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Market Analysis of the Chocolate Confectionary Industry in Australia

Discuss about the Burgeoning Chocolate Market In Australia.

Donald B, one of the popular chocolate makers in Australia owns two stores in Melbourne, he wants the brand to grow nationally and also compete in the international waters. He has a vision to make Donald B so popular that it is able to compete with larger rivals who are producing cocoa product, confectionary, crystallised, glazed fruit, drinking chocolates, liquorice, marshmallow, candid nut and candid popcorn. The purpose of the assignment here is to understand the buyer behaviour of the consumers towards chocolates to create chocolates in sync with their taste. Another important element is to understand the micro and macro environment forces which play an important role in the sustainability of the business. Fat consumption, health consciousness, increasing price of sugar and cocoa are the external drivers which might affect the production and consumption of chocolates in Australia (Davies & Kitchen, 2015). The intermediaries in the supply chain like distributers, wholesalers, retailers are of great use as they ensure the optimum delivery of the chocolates to the end consumers. The buyer behaviour of chocolate eating population is influenced by various cultural, social, personal and psychographic factors which affect their purchase decision, big data analytics can be used to better understand their behaviour and accordingly target those consumers.(Li & Mo, 2016).At the end, a macro environmental analysis is conducted on the Australian chocolate industry to understand the effect of political, economic, social, technological, legal and environmental forces on the industry. The detailed analysis can be concluded by saying the numbers are strong for the Australian market and Donald B has to the leverage to exploit the growing potential of the Australian Chocolate confectionary industry.

Every business has to assess the opportunity the market has catering to the particular Industry. Market analysis helps in identifying the competitors in the business, key drivers of growth for the business, the supply chain logistics, the audience and the scope of marketing potential. Analysis of all the points is necessary to understand the profitability and scope of the industry in the market. Environmental analysis is a component of the marketing analysis which helps to identify how different forces play a key role in shaping the market (Cherikoff, 2016)

The chocolate industry which is worth 6 Billion USD grew by 4% in the year 2017 in comparison to 3% in the year 2016. The growth in the industry can be attributed to the growing demand of the consumers for premium quality chocolates. The consumers still view chocolates as an indulgence; the health conscious individuals are choosing to reduce the chocolate intake and moving to the higher cocoa content products to satiate their indulgence in chocolate(Rousseau, 2017).

Macro Environmental Analysis

Mondelez Australia is the market leader which has captured 37% of the market share in chocolate confectionary in the year 2016. The decline in the market share of Mondelez Australia is attributed to the growth of premium chocolate brands in Australia. Major players in the chocolate confectionary are; Nestle, Lindt, Mars, Ferrero & Darrell Lea.  The Australian chocolate market is expected to grow at 7% CAGR, high demand for the confectionary products, good consumption of milk & related products, increase in the number of foreign players drive the Australian chocolate market (Poelmans & Rousseau, 2016). Depending on the type of chocolate, the market is further categorized into;

Market By Type

·         Milk

·         White

·         Dark chocolate

Market by Category

·         Count line

·         Tablet

·         Boxed

·         Others

Market by Age group

5-14 Years

15-24 Years

25-54 Years

55 Years and above

Market by End user

Retail, Food processing and food service industry

Distribution Channel

Groceries store

Hypermarket/Supermarket

Convenience stores

Chocolate boutiques

Online Retail

Market By Region

New south Wales

Queensland

Victoria

Western Australia

South Australia.

Downstream demand from super markets and other grocery stores-Super markets and grocery stores are the major distributers of the chocolate confectionary throughout Australia; it can also be seen as a direction function of the consumers demand. Factors such as health consciousness and healthy eating habits are driving relatively slow sales in the industry (Beckett, Fowler & Ziegler, 2017).

World price of cocoa- Besides sugar, cocoa is a major ingredient in making chocolates. The prices of cocoa all over the world are increasing considerably, forcing the companies to increase the price of the chocolate. This entire inflation in the prices of cocoa will push the prices of the chocolates thus adversely affecting the industry (Panza, Ville & Merrett, 2018).

Fat consumption-Australians are moving towards a state of high health awareness and thus are indulging them in low fat products. Chocolates, which have a high fat composition, are therefore falling in popularity among the fat conscious individuals.

World price of sugar-Increase in the prices of sugar will increase the manufacturing or the production cost of the chocolates.  Now the companies have to decide whether to pass down the burden of sugar prices on the end consumers or take the burden on themselves. Either way, rise in sugar price is a very important external driver to the industry (Thompson & Prideaux, 2016).


Health consciousness-Health and nutrition are the strategic goals of the Australian government; hence a lot of talk is growing around the topic of health consciousness and high nutritional value. Chocolate which does not fit in any of the above mentioned criteria is bound to suffer due to growing number of health conscious people (Giacosa & Santoro, 2016).

Despite all the negative impact of chocolates on the health conscious nation, the industry has been showing great resilience and is expected to grow at 4% CAGR throughout 2016-2021. In an earlier report, despite all the challenges faced by the chocolate confectionary industry,the Australians are eating more chocolate bars, blocks & boxed chocolates than they were eating in the year 2013(Bliss, 2017).

5 Bestselling boxed chocolate brands

Number of Australians who buy per 4 week

% of buyers who eat same brand per 4 weeks

1

Cadbury Favourites

610,000

65.4%

2

Lindt Lindor Balls

585,000

74.2%

3

Ferrero Rochers

535,000

74.3%

4

Lindt

485,000

71.9%

5

Cadbury Roses

385,000

63.5%

Buyer Behaviour of Australian Consumers

Buyer behaviour can be understood as a systematic approach which consumers follow while entering in the purchase process and making buying decisions. Consumer buyer behaviour is the sum total of a consumer’s attitudes, preferences, intentions and decisions regarding the behaviour of consumer in the marketplace which purchasing a product or a service (Pappas, 2016).

Influences

Definition

Characteristics of consumers of fast food and/or low calorie food

Cultural

Culture as a whole

Sub-culture

Social Class

Cultural influences means historical, geographical and familial factors which affect the consumer buying behaviour (Mythily, 2015).

These consumers fall in the age group from 34-54, both male and females.

The people have live in a community and abide by the norms of the community. Australian community loves chocolates despite it being of high calorific value

Social

References groups

Immediate family members

Relatives

Role in the society

These are the factors which are prevalent In the society and influence the buying behaviour of the customers

These type of consumers have the following characteristics:

Ask for the feedback on the chocolate

Reliant on the information from the peer about the product.

Easily influenced by a person of seniority in the society.

Always looking for recommendation from other society members.

Great influence from their colleagues, subordinate and senior

Personal

Occupation

Lifestyle

Economic condition

Age

Personality

Personal factor are a major influencers in affecting consumer behaviour. Depending on the lifestyle, occupation ,living condition, age and personality consumer makes buying choice

The typical characteristic of these individuals are:

Strong headed

Achiever/Enabler/ Believer

Average to good economic condition

Millennial

Digital media enthusiasts

Influenced by social media

Psychological

Motivation

Perception

Attitude

Beliefs

The level of motivation influences the buying behaviour due to the psychological characteristic. The characteristics are in accordance to the Maslow need hierarchy theory (Kew & Stredwick, 2017).

Focus on motivation before buying a product

Strong attitude

Focussed on learning

Consumers of online content

Micro environmental forces are a marketing term which implies depiction of the factors or the forces which have the ability to build and maintain successful relationship with the customers. These are forces which are internal to the firm. SWOT analysis is a part of micro-environmental analysis, as strength and weaknesses are internal to the organization. The utility of the analysis lies in leveraging the strength and minimizing the weakness of the organization (Clarke, Friese & Washburn, 2015). This section of the report will focus on the Suppliers and intermediaries, competition and publics which are crucial in understanding the micro environment.

Manufacturers are unable to sell the products directly to the consumers and hence they need suppliers and intermediaries to make the product reach to its customers. Suppliers and intermediaries play an important role in the supply chain management and companies have to make special efforts to maintain the effectiveness and efficiency of its supply chain network (Bonjean & Brun, 2016).

Merchant whole sellers-Also called as whole sellers, the purpose of whole sellers is to buy in bulk from the manufacturers and then resell the same product to other businesses or retailers. Merchant whole sellers differ in their operational strategy, some deal in just one product, while other store more than one products. The different models under which they operate are; Cash & carry outlet, warehouses, mail order business and online sales. Donald B should use whole sellers to spread its chocolates even in the interior of the Australian market (Grunig & Morschett, 2017)

Distributers-These are also called as functional wholesalers and work on a commission mode. They expedite the sale process between the producer and the retailer by supplying them the goods. Distributer model will ensure the retailer shelves are always filled with chocolates of Donald B.

Retailers-Retailers play a very important role in the supply chain ecosystem as consumers directly purchase goods from the retailers. The retailers can be used to ensure that the product is reaching even in the remote locations of Australia, and anyone who is interested in buying Donald B chocolates can have easy access to it.Example being Malls, super markets, hyper market, And Small Grocery Stores.

Micro Environmental Forces in the Chocolate Industry

Companies have to really work on making a strong relationship with the intermediaries as they are the connect between the company and the end consumers. Distributers at times try to push the products on which they are getting higher margin, similarly retailer fill the shelves with the product they are getting a higher commission; this can tarnish the image of the company. Hence, it is always advised to maintain a healthy relationship based on trust with the suppliers.

Publics are communities of people at large which have a direct or indirect association with the organization. Customers, Investors, employees, investors, media and shareholders are part of publics for any company (Armstrong, Kotler, Harker & Brennan, 2015).

Customers- Customers can impact the business both positively and negatively, the positive engagement can be by being a loyal customer of the company and negative can be by spreading negative word of mouth about the company’s product among the peer and on social platforms (Bolman & Deal, 2017).

Investors- Every business has either a private investor, institutional investor or the government is investing in the company, the prerequisite of all the investors is to achieve profit or return on investment. In cases, where the return on investment is negative or not up to the expectation of the investors, they withdraw their support to the company leaving company in jeopardy (Frederickson & Rohr, 2015).

Competitor

Overview of the competitive offering

Target Market

Positioning

Lindt

Psychological segmentation-Premium brand and depth strategy.

People willing to pay extra for premium chocolates, age group (25-31). Lindt chocolates find great utility as gift options.

Lindt positions itself as a luxurious and premium chocolate brand. The use of gold in the packaging is a sign of luxury and wealth. Positioned as the brand which gives high-class appeal.

Cadbury

Tailored strategy to break the market into:

Break segment, impulse segment, take home segment & gift segment.

Pre-teen products, Caramello & Freddo ( 9-12 years age children)

Old gold blocks and chocolate blocks attract all customers.

Targeting health conscious people.

Nut free products for nut intolerant people.

Cadbury has positioned itself as all-time favourite chocolate for all seasons and for people of all age group.

Home brands (Coles & Woolworths)

Lower price alternative in comparison to other brands.

Price lowers than both Cadbury and LIndt. Price sensitive consumers, smart shoppers and lower income people who want to enjoy similar product at a lower price.

Positioning as smart shoppers choice, offers customers with no frills alternative.

Macro environment can be understood as the forces which are external to the business and can affect the business organization adversely. Macro environmental analysis is an analysis of the Political, economic, social, technological, environmental and legal factors of the country.

Political

Refers to the factors which government may influence the economy. Political decision can change the laws overnight which can put any company in danger.

Australia is a safe destination for investment and the people absolute love chocolate in the country. The efficiency of the political system to tackle any challenges further helps the advancement of the economy. The openness, fairness and transparency in the system make Australia a good market for business opportunity.

Economical

These are the determinant factors of performance of an economy. Some of the factors which fall under the category are:

Economic condition

Economic system

Government policies

Exchange rate

Import and export policies

Inflation

Unemployment

GDP

Australia is one of the largest capitalist economies of the world which is dominated by the service sector. Ease of doing business, low unemployment, sustainability in the growth, low public debt makes Australia an extremely attractive destination for business opportunity.

Social/Cultural

Social factors mean a set of belief, customs, culture or behaviour which exists in the population. Any change in the social trend can overnight change the fate of the organization

The population of Australia has a major sugar tooth, thus it is one of the highest selling market for domestic and international chocolate brands. People these days are becoming health conscious and focussing on cocoa based products rather than plain dairy products to cut down the sugar intake in their system.

Technological

Technological factors are related to R&D, innovation, advancement of technology which can create new product or services

Long back, automation was brought in the chocolate industry and almost all the companies are using the tools of modern technology to speed up the production of chocolate in competitive times

Legal

This force is related to complying with the legal framework of Australia. Some examples of legal acts being Fair works act, discrimination act, minimum wage guarantee and many more.

All the chocolate manufacturing companies do an internal audit to assess its compliance with the legal framework of Australia.

Environmental

Environmental force is one of the most important forces to analyse in the present day. Governments all over the world are taking special care to preserve the natural ecosystem and are following the path of environmental sustainability. Companies which do not comply with environmental laws can be levied a high penalty to set example in front of others. Various  environmental acts which are set up to preserve the natural ecosystem are:

Environmental protection act-1983

The whale protection act-1981

The protection of Sea-1983

Chocolate companies are advised to have a waste treatment plant in the plant to keep the natural surrounding free from harmful gases. Apart from pollution, companies are advised to create recyclable or biodegradable packaging material to preserve the land soil. Fines are imposed on the plants which emit CO2 beyond the specified limits.

Conclusion

Operators over the chocolate confectionary industry has been facing some problems from quite some time, the problems are due to the increasing price of cocoa, sugar and other raw materials used in the preparation of so. More so, the awareness regarding health is increasing steadily in Australia, due to which a number of people are refraining themselves in indulging into the pleasure of eating chocolates. Having said that, the consumption of chocolates in Australia is on an upward trend, with the only difference that people are moving to bitter chocolate with less sugar and more of cocoa. The Australian chocolate market is dominated by Mondelez, Lindt , Cadbury and home brands of wools worth and Coles, every company has its own well defined audience and have positioned themselves according to fit into the spectrum of chocolate eating population. Donald B has two stores in Melbourne, in order to create an image in Australia, the company has to go with low pricing strategy d makes it product a head on competition to the local dairy product, this way the company will be able to earn profits and maintain business sustainability. The macro and micro environment of Australia is extremely conducive in nature for carrying out the business operation, thus the company has a good opportunity to make it mark in the evolving chocolate industry.

References

Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2015). Marketing: an introduction. Pearson Education.

Beckett, S. T., Fowler, M. S., & Ziegler, G. R. (Eds.). (2017). Beckett's Industrial Chocolate Manufacture and Use. John Wiley & Sons.

Bliss, S. (2017). Chololate: Interconnections, biomes and economic activity. Geography Bulletin, 49(1), 33.

Bolman, L. G., & Deal, T. E. (2017). Reframing organizations: Artistry, choice, and leadership. John Wiley & Sons.

Bonjean, C. A., & Brun, J. F. (2016). Concentration and Price Transmission in the Cocoa–Chocolate Chain. The Economics of Chocolate, 339.

Cherikoff, V. (2016). New Market Opportunities for Australian Indigenous Food Plants. Australian Native Plants: Cultivation and Uses in the Health and Food Industries, 339.

Clarke, A. E., Friese, C., & Washburn, R. S. (2017). Situational analysis: grounded theory after the interpretive turn. Sage Publications.

Davies, T., & Kitchen, B. (2015). Confectionery: Growing and processing cocoa in Australia. Food Australia, 67(5), 28.

Frederickson, H. G., & Rohr, J. A. (2015). Ethics and public administration. Routledge.

Giacosa, E., & Santoro, G. (2016, September). INNOVATION THROUGH ACQUISITION IN FOOD INDUSTRY: A CASE STUDY. In 9th Annual Conference of the EuroMed Academy of Business.

Grünig, R., & Morschett, D. (2017). Determining the Market Entry Modes. In Developing International Strategies (pp. 105-123). Springer, Berlin, Heidelberg.

Kew, J., & Stredwick, J. (2017). Business environment: managing in a strategic context. Kogan Page Publishers.

Li, F., & Mo, D. (2016). The Burgeoning Chocolate Market in China. The Economics of Chocolate, 383.

Mythily, G. (2015). A SURVEY ON CONSUMER BUYING BEHAVIOR AND BRAND AWARENESS OF CADBURY AMONG STUDENTS IN SCHOOL AND COLLEGE CANTEENS IN CHENNAI. International Journal of Management Research and Reviews, 5(12), 1204.

Panza, L., Ville, S., & Merrett, D. (2018). The drivers of firm longevity: Age, size, profitability and survivorship of Australian corporations, 1901–1930. Business History, 60(2), 157-177.

Pappas, N. (2016). Marketing strategies, perceived risks, and consumer trust in online buying behaviour. Journal of Retailing and Consumer Services, 29, 92-103.

Poelmans, E., & Rousseau, S. (2016). How do chocolate lovers balance taste and ethical considerations?. British Food Journal, 118(2), 343-361.

Rousseau, S. (2017). The role of organic and fair trade labels when choosing chocolate. Food Quality and Preference, 44, 92-100.

Thompson, M., & Prideaux, B. (2016). 4 Growing tourism from the ground up. Food Tourism and Regional Development: Networks, Products and Trajectories, 89.

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