Answer the questions as per below case study

Q1. What are the various forms of segmentation used in the case? What alternative means could Supreme Food have used to segment the US market?

Q2. Based on Hofstede score, what inferences would you make to market Supreme Food's products at USA wrt marketing activities.

France USA

Power distance 68 | 40

Individualism 71 | 91

Masculinity 43 | 62

Uncertainty avoidance 86 | 46

Long term orientation 63 | 26

Indulgence 48 | 68

Q3. Critically evaluate the notion that the product "attributes", rather than the core benefits, sell competitive products in light of the case.

Q4. Which action, or combination of actions, should Mr Belq recommend in his marketing plan? Why should he recommend this course of action(s)?

CASE STUDY

Supreme Foods of France

Late in April 1993 Andre Belq had to prepare budget for Spurt, a fruit-flavoured concentrate that could be sprayed into a glass of water to produce a fruit-flavoured beverage. The budget, which had to include forecast costs and revenues for Spurt for 12 months beginning 1 June 1993, was due on 15 May. The budget could include: (1) costs for further consumer research, (2) expenditures for a test market based on a tentative plan that had been submitted to Mr Belq by the firm's advertising agency, or (3) forecast revenues and costs for a national introduction in the United States.

The company

Supreme Foods of France (SFF) is a vertically integrated multinational firm that produces and markets a wide variety of convenience and commercial foods throughout western Europe. In addition, the company sells a variety of specialty products in the United States. These products are usually sold in the gourmet section of supermarkets.

SFF has shown consistent growth over the past decade. The company recorded sales of US$700 million in 1992. Although most company sales were generated from European operations, sales in the United States had shown a sizable increase. The growth of US sales was attributed to the increased popularity of gourmet foods, the popularity of French products, and the broadened distribution in supermarkets in the United States. In 1992 Supreme Foods of France sold its line of specialty food products through 50,000 US supermarkets and specialty food stores through a network of food brokers. SFF was organized into three divisions: The Commercial Foods Division, the Consumer Foods Division, and the International Division. Each division was managed by a director, to whom several products managers and marketing support managers reported. In addition, a New Ventures Department operated at the corporate level, with the responsibility for identifying ways that the company could launch new products with high growth and high profit potential. The primary tasks of the New Ventures Department consisted of exploring new markets for the company and preparing market studies. These studies also identified possible means of entry and possible positions of new products in particular markets.

History of Spurt development

Development of Spurt began in late 1991, when the director of the International Division met with New Ventures Department executives to discuss opportunities in the US$46 billion beverage market in the United States. During the course of their discussion frequent reference was made to the apparent success of innovative package designs in launching new products in mature markets. For example, the director of the International Division noted that the Check-Up brand of toothpaste captured a sizable percentage of the toothpaste market because of the unique pump dispenser package. Gillette successfully launched Brush Plus - a device that dispenses shaving cream through a brush - and achieved a respectable share of the market. In each instance the unique packaging was considered at least partially responsible for the success of the product. The meeting concluded with a consensus opinion that an opportunity existed for a new package design for dispensing beverages. Accordingly, the New Ventures Department went about searching for such a container.

Product development

In early 1992 the New Ventures Department came upon a container that appeared promising. The container, which had existed in France for five years, was used for dispensing a variety of fruit-flavoured concentrates. The container held 15 oz of concentrate and made 6 qt of a beverage when added to water. A metered valve on the container assured that each time the valve was pressed, sufficient concentrate was squirted to produce an 8 oz drink (including tap water). Six fruit flavours were available: orange, grape, cherry, strawberry, raspberry, and fruit punch. The concentrate contained a vitamin C additive as well. Further investigation revealed that the container and concentrate were generally well received. The product had a long shelf life and was ideal for storage since one container held the equivalent of 24 8 oz drinks and required no refrigeration. Both features were welcomed by French households. Furthermore, both children and adults appeared to like the flavours. Although actual sales statistics were not available, the product did have wide distribution in major metropolitan areas. Informal discussions with the container's producer indicated that a licensing arrangement was possible whereby SFF would be given exclusive rights to market the product in the United States. SFF would obtain the product from the container's producer and would not have to build its own production facility since production capacity of 1.5 million cases (24 cans to one case) was available at the producer's plant. SFF sought and received approval to begin consumer research on the product in the United States. The tentative name given to the product was 'Spurt.'

Consumer research

In late June 1992 the New Ventures Department commissioned a series of focus group interviews on Spurt under the direction of Todd Anthony, an independent consultant in the United States. The primary aim of these studies was to obtain qualitative information on consumers' reactions to Spurt and to learn how they viewed it relative to canned fruit drinks such as Hi-C, carbonated soft drinks, and powdered soft drinks of the Kool-Aid variety. Anthony's report of the results was as follows:

1. Spurt is conceived as a children's drink but also, secondarily, as an all-family drink because of its excellent quality.

2. After mixing their drinks and before tasting, about half the respondents would buy Spurt, and half would not. Those who said they would buy the product were even more favourably disposed toward Spurt after tasting the product than before tasting it.

3. Spurt appears to be conceived as a high-grade Kool-Aid for day-to-day use, especially in the summer, rather than as a soft drink or canned fruit drink.

4. Consumers believe that the container may in general cause many problems: it can get plugged up, kids make a mess with it, and mothers will not know how much is left.

5. The present flavours produce excellent quality with little noticeable aftertaste. However, further taste testing will be required to optimize the quality of the drinks.

6. The need for a vitamin C additive in fruit-based drinks is recognized by all consumers. 7. Users, especially children, appear to enjoy squirting Spurt into a glass of water.

8. Although 99 cents for 24 servings is considered a fair price, there is some doubt whether the can would actually produce 24 servings.

In summary, Anthony remarked, 'We appear to have a "superior Kool-Aid" product that would be thought of as primarily for kids' consumption, but not exclusively so, at a reasonable price. The container appears to arouse misgivings among some mothers.' In late August 1992 Todd Anthony conducted four focus groups with female heads of households with at least one child between 3 and 14 years of age. After a general discussion of fruit-type drinks, each group was asked to read a concept card describing the characteristics of the product, including its price, flavours, and cost per serving. Anthony summarized his inferences from the focus groups in four points:

1. Two groups were negative in their reaction to Spurt; two groups offered a positive response. The latter two said they would buy it for their children for a special treat. They did not say that the product would necessarily become a regular item.

2. The operation of the metered valve was a mildly pleasant surprise to the respondents. For many, it had a 'fun' element. However, continued use indicated that Spurt was a children's product, one that would likely be bought only with children in mind.

3. With initial trial of this product there would be tremendous variation in the amount used of the concentrate, the use of ice, and the need to stir. The wide range of colours in the final beverage indicates that consumers will be drinking very different drinks, depending on concentrate usage. As for ice, some use it and some do not. The addition of ice to the water before spraying the concentrate necessitates stirring. Many women stirred even if no ice was used.

4. From our studies, four distinct categories of beverage are evident: juices, nutritious fruit drinks, carbonated soft drinks, and Kool-Aids. Spurt falls into the Kool-Aid category. In comparison to Kool-Aids, Spurt wins on two points - more fun to use, and a better drink - and loses on two points - expensive (24 servings is not a believable figure) and on messiness.

In his summary, Anthony recommended that these findings represented a warning to move slowly on the project because it appeared that Spurt was potentially a one-time novelty that even children might not have the power to perpetuate. Soon after these results were submitted Mr Andre Belq, a product manager in the International Division, was assigned to the product. To supplement the research being carried out by Anthony, Mr Belq commissioned SFF's advertising agency in the United States to study the relationship between Spurt and powdered soft drinks and consumption data related to consumer preferences and shopping behaviour. In-home tests conducted by the agency indicated that Spurt was highly favoured over powdered soft drinks for the fruit flavours. However, when the fruit punch flavour was tested alone against Hawaiian Punch, a canned fruit drink, Spurt lost on such features as taste, colour, and aftertaste. Additional consumer tests by the agency on product positioning revealed that Spurt was most similar to carbonated soft drinks, not canned fruit drinks or powdered drinks. Furthermore, consumers expected to find Spurt located in the carbonated soft drink section of the supermarkets (see Table 1). Agency researchers considered this finding important, since consumption data on beverages indicated that powdered soft drinks sales peaked in April and May and carbonated soft drinks sales in June and July. Moreover, the agency estimated that carbonated soft drinks captured 65% of the US$46 billion beverage market, powdered soft drinks captured 12%, and canned fruit drinks captured 23%. Based on shopping behaviour patterns, shelf location, consumer preference tests, a newspaper coupon program, and a media expenditure level of US$5.5 million, agency researchers estimated that Spurt's introductory-year volume be 1.048 million 24-can cases. Mr Belq's reading of the consumer test prompted him to commission another independent research agency to study Spurt. The research agency was price_-_cost plan prepared by Mr Belq set the price to consumers for Spurt at 99 cents per can. The price per can to supermarkets was set at 72 cents, or US$17.28 per case of 24 cans. These cost and price figures, plus shipping costs, food broker commissions, and licensing fees, indicated that SFF could achieve a gross margin of US$6.50 per case. The only relevant fixed cost assignable to Spurt would be the advertising expenditure.

Table 1: Product Positioning and In-store Location

Spurt most similar to ...'

Carbonated soft drinks 60 %

Canned fruit drinks 21 %

Powders 19 %

Total 100

Expected store location:

With carbonated soft drinks 64 %

With canned fruit drinks 20 %

With powders 16 %

Options in April 1993

In late April 1993 Mr Belq received notice that he would have to prepare budget for Spurt for 12 months beginning 1 June 1993. This budget would be based on a marketing plan that could include a test market, further consumer research, a full-scale introduction of Spurt in the United States, or some combination of these actions

SFF's advertising agency executives advocated a test market for Spurt. The test market would be conducted in two cities and would run for 10 months beginning 1 July 1993. The agency recommended that Spurt be test marketed to valuate marketplace performance with two strategies, under the assumption that even though Spurt was primarily a children's product, there might be an opportunity for substantial volume from consumers over 12 years old. In one city, a lower level of advertising spending (equivalent to US$5.5 million per year on a nationwide basis) would be put into appeals directed toward children, with minimal reinforcement of product advantages to the rest of the family. Consequently, advertising would be directed to Saturday morning cartoon shows and Sunday comic strips. The agency proposed a higher level of spending (equivalent to US$7.9 million per year on a nationwide basis) in the second test city. This test market would include an exact duplicate run of the advertising program in the first city, plus appeals directed toward an all-family audience, televised at prime evening time. In both cities' redeemable coupons, which applied to the purchase of Spurt, would be inserted in Sunday comic strips and on a direct-mail program. Consumer panel data would be gathered in both cities to assess advertising effects and trial and repeat purchase rates to be used in drafting a national introduction program. The cost of the test market would be US$537,000

Todd Anthony advocated further consumer research. He believed it was necessary to replicate his and the advertising agency's studies, since the agency's results conflicted with his observations. He believed the positioning issue was unresolved and improper positioning could result in Spurt's failure. Further consumer research would commence 1 June, and be completed 1 August 1993, at a cost of US$15,000.

Senior executives in the New Ventures Department advocated a national introduction. They reasoned that sufficient research had been conducted and that the advertising agency's test market plan could be easily expanded to a national program. Furthermore, they noted that the container producer was talking with a US-based food products firm about the possibility of using the container for a similar type of product. Failure to act with dispatch could forever eliminate the opportunity Spurt provided.