A market study on the instant coffee mixes niche in Ho Chi Minh city, Vietnam

Executive summary This report was written after a market study on the instant coffee mix market niche was carried out in Ho Chi Minh City, Viet Nam by the end of February 1997. The overall objective of this market study was to evaluate the market potential and to determine success factors for our new product, a Nescafe 3 in 1 coffee mix in the niche. Our research efforts were therefore be organized to achieve the following sub-objectives: To get a feedback on the product perception; To get a feedback on the awareness and popularity; To estimate the market consumption volume; To find out where the product sales volume would come from: cannibalizing the firm’s existing products/brands; the competing products; or growing the market; To determine how to best position the product to enhance trial purchase; To determine what the price points and the acceptable price range are to gain maximum sales volume. We employed a phase approach to manage this study project. The first phase enabled us to obtain certain qualitative findings about the market through moderating a couple of focus groups. In the second phase, we obtained quantitative findings through carrying out two surveys with the consumers of the product field and the distribution channel members. Sample elements were chosen by a systematic approach for wholesalers, retailers and households in Ho Chi Minh City. Blind study is a key principle for this market research where people were not aware that we were conducting research on Nescafe 3 in 1 coffee mix. Besides, all relevant secondary information have continuously been gathered to build up background understanding of the market, especially in the first phase of the project, and to frame the whole picture of the market. With an estimated market consumption volume of 280,000 48-sachet bags per month, instant coffee mix is still a new product concept in the consumers’ perception. There are currently 8 brands on the market, of which Vinacafe, Mac Coffee, Indocafe and Super Coffee are in the four top popular brands. Nescafe Deluxe, Parrigold, Goldroast and OWL gain a very modest level of awareness in the mind of the consumers and they are obviously not popular at all. To launch a Nescafe instant mix brand, one of the first things the company must do in this introduction phase of the product life cycle is to build up the product and brand awareness. Strong awareness of the brand is really an important lever to boost up trial purchase, especially to compete against the leading brand Vinacafe. At the present time, cannibalizing is not a crucial problem for launching Nescafe 3 in 1. The consumer usage patterns prove that they drink instant coffee mixes in addition to the regular coffee they drink, so they drink more. Thus, the estimated sales volume would likely come from growing the market rather than from cannibalizing the company’s existing instant coffee products. In the eyes of the consumers, the 4 most important features of an instant coffee mix are aroma, taste, natural coffee essence and convenience (quick and easy to prepare). These features are the key dimensions which marketers must consider in defining their product positioning strategy. The company’s brand has relative advantage as it might appeal the consumers that “it is a natural taste”. On the side of promotion, we think that a pull strategy is probably more appropriate than a push strategy in the current market situation. The company’s marketing activities should be concentrated in consumer promotion rather than in trade promotion. This suggestion is based on the research results for the channel member attitudes toward brand carry and the consumer attitudes toward brand choice. The trade survey shows that nearly 60% of the channel members are likely to carry brands if they have demonstrated demand. Most of them seem to be promotion insensitive, too. The survey data prove that customers are the most important source of knowledge to the channel members. In addition, clerks or salespersons could well influence the consumers’ decision at stores. About good promotion tools, we find it that the sales promotion tools which rely on price reduction basis are not very effective. Looking at the consumers’ sources of knowledge, we would see that advertising is likely the most effective way to communicate. Consumers also tend to learn about brands through clerk/salesperson and talking with friends. Thus, to maximize the effectiveness of communications, the company may spend much of its efforts in enhancing the positive role of demonstrators and using point-of-purchase displays. Sponsorship activities and word-of-mouth management are substantially needed, too. We suggest that the nature of the promotion should be a product campaign rather than a brand campaign. A product advertising campaign will be sufficient because people tend to know about the brand Nescafe (Classic) well. A point that should be made clear is the difference between instant coffee and instant coffee mix. Awareness of Nescafe Deluxe would come along with the product concept itself. The message of the advertising campaign should serve to tell consumers about the product’s aroma, its natural taste and its convenience in use such as time saving, quick and easy to prepare. Our target audiences are the coffee drinkers who drink coffee at home. In order to support for the pull strategy in communication and promotion, the distribution system must be organized well to be ready in providing goods when the consumers come to demand. It should be noted that most common places to buy coffee products are provision shops and outlets in markets. The key role of these salesmen is to come to appeal the retailers to carry the company’s own brand rather than just come to deliver goods. How to set prices depends on the company pricing objectives. We find out with interest that the consumers would likely accept a relatively wide range of price points. This would allow the company easily adopt price levels to best fit with various pricing objectives. If the company decides to launch its Nescafe Deluxe into this market niche, it would be able to gain some advantages of a market nicher. Firstly, the company has required skills and strong resources to serve the niche in a superior fashion. Secondly, the company can defend itself against the major attacking competitor (Vinacafe) by the customer goodwill it has built up. Furthermore, Nestle has been a very famous name in Vietnam for many years. Thirdly, the niche has growth potential. Launching decision is still depended on two major considerations. The first issue is whether the company product well satisfy the consumer taste. The second issue is whether the financial analysis come to prove that the product sales volume may gain sound profitability.