Marketing Management

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Marketing Assignment II Individual Assignment

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Statement of Originality

Damith Danushka Siriwardana

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Accounting for Decision Makers

“I hereby Confirm that the work presented here in this report and in all other associated

material; is wholly my own work.

And I agree to assessment for plagiarism”

Signature:……………………………

Date:…………………........

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Acknowledgement

I am heartily thankful to the lecturers of the Marketing module, Mr. Chris Kariyawasam and

Mr. Ravi Liyanage and Mr. Ravi Jayawardana whose encouragement, supervision and

support from the preliminary to the concluding level enabled me to develop an understanding

of the subject.

Next my heartfelt gratitude goes out to my parents for giving their hearts out and for staying

with me whenever I needed a hand to make this Report a successful one.

Last, but not least, I would like to offer my regards and blessings to all of those who

supported me in any respect during the completion of the report.

Thank you!!!...

Danushka Siriwardana.

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Executive Summary

"Marketing is not the art of finding clever ways to dispose of what you make. It is the art of

creating genuine customer value."-Philip Kotler

As the International Marketing Manager of Dilmah PLC. Of Sri Lanka; while the Managing

Director is also concerned about the limited growth potential of the market; hence the

company has decided to move a step to the international market in order to expand and grow

its market. The main task as the marketing manager of Dilmah, with the instructions given by

the Managing Director, is to propose an International marketing plan to enter the most

potential market which is the Chinese tea market which would offer the greatest growth

potential in the next two years. In order to enter to the Chinese tea market, Dilmah has come

with a strategic marketing plan to introduce the Dilmah Freshleaf Ready to Drink Iced tea to

the consumers in the segment of age between 10 years and 29 years old who would fall

mostly to the Generation Y and Millennium Generation category.

The report will developed by assessing the company’s current situation by carrying out a

situational analysis and by analyzing the market growth of the Tea industry. And then the

report will give the analysis of the Segmenting, Targeting and positioning strategies which the

company has developed for the new product. At the next part of the report, the writer will

illustrate the marketing mix strategies for the product while giving its Financial Projections &

Evaluation Measures with Projected Budget for Dilmah Freshleaf Iced Tea for the years 2013

– 2015. The Export Potential will be analyzed for the product and the company’s

implementation plan for the new product which is to be launched will be illustrated and

finally the writer will give its conclusion.

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Table of Contents

Background...........................................................................................................................................4

Dilmah Freshleaf Ready-To-Drink Iced Tea.........................................................................................4

Situational Analysis of Dilmah..............................................................................................................5

SWOT Analysis:.....................................................................................................................................5

PEST Analysis.......................................................................................................................................7

Competitor Analysis for Dilmah – Porter’s Five Force Model Analysis...............................................9

Market Growth of the Industry............................................................................................................12

STP Analysis for Dilmah Freshleaf Ice Tea – Segmenting, Targeting, Positioning.............................14

Marketing Mix Strategies....................................................................................................................16

Financial Projections & Evaluation Measures.....................................................................................18

Projected Budget for Dilmah Freshleaf Iced Tea (2013 – 2015).........................................................18

Export Potential...................................................................................................................................19

Implementation Plan............................................................................................................................19

Conclusion...........................................................................................................................................20

Appendices..........................................................................................................................................21

Reference List......................................................................................................................................22

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Background

The MJF Group’s origins date back to the 1950’s just after Sri Lanka, then Ceylon, became

independent from British colonial rule. Founder of the Group, Merrill J. Fernando has

devoted a lifetime to tea, the core business of the Group.

Merrill heads the family managed Group to this day, with his two sons and a dedicated team

of professionals. The Group retains Merrill’s early emphasis on his vision for bringing quality

back to tea and his commitment to integrity, tradition and personalized customer service. The

Group’s Dilmah brand, coined by the Founder from the names of his two sons, Dilhan and

Malik, is known for its quality in almost 90 countries around the world. Dilmah has

revitalized a category in decline through genuine innovation, quality and freshness and is

widely credited with halting the trend towards commoditization in tea. (Dilmah, 2013)

Dilmah Freshleaf Ready-To-Drink Iced Tea

The state-of-the-art RTD plant gradually took shape, culminating in completion and official

launch in August 2007. The product is determined by the conservation of the health benefits

of tea, while keeping significant concentration taste of the tea, and ultimately invented the

formula which certainly met these aspirations.

Dilmah Freshleaf Iced Tea is made from fresh leaf that is handpicked on-site and only the

tender shoots are selected, sanctioning for a fresh as enabling utilization of tea in the

manufacture of Dilmah Freshleaf RTD Iced Tea by converting the tea leaf to a tea concentrate

will be finished within 24 hours. This seals the rapid production of time in the healthy

properties of the product and ensures freshness that no substitute brand could match.

(Pressroom-Dilmah, 2012)

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“Freshleaf Iced Tea” will be a bottled beverage and positioned

as the only fresh ready to drink tea product offered to the

market. The drink is. The beverage is offered to the consumers

with enhanced fruit flavors such as Lemmon, Berry and Peach

flavors which will bring an absolutely unique drinking

experience to its consumers. It will be placed as an alternative

to traditional tea by making consumers feel funky and unusual

great taste of even a real fruit juice in a convenient and

attractive packaging. Dilmah’s “Freshleaf Iced Tea” will play a

strategic role by focusing on four main objectives:

To expand its core business in the Fresh Tea market by

creating high value toward customers.

To be at the forefront as the market leader in the Tea

industry, by offering innovative products and launching successful products to the

market.

To reinforce and satisfy the expectations of the more audacious Millennium

Generation and Generation Y consumers with a new eye-catching product which

functions towards relaxation;

To become the market leader in the Fresh Tea segment by entering to touch the

functional drinks segment with an increased market share

Situational Analysis of Dilmah

SWOT Analysis:Strengths:

Strong Brand Image in the Global Tea Industry

The levels of anti-oxidants in Dilmah Freshleaf are far higher than most brands in the

market

No preservatives are added and Freshleaf uses only natural flavors and contains no

chemicals.

Its healthfulness when compared to popular colas’ due to its reduced sweetness.

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The Ready-To-Drink tea market is presently the fastest growing segment of the tea

industry, monopolized by multinationals.

Most Ready-To-Drink teas in the market have little or no tea character. At best the tea

in them is but a natural colorant. The Dilmah project on the other hand offers a better

quality RTD, produced from freshly picked tea leaf, from their own tea gardens,

retaining the quintessential characteristics of Ceylon Tea.

Weaknesses:

Raw material source supplied depends on many factors, such as weather, natural

disasters, increasing in fertilizer price, etc.

Dilmah as an imported product competing against brands packed in that country

makes the product very expensive.

Brand dilution

Opportunities:

In the long run there is going to be a lucrative market for Ice-Tea and flavored tea.

Market tea products to the Young population

The living standard is increasing very sharply

Expansion in other countries

Introducing of more flavors

Threats:

Strong competition in the Market

Internationally increasing tea prices

Political conditions in the country may be obstacle to exports

High inflation in the country can negatively affect the brand

Substitute Products such as Soft drinks can be a threat to the market

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SWOT Matrix:

Strength – Weakness – Opportunity - Threats

Backed up by a strong brand name, easier to develop its market.

Based on the existing distribution networks, expand its market easily.

Do market research to set the suitable price for the living standard of people.

Deal out the product more widely to tourism cities.

Create more flavors to attract a large number of populations, especially the youth, who

are willing to try something new.

Take the innovation in some features of the product to attract more customers.

Reduce the production cost such as transportation cost by cooperating with other

SBUs.

Create new flavors, which are suitable for each segment,

Have plans to store material enough in the case of bad weather and natural disasters.

PEST Analysis

Before entering the new market, Dilmah also have to understand the four main factors that

impact on entering to the new market externally by country’s politics, economic situation,

social and technological impact. Since it needs to ensure that the new target market is the

right market for Dilmah’s product and marketing strategies must be appropriate, effective and

efficient, with new target market.

Political & Legal Environment

So far, China has been under the communist party, therefore its political situation is very

stable. Stabilities of the political situation of the country could facilitate and lead to augment

direct foreign investment. When the foreign direct investment of the country increase the

country's GDP and employment opportunities also would automatically increase. Therefore,

there will be reduction in unemployment rate and decline in inflation. Here's a thing we have

to consider; the rules and regulations are not very transparent and absolute in China. In this

business, Sri Lanka and China having free trade agreement between each other is one of the

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biggest advantages of our product. Consequently, no high trade there are barriers such as

taxes, traffic, licensing and customs fees not be too high in this business.

It is important to understand the laws of copyright and licensing in planning market entry in

an emerging market. Dilmah needs to use intellectual protection laws to protect its business

model and the brand from being illegally copied in China.

Economic Environment:

We can see in the economic factors as China is the largest producer of tea and a world's

largest recipient of foreign capital. In China joined the WTO since 2001 and has contributed

to a rapid increase in exports, imports and foreign direct investment. But when we studied

their domestic competitors, the possibility that we can see is our product has even 70,000

thousand Chinese tea companies are operating in the country; there is no known global brand

in the international tea industry. Besides China although not a traditional way to serve tea,

iced tea has increased its popularity in even rural areas since the 1980s with canned or bottled

tea. Many varieties of tea, comprising green tea are available, packaged and sold in stores.

Based on these factors can be assumed, as the Chinese market will be a great demand for

Freshleaf Iced tea.

Social & Cultural Environment:

China is the country that has the world's largest population and has more than 13 million

people. One of the most important social and cultural factor have supported us is entering the

Chinese tea market, representing almost 95% of Chinese people have the habit of drinking

tea. Dilmah Freshleaf Iced tea is also rich in nutrients and has many health benefits,

especially which helps prevents diabetes, cancer, and many other diseases; the iced tea also

makes relax and fulfills your thrust at any time . Dilmah Freshleaf Iced tea is not only for

both gender, ranging all ages and also for daily consumption.

Technological Environment:

Nowadays china become transform from manufacture country to innovation country. As a

consequence, China’s economy also shifts from labor intensive economy to capital intensive

economy. Being highly labor intensive technological factors is least affecting the tea industry

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and also the Technological factors of China might not affect much to Dilmah Freshleaf Iced

Tea whereas the product will be manufactured in Sri Lanka and exported to China.

Incorporating the highest technological standards in its production of tea In Sri Lanka,

Dilmah is a symbol of excellence giving a perfect bland of quality and care in every product it

offers. Besides Using cutting edge technology and state-of-the- art equipment, Dilmah

produces the Ready-To-Drink tea of the highest tea character, using freshly picked tea leaf

from their own tea gardens, rich in antioxidants, with no chemicals used in manufacture.

Competitor Analysis for Dilmah – Porter’s Five Force Model Analysis

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Threat of Substitutes – MODERATE

Even though tea is consumed the number one drink in China, soft drinks, coffees, health

drinks are main rivals, cola spends on advertising facilitates its penetration into the lifestyles

of consumers in China, especially among the younger groups .

Recent emphasis on coffee outlets can also increase coffee consumption.

Bargaining Power of Suppliers – MEDIUM

Labor is the biggest cost element. While the job is unionized, the non-availability of other

employment opportunities in areas where the tea plantations maintained possess their

bargaining power in check.

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Inter-firm Rivalry – INTENSE

The low growth in local demand regional fragmentation, aggressive competition in export

markets together largely fixed cost structure with the intensity of competition in the industry

competition bought leaf tea producers’ local brands is another factor that affects the Player of

the Century.

Bargaining Power of Buyers - LOW

The demand instigates from millions of household where consumption is widely distributed

while Dilmah being a consumer product; subsequent in low bargaining power in the hands of

any single customer.

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Barriers to Entry - MEDIUM

Very along the value chain of the industry and high in the production of the tea leaf, it is low

when it comes to retailing processing and distribution. As trade and distribution is driving

demand. The strength of competition in this segment is driving the whole competitive force of

the industry.

Market Growth of the Industry

Canadean's, "Iced/RTD Tea Drinks Market in Asia to 2017: Market Guide" provides in-depth

details on the trends and drivers of the RTD Iced tea market in Asia. The research shows that

the RTD tea is often gaining popularity due to quick and busy lifestyle, and as a substitute for

carbonated drinks. RTD tea is especially sought after consumers in the East as a health drink

and it makes the consumer more alert. Knowing more about the health benefits of drinking tea

as an antioxidant, growing population makes busy lifestyles and increase of disposable

income where consumers are opting for RTD tea.

The negative effects of carbonated drinks are another factor for the shift in demand towards

the RTD tea products. The winning imperative of the industry is the distribution alliances

which is helpful in developing the untapped market, but also to upsurge product visibility.

The old custom of drinking hot tea and higher prices for RTD tea are the inhibiting factors.

The global market for RTD tea in terms of revenue is valued to be worth approximately $ 69

billion in 2011 and projected to reach $ 125 billion in 2017, budding at a compound annual

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growth rate estimated up to 10.9% from 2012 to 2017. The largest has being the Asia-Pacific

region. The demand for RTD tea market is expected to increase in the North America due to

increase of health awareness and the harmful effects of carbonated drinks.

According to Euromonitor International, RTD tea has been identified as one of the categories

most likely to show resilience over 2009-2012. RTD Tea perhaps relishes the largest health

claim over all soft drinks, with the natural antioxidant health benefits of tea provided are well

communicated by the manufacturer and is gradually understood by the consumers. Health and

Price are the two important factors when it comes to purchase decision.

Source: Euromonitor International

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STP Analysis for Dilmah Freshleaf Ice Tea – Segmenting, Targeting, Positioning

Market Segmentation

Segment identification: Dilmah Freshleaf Ready to Drink Iced Tea will be established within

the Ready to Drink Tea sector.

Segment needs: The product will accommodate to both social needs (perception of a social,

fun drink with a sense of belonging within peer consumer groups) and physiological needs of

the consumers (hydrating and nutritional value).

Segment Trends: Current trends include the abandonment of junk foods and carbonated

drinks; the emerging interest in healthier products / benefit also for "body and mind", the

trend is the availability of on-the-go products for the consumption for people with an active

lifestyle, along with the trend towards personalization by adapting (or for drinks which seeks

a variety in a wide introduction of flavors).

Segmentation Variables and Breakdowns for China Consumer Market of

Dilmah Freshleaf Iced Tea

Main Dimensions Variables Breakdowns

Geographic Segmentation Region Nationwide (all provinces and

territories) with emphasis on

urban areas and adapted

strategies for all geographical

groups

Density Urban, suburban

Climate All (East, West)

Demographic Segmentation Age 10-29 years old (teenagers,

studying age and young adults)

Gender Male and Female

Income All under $30000

Occupation Students; new graduated; new

workers; young professionals

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Race All: Asian, Black, White,

Native; other; with adapted

strategy for Asian consumers

already familiar with Tea

Psychographic Segmentation Personality Brand conscious, anchored in

popular culture, inclined for

differentiation and

sophistication, very tolerant

towards multiculturalism and

internationalism (open-minded),

quick maturation with modern

products

Lifestyle Most of them dependent on

parents, no major

responsibilities, highly

influenced by peer groups,

active life, importance of

school, work and social life

Behavioral Segmentation Benefit sought COMMUNICATION

BENEFITS

-Nutritional information

-Informational text on history of

product

FUNCTIONAL BENEFITS

-Healthier than soft drinks

-Convenient, easy to take out

PERCEPTUAL BENEFITS

-Quality/Premium price

-Social standing/good-looking

Usage Rate Seasonal (peak in summer),

daily-basis, weekly basis

Usage Status Non-user, regular user (current

user through existing bar-shops)

Loyalty Status None, medium, strong

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Positioning strategy

The only Dilmah Freshleaf Ready to Drink Iced tea available. Funky & eye-catching bottle,

functional packaging, premium-priced, cool, new and unusual, unique drinking experience,

aspects of play (Berry, Lemon, Peach), variety of flavors, sweet, refreshing, for hip & young

people, healthier alternative to heavy-sugar drinks.

Marketing Mix Strategies

Product

Core benefit:

Scientific researchers have attested tea is an essential and healthy drink. Customers buy Tea

to not only satisfy their thirsty; but also hope to find “a healthy body” in the bottle.

Brand name:

Dilmah needs find clients to sponsor the product in

order to catch up the market initially, and a good

image in the customers’ mind before.

Packing:

Tea has four types of packet, which are 500ml, and

1000ml, and 500ml Plastic Bottle (on process).

A Dazzling Orange color and the natural green

color of tealeaves and the eye-catching fruit colors

are chosen to decorate for every packaging.

Quality level:

No preservatives are added and Freshleaf uses only natural flavors and contains no chemicals.

Dilmah tea is produced from freshly picked tea leaf, from their own tea gardens, retaining the

quintessential characteristics of Ceylon Tea. So the quality of the product is highly guarantied

and goes beyond the customers’ expectations.

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Flavors:

At present, Dilmah Freshleaf Tea has introduced

three varieties of flavor: Berry, Lemon and Peach

flavored Iced Tea. Dilmah will look into more

flavors as soon as they catch the China market.

These three flavors will offer the consumers the

best taste of fresh tea along with the

mouthwatering fruity flavors.

Features:

Tea has reflected the “first mover” in the ready-

to-drink tea industry in China, so it is a huge

competitive advantage for the product itself.

Price

"The delivery of a product worthy of 'budget' customer Dilmah is the message sent to

customers. The price of the product will be higher than other soft drinks, since the

imperative high quality of the product involved.

Price - demand relationship approach can be applied

Most of the consumers ponder that tea is a health conscious beverage; consequently the

price of the product appears to be a less influential factor in its application.

When the launch of the product, a promotion price is will be applied in order to entice

customers’ attention in the particular area.

Place

Dilmah has its own distribution channels; they will use the intensive distribution strategy for

the product in order to make it widely available.

For instance, in countries such as Australia, USA, and European countries Dilmah uses its

own distribution channels where the customers believe in manufacturer own brand and

distribution. In certain countries such as Jordan, UAE, etc. it uses a native goods distributor to

distribute their tea since these customers buy the products which comes from their own

distributors. Dilmah has its own outlets named as “Dilmah Tea Boutique”.

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Promotion

In order to get the recognition of customers quickly, Dilmah need to invest significantly in

advertising for Dilmah Freshleaf RTD Iced Tea. A combination of Push and Pull promotion

mix could be practiced. On one side, consumer advertising is directly applied to entice

consumers’ attention. Moreover, “Push” the product through distribution channels to final

customers is also will be used effectively.

There will be many methods Dilmah will be using to promote its product.

Advertising – the product will be advertised by many TV commercials

Magazines and newspapers

Internet - Internet is a useful tool to advertising; the product will be advertised in the

Dilmah Facebook fan page and Twitter.

Public relations – Dilmah will be sponsoring many events such as sports events,

musical shows and concerts and also sponsoring many airlines.

Financial Projections & Evaluation Measures

Selling Price for Dilmah Freshleaf Iced tea will set as at an average Bottle for CH ¥ 9.00. As

in USD, the selling price will be UD $1.45. So the company has decided to contribute by 10%

of its total export revenue of US $5,835,114 whereas the company will gain a US $583.52

Million annually for the 1st two years.

Projected Budget for Dilmah Freshleaf Iced Tea (2013 – 2015)

Plans Division Time Frame (June 2013 – May 2015) Budget

Promotion: (Trial drink in public areas) Sales promotion - US $100 million

Advertising: Advertising on News Paper and Magazine, including E-news webpages - US

$150 Million

Public Relations:

Co-Sponsor for 2014 Second Youth Olympic Games, 17 Aug 2014 - 28 Aug 2014,

Nanjing, China - US $20 Million

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Sponsor for the new drama, Bodyguard which will be available on Viki Channel - US

$80 million

Monthly scholarship for poor students - US $120 million

Product and Market Research:

Consumer Feedback Analysis Marketing and Sales Department US $50 million

Developing new flavor Marketing and Production Division US $150 million

Quarterly Market research Marketing Department US $150 million

Distribution channel:

Seeking and contracting with wholesalers - Sales Department US $150 million

Seeking and contracting with important retailers Sales Department US $80 million

TOTAL US $1.05Billion

Export Potential

With a total population of 1,351,657,890 in the end of 2012 and 327,714,000 in our

target market (age 10 to 29 years old). So there definitely is a great potential worth to

work on.

Absolute expenditure on food and non-alcoholic beverages is expected to increase

from 1,777 billion in 2005 to 2,154 billion in 2010 (though the proportion of

consumer expenditure on this part is decreasing from 28.39% to 25.75% )

Soft drinks industry and the Tea industry is the fast growing industries in China,

especially fruit/vegetable juice, RTD tea, and Asian specialty drinks and bottled water

have shown a sharp increase during 2000 to 2012.

Dilmah RTD tea was first introduced to USA. Soon after its introduction in USA, it

became one of the most popular beverages sold Dilmah tea stores on the streets due to

the taste and health consciousness. So, it is a good chance for us to enter into the

Asian market where the climate of the Asian region itself seems to be mostly warm in

most of time throughout the year.

Implementation Plan

Attached

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Conclusion

Based on the above-mentioned analysis, Dilmah Freshleaf Ready to Drink Iced tea appears to

be a profitable and innovative product with a resilient outlook for market share presence and

segment growth opportunity. Upon implementation of the marketing plan, the Dilmah

Company will regain increased market shares and claim its targeted situational position of

market leader in the Ready to Drink Tea segment as well as keeping its long-standing

consumer recognition for innovative and successful product launches in diversified markets.

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Appendices

Dilmah Advertising

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Reference List

Michael Czinkota, R. and Ilkka Ronkainen, A., 2008. International Marketing. 8 th ed.

New Delhi: Cengage Learning India Private Limited.

Kotler, P. and Armstrong, G., 2008. Principles of Marketing (Pearson International

Edition). 12th Edition. Pearson Education International.

Afaqs, 2013. News Company Briefs Dilmah launches naturally flavoured fruit teas in

India. [ONLINE] Available at:

http://www.afaqs.com/news/company_briefs/index.html?

id=2156_Dilmah+launches+naturally+flavoured+fruit+teas+in+India. [Accessed 2nd

March 2013].

Financial Times, 2013. Sri Lankan iced tea product tastes success in US market.

[ONLINE] Available at: http://www.sundaytimes.lk/050410/ft/6.html. [Accessed 3rd

March 2013].

Dilmah, 2013. Welcome to Dilmah - the Freshest & Finest Tea. [ONLINE] Available

at: http://www.dilmahtea.com/. [Accessed 3rd March 2013].

World Population Review, 2013. Population of China 2012. [ONLINE] Available at:

http://worldpopulationreview.com/population-of-china-2012/. [Accessed 4thMarch

2013].

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Marketing Management

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