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Analysis of external and internal environment




Tea is a traditional Russian drink that is a fully saturated product area with much wider unit price variety. In 2010 the volume of the Russian tea market is estimated at 150-180 thousand tons. There is practically no growth in demand for tea during the last few years. Analysts predict that tea sales in Russia will slowly decline on average by 2% per year in 2011-2015. In 2015 sales will amount to 117 thousand tons. The reduction in sales can be explained by several reasons.

First, the Russian tea market is saturated. Traditionally, consumers of tea are almost the entire population therefore the increase in sales due to the increasing number of consumers is impossible. Moreover an annual population decline in Russia leads to the gradual decrease in the number of tea consumers. Second, tea consumption can not further increase by the average consumption per person. Primarily increase in per capita consumption of coffee can provoke a slight but steady decrease in the average amount of tea consumption. Third, growing share of annual sales of tea bags leads to more economical tea consumption.

It was already mentioned that in Russia tea is popular among the entire population. 98% of Russians are tea consumers, while the annual growth of 2-3% is achieved only through the growth of the market in money terms.

According to analysts one reason for this phenomenon is the steady decline in the segment of cheap tea in recent years. In other words, consumers' preferences shifted significantly in favor of more expensive tea products. In connection with consumers' preferences it is also important to mention that traditional black tea continues to occupy a significant proportion of tea consumption in Russia. However in recent years supply of green and fruit tea has increased in the Russian tea market. Tea with various flavoring additives is also gaining popularity. At the same time, tea bags are still popular among Russian consumers that provoke serious competition for traditional loose tea.

Almost all of the raw materials for the tea production come from abroad. Only 1% of tea is supplied from Russia. At the same time, more than 95% of tea in Russia is imported and packed by Russian industrial enterprises. Russia is in the first place by tea import, the share of packaged tea import is about 60%. Most of the tea from Russia supplies to Ukraine and Kazakhstan.

According to the retail audit results Moscow tea market still remains the most capacious. Nearly a third of products of this category are sold in Moscow – in value terms its share is about 40% of total tea sales in Russia. On the whole, 45,5% of tea is sold in the major cities of European Russia and only 14,5% of tea products are sold in 6 cities of Siberia.

Competitive Russian tea market is characterized by a high level of consolidation. The process of consolidation began five years ago in the Russian tea market. Currently small companies, including sellers of elite tea, occupy approximately 20% market share in value terms. According to the data of 2010 there are four major players in the Russian tea market: Orimi Trade, Unilever, SDS-Foods, Maysky Chai.

In order to define the clear point of difference for the development of Wissotzky positioning there was conducted the research of competitors’ brands positioning in ‘masstiege’ specialty tea segment. In the framework of this research seven direct competitors were revealed: Curtis (Maysky Chai), Ahmad Contemporary (SDS-Foods), Ahmad Healthy & Tasty (SDS-Foods), Greenfield (Orimi Trade), Maître de Thé, Lipton (Unilever), TESS (Orimi Trade). Then the positioning map of competitors was developed where the position of every competitor brand was defined by means of describing key brand and product attributes (see Appendix 1)

According to the conducted research of competitors’ brands positioning in ‘masstiege’ specialty tea segment there is a number of brand attributes that are used in almost every brand in the segment and therefore provide no difference. These attributes are the following:

Good taste;

Premium feel;

Wide range of tastes, exotic tastes;

Tea expertise, long heritage;

Not Russian.

Speaking about the last attribute it is important to mention that traditionally Russian products are considered less quality and not contemporary, therefore even Russian companies create foreign looks and fake corporate brands in order to compete in premium segment. Here are the most common examples: Curtis by Curtis & Partridge (originally by Russian Maysky Chai), Greenfield by Greenfield Tea Ltd (originally by Russian Orimi Trade), TESS by Greenfield Tea Ltd (originally by Russian Orimi Trade).

However there were also revealed a range of product and brand attributes that provide a point of difference for competitors’ brands. Thus the positioning of Curtis is primarily based on unearthly taste while Maître de Thé and Ahmad Healthy & Tasty tea can be best described as inspirational and perfectly healthy correspondingly. Ahmad Contemporary’s key feature of positioning is self-expression that is implied an educated and contemporary essence of brand. As regards Greenfield and Lipton tea it is well-known that these brands are destined to bring harmony (Greenfield) and positive (Lipton). TESS focuses on the younger audience.

Due to conducted research it was identified that new experiences as brand attributes are not actively used by competitors in the Russian tea market and therefore are available for positioning of new brand. Later we will discuss the Wissotzky positioning based on new experiences in detail.

Internal analysis of Wissotzky group environment has also provided the base for brand positioning. The main company features formed the foundation of brand identity as tea expert. Among these features are:

Over 160 years of experience in tea industry;

Long-standing commitment to quality and excellence;

Presence in a number of countries all over the world;

Leading producer of tea in Israel with a consistent high market share of approximately 80% successfully competing with international brands;

Producing of all types of tea: loose tea, tea bags (Black, Black specialty, Green, Herbal&fruit teas), as well as a rich variety of caffeine free fruit & herbal infusions;

Constant providing of innovations.

Despite the stiff competition in the Russian tea market, Wissotzky internal specific features can provide sustainable competitive advantage on conditions that competent positioning and promotion strategy will be developed for the company. The company will succeed if it applies its strengths appropriately in accordance with quite limited but nevertheless existing market possibilities.


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