on company’s environment. Secondly, the external influences can create certain threats within a society which might affect Kinder Surprise sales, thus should be mentioned in the marketing plan. For example, a trend of people paying more attention to their health can subsequently result in people eating considerably less chocolate. Thirdly, large expenses can be avoided if a marketing plan is done successfully, because trends, environmental influences and problems are taken into account. Ferrero Netherlands might not write a marketing plan since they have a lot of departments worldwide which means that they should spend a lot of time doing time-consuming stuff. There could be sales forecasts used in order to develop further on a marketing plan for Kinder Surprise for the years 2016, 2017, 2018. I would use Customer forecasting technique in the future. According to (Dibb, Simkin, Pride, & Ferrell, 2012, p. 187), through it marketers can ask customers what types and quantities of products they intend to buy during a specific period of time. Second advantage will be increasing sales potential by people’s integration in the decision-making process itself. The advantage of this is that customers can start being involved somehow in the development of the Kinder toys, for instance giving ideas or sharing their favourite character. The disadvantages of this is that customers must be able and willing to make ac- curate estimates of future product requirements (Dibb, Simkin, Pride, & Ferrell, 2012, p. 187). The other disadvantage is that people might do it just for fun not paying attention to how accurate the answers should be.

International market advantages and risks

Kinder is an international brand which is recognised almost all over the world. There are 49 countries worldwide where the company Ferrero has its sales facilities and/or factories, manufacturing facilities. This countries include 27 countries in the European zone, 9 countries in America, 9 in Asia and 2 in the area of Oceania. The most recent establishments took place in Turkey, Mexico and China. Kinder Eggs are sold all over the world, including the United States, where they are sold in European Markets and Russian Deli stores, despite being illegal. Going against the ban, suppliers began to put them in a secured box and deliver it via shipping cargo (as a safer way to import Kinder Surprise in the United States) and put it in one vehicle. The importance of Kinder products is such that without them, Ferrero’s international market share would fall to 14% from 38%. Comparing between product orientation strategy and market orientation strategy, Ferrero follows product orientation, with some products, like Kinder Joy, Kinder Surprise and some multipackages being market oriented. This is because the company tries to meet needs of children to have a suitable and trendy toy inside. Since an establishment of a factory in Vladimir in 2009, Ferrero employs 1,500 of groups total payroll of 22,000. Sales in year 2011 in August were €6,6 billion with profit before tax of €900m.

Sales in a company can be affected by legal forces, tax  regulations, political factor due to relationship between countries. This was the case in Russian market when the west started to restrict import into Russia. On average Russian buys 8 Kinder Surprise items per year. This number was at high risk of change because of the fact that countries were imposing sanctions on Russia over the crisis in Ukraine.

The examples of government policies and their affects on international companies could be the United States and Chile. It’s been more than 30 years already since the US government keeps an embargo on Kinder Surprise eggs. The 1938 Food, Drug and Cosmetic Act bans non-nutritive objects, such as toys claiming that the surprise toy could be a choking hazard for kids and therefore are too dangerous for children. There has been a nutritional food labelling law introduced in Chile in 2013, which says that companies cannot use ‘commercial hooks’ to attract children under 14 years of age. This policy is concerned with obesity problems. Kinder Surprise eggs accused of featuring a ‘commercial hook’ as well as McDonald’s. These companies will be affected by law. 

Environmental analysis

The producing company of Kinder Surprise is Ferrero. Associated with better nutrition needs and boost of the number of children involved in physical activities, Ferrero has started to introduce sport campaigns and promote physical activity amongst young children. The company sponsors, organises tournaments and events highlighting the importance of sports in our lives. Company becomes better marketed this way.

Recently, there have been going a lot of discussions about the use of palm oil in the production of food. Many claim that it is not healthy, and if used too much it is even dangerous for us. Also only about 40% of the world’s palm oil producers are the members of the RSPO organisation, which ensures the sustainability of palm oil.

Since the topic is rising its popularity and everyone is becoming aware of it, there is a lot of attention given to it on that matter and now people start paying more attention to the ingredients. Many products are not being bought because of the use of palm oil and the companies decide to change to certified segregated sustainable palm oil.

Same way for Ferrero, starting from 2012 until 2014 the amount of certified oil sourced increased from 60% to 100%. Research has found that the companies that switched to that kind of oil had become more profitable and had gotten significant returns on investment.

According to the Central Bureau of Statistics, there is more chocolate and cacao exported than it is imported in the country. This can be related to the higher price of the product in this country and the reason of the prices in the other countries. The second external factor which can be useful is the age of the people living in the country. The reason for that is because the majority of the people that consume that product is important. In this case it is the younger generation. The increasing amount of the younger people in the country can play a role in the increased consumption of the product. According to the statistical publication, the country gets older and this can be a reason for the decreased consumption of the product.

There are many vegetarians in the Netherlands. The majority of those might not drink milk, which automatically means that they won’t be buying Kinder Surprise because due to the same reason. Religious differences will not affect the buying trend of the product in the Netherlands. 

Is Kinder Surprise sold straight to supermarkets as we think?

It may seem that Kinder Surprise does not have B2B relations, but this is the part that requires investigation and those B2B partners do exist, in fact, there are many of them. On (Ferrero Russia, 2016), they state that they develop a suitable packaging for the products in order to attract more attention to their partners from the side of consumers. Ferrero is ready to offer their services in different sales channels: coffee companies and fast food, restaurants and bars, hotels, schools and universities, catering and offices, traveling spheres (Ferrero Russia, 2016).
What exactly are business markets? There are 4 types of them: producer, reseller, government and public sector, institutional markets (Renssen, 2016).

Ferrero company is based in 53 countries and its products are present, sold, directly or through authorized retailers (Ferrero, 2016). This and before stated statements, confirm that the company has business to business relations and in this case it’s a reseller business market.

As for producer business market (or industrial), these are suppliers of raw goods for Kinder Surprise (Ashe-Edmunds, 2016), for instance flour, eggs, milk cocoa. Their suppliers usually do service, plant maintenance and production systems checks (Ferrero UK, 2016).

Kinder Surprise is being sold since 1974. During this period of time the product has been adapted to the business market. Adaption process involves maintenance of specific level of quality and repetitive usage of the same raw material suppliers, for example. They only buy from suppliers that have won their trust (Ferrero UK, 2016). The cocoa that is used for Kinder Surprise and other products of Ferrero has been known and used in Central America for thousands of years (Ferrero UK, 2016).

There are three types of business purchases: new task purchase, modified rebuy purchase or straight rebuy purchase. I think that straight rebuy purchase is most likely to be used for the product, as there are relatively the same amounts of raw materials purchased every period (week, month, etc.). New task purchase might take place when there are new resellers who would like to order Kinder Surprise.

Describe the buying center and the buying process for your product in a selected business market – reseller.

Case: Kinder develops a new Christmas packaging of different types and overall looks.

1.    Determining who potential customers are and what they require. (In this case, a decision-making unit will be choosing from already existing customers and their likelihood of buying Christmas tree carton Kinder Surprise packs).

2. Deciding how many and locating where they are (After the decision unit is done their research, and after contacting them to know their interest in the new product, they will count the number and estimate everything according to the location).

3. After this, they discuss the features of future contracts.

A buying centre in this case is a decision-making unit of Kinder which requires to do a research on already existing customers and their possible interest in new Kinder Surprise products.

Derived demand – when the amount of good being ordered depends on the size of raw material suppliers. This takes place when one of the Kinder Surprise suppliers (supplier of cocoa, milk, salt etc.) has some delivery problems from other countries and automatically they cannot produce as many products as they usually do and they have to lower the amount of the deliveries to their resellers for some time. In the best case, the usual supply will come back to its normal flow, if not Kinder will be using a lot of money as well as the resellers. However, for some resellers it might be not that affective as for the company itself, unless it will take a lot of time.

Why does Kinder Surprise keep us hooked?

Child’s choice of a chocolate depends on whether there is a toy that comes with it or not. There are two brands which have a toy inside and which we can compare. Cadbury's Jems &Kinder Surprise (Titus, 2010). With time, Cadbury's has become less popular (Titus, 2010). Why? Because the toy that was inside, repeated, which means that a child got the same toy at least second time in a row. Kinder Surprise, most usually has a different tactic, where at the end you have the least number of the same toys.

What keeps us hooked on a product is a sense of anticipation. Brands that can promise us surprises are the ones that grab our attention the most.

For more than 40 years already, Kinder Surprise is maintaining its leader position. What else helps it to sustain and what can make the product fall?

Social external factors largely influence Ferrero business. The main factor is the current trend of 'snacking' (UKessays, 2015). Indeed, the number of people eating on the go is increasing over the years. This can be a strong advantage for growth not only for the product, but for the whole company.

Kinder Surprise is targeted on the young audience with children, who will have an impact on their parents' decision making process (UKessays, 2015). Thus, any social change outside Ferrero has a possible impact on the new strategy. If for instance, the birth rate falls, Kinder Surprise won’t bring as much profit to the company as it does now. Likewise, Ferrero gets less in those countries where the birth rate is low rather than of the high birth rate countries. If the birth rate increases we can assume a larger demand for the young population (UKessays, 2015).

More than that, increasing obesity is a problem. Numerous studies announced that diet trend increases, and will even more in the near future (UKessays, 2015). This means that the demand for Kinder Surprise will decrease; people will prefer fruits to chocolate.

Fashion is a contemporaneous factor that changes customers' mind and tastes (UKessays, 2015). Ferrero constantly has to adapt adverts and promotions in order to keep catching customers' attention.

There are several family life cycle to which you can assign your product in particular. There can be more to one. It determines the type of family the target market consumer belongs to (Marketing teacher, n.d.).

·        Young and single – not the very targeted group but still there are many people on this stage who buy Kinder Surprise, because sometimes they want to remember their childhood or just do it for fun.

·        Engaged couples – not likely to be a target group as there are no children. Engaged couples buy products to begin a life together and the recently divorced are buying products that they already had and now need to replace (Marketing teacher, n.d.).

·        DINKS (Double Income No Kids) – not likely to be a target group as there are no children

·        SINKS (Single Income No Kids) – not likely to be a target group as there are no children

·        Married with children: Babies, Toddlers, Teens, Older – the main target group Kinder Surprise as a product is oriented to. Those who buy the product are usually people aged 18-35, because they buy it for their young children, sisters/brother etc.

·        Single parents – same as the one above, it is the main group of the product orientation.

·        Empty nester – someone whose children are now grown adults and have moved out of the house (Marketing teacher, n.d.). It can be another target market if those grown adults already have children.

 

What type of consumer buying behavior is most likely to exist for Kinder Surprise?

1.     Impulse Purchases (happens when a customer stands at the cashier next to little low-priced products such as gums and chocolates and adds one of the items to his groceries cart) (Brookins, 2016). The consumer makes a purchase with little to no thought or planning involved.

2.     Routine Purchases (when there are items consumers are used to purchase every day, once a week or monthly (Marketing teacher, n.d.). Customers spend little time purchasing this item and don't typically need to read reviews before buying the product). Kinder can be bought with a routine purchase, as in some families there are family rules of a parent buying a child Kinder when coming from work every day, etc.

The global company Ferrero produces Kinder Surprise. There are many more products created by the company which suit a lot of tastes and ages. Its confectionery is so well known all over the world, that it has become a custom and a cultural icon of many countries. Ferrero’s mission lies in selecting the finest raw material so high quality, fresh products are made from it taking into account respect and consideration of their customers.

Ferrero’s most important brand is Kinder as it consists of a large number of different confectionary products. Among company products, Nutella, Ferrero Rocher and Kinder Surprise are the most sold ones during the 4 year performance, starting from 2008 till 2012. It is being manufactured since 1974 by Italian company Ferrero and even now it’s maintaining its reputation and sales across the world.

For the generic competition, there are so many eggs introduced by other companies, mainly by local ones in almost each country. Still yet, consumers choose Kinder Surprise over other cheaper substitutions. In Russia for example, there are at least 2 companies which also produce eggs with a toy inside and which are sometimes twice as cheap as their rival Kinder. The difference between cheaper eggs with toys and Kinder Surprise is in chocolate taste/type and the toy. However, it is also about the impression a Kinder egg had on a child rather than just a random egg by another producer.

As for a substitute product, Kinder Joy (another product of the Kinder brand) can be one, because it also has a form of an egg and a toy inside.

Then, there is another example with banned Kinder Surprise in US. Import of it and its production is banned there due to safety reasons. There was a substitute made for chocolate egg lovers. The company that produces the “safe eggs” is called Candy Treasure and their product Choco Treasure.

There were a few reasons named before, but to make it more deliberate, I will tell more about the competitive position of the chosen product. Why with existence of cheaper versions of a chocolate egg, people continue buying a more expensive one but which is well established in the market? There are actually many more answers to this question. First of all, Kinder only buys its ingredients from suppliers with which it has a long-standing relationship. Monitoring procedures are carried out at every stage of an ingredient’s life: from production to its delivery. Secondly, the toy designs done by employees of Ferrero Company goes always according to recent movies or cartoons. They know what is popular in the market and that’s the part of their strategy. For example, at the time “Minions” were released, Kinder company had already developed the characters which made an absolute boom amongst customers.

There is a lot of competition nowadays, broadens the variety of substitute products. Substitutes for Ferrero products are usually almost twice as cheap. However, Ferrero uses various extension marketing mix strategies as for example promotion, people and product to extend the life of the product. As it was mentioned before, there are different size of packages available for customers and also Ferrero has built a good reputation with different chocolates to cover various target audiences. This makes people still choose Kinder over other brands after so many years. Kinder keeps its demands by introducing new packaging styles or making new sets of a certain product. For instance, Kinder introduced a package of 3 Kinders, or a limited edition of Kinder Surprise with aeroplanes. In other words, the company always thinks of possible ways to keep the consumers be interested in the product even after so many years. Ferrero use sales promotion a lot, when offering pack-deals or when introducing extra activities for children which they will be interested in (contest, sweepstakes, instant win game, etc.). According to (Ferrero, 2009),the chocolate eggs lovers could win a personalised storybook.

Ferrero has multiple partnerships. Since 2013, the number of them has increased from 40 to 92. The Kinder+Sport programme, which promotes sporting activities, has a partnership with ISF – the International School Sport Federation (Ferrero, 2015). The company itself is a sponsor of many football teams and other popular sports, which brings them even more popularity and maintains the company among chocolate world leaders nowadays.

In general, the company spends a lot of money on marketing that plays an important role in our lives as it can be addictive. By conveying commercial communications consistent with the principles of good nutrition, balanced diet, physical activity and personal choice, industry can play an important role (Ferrero).

It’s hard to advise which growth strategy that popular and developed company has to take but there is always something which can be improved. For example, Ferrero was thinking about Kinder Surprise manufacturing in USA, however already for 30 years it’s been unsuccessful. The company doesn’t want to change/adjust the product so it suits American laws. However, they could try to do that as they can expand their market even further. This strategy, according to Ansoff Matrix makes part of market development.