Relaunch plan for ovantine vietnam to become market leader in tomic food drink market

MMA6 NGUYEN THI HONG NHUNG Relaunch plan for Ovaltine Vietnam to become market leader in Tonic Food Drink market MASTER PROJECT MASTER IN MARKETING & ADVERTISING Tutor’s Name: SERG

MMA6

NGUYEN THI HONG NHUNG

Relaunch plan for Ovaltine Vietnam

to become market leader

in Tonic Food Drink market

MASTER PROJECT MASTER IN MARKETING &

ADVERTISING

Tutor’s Name: SERGE BYWALSKI

Ho Chi Minh City

(2013)

finishing this thesis, I have had the chance to review what I have learned during the course and applied the knowledge into this real case of Ovaltine And thanks to this, I’ve gained a deeper understanding about marketing, in theory and practice

There are several people who have been instrumental for me and whose contribution I truly appreciate First, I would like to thank my professor Alain and professor Serge for their support and guidance throughout the course I also would like to say thank to my friends, colleguages for the invaluable feedback, suggestions, insights And I would like to express my appreciation to all the customers I had chance to talk to for this project Thank you for your time and generosity This thesis would not have been possible without your all input

Finally, herewith I would like to confirm all I have written in this thesis are true and based on real facts and figures Thank you

very early, Ovaltine used to be the market leader in Tonic Food Drink and became a familiar brand in Vietnamese households However, after some years quiet with less activities as well as ineffective communication has made Ovaltine from market leader to the follower with only around 20% The rising market leader is Milo with much investment on media and many effective activities If Ovaltine does not change, the risk of losing Vietnam market is possible esp when Milo and many other milk brands such as Dutch Lady, Vinamilk, TH True Milk and the newest player Love in Farm have become more and more active in this market

So this study aims to analysis dairy market in general and tonic food drink in particular, the competition and Ovaltine’s brand performance to find out the solution for Ovaltine to get back their market leader position

a) The spending of consumers is increasing 1

b) The booming of dairy products, esp Liquid milk 2

2 Tonic Food Drink – a promising land 5

II COMPETITION ANALYSIS 7

1 Direct competitor – Milo 7

2 Indirect competitors 11

III OVALTINE BRAND PERFORMANCE 15

IV RECOMMENDATION FOR OVALTINE 22

FMCG Fast Moving Consumer Goods

GDP Gross Domestic Product

MFD Malted Food Drink

RTB Reasons To Believe

RTD Ready To Drink

TFD Tonic Food Drink

TOM Top of Mind

TVC Television Communication

UHT Ultra High Treatment

WTO World Trade Organization

and projected till 2015……… 1 Chart I.1.2 Consumer Spending in FMCG products 2011 versus 2012 ………… 2 Chart I.1.3 Dairy Industry - Contribution by segments……… 3 Chart I.1.4 Growth rate by categories year on year ……… 4 Chart I.1.5 Price increase affects shopping behaviour ……… 4 Chart I.2.1 Volume Sales in TFD category from 2009 to 2012 in Urban ………… 6 Chart II.1.1 Distribution of Milo and Ovaltine from 2010 to 2012 in 6 key cities… 10 Chart II.2.1 Value Share by brands in Urban and Rural in March 2012……… 12 Chart III.1 Ovaltine’s Distribution in 6 key cities from 2010 to 2012……… 20

I MARKET OVERVIEW

1 Dairy Industry in Vietnam

a) The spending of consumers is increasing

Many years ago Vietnam used to be one of the world’s poorest countries Today the world is observing the strong development of Vietnam in economy, esp after joining World Trade Organization (WTO) Vietnam’s GDP per capita has more than tripled from $351 in 2000 to $1,156 in 2010 More than one fifth of a population of 87 million people now live in cities like Hanoi, Ho Chi Minh City and Hai Phong The number of consumers – with a monthly household income of at least $300 – in the top six cities has more than doubled from 2.6 million in 2000 to 5.8 million in 2010 [1]

Middle Class is growing rapidly, esp in Urban According to a research in

2012 of a famous research company Kantar WorldPanel in 2012, the middle class has been rising from 70% in 2005 to 83% in 2012 and is projected to increase further in the future With more money in their pockets, the Vietnamese are spending like never before, and the consumption of dairy projects has been booming

Chart I.1.1 Living Standart Measurement (LSM) in Urban from 2005 to 2012 and

projected till 2015

Source: Kantar WorldPanel (2012), Consumer Panel Research

Below is a chart showing Share of Wallet – the budget consumers spend for some main categories Consumers have increased their spending from 51 USD per month in 2011 to 57 USD per month in 2012 And the Chilled Food & Dairy has increased its share in consumers’ pocket from 32.6% to 33.1%, gained +0.5%

(1) Tetra Pak Dairy Index, Issue 4, July 2011

In other words, the total budget for this category has raised from 203 USD per year to 230 USD per year This shows the importance of Chilled Food & Dairy in Vietnam nowadays

Chart I.1.2 Consumer Spending in FMCG products 2011 versus 2012

Source: Kantar WorldPanel (2012), Consumer Panel Research

b) The booming of dairy products, esp Liquid milk:

When the economy is developing, the citizen’s living standard has been improved and the Dairy industry plays an important role in increasing health and

longevity Within 20 years since year 1990 to 2012, the dairy consumption in

Vietnam has increased more than 30 times: from 0,47 litres in 1990 to 15 litres in

2012 per person per year [2]; [3]

The increase in consumer’s income & spending as well as their understanding

of the importance & benefits of milk has helped this category become the essential needs for consumers However, according to a Statistics of Food and Agriculture Organization of the United Nations (FAO), the Vietnamese’s milk consumption is

15 litres per person per year is still low compared to Thailand and China (23 and 25 litres per person per year respectively) [4]

(2) Milk Report 2012 of Ministry of Industry and Trade:

du-bao-5-thang-cuoi-nam_1218.htm

http://htpc.gov.vn/xuatkhau/bao-cao-nganh-hang_74/bao-cao-thi-truong-sua-7-thang-va-(3) “Sai Gon Tiep Thi” Magazine, Issue No 13, Dated 30 Jan 2013, Page 23

(4) “Thị trường sữa Việt Nam và những thay đổi tích cực”, dated 12 Dec 2011:

nhung-thay-doi-tich-cuc/

http://vnexpress.net/gl/kinh-doanh/doanh-nghiep-viet/2011/12/thi-truong-sua-viet-nam-va-Chart I.1.3 Dairy Industry - Contribution by segments

Source: Euromonitor International (2012)

• Power milk: 40,7%

• Liquid milk: 31,6%

• Yogurt: 10,6%

• Condensed milk 15,6%

• Other- soya milk

Moreover, according to a research of Kantar WorldPanel in Urban 2012 below, the Fast Moving Consumer Goods (FMCG) still grew in both value and volume, in

which Dairy & Chilled was best performing category with highest volume growth

rate It grew 8.1% in volume and 17% in value vs 2011

Particular in Dairy Industry, Liquid Milk was the category with highest

growth rate (13.5% in volume and 30% in value) while other Dairy Based Products

such as Drinking Yogurt, Sweet Condensed Milk, etc… mainly grew in value due to price increase while volume just grew a little bit or stagnant

Chart I.1.4 Growth rate by categories year on year

Source: Kantar WorldPanel (2012), Consumer Panel Research

One more thing, in recent years, esp after the economic downturn, consumers are very price sensitive when almost all the essential products increase prices year

on year and that affect the purchasing power However, as an important category, Dairy category seems to have less impact from price increase According to a research from Nielsen below, majority of consumers claimed that for Dairy (except.Adult Milk) they would not change their shopping behaviour due to price increase

Chart I.1.5 Price increase affects shopping behaviour

Source: Nielsen Vietnam (2012), Vietnam Pocket Reference Guide 2012.

In conclusion, dairy based products have become essential in each Vietnamese household and with the increase in income & spending for FMCG products, Vietnam is really starting to penetrate a break-through era of Dairy industry in these coming years

2 Tonic Food Drink – a promising land

Tonic Food Drink (TFD) or also call Malted Food Drink (MFD) is a particular category in healthy beverages There is no official definition for this kind of product but it’s the name for types of products that made from barley extract, milk and cocoa Barley is used for animal fodder, as a source of fermentable material for beer and certain distilled beverages, and as a component of various health foods Many researches have shown that Barley extract or Malt is good for against constipation, good for health because it contains many vitamin B, Fe and high fibre [5] That’s why TFD in general provides energy, nutrients that made from natural ingredients that body needs with chocolate taste

TFD has been in Vietnam market for many years The popular brands in Vietnam market in this segment are Milo and Ovaltine But in Vietnam, consumers

do not know much about TFD and they still perceive TFD as milk Therefore, they often call Milo and Ovaltine as “Milo milk” and “Ovaltine milk” instead of “Malted Food Drink” Given the fact TFD is highly nutritious and Vietnamese consumers perceive it as milk, TFD category is now still segmented as healthy beverage and under Dairy category With the long heritage, TFD has been entering many Vietnamese household and expanding its importance very fast Joining together with the booming of Dairy industry, TFD has been increasing strongly year on year

Chart below shows the continuous development of TFD in the past 3 years with the contribution of both Powder and RTD, esp RTD Growing demand for convenience among middle-class households in Vietnam’s cities is reflected in

growing sales of packaged, RTD UHT milk “With many families leading

increasingly hectic lives, parents are ready to spend a little more on their kids to ensure they get the best nutrition They also want to save time by buying products which offer real convenience Convenience is really important these days and that is why ready-to-drink milk is so attractive It saves parents time” said Cassandra Le,

Marketing and Product Management Director at Tetra Pak Vietnam [1]

Chart I.2.1 Volume Sales in TFD category from 2009 to 2012 in Urban

Source: Nielsen Vietnam (2010 – 2012), Retail Audit - Tonic Food Drink - Urban

In 2012 vs 2011 Urban, total TFD grew at 35% in volume and 58% in value, driven by UHT while Powder is quite stagnant [6] This is partly because of the demand for healthy products has been rising in recent years when there were lots of

issues in food safety and consumer health 88% Urban Housewives agreed: “I

worry about my health more than before” while in Rural it’s 86% And 81% Urban

Housewives agreed: “I am ready to pay a higher price for healthier foods” vs 75%

Rural Housewives Health is the second biggest consumer concern in Vietnam after rising food prices, according to Nielsen Omnibus report in the fourth quarter of

2010 Apart from reasons related to health, the unique chocolate taste in TFD which

is quite different from the chocolate milk is also one of the key reasons for Kids favoring TFD Kids love chocolate and moms often buy TFD for its chocolate flavor In 2012, among FMCG categories, TFD has become one of the top 3 volume growing categories in Urban and top 6 in Rural has shown the great potentiality of this segment in Vietnam market for the upcoming years [7]

(5) Tetra Pak Dairy Index, Issue 4, July 2011

(6) Nestle Vietnam website, “Thức uống lúa mạch”:

http://www.nestle.com.vn/brands/beverages/thuc-uong-lua-mach

II COMPETITION ANALYSIS

1 Direct competitor: MILO

TFD market with only 2 main players Milo and Ovaltine is current very small

vs total Liquid Milk (around 12% in value and 14% in volume – according to Nielsen Vietnam, Retail Audit 2012) This pie is growing year and year and there is still huge potentiality for both 2 brands to expand their territory

 Brand Color: Green

 Brand Positioning: Energy to succeed

 Brand Characteristics: successful, dynamic, young

 Target users: Kids 6-12 years old, ABC Class

 Benefits:

o Functional benefit: Physical - Energy for whole day

o Emotional benefit: successful, long lasting energy, active

 RTB: ProtoMalt (Malt extract)

Milo – the key competitor of Ovaltine was not the 1st player in TFD in Vietnam market Ovaltine was the 1st one to enter and was market leader long time ago These 2 brands have the same target users that are Kids 6-12 years old, ABC Class However, after several years quiet without much communication and activities, Ovaltine left the market leader position to Milo Milo with the positioning

“Energy to succeed” with huge investment in communication and many activities talking to moms has attacked the right insight of Vietnamese moms: always want the best for their children That has helped them to achieve 100% brand awareness; 12% TOM among healthy beverage categories (comparing with milk, green tea, juice, etc…) and 90% TOM in TFD market (if comparing with TFD market only)

(6) Nielsen Vietnam, Retail Audit, Tonic Food Drink, 2012

(8) IPSOS Vietnam, Brand Health Tracking, 2012

Promotion

For many years, Milo was very consistent in their communication: always talk about Energy with Sport theme and “Protomalt” RTB Milo has huge media budget that their TVC was on air almost every month to remind consumers about their brand Milo’s communication target audience: Moms with kids 6-12 years old, ABC Class Their consistent message has helped moms to remember their brand image

TVC 2010:

TVC 2011:

TVC 2012

:

But in Milk Industry recently, the pester power of Kids is very important Kids

in these ages are the one who choose the products for themselves and ask Moms for that Acknowledged this, Milo in 2012 started to change their direction, not only communicated to Moms but also communicated to Kids as well via their successful

4 ways straw promotion with TVC support This campaign created a big boom for Milo to expand the pie to new users and uplifted total TFD category [6]

Place

Milo as a long established brand and high consumer support has built a wide coverage across Vietnam Also Milo is under Nestle Vietnam that can take use of the distribution of other brands such as Nescafé, Nestea, Maggi, etc…

Chart II.1.1 Distribution of Milo and Ovaltine from 2010 to 2012 in 6 key cities

Source: Nielsen Vietnam (2010 – 2012), Retail Audit - Tonic Food Drink - Urban

Milo currently has distribution in 59% number of TFD shops which accounts for 98% turnover of the category That means they have been available in key big shops of TFD Meanwhile, Ovaltine is still quite small (only half of their Numeric distribution) but it’s expanding quite fast

However, Milo always faces up with the out of stock due to the insufficient production and high consumer support which creates opportunity for Ovaltine to tap

in the demand gap

Packaging

The green color of Milo is a point of differentiation vs Ovaltine and also has advantage One of the barriers of this TFD category is the chocolate flavor Consumers perceive chocolate as creating inner heat and constipation But the green color of Milo has helped to create a fresh feeling and reduced the heatiness in consumers’ minds

Besides, Milo also tried to have some new packaging recently with the cartoon packaging for promotion campaign “4 way straw” that created new” element for the brand and a linkage to Kids and is loved by Kids much

(6) Nielsen Vietnam, Retail Audit, Tonic Food Drink, 2012

So in conclusion, Milo is clearly differentiated with Ovaltine and other liquid milk brands in many factors They are quite good 6Ps elements as well which created high pressure for Ovaltine to conquer this market

2 Indirect Competitors:

Even though not directly competing in Liquid milk market, in Vietnamese consumers’ perception, Milo and Ovaltine are still considered as “Milk” so other players in Liquid Milk are somehow also competitors to Milo & Ovaltine in winning consumers’ choices for healthy beverages

The exciting and fast growing Liquid Milk category is being dominated by 2 big brands Vinamilk, Dutch Lady and welcoming more and more new brands joining such as TH True Milk, Love in Farm

Chart II.2.1 Value Share by brands in Urban and Rural in March 2012

Source: Nielsen Vietnam (2012), Retail Audit