MKTG304- Group- Report-final PDF

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2 Table of Contents Executive Summary.....................................................................................................................3 Marketing Report Objective....................................................................................................3 Phase 1: Basic Demand Conditions.....................................................................................4 Consumption Patterns................................................................................................................. 4 Consumer Segments..................................................................................................................... 4 Geographic.................................................................................................................................................4 Demographic.............................................................................................................................................4 Psychographic...........................................................................................................................................5 Environmental Impacts on Demand....................................................................................... 5 Socio-Cultural............................................................................................................................................5 Technology..................................................................................................................................................6 Consumer Buying Behaviour..................................................................................................... 6 Business customers’ existing knowledge and beliefs towards M&J Chickens. ..7 Buyer Power...............................................................................................................................................7 Blue Ocean Strategy...............................................................................................................................7 Phase 2: Nature of Industry Marketing and Competitive Positioning Strategies.........................................................................................................................................8 Industry Overview.......................................................................................................................... 8 M&J Strategy.................................................................................................................................... 8 Competition....................................................................................................................................... 9 Inghams.......................................................................................................................................................9 Baiada..........................................................................................................................................................9 Porter’s Five Forces...................................................................................................................... 9 Blue Ocean Framework.............................................................................................................. 10 Phase 3: Supply Conditions and Intermediaries, Environment and Observers .............................................................................................................................................................11 Competitors.................................................................................................................................... 11 Supplier Power Analysis............................................................................................................ 13 Economic Factors influencing cost....................................................................................... 14 Government implications.......................................................................................................... 15 Nature of intermediaries.......................................................................................................... 15 Phase 4: The Current Australian Marketplace.............................................................16 Consumer Confidence................................................................................................................. 16 Cost of living................................................................................................................................... 16 Technology....................................................................................................................................... 17 Industry Observers Outside the Firm and Service Organisations and their influence/role.................................................................................................................................. 17 Phase 5: The Future..................................................................................................................18 Future Developments................................................................................................................. 18 Blue Ocean Strategy................................................................................................................... 18 Four Action Framework.............................................................................................................. 18 Four hurdles to strategy execution..................................................................................... 20 1. Cognitive hurdle................................................................................................................................20 2. Resource hurdle.................................................................................................................................20 3. Motivational hurdle..........................................................................................................................20 4. Political hurdle....................................................................................................................................20 Budget................................................................................................................................................... 21 References.....................................................................................................................................22

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Executive Summary The Poultry Processing industry is currently experiencing a mature life-cycle phase, characterised by intense level of competition, slower rates of industry growth, and established products with little differentiation. In essence, the poultry processing industry is experiencing a ‘Red Ocean’ - a term coined by Kim and Mauborgne (2005) to characterise industries that experience head-to-head competition with industry players fighting for existing demand. This report provides an analysis of the current poultry processing market with direct relevance to the strategic operations of M&J Chickens, a wholesale provider of poultry to various Business-to-Business clients in Australia and part of Asia. The analysis of M&J’s marketing problem points towards a new Blue Ocean Strategy to provide M&J Chickens a sustainable source of revenue in the next five years. Methods of analysis include IBIS industry reports on the Poultry Processing industry, the supermarket industry, and relevant ABS data pertaining to consumption patterns for the wider Australian market. Competitor analysis for Baiada and Ingham’s highlights the strategic positioning of the major industry operators and the future considerations for M&J to overcome stiff strategic activities of rivals in the industry. All relevant industry data is included in the appendix. Results of the analysis reveal a red ocean that exists for M&J within the poultry processing industry. Maturity in the industry has prompted further developments in capital intensity, while smaller providers are seeking value-added poultry options in direct response to shifts in consumer preferences over the past five years. Further, large industry operators have established significant economies of scale through automated cutting lines and developments in supplier relationships to combat changes in demand and offer a range of poultry options.

Marketing Report Objective This marketing report has been developed for the purpose of formulating a cohesive Blue Ocean Strategy (BOS) for M&J Chickens. The particular marketing issue pertaining to M&J chickens currently is the company’s future growth objective to treble business growth in the next five years within a mature and highly competitive industry. Addressing this issue with the BOS application in consideration, this report seek to attain the following objectives:  Identify the main demand determinants of poultry consumption within Australia, with particular reference to future consumption trends  Outlay the possible sources of competition for M&J Chickens with respect to Porter’s five forces of industry competition

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Determine the various conditions of supply within the poultry processing industry Analyse current Australian economic indicators impacting on poultry processing Develop a framework for the development of a BOS strategy which incorporates both Business-to-Business (B2B) and Business-to-Consumer (B2C) markets

Phase 1: Basic Demand Conditions Consumption Patterns According to industry reports gathered by IBISWorld, poultry consumption has steadily increased over the past decade as a percentage of total meat consumption in Australia (Cloutman, 2018). On average, Australians have increased poultry consumption just under 35% in the past 8 years alone, from 36.3 kg per person to 49 kg per person (ACMF, 2018) (See Exhibit 1). Data from the Australian Bureau of Statistics (2017) shows a two-fold increase in lean poultry consumption compared to other alternative sources of protein between 1995 and 2011 (See Exhibit 2). The increase in poultry consumption has stemmed from the rise in health consciousness as Australians seek healthier alternatives of meat in their diets (Cloutman, 2018). In particular, chicken consumption is projected to surpass all other meat protein sources in Australia by 2022 (ACMF, 2018). Poultry consumption in Australia is dependent on the retail prices of poultry and other alternative sources of meat such as beef, lamb, and pork (Cloutman, 2018). According to data published by ACMF (2018), poultry retail prices are significantly lower compared to other meat sources as capital investments in automated facilities have increased production volumes and placed a downward pressure on retail prices (Cloutman, 2018). In addition to automated processing lines, retail supermarkets have also placed downward pressure on poultry prices over the past decade (Cloutman, 2018). For example, Australian supermarket chains Coles and Woolworths often ignite in price-cut ‘wars’ on various generic poultry products to increase supply across their stores (Lopez-Vito, 2018). Furthermore, domestic prices for alternative sources of meat such as beef and lamb have slowly increased over the past two years shifting consumer preferences towards cheaper alternative sources of lean meat such as poultry (ACMF, 2018). (See Exhibit 3). Although this trend will help stimulate future poultry consumption, poultry processing and farming companies such as M&J face significant price pressures on their bottom line in the next five years (Cloutman, 2018).

Consumer Segments

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Geographic Poultry consumption occurs across all major Australia capital cities, both in urban and rural areas (Cloutman, 2018). However, the Department of Economic Development, Jobs, Transport and Resources (2014) in Victoria notes that large poultry processing facilities are situated in close proximity to metropolitan areas where a large portion of the customer base resides.

Demographic According to ABS (2017) lean meat consumption, such as poultry, is heavily skewed towards older age groups. Particularly, adults between the ages of 51 and 70 lead consumption statistics for lean meat protein sources. In addition, household data has also indicated an increase in lean meat consumption across all age groups from 1995 to 2011/12 for both male and female groups, with the highest consumption increases evident across the 19-50 and 51-70-year-old age groups (ABS, 2017) (See Exhibit 4). According to data compiled by Sui et al. (2016) both males and females consume similar amounts of poultry, and both groups of study had decreased red meat consumption from 1995 to 2011-12.

Psychographic With the fact that rising health consciousness has driven greater demand of white meat (ACMF, 2018), plus chicken has often been defined as accessible because of the price, individuals have become more willing to consume the chicken product in clubs, cafes, restaurants and other food-service outlets (Gatfield, 2006). Moreover, caused by the arise concern with environmental and animal welfare issues, the consumption of free-range and organic chicken has increased significantly over the past five years.

Behavioural Because of the fact a number of individuals are facing time-poor situation and they choose to eat-out. As well as the table turnover rate is positively related to potential maximum profit for many M&J’s customers like Café, Hotels and Pubs, they are facing the time-poor conditions. Thus, the best performers for these markets are things like “Char Grilled” and “Chefs Creations” which both belong to the “pre-cooked” category.

Environmental Impacts on Demand Socio-Cultural Data from the Australian Bureau of Statistics (2017) shows that as the age growth, people are more willing to consume lean meats, which demonstrated the Australian’s health consciousness. Moreover, research shows that Australians are eating chicken meat 2.2 times a week on average, which is higher than any other type of meat (ACMF, 2018). The location of consumption has also shifted in Australia, with a large proportion of Ethnic-Australians seeking meals ‘out-of-home’ (Nielsen, 2018) (See Exhibit 5). This shift in eating habits has direct impacts for poultry-processing companies such as M&J to re-strategise their operations around various ethnic cultures to

6 include a range of ethnic recipes and flavours in convenient locations (Nielsen, 2018).

Economic (ABS, 2017) (See Exhibit 6). In addition, the latest IBISWorld report on Australia’s takeaway chicken shops suggested the idea that the increasing household income is positively related to consumers seeking more ‘eat-out’ options for convenience and taste (Vuong, 2018). Specific economic indicators relating to the cost of living and consumer confidence are analysed later in this report in section 3 ‘The current Australian marketplace’.

Regulations The regulation named Primary Production and Processing (PPP) Standard aims to strengthen food safety as well as traceability throughout the food supply chain from paddock to plate (Food Standards, 2018). The industry regulation level was rated “Heavy” in Cloutman report (2018).

Technology Poultry farming and processing industries have benefited from various technological advancements that have increased volume production and valueadding product options (Cloutman, 2018). For instance, many industry operators have implemented automated cutting lines into their processes to increase the volume of output, whilst also improving quality assurance against industry standards (Cloutman, 2018). The pace of technological change is continued to exert significant influence over head-to-head competition, particularly for pricecuts. Future technological developments will play a significant role in valueadded products (Cloutman, 2018).

Consumer Buying Behaviour Five typical stages are included in the consumer buying process (Johnston, 2016). Stage 1: Need Recognition M&J’s business customers need to purchase chickens to serve their customers. These businesses like Catering Service’s demand is partly decided by their end customers (individuals), M&J’s should also take end customers’ demand into consideration and this will be further discussed later. Stage 2: Information Search We assume that M&J’s customers find information largely through internet sources. Zilincan (2015) suggests that search engine optimization is a useful tool for online marketing. Google AdWords, as a search engine advertising tool which enables M&J’s ads to be shown on customers’ page who searched keywords such as “poultry supply” and “chicken supplier”. Stage 3: Evaluation of Alternatives Customers would evaluate different alternatives to determine which supplier to choose. Industry leading firms like “Inghams” and “Baiada” and other Tier-2 suppliers should be considered by them as well. M&J Chickens needs to hold their

7 “premium brand” positioning in both business customers’ and end customers’ eyes in order to keep on expanding the business. Stage 4: Purchase The final purchase decision can be disrupted by negative feedback from others and just as we mentioned before, it is important for M&J to acquire a credible reputation in the market. Stage 5: Post-Purchase Evaluation At the last stage, customers will re-evaluate the product and this determines if the re-purchase or contract extension will happen or not (Johnston, 2016). Service industry like Café and club attach importance to their customer’s feedback and it is likely that feedbacks will be collected. Currently, there is no feedback loop built by M&J Chickens which can be a potential weakness for future growth potentials in the consumer markets.

Business customers’ existing knowledge and beliefs towards M&J Chickens Positive   

High quality (premium brand) Variety of raw and pre-cooked products across a range of poultry sources Chicken is highly demanded by clients from various food-service industries, serving a range of markets in Australia

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Higher price than competitors Relatively smaller scale compared to Tier-1 giants like “Inghams” and “Baiada”

Buyer Power The Porter’s five forces analysis suggests that customers have power to bargain with the selling firm (Harvard Business School, 2018). With the fact that many of M&J’s customers are large businesses with a lot of bargaining power, the low switching cost, as well as the high buyer information availability, customers can leave M&J Chickens if the product performance is not as good as they assumed.

Blue Ocean Strategy Path 3: Buyer Group End-user groups of buyers, particularly consumers of poultry, are the main focus for poultry processing and farming operators. Industry operators gear their marketing and production efforts towards end-users as supermarkets, primarily serving consumers, hold 38.4% share of the $6.4b poultry processing market.

8 However, for wholesales such as M&J, the focus of production and marketing efforts is geared towards food-service providers and caterers, acting in a B2B market. Instead of keeps competing in the B2B red ocean market, we are actively searching ways to help M&J to reach out to those end-customers, detailed information will be provided in the upcoming phases.

Phase 2: Nature of Industry Marketing and Competitive Positioning Strategies Industry Overview The Poultry Processing industry in Australia is projected to contract in growth over the next five periods at a rate of 0.7% to $6.7bn, a 1.2% decrease from the previous five years (Cloutman, 2018). Backed by a growing consciousness for chicken and poultry as healthier sources of meat amongst consumers, revenue figures have seen a positive annualised 1.9% growth from 2013 to 2017, at $6.4bn (Cloutman, 2018). The industry is currently positioned in a mature lifecycle phase characterised through its slow rate of growth compared to annual GDP figures, total market acceptance of chicken and other poultry products, and a focus...