BHO6505 - Marketing Management Report: O-Dairy for Fonterra

This report provides a comprehensive marketing management strategy for Fonterra's proposed O-Dairy brand, a vegan dairy product line. The report begins with an executive summary and table of contents, followed by an introduction that emphasizes the importance of innovation in the consumer goods sector and the growing trend of veganism. A detailed viability analysis assesses the concept proposition, PESTLE factors (political, economic, social, technological, legal, and environmental), and Porter's five forces. The core of the report focuses on segmentation, targeting, and positioning (STP) analysis, emphasizing value creation, customer loyalty and retention, and identifying the most desirable market segments. The report establishes SMART marketing objectives, including communication and sales goals, and consolidates the viability analysis. The report concludes that introducing a vegan dairy-based product will enable Fonterra to tap into a new market segment and increase revenue. The report includes references to support the analysis and recommendations.

Running head: MARKETING MANAGEMENT
Marketing management
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the potentiality and opportunities to be gained by
Fonterra by introducing a vegan based dairy products under the brand name of O-Dairy.
Moreover, this report has also done a viability analysis, which helped in identifying the major
trends in the market and industry. Based on the trends, segmentation, targeting and positioning
strategies are being discussed along with objectives to be fulfilled. This report concluded that
introduction of vegan dairy based products will help Fonterra to tap a new market segment and
increase their market revenue.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Viability analysis of Fonterra......................................................................................................3
2.1 Concept proposition...............................................................................................................3
2.2 PESTLE analysis...................................................................................................................4
2.3 Porter five forces analysis......................................................................................................5
3. Segmentation – Targeting – Positioning Analysis.......................................................................7
3.1 Analysis emphasizing value creation.....................................................................................7
3.2 Loyalty...................................................................................................................................8
3.3 Retention................................................................................................................................8
3.4 Identification of the most desirable segments.......................................................................9
4. Marketing objectives.................................................................................................................10
4.1 SMART objectives..............................................................................................................10
4.2 Communication and sales objectives...................................................................................10
4.3 Consolidation of viability analysis......................................................................................11
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................13

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1. Introduction
Innovation is the key to success in the current business scenario due to the reason that
innovation can only help in meeting the changing trends of customer requirements. Consumer
goods sector is one of those sectors, which is witnessing rapid change in the taste and preference
pattern of the customers (Jay 2016). Fonterra is operating in this sector and offering different
dairy based products. However, they are also witnessing the growth of veganism trend
worldwide and people are more avoiding animal based products. In view to this situation, they
are about to launch a plant fiber based dairy brand named O-Dairy.
2. Viability analysis of Fonterra
2.1 Concept proposition
With the growth in the veganism trend in the recent time, demand for the conventional
dairy based products is reducing. Thus, it is also getting important for Fonterra to offer an
alternative solution to the vegan population and in this case, O-Dairy will be an effective option.
This is due to the fact that O-Dairy will be made from plant fiber and thus animal milk will not
be in use (Makinen et al. 2016). In addition, different products including pasteurized milk,
cheese, yoghurt and ice creams will be promoted under this brand and all will be based on plant
fiber. Thus, the vegan customers will have the options for availing the taste and nutritional
benefits of the conventional dairy based products. The products under O-Dairy will be made
similar to the conventional ones in terms of taste and nutritional value if not more. Thus, the
value proposition for the vegan customers will be in similar to the conventional dairy based
products (Tuso et al. 22013). In terms of pricing, the price will be slightly in higher side
compared to the dairy based products due to the huge investment involved in the research and

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development process. However, in the due course, price level will be similar to the conventional
products.
2.2 PESTLE analysis
Political  Fonterra is mainly operating in Australia and New Zealand and political
scenario for businesses is favorable in both the countries.
 Political issues will be less relevant for promoting ethical products for
the vegan population (Sabate and Soret 2014).
 This information will enable Fonterra in planning their future
investment program in the said area properly.
Economical  Competition will be less due to the promotion of completely new
products in the market and thus the competitiveness will be high.
 Offering in the same price level of the conventional dairy based
products will help in tapping the larger customer bases (Westhoek et al.
2014).
 This data is useful due to the reason that future business potentialities of
Fonterra will be depended on this.
Social  Percentage for vegan population is increasing in Australia with being
reported that currently more than 2 million Australians are vegan. Thus
the social business opportunities are also increasing.
 Promotion of O-Dairy will create favorable image in the market due to
the reason that it will be perceived as an ethical product for the vegan
people (Kumar, Vijayendra and Reddy 2015). This will also help
Fonterra in pushing the sales of their existing products.

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Technological  Technology is the key in ensuring the success for O-Dairy due to the
reason the effectiveness of the research and development will determine
the value proposition of the new products.
 Fonterra is already a leading name in terms of technological
development due to their years of experience in the dairy sector (Vigne
et al. 2013).
 This will be beneficial for Fonterra for initiating the technological
development and expertise in developing plant based dairy products.
Legal  Strict legal standards are to be maintained in the case of dairy products
in terms of hygiene and product quality.
 Fonterra is already following and adhering to all these standards with
their existing products and thus it will be easier for them to adhere to the
same for O-Dairy (Jeske, Zannini and Arendt 2018).
 This will also ensure that the quality standards being maintained by
Fonterra till now will be carry forward for O-Dairy also.
Environmental  Probability of environmental degradation is there due to the reason that
plant fiber will be used. However, sustainable production process will
be promoted to have the least impact (Lee, Clark and Roche 2013).
 It is also important for Fonterra to ensure that they are having renewable
sources of plant fiber without damaging the ecosystem.
2.3 Porter five forces analysis
Bargaining power of the  Bargaining power of the buyers will be low.

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buyers
 Vegan population is having limited options in terms
dairy products.
 The brand value of Fonterra in the dairy sector is huge
and this will also retain a number of customers.
Bargaining power of the
suppliers
 Bargaining power of the suppliers will also be low.
 They are having fewer alternatives in selling materials
related to plant based dairy products.
 Fonterra will have own backward integration process to
supply their materials.
Threat of new entrants  Threat of new entrant is moderate due to the reason that
number of big brands are operating in the dairy sector.
 With the growth in the vegan market, these brands will
enter in the plant based dairy product market.
 However, the research and development required will
cause incurrence of huge capital. This will stop some
entities to enter in this market.
Threat of substitutes  Threat of substitute is less for Fonterra due to the reason
that no other firms are offering the same product in the
market.
 Barriers in entry will also cause fewer substitutes in the
market.
 However, entry of the existing brands will pose some

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sort of threat of substitute to Fonterra.
Competitive rivalry  Competitive rivalry is low due to the less competition in
the market.
 Moreover, dairy products are marketed mainly in the
market determined price, which further reduces the
intensity of competitive rivalry.
 The brand value and identity of Fonterra in the
Australian market will further help in fending off the
competitive rivalry in the long term.
3. Segmentation – Targeting – Positioning Analysis
3.1 Analysis emphasizing value creation
In terms of demographic variables, customers between the age groups of 16 and 35 will
be segmented as the primary target segments. This is due to the reason that this group is having
the major trend of veganism. In addition, the age groups below 16 will also be targeted as the
secondary target segments (Venter, Wright and Dibb 2015). Value creation will be more for this
age group due to the reason that this middle age group is more aware about the characteristics of
veganism. In terms of geographic segmentation, tier I cities will be segmented in the initial stage
due to the reason that customers from tier I cities are more aware about these urban trends and
they are also having higher purchasing power for plant fiber based dairy products. Moreover, in
terms of behavioral segmentation, customers following vegan diet will be targeted along with the
customers who are having preferences for sustainable products (Sair 2014). Targeting these

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segments will help in meeting their expectations effectively and thus their value will be
enhanced. Millennial will also be targeted due to the reason that they are more aware about the
veganism trend and the concept of sustainable consumption.
3.2 Loyalty
The more effective will be the targeting and positioning strategies, the more will be the
loyalty level of the targeted customers. This is due to the reason that different customer segments
are having different sets of expectations that can be met by different targeting approaches. The
segmented customers should be targeted based on the cost leadership strategy and market focus
strategy (van der Zanden et al. 2014). This is due to the fact that customers will be loyal to the
certain brand only when their expectations and needs will be met properly. Moreover, with the
help of the cost leadership strategy, the loyalty of the customers will further get increased by
getting the maximum value for the cost. With the help of the market focus strategy, Fonterra will
be able to target the specific market of vegan customers and determine their taste and preference
pattern (Khan 2013). Accordingly, they will be able to offer the products. This will ensure that
all the requirements of the targeted customers will be met and will also increase the loyalty level.
It should also be noted that with gaining economies of scale, the cost of operation will also come
down and this will enable Fonterra to promote cost leadership strategy. Hence, initiation of the
market focus strategy coupled with the cost leadership strategy will ensure that major of the
customers targeted remain loyal to the brand.
3.3 Retention
Fonterra should initiate positioning strategy based on the price, features and benefits of
the products. This is due to the reason that positioning on the basis of price will help in aware the

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High price
Low price
Low product variants High product variants
Fonterra
A2 milk
Parmalat
customers about the competitive pricing. Thus, the new entrants will find it difficult in offering
the same price and majority of the customers can be retained (Siu, Zhang and Yau 2013). In
addition, positioning on the basis of features and benefits will help Fonterra in aware the
customers regarding the distinctive value. Thus, the more will be the distinctive values, the more
will be the retention level of the customers to the brand.
3.4 Identification of the most desirable segments
From the above analysis, it is identified that age group between 16 and 35 with having
the preferences for sustainable consumption will be the most desirable segment. This is due to
the reason that this age group will be self sufficient and will have purchasing power. Moreover,
this age group will also have the larger set of awareness among the customers regarding
veganism. Moreover, the customers with having the preferences for the sustainable consumption
will be desirable due to the reason that their requirements can be met effectively.

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4. Marketing objectives
4.1 SMART objectives
 To generate 15 percent of total revenue of Fonterra from O-Dairy in the next 1 year based
on the huge market opportunities and potentialities
 To cover the diverse market sections among the vegan population by introducing
minimum 6 variants under the O-Dairy brand within the next 1 year
 To have the maximum level of market penetration by offering most competitive pricing
in the market and will be the least priced vegan dairy product in the market
 To maintain the loyalty and retention level of the existing customers by minimum 20
percent for the next 5 years
4.2 Communication and sales objectives
Objectives Specific Measurable Assignable Relevant Time-based
To cover more
than 70 percent
of the target
market with
brand
awareness
70 percent of
the target
market
Measuring the
market areas
covered
It can be
achieved
provided the
expertise of
Fonterra
It will help in
pushing the
sales of new
products
Within 1
year
To have two
was
communication
system for
Online
portals for
the
Determining
the satisfaction
rate of the
It can initiated
aside the
conventional
marketing
It will help in
generating
positive word
Within 1
year

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higher
customer
retention
customers customers activities of mouth
4.3 Consolidation of viability analysis
From the above viability analysis, it is identified that Fonterra is having huge market
potentialities in the vegan dairy product market due to the less intensity of competition.
Moreover, it is also identified that offering larger product variants under the newly formed O-
Dairy brand will help in meeting the different and diverse requirements of the customers from
the vegan population. Porter five forces also identified that due to the less intensity of
competition, pricing will not be a major factor for Fonterra and thus the profitability can be
maintained for the long term. Fonterra is effective enough in terms of expertise and infrastructure
to develop the plant fiber based dairy products, which will help in gaining economies of scale in
shorter time period. Moreover, it is should also be noted that as vegan population is limited, thus
market focus strategy should be initiated to offer products according to taste and preference
pattern of the targeted customers. This will help in effective solidification of the leadership
position of Fonterra in the newly evolved market.
Conclusion
This can be concluded that Fonterra is having huge opportunities in promoting their new
brand O-Dairy for the vegan customers. In this report, viability analysis is being done based on
PESTLE analysis and porter five forces analysis. This helped in identifying the key trends and
factors to be considered. It is also being concluded that the stated objectives in this report will

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help Fonterra in tapping the growing opportunities of offering vegan products and can increase
their revenue to the next level.

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Reference
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Agricultural Sustainability?. Agri-Food Commodity Chains and Globalising Networks, p.147.
Jeske, S., Zannini, E. and Arendt, E.K., 2018. Past, present and future: The strength of plant-
based dairy substitutes based on gluten-free raw materials. Food research international, 110,
pp.42-51.
Khan, T., 2013. STP strategy for New Product Launch-a Work in Progress. International Journal
of Business and Management Invention, 2(3), pp.56-65.
Kumar, B.V., Vijayendra, S.V.N. and Reddy, O.V.S., 2015. Trends in dairy and non-dairy
probiotic products-a review. Journal of food science and technology, 52(10), pp.6112-6124.
Lee, J.M., Clark, A.J. and Roche, J.R., 2013. Climate‐change effects and adaptation options for
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pp.485-503.
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