Principles of Marketing Term Paper on Knorr Pasta

Introducing Knorr PastaTerm Paper on the Launch Strategy of Knorr Pasta

August 15, 2007

Prepared By,

Amyna Nasruddin (2006-01-66-6281)

Arsalan Islam (2006-01-10-6843)

Muhammad Atif Khan (2006-01-19-6746)

Talha Suhail (2006-01-62-6862)

Submitted to,

Umair Zia

Principles of Marketing Term Paper on Knorr Pasta

Table of ContentsTable of Contents.....................................................................................2Background..............................................................................................4

About Knorr..............................................................................................................4Passion for Flavor................................................................................................................4Key Facts.............................................................................................................................4

Product Concept & Proposition.................................................................6About Pasta..............................................................................................................6The Instant Pasta Concept.......................................................................................6

Target Market Analysis.............................................................................7Target Segment Identification (Ideal Consumer Profiling)........................................7

Demographics......................................................................................................................7Psychographics....................................................................................................................7Consumer/Buyer Behavior...................................................................................................7

Market Potential.......................................................................................................8Symbols...............................................................................................................................8Calculating N.......................................................................................................................8Determining Q.....................................................................................................................9Determining P......................................................................................................................9

Competitive Positioning..........................................................................10Brand Values..........................................................................................................10Positioning Statement............................................................................................10

SWOT Analysis.......................................................................................11BCG Matrix.............................................................................................12Financial Forecasts.................................................................................13

During Test Marketing Period.................................................................................13Test Market Details............................................................................................................13Socio Economic Classification............................................................................................13Test Market Potential.........................................................................................................13Assumptions......................................................................................................................13Price...................................................................................................................................13

Post Test Marketing................................................................................................14Revenue and Operating Profit Projections..............................................................15

Basic Parameters...............................................................................................................15Forecasted Sales (Units)....................................................................................................15Forecasted Sales (Rs.).......................................................................................................15Forecasted Operating Profit...............................................................................................15

Pricing Strategy.....................................................................................16Distribution & Sales Strategy..................................................................16Background: Knorr’s Brand Strategy Today.............................................17Communication Campaign.......................................................................18

Campaign Objectives.............................................................................................18Communication Message.......................................................................................18

Advertising Strategy...............................................................................19Electronic Media.....................................................................................................19Press Media............................................................................................................19Out of Home (OOH) Media......................................................................................19

Activation Strategy.................................................................................20Out of Home (OOH) Activation...............................................................................20

School / College / University Activation.............................................................................20Mall Activation...................................................................................................................21Apartment Activation.........................................................................................................21“Planet Knorr” - Point of Purchase (POP) Activation..........................................................21

Page 2 of 27Created On: August 12, 2007 Last Saved On: December 15, 2007


Leisure Activation...................................................................................................22Surprise Pasta @ Cineplex.................................................................................................22Canteen/Cafeteria Branding..............................................................................................22Branded Mobile Vans.........................................................................................................22

Sales Promotions....................................................................................23Consumer Promotion..............................................................................................23

Instant Pasta Recipe Contest.............................................................................................23Trade Promotion.....................................................................................................23

Budgets......................................................................................................................24



BackgroundThis report forms the launch plan for Knorr Instant Pasta in the Pakistani urban market.

The launch plan has been constructed as an academic project for the course titled “Principles of Marketing.” The plan contains our views on the overall product concept and proposition, the product’s target market, positioning, communication, distribution, pricing, and a broad based business model that outlines projected financials subsequent to the launch of the said product.

About KnorrKnorr believes in the power of the cooking woman. Cooking is more than just transforming raw ingredients into a dish. It is the creation of flavor into food, which sparks delight into everyday meals. With the power of cooking in their hands, women create relationships and strengthen bonds. This conviction lies at the heart of Knorr's success - it is Unilever's no. 1 brand.

Passion for FlavorA passion for good food goes right back to Knorr's earliest days. The business was formed in 1838, when founder Carl Heinrich Knorr pioneered experiments in drying seasonings and vegetables to preserve their flavour and nutritional value. Since then Knorr has become an international brand offering a wide range of bouillons, soups, seasonings, and other cooking aids that is every cooking woman’s kitchen partner.

Soup is at the heart of good food and good nutrition - and the heart of Knorr. Soup naturally enjoys a healthy nutritional profile, can help consumers increase their daily consumption of vegetables and will help them look good, feel good and keep fit.

It is well known, for instance, that people who eat more soup tend to have:

A lower Body Mass Index

Lower fat intake

Lower energy intake per day

Better cholesterol values

Better nutritionally balanced breakfasts, lunches and dinners

Soup is a nourishing dish offering an almost primitive comfort. That is why Knorr will continue to create delicious soups, based on its long experience of producing soups of all kinds and flavors.

Key FactsKnorr is a trusted and popular brand, recognized and appreciated all around the world:

It's Unilever's no. 1 brand, with annual sales of more than €3 billion.

Knorr products are currently sold in more than 80 countries and it is growing fast beyond its European heartland, particularly in Latin America, Africa, the Middle East and Asia.



The Knorr logo contains the original signature of Carl Heinrich Knorr, the founder of the company.



Product Concept & Proposition

About PastaA 1/2 cup serving of cooked pasta (spaghetti) contains a mere 99 calories, less than half a gram of fat, and less than 5 milligrams of sodium.1

Pasta is high in complex carbohydrates, which helps give us energy. Instead of a quick burst of energy, complex carbohydrates provide a "time release" of energy. Athletes who take advantage of "carbo-loading" eat complex carbohydrates to save up the energy in their body. The carbohydrates become glucose stored in the muscles. The glucose energy is then released when needed during long, tiring exercise, like long-distance running or biking.

Pasta comes in many different shapes and sizes. There are simple string-shaped pasta like spaghetti and vermicelli, ribbon-shaped ones like fettuccine and linguine, short tubes like elbow macaroni and penne, decorative fancy shapes like farfalle and rotelle, large sheets like lasagna, and hollow pasta stuffed with filling, like ravioli, manicotti, and tortellini.

The Instant Pasta ConceptToday's consumer has redefined traditional eating. This "on-the-go" generation has created a demand for nutritional pasta that is quick to prepare and portable.

In recent years, research indicates that young urban Pakistanis have continued to find lesser and lesser time to actually “cook” the food they eat, while its demand for tasty and healthy food that can be conveniently prepared at home continues to grow.

Therefore, we would like to introduce the concept of “Instant Pasta” in order to capitalize on this market dynamic. The concept can be described as follows:

[Knorr] Instant Pasta is an alternative and faster way to make great tasting pasta in half the time taken to make it using traditional recipes.

[Knorr] Instant Pasta comes in a variety of flavors, shapes and packaging.

It is very simple to make and the preparation time is very low.

1 Source: USDA Handbook 8-20



Target Market Analysis

Target Segment Identification (Ideal Consumer Profiling)After careful analysis of the market as well as consultation with the Knorr brand team, we have identified the following market segment to be targeted as ideal consumers for Knorr Pasta:

DemographicsBuyer Consumer

Density Urban [Same]

Age 30 – 35 8 – 15

Gender Female Male/Female

Family Size 4+

Lifecycle Stage Married with children Kids/Early Teens

Minimum Household Income

Rs.25,000/- N/A

Education Graduate Primary/Secondary School

Occupation Housewife/Working Woman

Students

PsychographicsBuyer Consumer

Social Class SEC A1, A2 or B

(Middle, Upper Middle, Lower Upper and Upper Upper Classes)

[Same]

Lifestyle Believers Achievers

Personality Ambitious, trendy Extrovert, confident

Consumer/Buyer Behavior2

Consumption/

PurchaseBuyer Consumer

Occasions Most commonly bought during daily/weekly groceries by the housewife or the chief wage earner.

School lunch breaks, evening/general snacks, school night dinners (especially when the main

2 Source: Knorr Brand Team, Unilever Pakistan



course is not liked), alternative to lunch.

Benefits Sought Good health and great taste in the food that can be prepared quickly and conveniently which her children would readily eat and thus facilitate her in raising them to the best of her abilities.

Great tasting alternative to already available/unavailable food in the house.

Status Regular Instant Noodles Buyer

Regular Instant Noodles Consumer

Average Usage Rate(s)

6 packs a week 3 packs a week

Loyalty Medium Strong

Attitude Low Involvement, Positive, Habitual

Habitual, Enthusiastic

Market Potential

Symbols1. TMSD: Total Market Segment Demand.

2. N: Number of Buyers in the Market Segment.

3. Q: Quantity purchased by an Average Buyer per Week.

4. P: Price of an Average Unit.

Where,

TMSD = N X Q X P

Calculating N The total population of Pakistan is 160 million, according to unofficial estimates. 3

The average household size is 5 in the target market segment identified above.Error: Reference source not found

Hence, there are a maximum of 32 million households in Pakistan, (assuming that the average household size stays constant across various geographies in the country.)

According to human development index (HDI) statistics provided by UN, 15% of Pakistani population is below the poverty line i.e. in absolute poverty.

Hence, (100% - 15%) x 32 million yields 27.2 million households across Pakistan

The urban and rural split in the country’s population is 35%:65%Error: Referencesource not found

3 Source: Economic Survey of Pakistan, Chapter on Population



Hence, 35% x 27.2 million yields 9.52 million urban households or 9.52 million urban housewives

Determining Q Based upon the buyer and consumer behavior mentioned above, the average units bought per week per buyer is 6.

Determining PKnorr Pasta would be sold at the price at Rs.15/- per unit.

The total market segment demand per week i.e. market potential per week is as follows:

TSMD = N x Q x P

= 9.52 x 6 x 15

= Rs.856.8 million

Note: According to estimates received from Unilever, Knorr Noodles currently has 30% share of this potential market.



Competitive PositioningAt Knorr, we want people to enjoy good food, any day, any time. This is why we would like to functionally describe Knorr Instant Pasta as follows:

“Knorr Instant Pasta is a ready to make, healthy and tasty meal specifically developed for children and teenagers. It is quick and convenient to prepare and comes in a variety of flavors.”

Brand ValuesWe intend to communicate what Knorr Instant Pasta should mean to our profiled ideal buyers (i.e. housewives within the targeted market segment) and consumers. It is much more than merely an instant meal. It is a passport to world cuisine, adding new ideas and new twists to old favorites. The challenge is to make our products the healthy choice for consumers without compromising taste, convenience and affordability.

Knorr’s value statement is as follows:

“Great food is exhilarating. It elevates us out of the everyday. No matter what your background or cooking skills, we believe that everyone should be able to create an incredible meal without having to spend hours in the kitchen. That's why we've taken some of the world's greatest pastas and put them right in your home - inspired by different recipes that stimulate the senses.”

Knorr believes that good food matters. It adds untold pleasure to our lives. And everyday meals can be just as magical as special occasions.

Food is not just fuel, it really is the glue of life.

Positioning StatementBased upon the above, Knorr Instant Pasta will be positioned in our target market as follows:

“A food solution that elevates you out of everyday life and provides you the exciting ability to create an incredibly tasty meal without any hassles and thus ensure your family’s good health while remaining within your budget.”



SWOT AnalysisStrengths Weaknesses

High Brand Awareness Levels (Recall)

Association with quality, taste, convenience and innovation

Strong brand heritage.

Expanding distribution network.

Wider variety of taste offered to the consumers.

Health consciousness on the rise in consumers.

Low Brand Salience Levels (Consumers are not really aware of the brand’s benefits, despite reasonably high recall)

Limited Distribution

Offering suitable for urban markets only

Opportunities Threats

(Net) disposable income has increased over the past few years, thus increasing the consumers’ purchasing power.

Awareness of healthy, hygienic and conveniently packaged food is on the rise.

Consumer exposure to foreign products has also increased.

Influx of other foreign brands in the same category can give rise to sterner competition

Frozen foods can curtail the sales.



BCG Matrix



Financial ForecastsDetailed financial forecasts are enclosed in the attached annexure. These forecast have been made based upon the information provided below

During Test Marketing Period

Test Market DetailsTest Market Karachi

Activity Duration 6 Months

Total Test Market Population 16,000,000

Average House Hold Size 5

Total House Holds 3,200,000

Socio Economic ClassificationSEC %age of Population

A 1 2%

A 2 3%

B 15%

C 20%

D 35%

E 25%

Test Market Potential Potential (Targeted) House Holds: 640,000

AssumptionsTrial Purchase Rate 20%

Repeat Purchase Rate 50%

Repeat Purchase Frequency Weekly

PricePrice per Package (PKR) 15.00



Post Test Marketing Once the test marketing stage is over, the average monthly volume for Karachi will be taken as benchmark and the following volume split is expected across the country.

City Volume %age

Karachi 50%

Lahore30%

Islamabad

Faisalabad20%

Others



Revenue and Operating Profit Projections

Basic ParametersAvg. Monthly Vol. (Units) 981,333

Annual Sales Increase 10%

Operating Profit 40%

Forecasted Sales (Units)

Period KarachiLahore &

IslamabadFaisalabad &

Others Total

Year 1

Test Marketing 5,888,000 - -

17,664,000 Post Test Marketing 5,888,000 3,532,800 2,355,20

0

Year 2 Post Test Marketing 12,953,600 3,886,080 2,590,72

0 19,430,400

Year 3 Post Test Marketing 14,248,960 4,274,688 2,849,79

2 21,373,440

Forecasted Sales (Rs.)

Period KarachiLahore &

IslamabadFaisalabad &

Others Total

Year 1

Test Marketing 70,656,000 - -

211,968,001 Post Test Marketing 70,656,000 42,393,600 28,262,400

Year 2 Post Test Marketing 155,443,200 46,632,960 31,088,640 233,164,801

Year 3 Post Test Marketing 170,987,520 51,296,256 34,197,504 256,481,281

Forecasted Operating ProfitPeriod Operating Profit (Rs.)

Year 1 84,787,200/-

Year 2 93,265,920/-

Year 3 102,592,512/-



Pricing StrategyKnorr Instant Pasta will be priced along the corporate policy of having sustainable and premium profit margins. The average operating margin for all Knorr products sold in Pakistan is 40%.

Knorr Instant Pasta will be sold in a single serving pack. Assuming that the Overall Cost of 1 Pack Sold is Rs.10/- we would price Knorr Instant Pasta at Rs.15/- + GST per pack.

Customers usually have a reference price in their mind for a particular product and therefore they might compare the price of knorr instant pasta with the price of knorr noodles. Therefore we have priced it for Rs.15 as in knorr instant pasta we have kept a pasta sauce rather than a powder which makes it different from the knorr noodles and also the cost production increases.

Distribution & Sales StrategyKnorr Instant Pasta will be distributed in the market using standard distribution mechanics for all existing Knorr products.

Distribution is carried out as follows:

1. The exclusive distributor for Knorr buys from Unilever and sells it to various whole sellers in the target market cities. Since these are high volume sales, per unit margins are relatively low.

2. These whole sellers then sell to retailers at a higher margin but lower volumes.

3. Retailers then sell to consumers.

Along with the abovementioned, the Sales Force for Knorr is structured to facilitate the entire process. The structure is as follows:

Position Role

Territory Sales Officer Revenue Target Driven

Responsible for a location/area within the targeted city

Liaison with retailers

Ensuring product placement, availability and merchandizing at POP/POS

Liaison between the retailer and whole seller/distributor

Area Sale Manager Responsible for a cluster of territories

Managing various territories

Personnel Management

Conflict Management & Problem Resolution

Regional Sales Manager Responsible for a collection of areas usually comprising of more than one city.



National Sales Manager Responsible for the sales within the entire country for the brand.



Background: Knorr’s Brand Strategy Today• Relatively efficient Use of ATL Media:

– Electronic (min 45 sec TVC to break into the clutter)

– Radio

– Ads in selected magazines and

– Occasionally in Newspaper

• Merchandizing activities through:

– Product placement at Eye Level

– Strategically designed POS material with particular emphasis on in store branding material particularly buntings

• Store Converter Activity:

– Trial are generated by placing branded Kiosk at outside the selected superstores and shopping malls

• Trade Activities:

– Ensure that Competitive margins are offered to trade in order to retain their interest in the brand

– Also to maintain maximum trade barriers for new rivals



Communication Campaign

Campaign Objectives• Create a strong brand association by means of an emotional theme in

communication highlighting the important role the brand plays in terms of care and health of the family.

• Own a unique position in consumers’ mind through elaborating the functionality of the product and try establishing the position as in the positioning statement.

• Leverage on the brand’s heritage (“Its from Knorr – it’s healthy and gives you happiness because its Premium and unique”)

• Use best practices and techniques for developing greater brand awareness, interest, and trial generation.

• Maintain consistency in visual presentation to establish strong brand recognition.

Communication Message See: Positioning Statement



Advertising StrategyAt the launch phase, emphasis should be placed on BTL marketing activities that will be supported by ATL at the follow-up stage.

Electronic Media A slice of life TVC for 45 seconds will be developed to thematically portray the

positioning statement in a creative and engaging manner.

Subsequently, shorter adaptations of the TVC will be developed.

The TVC will also be adapted into a radio commercial.

Radio will also be used to deliver branded content via content sponsorships

Press Media The electronic media will be adapted visually

The headline will come from the creative idea used for the TVC

The body copy will be formed using the positioning statement and adapting it to the creative idea

The Knorr tagline will be retained as is.

Out of Home (OOH) Media Billboards

POP/POS Material



Activation Strategy

Out of Home (OOH) Activation

School / College / University ActivationVarious leading educational institutions i.e. schools, colleges and universities in major cities will be activated for infusing product awareness as well as generating trial.

Product awareness will be given via a branded kiosk/stall placed inside the cafeteria/near the tuck shop. The kiosk attendant will be responsible to educate potential customers as well as generating interest and desire while inducing trial.

A non exhaustive list of educational institutions where the activation will be conducted is as follows:

Karachi Karachi Grammar School

Beacon House School System

The City School

Foundation Public School

Aga Khan Higher Secondary School

DA Degree College

Baharia College

Institute of Business Management

Institute of Business Administration

FAST NU

Baharia University

SZABIST

Iqra University

Lahore Top 3 Secondary Schools

Aitchison College

Lahore University of Management Science (LUMS)

Lahore School of Economics (LSE)

National College of Arts (NCA)

Islamabad Top 3 Secondary Schools

Top 3 Colleges

Top 3 Universities

Mall ActivationThe activation of educational institutions will be replicated at various shopping malls across the city. Along with awareness and trial objectives, interest in the product’s offering will be enhanced through various competitions, games and prizes.



This activity will be conducted at the following venues:

Karachi Park Towers

Forum

Millennium Mall

Dolmen Mall

Lahore Pace

HKB

Fortress Stadium

M. M. Alam Road

Islamabad Jinnah Market

“Planet Knorr” - Point of Purchase (POP) ActivationPOPs of super stores and super markets will be activated using an idea called “Planet Knorr.” The details are as follows:

A particular segment of the Super Store will be dedicated as Planet Knorr, which would have:

A branded wall to give it a creatively distinct look from its surroundings

A store converter – an educated and pleasant female promoter that will pitch to every (potential) consumer that ventures to that particular area. She will inform them about the product, induce tasting, and persuade for trial purchase by attractive introductory/ discount/special price offering.

Electronic Screens in Super stores that run the TVC for Knorr Instant Pasta.

Floor graphics/Direction stickers at super stores / supermarkets directing to planet Knorr for an attractive offerings.

Attractive POP to be placed at strategic locations of all the major outlets. These would include lamas, shelf talkers and wobblers.



Illustration 1: Planet Knorr

Leisure Activation

Surprise Pasta @ CineplexPotential consumers visiting Universe Cineplex, Karachi will be tapped using the branded kiosk approach. However, the difference here is that there will be no sampling. However, Knorr Instant Pasta will be served in a pre-cooked form on a per serving basis.

Furthermore, an unannounced lucky draw will be conducted at every show’s interval and the winners will receive a free serving of Knorr Instant Pasta.

Canteen/Cafeteria BrandingCafeterias/canteens and tuck shops of selected schools/colleges/universities will be activated via branding using the communication campaign’s visual adaptations. Furthermore, since Knorr Instant Pasta will be served at these venues at subsidized prices, it is likely to generate greater trial and repeat purchase.

Branded Mobile VansDuring the test market stage, branded Vans will be deployed in targeted areas near offices (e.g. II Chundrigar Road, Shahrah-e-Faisal, etc) during lunch hours, near parks (e.g. Nisar Shaheed Park, Hill Park, Sea view, Race Course Park etc) during peak hours, to serve Knorr Pasta at introductory prices.



Sales Promotions

Consumer Promotion

Instant Pasta Recipe ContestPost launch, a press and radio driven consumer promotion will be designed to invite consumers to share their own innovations and customizations to Knorr Instant Pasta Recipes.

Consumers will be asked to share their recipe for a variation of Knorr Instant Pasta. The recipe will be sent along with 2 used packages of Knorr Instant Pasta and a copy of the consumer’s CNIC.

The first prize would be Rs.100,000/- along with recognition in the form of the recipe being printed on the packaging along with the customer’s photo (if they so desire).

Trade PromotionRetailers will be provided a lot of branding and merchandizing material including customized dispensers.

Also, tiered trade discounts will be given to retailers to increase their off take vis-à-vis Knorr Instant Pasta.

The trade terms will not simply be 2 N net 30. However, a special trade discount structure during the launch period will comprise of:

X N net Y

Where,

X Y

2% 30 days

3% 25 days

4% 20 days

Price ceiling:



Marketing (Communication) BudgetThe launch year marketing budget is as follows:

Knorr Instant PastaLaunch Budget - Marketing Communications

Ceiling 105,984,000

AdvertisingTelevision

Production Cost 10,000,000

Media 40,000,000

Subtotal 50,000,000

Radio

Production Cost 200,000

Media 2,000,000

Subtotal 2,200,000

Newspapers


Average Tariff 350,000

Media 7,000,000

Subtotal 7,365,000

Magazines


Average Tariff 75,000

Media 750,000

Subtotal 840,000

Out of Home

Billboards 20,000,000

Merchandizing 10,000,000

Subtotal 30,000,000

sales promotion



trade promotionRetailers 14719995disc 2% 255146.58Subtotal 14464848.2Ifdisc 4% 588799.8Subtotal 14131195.2

Activationschool/college/university

sales 47250cost of cups and spoons 28350amount given to each institution for putting up a stall 14175Subtotal 61425

mall activationsales 303750cost of cups and spoons 182250cost of putting up a stall 50000Subtotal 536000




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Principles of Marketing Term Paper on Knorr Pasta