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Joo Yong Shin n10261931 Marketing MARKETING ASSESSMENT 2 MILO PLAN Name: Joo Yong Shin Student Number: n10261931

Word Count: 1918

1.0 Situational Analysis Milo, part of the Nestle Group is an Australian company that primarily serves chocolate and malt powder, as well as cereals, energy-bars and ice-cream. Since 1934, its powder from the iconic green tin-can can be mixed with hot water or milk produces a beverage that is renown and enjoyed across Australasia, South-East Asia and South America (Milo, 2018). Although in steep decline, in 2018, Milo took up 48.6% of the brand market share for hot drinks (excluding coffee and tea) in Australia (Euromonitor International, 2018), essentially dominating the hot drinks industry. Milo’s most reputable product, the powdered energy formula, which targeted energetic individuals, particularly athletic children. Milo contains a variety of nutritious sources such as calcium, vitamin c and protein (Milo, 2018). However, in recent years, people have been more health-aware and have criticised Milo for “healthwashing” its high sugar content (46% is sugar in a standard serving) and was accused Milo of manipulative health promotion tactics. Additionally, in 2018, Nestle removed the 4.5 health rating for Milo, further signifying a mature industry (ABC, 2018).

Facing scrutiny over health issues within an already oversaturated market of hot drinks alongside its competitors such as Ovaltine and Nesquik, have forced Milo to seek other viable alternatives for future growth. Firstly, in consideration of the most significant macroenvironmental factor, social trends. Current social trends illustrate that people have become more health-orientated, with the amount of fitness centres increasing and physical education professions expanding (Euromonitor International, 2018). Therefore, it is imperative that Milo develops a product that is healthier and with a lower sugar content, in order to compete in an already existing market of similar products such as Nesquik’s No Added Sugar Powder (Nesquik, n.d).

Secondly, the issue of demographics remains, as the primary consumers of Milo are children between the ages 0-14. However, current population estimates illustrate that fertility rates are stagnating, indicating less children being born per household. From 2008 to 2016, Australia’s fertility rate dropped dramatically from 2.02 babies per woman to 1.79 babies. Furthermore, the average age for a woman to have babies have been increasing, where mothers ages 30-34

Joo Yong Shin n10261931 Marketing have the highest fertility rate (ABS, 2017). The statistics above exemplifies diminishing demand prospects for the younger generation. 2.0 Marketing Goal In the wake of increasing health-concerns in an ageing industry, Milo, as a response to changing consumer needs, should produce a healthier, more nutritious product and add additional flavours available to its iconic green tin powder. Therefore, Milo should aim to halt the decline of sales, and increase its market brand share of other hot drinks up from 48.7% to 55% by the next financial year. 3.0 Marketing Strategy Within the last decade, the decline of the brand share of Milo can be particularly attributed towards the increase in health-awareness of individuals and the falling fertility rate for households in Australia. As consumers continue to avoid Milo due to the current lack of development to cater to these needs, there has been increasing demand for more mature, healthier products.

Segment 1: Working adults Demographic Factors

Age: Adult Age (18-50), working full-time jobs. Many of them whom are often concerned about their sugar intake, where many whom in recent years have begun to prefer “lighter” and “no added sugar” options such as Coke Zero, dark chocolates,

Geographic Factors

black coffee, which can be considered as more mature tastes. -Suburban Home Locations would allow for excellent accessibility to supermarkets, therefore allowing for increased

Behavioural Factors

exposure to Milo products during shopping (Nestle, 2018) -The demand for Milo products are relatively elastic, where an increase or a decrease in price would greatly affect consumer demand, especially for lower to middle class individuals (lower the price higher the consumer demand  more sales and

Psychographic Factors

profitability) (Grewal et al., 2015) -Milo’s high sugar contents in recent years have been scrutiny by those who are concerned about health, due its previous misconceptions about its health benefits. Therefore, it would advantageous to Milo to be more inclusive of health-concerned

Joo Yong Shin n10261931 Marketing individuals such as athletes by introducing products with more nutritious elements

-Adults may consider Milo to be more child-orientated and therefore may not consume it as much as children, preferring substitutes over Milo such as tea and coffee. It may be advantageous of Milo to introduce more flavours in order to cater to more mature tastes (Euromonitor International, 2018)

Figure 1 Segment 2: Children Demographics Factors

Age: The primary consumers of Milo are children ages between 0-14 years

Dependents: Children are dependent on their parents (typically between 20-50 years) with stable income, and allows them to Geographic Factors

afford basic kitchen goods such as Milo Accessibility: Suburban Home Locations would generally include supermarkets, therefore allowing for increased exposure to Milo products during shopping. Furthermore, children may also be exposed to Milo products

Behavioural Factors

when parents and children shop for groceries together -The demand for Milo products would remain relatively elastic for average families with children on middle-class income, where an increase or a decrease in price would greatly affect consumer demand (lower the price higher the consumer demand  more sales and profitability) -Families with more children will likely purchase more Milo

Psychographic Factors

products. -Children’s perception of chocolate has always been that of fondness, which will allow Milo to remain as a primary contender in the brand share of hot drinks for children. Therefore, they may not be too influenced by the new product developments.

Joo Yong Shin n10261931 Marketing Figure 2

Target Market: Working Adults Regarding the market for children, the fertility rate for women is based purely upon changes in socio-economic trends, therefore it may be not viable for Milo to pursue any tactics towards children. Consequently, working adults with stable incomes and with mature tastes were chosen as the final target market. Therefore, it would be beneficial towards Milo to develop products that have better addressed certain health-concerns and mature tastes for working adults instead of children.

Value Proposition The reasons for Milo’s declining sales was that it was not inclusive of all potential target markets, particularly working adults. Thus, working adults may want to purchase Milo products with reduced sugar content and with more flavours. As seen in Figure 3 below, it should aim to position itself closer to that of Nesquik and Up and Go.

Diversity of Flavours unavailable

Different Sugar

Different Sugar

levels available Joo Yong Shin n10261931 Marketing

Diversity of Flavours available

Figure 3 4.0 Marketing Tactics

Product Milo’s requirement for product development allows it to meet the changing demands of the market, which will allow them to attain their marketing goal. Currently, Milo’s brand identity illustrates itself as the viable nutritious supplement in children and athlete breakfasts (Nestle, 2017). However, Milo have received increasingly scrutiny over high sugar content, which contrasts its identity of providing a healthy, yet tasty drink. Hence, Milo should launch healthier and improved powder formula known as “Milo Ultraboost”. Therefore, reducing and replacing its high sugar content with natural sweeteners such as honey, and increasing its protein content. Furthermore, Milo should introduce new, more mature flavours for available for selection in Ultraboost products such as coffee, vanilla, bananas. Therefore, Milo’s product developments would not only cater to children, but to adults as well. This offers Milo to improve its brand identity by including becoming more-premium orientated, in conjunction with its old, iconic formula.

Price Successful price strategies would be based upon the 5c’s (competition, costs, company objectives, customers and channel members). Therefore, the pricing of the new product must take into account the additional costs of a “premium product” as demand for Milo is relatively elastic, it must take into account various substitutes and competitors, such as Nesquik and Ovaltine (Grewal et al., 2015). In the case of a “Milo Ultraboost” product, the

Joo Yong Shin n10261931 Marketing competition-based pricing method may be the most effective and profitable. This is because of the current environment that of the hot drinks industry is oversaturated, with competition from similar products and low-entry barriers for major companies (IbisWorld, 2018). As well as close competitors such as Nesquik, already having launched similar products such as the “No sugar added formula” (Nesquik, n.d). Therefore, setting a price level that is similar to that of Milo’s competitors, will allow the target market to interpret it to have better or similar health benefits and values. This may incentivise working adults to switch to Milo from other hot drink brands, or at the very least cause them try Milo. Overall, using the competitionbased pricing will increase the perceived value of the new product, allowing them to settle steadily into market without increasing competition and therefore increase consumer demand, allowing Milo to reach its marketing goal.

Place/Distribution An efficient distribution system is essential in order to maintain a steady supply flow of products, therefore, the Nestle group, is responsible for Milo’s distribution channels As Milo does not have any physical store present, they should continue utilising the indirect channel-2 intermediary method of distribution (ManufacturerWholesalerRetailerCustomer). Signifying like their well-established products, new products will be directly distributed to regional wholesalers such as Woolworths and Costco, and then distributed towards local supermarkets and convenience stores. In regards to Nestle’s marketing channel, wholesalers would often act as retailers as well (Bartleby, 2010). In order to eliminate the issue of inventory mismanagement in retailers reordering quantities, Milo should be involved directly in the stock take of quantities in supermarkets, ensuring that there are enough tins on the shelves (Grewal et al., 2015). Furthermore, Milo may choose to individually package these tins, in order to ease the burden of promotion displays in stores.

Promotion In modern-day times, social media would be the most effective and practical platform for the promotion of products. Various online platforms with many monthly-users, such as YouTube and Facebook can be used to promote persuasive advertising (Grewal et al., 2015). Consequently, Milo should advertise towards customers to change their Milo’s existing perception of unhealthiness and lack of mature flavours, towards a more refined, premiumorientated and healthy. It may also choose to go alongside its original promotion campaign, with its social media HASHTAG #Itsgottabemilo. Individuals would upload photos with the

Joo Yong Shin n10261931 Marketing new Milo tins on Instagram, with high to low prizes, from flight tickets to movie vouchers, for randomly selected individual posts (Milo, 2018). Therefore, through online advertising such as short video ad clips on YouTube and animated slideshows on Facebook, it should illustrate the differences benefits between the previous Milo (more suited towards children) and the new Milo (more suited towards adults). The objective of advertising is to increase awareness of the “better and newly introduced formulas”, in which previous and potentially new consumers will be able to choose between the old and newly introduced powders, each with their own benefits.

This is very flexible and specifically designed towards potential customers, which allows Milo to meet their competitor’s customer needs. Furthermore, as people may be initially reluctant of drinking new milo products, therefore it is important for Milo to increase awareness of the benefits and the availability of their new products in the local supermarkets. Thus, Milo should set up stalls and displays in both the CBDs’ and inner-city suburbs, in areas such as parks, shopping centres and major transportation hubs. These stalls would allow those that pass by to taste samples of new flavours, receive discount coupons (such as buy one, get one free) and learn information about the ingredient changes. It may also be more convenient and less pressuring for time, as these adults are easily exposed to these promotional stalls as the travel to and from work.

5.0 References ABC News. (2018). Nestle removes Milo’s 4.5 Health Star Rating in response to criticism from public health groups. Retrieved from http://www.abc.net.au/news/2018-03-01/milos4.5-health-star-rating-stripped-away-by-nestle/9496890

Australian Bureau of Statistics (ABS). (2018). Consumption of Added Sugars From 1995 to 2011-2012. Retrieved from

Joo Yong Shin n10261931 Marketing http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/4364.0.55.011~201112~Main%20Features~Consumption%20of%20Added%20Sugars%20-%20A %20comparison%20of%201995%20to%202011-12~20

Australian Bureau of Statistics (ABS). (2017). Fertility Rates in Australia. Retrieved from http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/3301.0Main%20Features42016? opendocument&tabname=Summary&prodno=3301.0&issue=2016&num=&view

Bartleby Writing. (2010). Essay about Nestle Distribution Channel. Retrieved from https://www.bartleby.com/essay/Nestle-Distribution-Channel-PKUCSEKVJ Euromonitor International. (2014). The Sugar Backlash and its Effects on Global Consumer Markets. Retrieved from https://www.euromonitor.com/the-sugar-backlash-and-its-effects-onglobal-consumer-markets/report

Euromonitor International – Passport. (2017). Hot Drinks in Australia- Country Report. Retrieved from http://www.portal.euromonitor.com.ezp01.library.qut.edu.au/portal/analysis/tab

Euromonitor International – Passport. (2018). Other Hot Drinks in Australia- Country Report. Retrieved from http://www.portal.euromonitor.com.ezp01.library.qut.edu.au/portal/analysis/tab

Grewal, D., Levy, M., Matthews, S., Harrigan, P., & Bucic, T. (2015). Marketing. North Ryde, NSW: McGraw-Hill Education (Australia) Pty Ltd.

IbisWorld. (2018). Nestle Australia Pty Ltd. Retrieved from http://clients1.ibisworld.com.au/reports/au/enterprisepremium/default.aspx?entid=807

Milo. (2018). Milo Nutrition. Retrieved from https://www.milo.com.au/

Nestle. (2017). Annual Reports 2017. Retrieved from https://www.nestle.com/assetlibrary/documents/library/documents/annual_reports/2017-annual-review-en.pdf

Joo Yong Shin n10261931 Marketing Nesquik. (n.d). Chocolate and Strawberry Flavors. Retrieved from https://www.nesquik.com/en/powder

Stevens, S. (2009). Nestle Milo. Retrieved from https://ro.uow.edu.au/cgi/viewcontent.cgi? referer=https://www.google.com.au/&httpsredir=1&article=1060&context=aabfj

6.0 Appendices Appendix 1 SWOT Strengths -Milo products have strong presence internationally and domestically as well as a long operating history -It has strong brand equity, with a brand recognition (such as its iconic, nostalgic green tin can) and strong reputation for its emphasis of health in its chocolate and malt products, giving consumer confidence (Euromonitor International, 2018)

Weaknesses -Even though it is very popular, Milo lacks diversity in flavours available, producing relatively the same chocolate and malt products since its inception -In recent years, certain unhealthy elements such as the high sugar levels have come to light to the public, with Nestle publicly downgrading Milo’s own health rating

-It maintains strong CSR (Corporate Social Responsibility), with various charitable causes and sponsorships; such as the FoodBank, Aboriginal Youth Development Program (Milo, 2018) -Nestle, the company that owns Milo, allows for efficient production and distribution of Milo products worldwide, as Nestle already have wellmaintained diversified businesses such as coffee, food etc. across various markets Opportunities -Milo has opportunities to target older markets through product development, such as adults, who may consider Milo to be more child-orientated. This allows Milo to further adapt to the changing needs of the market -Alongside potential new markets,

Threats -Competitors include Nesquik and Ovaltine where they dominate North American and European markets, as well as competition domestically -Public health concerns in recent years over high sugar levels may damage the brand reputation

Joo Yong Shin n10261931 Marketing -As children are one of the main demographics that consumes the most Milo (ages between 014), the falling fertility rate of Generation Z in Australia poses the threat of decreased sales and less consumption (ABS, 2018) Appendix 2 CDSTEP Culture

Demographics

Social Trends

Technological Advances

Economic Situation

Analysis -Milo has always been an essential part of Australian culture and breakfast, and is one of Australia’s biggest icons (Milo, 2018) -Milo’s biggest consumers are children, particularly children that regularly participate in sports -Often consumed as a daily source of nutrition and energy (Milo, 2018) -Society is becoming more health-aware, with an increase in gyms and avoiding high-sugar products (IbisWorld, 2018) -Milo could develop and market their products to further increase protein levels and decrease sugar content Milo powdered products have remained relatively unchanged since its founding, with no major technological advances that would improve the consumption of the products (Milo, 2018) -In the next few years, supermarkets are expected to follow the increasingly social trends of healthiness therefore, may include healthier and premium products (Euromonitor International, 2017) - There Milo should target consumers who are older and have higher disposable income, such as working adults, who are often known for preferring “premium-orientated” and “limited” products (IbisWorld, 2018)

Political/Legal

-Therefore, it may be expedient to Milo to target working adults, as they may be more willing to pay higher for a better quality product -Nestle Milo has maintained its public image well, with no major controversies and makes ethical business choices -It regularly follows Australian consumer laws and guidelines, and markets their products, clearly and ethically (Stevens, 2009)...