Executive Summary

As for this assignment, we have chosen chocolate & confectionery from Nestle, specifically on Nestle Kit Kat. Here, we have research on the current market situation as well on SWOT analysis whereby we have done on the strength, weakness, opportunity and threat of Kit Kat. Furthermore, we have done our own marketing strategy on our chosen brand such as on the product, pricing, promotion and distribution strategies.

Table of Contents
Executive Summary ............................................................................................................ 1 Introduction of Kit Kat........................................................................................................ 3 Current Market Situation .................................................................................................... 6 SWOT Analysis Of Nestle Kit Kat ..................................................................................... 7 Objectives of the Marketing Plan ..................................................................................... 10 Marketing Strategies ......................................................................................................... 13 Pricing Strategy ............................................................................................................. 13 Product Strategy ............................................................................................................ 14 Distribution Strategy ..................................................................................................... 15 Promotion Strategy........................................................................................................ 16 Conclusion and Recommendations ................................................................................... 19 REFERENCES ................................................................................................................. 21 Appendices ........................................................................................................................ 25

Introduction of Kit Kat

The origin of Kit Kat can be traced back to 1935, which a four-finger wafer was launched in UK as Rowntrees Chocolate Crisp (Netnewspublisher.com, 2010). The idea came from one of the Rowntrees employees who felt that Rowntrees should make a chocolate bar that a man could take to work in his pack up (packed lunch) (Netnewspublisher.com, 2010). The name changed to Kit Kat Chocolate Crisp in 1937, before finally becoming Kit Kat in 1949 (Netnewspublisher.com, 2010).

Figure 1: Advertisement of Kit Kat in 1937 (Nestl S.A., n.d.)

Figure 2: Advertisement of Kit Kat in 1950s (Nestl S.A., n.d.) 3

Kit Kat has seen many changes during its first 76 years a temporary move to blue wrapping when the recipe had to change during rationing in the Second World War, the development of a two-finger variant in the 1960s and expansion across Europe in the 1970s (Netnewspublisher.com, 2010). However, for the last 51 years, there has been one constant: the now-classic advertising line, Have a Break, Have a Kit Kat, which appeared in one of the UKs earliest commercial TV advertisements in 1958 (Netnewspublisher.com, 2010).

Figure 3: Kit Kat 75 years full cycle (Anna Rudenko, 2010)

In 1988, Nestl acquired Kit Kat through the purchase of Rowntree's (Nestl S.A., n.d.). This gave Nestl global control over the brand (except in North America), and the past two decades have seen an ever-more hectic pace of brand development in established 4

markets and manufacturing expansion in emerging markets (Netnewspublisher.com, 2010). Throughout the decade Kit Kat has introduced dozens of flavours and line extensions within specific consumer markets. Kit Kat bars contain varying numbers of fingers depending on the market, ranging from the half-finger sized Kit Kat Petit in Japan, to one large finger Kit Kat Chunky, to the three-fingered variants in Arabia, to the twelve-finger family-size bars in Australia and France (Nestl S.A., n.d.). In Ireland, the UK and America Nestl also produce Kit Kat Ice Cream, and in Australia and Malaysia, "Kit Kat Drumsticks" (Nestl S.A., n.d.).

Current Market Situation

In the current market situation of products such as chocolates, there are a few leading brands in the chocolate world. Twix by mars, Hersheys, Galaxy, Kinder Bueno, and time out by Cadburry are a few of Kit Kats main competitors. Despite the heavy competition, Kit Kat remains as one of the UK's best-selling chocolate bars. But recently In both the US and Canada, the Kit Kat is also extremely popular and is one of the top ten candy bar brands. In 2006 (William Grobel), Kit Kat came in at number three for the UKs most valuable confectionery brands whereas Cadbury dairy milk came in at number one and Wrigley extra at number two. Some experts such as William Grobel, marketing director of intangible business states that Kit Kat is a brand with a degree of unrealised potential. According to Brandirectory (n.d.) brand value is considered to be the net present value of the estimated future cash flows attributable to the Brand. Kit Kats brand value as at 31st December 2011 is to drop by $3,279m.

SWOT Analysis Of Nestle Kit Kat

Strengths The main strength of Kit Kat is being owned by Nestle, the worlds largest nutrition and food company and globally successful folio of products and brands. This itself is a huge promotion for Kit Kat that ease the market penetration whereby customer believes that Nestle production itself is high standard of quality product and image. Kit Kat being not only a chocolate but also a wafer gives a different texture of chocolate combination of wafer whereby most people still have it in their favourite list. It was Kit Kat that came up with a chocolate-wafer combination and could not be overtake by its main competitor Cadburys Time Out till date (Anon., 2010). Kit Kat has creative, simple and visible advertising where the slogan Have a Break, Have a Kit Kat created a hype among customers especially children and youngsters which creates high brand awareness. Kit Kat products are easily reachable as it can be found in small grocery stores up to huge hypermarkets. Furthermore, Kit Kat has been one of Nestle best selling products for its high sales and revenue record (Anon., 2010). Revenue generated by Kit Kat is $201.8 million with a unit sale of 202.5 million according to CNBC (Fox, 2011). Weakness In European countries, Kit Kat has expanded vastly but in regions like Asia especially in Malaysia as in small towns and villages, it is still not so recognized. Thus, Kit Kat is lacking on distribution strategy to reach small towns and villages and pricing should be lowered as the citizens here are usually low income earners.

Nowadays, people are becoming more health conscious and avoiding having chocolates. Moreover, Kit Kat does not have any health- conscious chocolate bars that attracts health conscious crowd. In addition, packaging is a silent promoter for a brand and Kit Kat has not change its packaging style for some time. Possibility to attract more customers indeed is there if Kit Kat tries changing its packaging style. Opportunities Expanding market growth in emerging countries such as Russia, Brazil, India and China would be an excellent strategy to improve their revenue. Company can opt to establish a company in China And India for cheap labor. Kit Kat came up with The Cocoa Plan where Kit Kat enhancing the product quality and the production of cocoa by itself which can help to reduce production cost. Growth of technology, helps Kit Kat continuously improve their product into a quality and environmentally friendly (Aboumerhi, 2012). Adding on, chocolate confectionery market is growing as well the sales whereby it is expected to increase from $83.2 billion in 2010 to $98.3 billion in 2016 (Aboumerhi, 2012). Threat Due to rising costs of raw materials, fuels, dairy cost and the hiking price of packaging and manufacturing result in a higher price of Kit Kat product. This shifts the price burden towards the consumers by the company, whereby shrinking packages which is unnoticeable, so consumers pays same price for less product (Fifield, 2007).

Contamination to the product will cost in recalling of the brand. This is caused by the weather or irresponsible attitude of workers and quality check. For instance in 2009 there was a outbreak of virus e-coli in the Toll House brand cookie dough which made it to recalled (Anon., 2010). Lastly, there are huge competition (Fifield, 2007) with Mars, Cadbury and Twix in market where Kit Kat has to compete to remain an established brand and favourite chocolate-wafer.

Objectives of the Marketing Plan

Marketing Objective Marketing objective is an organization statement of what is to be accomplished/achieve through marketing activities. Before the details of a marketing plan can be developed, goals and objectives for plan must be stated. Without objectives there is no basis for measuring the success of marketing plan activities. (Charles W. Lamb, 2009). Kit Kat is stated as Have Break, Have Kit Kat Kit Kat markets its product in two different formats. Which are as follow; 1. Two finger format 2. Four finger format These formats are promoted and marketed differently in order to cover more than one market segment, and also to play with the minds of consumer not to be able to tell the difference. Both formats cover the same aspects of objectives which are needed to conform to the commonly used SMART criteria. Kit Kat SMART objectives can be express as follows; S-Specific Kit Kat has to adopt to obtain maximum customer satisfaction. Where Kit Kat is trying to pursuit and coup up with different types of people in the world based on their culture and eating habits. They try to come up with different types of flavors and size just to satisfy customer needs in order to survive in the business market. For example in 10

France Kit Kat produce its products in form of Balls, In Singapore, youll find Bites and In the Arabian region, theres a 3-finger version and so many others according geographical regions globally. M-Measurable The effects of integration will have on the brand globally. For example in the year 1999, Kit Kat Chunky Sell 50 million units (i.e. 2,750 tonnes of product) as soon as the lunch of the product. The company also measures the sales they have achieved per week, per month and per year to get track of the profits they have achieved worldwide and forecast the measurements made that do the consumers admire Kit Kat. This forecast measurement helps them in producing Kit Kat according to the huge demand in the global market. A-Achievable In order Kit Kat to achieve its goal, it must obtain maximum profitability. This is where by increase sales in subsequent years as soon as the launch their products. For example, to achieve 90% distribution in all sectors of the confectionery market within the first four weeks after the launch. R-Relevant The company must know who their competitors are in order to figure out what new ideas they are coming up with in order to sustain and succeed by generating innovative and unique promotions and ideas for maximum customer attraction. This information is relevant to their mission statement.

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T-Timed line Follow future recommendations to sustain in the business industry. This will help Kit Kat to stay ahead of the competition from rival chocolate confectionaries companies e.g. Cadburys, Mars and etc. Nestle has timely goals to manufacture Kit Kat. The company confirms to produce specific amount of Kit Kats to be delivered in the market in a given time period.

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Marketing Strategies
Pricing Strategy
In order to sustain a strong brand image in a competitive market is level of flexibility in pricing strategy. Kit Kat has remained outstandingly stable over the last sixty years. Kit Kats pricing increases as sizes varies, the bigger the size, the higher the price. Kit Kat able to reduce its production cost of buying cocoa from another company by investing in their own production The Cocoa Plan, which help to maintain the price of the product in the market. Food products such as chocolates, ice-cream and snacks are introduce in a low initial entry price lower than intended established price to attract customers. Kit Kat at the start could introduce a lower price for its new upcoming flavors. This is can be used for seeking to enter marketplace and develop a niche for themselves which is known as penetration pricing (Groucutt, 2005). Furthermore, Kit Kat has to be a competitor- based pricing (Groucutt, 2005), whereby there is wide choices for customers to choose the cheapest and best customer service. However, customers would prefer to a reasonable price in market, thus Kit Kat will be a pricetaker as it has to accept the ongoing market price as determined by demand and supply. This will be Kit Kat following the price of Cadbury, Twix, Mars and other chocolate brands. So when price is not a competitive advantage, business needs to have other ways to attract customers such as discount prices, free gifts or better availability.

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Kit Kat company can also apply promotional pricing (Groucutt, 2005), during festivity season as Malaysia is rich with different races and celebration whereby they can change the packaging color to green during the Eid celebration and others. Kit Kat can also offer discount pricing in certain time of the year to attract customers.

Product Strategy
In todays world, creativity and innovation is the key to success. Market research has shown that consumers prefer special edition to be available for limited periods only. Thus, Nestl could release some special edition once a while as it will be a good way of injecting new life into the product life cycle of Kit Kat. In term of appearance, Nestl can release different edition for different holidays and festivals, with some customised words related to the holiday or festival. For instance, Nestl could introduces 4 fingered Kit Kat during Valentines Day, with each customised words such as Kiss me, Hug me, Love me, Hear me, to replace the name Kit Kat on each bar. In term of quality, Nestl could create better and healthier chocolate crisp which is low fat, low calories or low sugar. Since nowadays people have become increasingly health-conscious, Nestl could reduce the sugar level in the ingredients of Kit Kat or come up with new recipe such as high fiber Kit Kat or Kit Kat with collagen. In term of flavour, Nestl can come up with variations that reflect the local produce and palate of each region, and create more unique flavours. For instance, Cameron Highlands is well-known with its tea plantation, so Boh tea-flavored Kit Kats

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could be introduced. Nestl can also create durian-flavored dark chocolate Kit Kats as Pahang is famous for its durians. In term of packaging, Nestl could add on some unique features of the country or local culture to the packing design of Kit Kat. For example, kangaroo picture on Australia package, whereas panda pictures on China package. As the result, the limited edition Kit Kat will turn into coveted souvenirs for domestic travelers, and each flavour will only sell in the region for which it was created. As a nutshell, many of the special flavours can only be introduced for a limited time to entice consumers to try something new while they can, then Nestl have to quickly take off from the market. Excess inventory can be collected and use to create the mixed bags of consumer favorites and exciting new flavours as high-value gift bags, and sell during the major gift-giving periods, such as New Year, Fathers Day, Mothers Day and Christmas.

Distribution Strategy
Distribution strategy is referred as a plan created by the management of a manufacturing business that specifies how the firm intends to transfer its products to intermediaries, retailers and end consumers. (Business dictionary, 2012) For Kit Kat to control, vary its marketing of its product and to influence huge number of customers to buy the product they must provide it at the right place and at the right time. For Kit Kat to be successful in distribution of its product and marketing in the future it has to come up with a new plan and idea which will penetrate and be stable in 15

the change of business environment and to survive in a huge business market where theyre a lot of competitors. For example they can offer their inventory of its product through both online and in-store means, satisfying customers of different needs and shopping styles. Other than that, Kit Kat can offer their customers a place to buy their products as well as offering to deliver the products right to their doors. In the end, both Kit Kat and its customers will approach to this situation which will provide the most profitable situation. Furthermore Kit Kat can expand its product ranging from Kit Kat Snacking range, Kit Kat Hunger range and any name that come up. This will help Kit Kat to show that they care and are willing to change due to the changing of business environment and also the change of technology in order to be up to date and more the less to survive and also to maintain its current position in marketing by distribution.

Promotion Strategy
For Kit Kat to maintain as one of UK's best-selling chocolate bars, they need to have an outstanding promotion strategy to maintain as the best. One of the ways they can do that is by advertising. Advertising plays an important role in promoting the product as advertising is a paid form of communication, delivered through media from an identifiable source, designed to persuade the receiver to take some action, now or in the future (Grewal and Levy, 2008). Kit Kat can advertise with creative and innovative advertisements such as television advertisements, magazines and newspapers, posters, outdoor advertisements

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such as the Kit Kat bench, and of course advertisements through the internet like social networks to capture the hearts of consumers once more. By doing so, Kit Kat may boost sales as in the past, Kit Kat has generated remarkable success from net advertisement as their $1million campaign achieved results Nestle would normally have expected from a television campaign, but at a quarter of the cost (Lara Sinclair, 2009).This gives Kit Kat a better chance to generate impressive profit. Apart from that, product placement is also one of the promotion strategies that can be used for Kit Kat. Product placement is a form of non-personal selling in which the marketer pays a motion picture or television program owner a fee to display his or her product prominently in the film or show (Grewal and Levy, 2008). Famous celebrities can promote Kit Kat by having it appear or consuming it in their film or show. By doing so, this can ignite an interest in Kit Kat as Kit Kats potential customers who ido lises the celebrity would follow every step of the celebrity and consume the product. For example, Kit Kat is one of the featured brands that has appeared in 2 films which is exit wounds in 2001 and sex and the city in 2008 (Brand Channel, n.d). Furthermore, Kit Kat can adopt sales promotion as part of their strategies. There are many types of sales promotion that can be used. One of the sales promotion strategies are coupons which is a certificate with a stated price reduction of the item (Grewal and Levy, 2008). Deals such as feature price and buy one get one free is another sales promotion used by many firms (Grewal and Levy, 2008). Moreover, sampling offers potential customers the opportunity to try a product before they make a buying decision. This is one of the most costly sales promotion tools but also one of the most effective (Grewal and Levy, 2008). Besides that, point-of-purchase displays are merchandise 17

displays located at the point of purchase, such as the checkout counter in a grocery store (Grewal and Levy, 2008).

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Conclusion and Recommendations

In conclusion, Kit Kat is one of the most popular chocolates all around the world, owe to its marketing strategy all over the years. Its trademark red and white colours and the distinct Kit Kat logo makes it one of the most recognized brands ever. The marketing strategies of Kit Kat chocolate were good enough, but like any other product there is always room for improvement. Kit Kat can also improve its competitive advantage by adopting new and innovative strategies. No matter how effective the promotion and packaging, a firm will find it difficult to market a product which fails to satisfy a consumer need. Since nowadays people are concern about their health, Nestl could create Kit Kat which is low fat, low calories or low sugar to target on the health-conscious consumers. Besides, it can also create higher value product such as high fiber Kit Kat or Kit Kat with collagen to increase its sales. To increase more loyal Kit Kat consumers, it is time for Kit Kat to change its packet design. It can be turned into limited edition or coveted souvenirs by adding some unique and attractive features to the packing design, so that people will be attracted and buy it as their personal collection just because it is a limited edition. Although there are numerous weakness and threats awaiting Nestl Kit Kat to neutralize and overcome, the brand has been performing excellently during its 76 years of development. The companys competitive strategy has made a good impact on Kit Kat in establishing a strong and positive brand. Kit Kat has a lot of strengths and opportunities to build upon it to face future challenges. It can be confidently anticipated that Nestl Kit

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Kat will keep demonstrating and improving its position in chocolate and confectionery industry. 3200 words

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Anna Rudenko, 2010, Kit Kat Turns 75 [online], Popsop Ltd., Available from http://popsop.com/39282/ [Accessed 18th June 2012]

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Anon, 2010. SWOT Analysis Nestle. [online] Marketing research. Available at: <http://www.marketing--research.com/marketing/swot-analysis-nestl%C3%A9> [Accessed 21 June 2012].

Brandirectory, n.d., Brand Value Definition [online] Available at: http://www.brandchannel.com/brandcameo_brands.asp?pageno=12&brand_year_az_all= brand_year_az_all [Accessed on 24 June 2012].

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Fox, M., 2011. Americas Favorite Chocolates. [online], CNBC. Available at: <http://shine.yahoo.com/shine-food/americas-favorite-chocolates-2514741.html > [Accessed 20 June 2012].

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Netnewspublisher.com, 2010, Iconic Brand Kit Kat Celebrating Its 75th Year [online], Net News Publisher, Available from http://www.netnewspublisher.com/iconic-brand-kitkat-celebrating-its-75th-year/ [Accessed 18th June 2012]

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Appendices
Work Break down structure

Members

Work Assigned CURRENT MARKET SITUATION PROMOTION STRATEGIES

Yeoh Sook Yen

Grijha Selvakumaran

SWOT ANALYSIS PRICING STRATGIES

Yeoh Shin Yee

INTRODUCTION PRODUCT STRATEGIES CONCLUSION AND RECOMMENDATIONS

Ally Humud Saleh

MARKETING OBJECTIVES (SMART) DISTRIBUTION STRATEGIES

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