1 MARKETING STRATEGY FOR KIDO’S ICE CREAM Writen by Asso Prof Dr Le Thi My Linh 1 Introduction KIDO foods (KIDO foods) has marked an important milestone in the history of Vietnams ice cream industry. 1 MARKETING STRATEGY FOR KIDO’S ICE CREAM Writen by Asso Prof Dr Le Thi My Linh 1 Introduction KIDO foods (KIDO foods) has marked an important milestone in the history of Vietnams ice cream industry.1 MARKETING STRATEGY FOR KIDO’S ICE CREAM Writen by Asso Prof Dr Le Thi My Linh 1 Introduction KIDO foods (KIDO foods) has marked an important milestone in the history of Vietnams ice cream industry.1 MARKETING STRATEGY FOR KIDO’S ICE CREAM Writen by Asso Prof Dr Le Thi My Linh 1 Introduction KIDO foods (KIDO foods) has marked an important milestone in the history of Vietnams ice cream industry.
MARKETING STRATEGY FOR KIDO’S ICE CREAM Writen by Asso.Prof Dr Le Thi My Linh Introduction KIDO foods (KIDO foods) has marked an important milestone in the history of Vietnam's ice cream industry with the fact that a domestic company bought the manufacturing and production line of a multinational company Wall's from Unilever in 2003 KIDO was established and quickly developed to become one of the leading companies in the ice cream market in Vietnam with two famous ice cream brands including Merino and Celano In 2019 it accounts for 41.4% market share (Euromonitor, 2019) KDF(Kido Frozen Food, one company of KIDO group) has chain factories system located from the North to the South being considered the most modern in Asia With its products and distribution systems, KDF is deemed the “King of the frozon food industry” in Vietnam (kidofoods.vn) According to KDF's 2019 financial statements, KDF's revenue from sales and service provision and profit in 2019 reached VND 1,432 billion and VND 143 billion, respectively KDF's revenue accounted for 19.5% of total revenue, but profit after tax accounts for 71.5% of total interest of Kido In other words, the gross profit margin that ice cream, yogurt, and frozen products dominated in comparison to other segments of Kido KDF's gross profit margin is 60%, while that of Kido is only 23.9% in 2019 (Ngoc Lam, 2020) Recently, KIDO has informed a new development strategy in June 2020 KIDO Group (KDC) and Vietnam Dairy Products Joint Stock Company (VNM) signed a memorandum of understanding regarding the establishment of a joint venture in the beverage and ice cream sector, in which VNM's capital contribution is 51%, while KDC is 49% VNM is the leading brand in the dairy industry, while KDC is currently the leading ice cream brand in Vietnam This combination of two domestic companies is aiming to build the brand of Vietnamese drinking water - Vibev The joint venture of the two sides is the production and trading of beverages, (including healthy drinks, tea, milk tea excluding carbonated drinks), production and trading of all kinds ice cream and frozen foods (Tri Tuc, 2020) Nguyen Van Phong*- probationary staff of Marketing department of KDF will finish his probation (trial job) in two weeks By that time, he has to submit a marketing strategy for KDF’s ice cream to be selected as a full-time staff His outline report includes: Marketing environment analysis (external environment, internal environment- included current marketing mix strategy, target market, marketing mix strategy) He wonders if this structure is fine and reads again some parts that he has written as below Ice cream Market share in Vietnam The competition in ice cream and frozen dessert market in Vietnam become more intense because of high growth rate and big potential market of young population Over the past time, the ice cream market has received more and more foreign brands investing in Vietnam Big international brands have entered the market and increased brand awareness through the continuous expansion of store chains For example, Baskin Robbins has reached nearly 50 stores, Bud's ice cream chain has opened 12 stores Similarly, Fanny ice cream has 11 stores across the country, Snowee stores, Haagen Dazs stores Most international brands focus on high-end product segment, serving mainly at stores with eye-catching and delicate design to increase the experience and emotions for customers, so the price is quite high (Dang Lam, 2017) Currently, there are many ice cream brands competing in the market: Kido, Unilever, Vinamilk, THtruemilk, Trang Tien, buds, Baskin Robbins, Bach Dang, Haagen Dazs,ect The market share of each rival is as below: ICE CREAM AND FROZEN DESSERTS MARKET SHARE IN VIETNAM IN 2019 (%) Others, 27.6 KIDO Foods, 41.4 Bach Dang, 1.2 Thuy Ta, 1.4 Phan Nam Monterosa, 1.9 Trang Tien, 4.1 Fanny, 4.7 Vinamilk, 8.8 Unilever, 8.9 Source: Euromonitor, 2019 in Nha An, 2019 Current Marketing mix strategy of KDF 3.1 Product After acquiring Wall of Unilever in 2003, KDF quickly realized Wall's failure when the taste and price did not match the Vietnamese demands KDF implemented a series of product and price strategies First of all, they changed the flavor of products in the direction of localization to suit the taste of domestic consumers Next, the company priced the product in line with the income of the majority of consumers (Dang Lam, 2017) Kido has two main brands of ice cream: Merino- regular ice cream and Celano - premium ice cream with a variety of products, with total of more than 200 products (Kdf.vn, 2020) Merino is planned to become the largest and most popular ice cream brand in Vietnam Merino is an ice cream label focusing on the traditional flavors with the main products of ice cream sticks, glass ice cream , ice cream tub KDF also clearly categorizes products suitable for each age group, such as Cutie Bear ice cream suitable for children because of its amusing shape, ice cream flavors such as lemon ice cream, taro ice cream, etc are suitable for most of customers Celano is considered the leading ice cream market share in the premium ice cream line Celano imported ingredients with international flavors: Vanilla, Chocolate, Pistachio Celano ice cream has main categories: ice cream (Passion), cake ice cream (Cone Classic, Cone Extra), ice cream Tub (Celano Tub), ice cream cup (Celano cup) and Ice cream (Celano Sweetie) that is creative and trendy with flavors: fish cake, ice cream, bubble tea, etc ( KIDO, 2020) Celano always strives to create trendy and unique ice cream lines to attract potential young customers Each of Celano's flavor has its own stories, which means that the ice cream flavours customers choose will reflect their personality With the strategy of product diversification, KIDO is capable of catching the trends, which means KIDO carefully researches and creates new products with the right flavor, image and price, such as Merino: watermelon cream, pearl milk tea ice cream, Thai tea ice cream, or Celano black sugar bubble tea milk tea, fish cake Celano, ect which are popular with young people KIDO’s products are always manufactured to meet standards such as ISO 14001: 2004; ISO 22000: 2005; etc Therefore, Kido products always ensure food safety and high quality (kdc.vn, 2020) 3.2 Price strategy Instead of calculating the cost of a product to set a selling price, KDF determines a price that is affordable to consumers first With an affordable price, wide segment, and large market share, this creates favourable conditions for KDF to grow strongly in sales It can be seen that although MERINO products are priced at very narrow margins to suit a large number of consumers, they contribute up to 55% of profits for KDF (Minh Son, 2017) - Merino: price range from VND 6,000 to 10,000 This price is affordable for most of families if their children want to buy an ice cream - Celano: price range from VND 15,000 - 20,000, with high quality ice cream, Celano is attracting young customers, officers from 20-40 years old, middle and high income customer in big cities Table: Segmentation by prices Price Brand Product Premium (~18.000 VND) Nearpremium (~15.000 VND) Common (~10.000VND) Affordable (~7.000VND) (Source: Kdc.vn) 3.3.Place KDF has the largest distribution system in Vietnam The finished products are delivered from factories to KDF's cold storages across the country, and then delivered to 113 distributors These distributors would directly deliver the products to POS in areas of high demand (urban areas and tier-2 cities) or through sub-distributors in more remote areas Most of KDF’s transportation work is carried out by a fleet of 170 refrigerated trucks owned by either KDF or its distributors while during summer, KDC usually has to outsource some transportations due to capacity constraints (Le Nghia, Dang Phap, 2017) Kido follows the intensive distributions strategy so that consumers can approach Kido’s products very conveniently, they can buy KDF ice cream in 120,000 retail points, 4,600 supermarkets/convenient stores, KDF owns 50,000 cream freezers/cabinets (kdc.vn, 2020) Traditional trade: Products from KDF's factory will be distributed directly to distributors, who will then ship to agents, and assist them in displaying the products and providing ice cream cabinets for retail outlets Enterprises can also distribute products directly to agents in remote areas when the distributors cannot take good care of the market From these agents, products continue to be transferred to retail points (food stores, department stores, convenience stores, and beverage shops) to reach consumers Model trade: The company distributes products directly to major supermarkets across the country, along with direct distribution to industrial parks, hospitals, school canteen, and large amusement parks such as Dam Sen, Suoi Tien, Dai Nam, Vinpearl Land, and restaurant chains Besides, the business also actively sell goods through major trade fairs, helping to increase brand recognition to consumers 3.4 Promotion KIDO use many promotion mix to promote its’ product to customer, their ice cream has 100% brand awareness and 43% Top of mind (Kido, 2020) They focus on Advertising, sale promotion and social media • Advertising: KIDO advertise its ice cream on TV, popular newspaper for young such as: vnexpress.net, zingnews.vn, kênh14.vn, yeah1.com and social networks such as Facebook, YouTube, Instagram, Zalo and their official website Besides, KIDO also uses banners, posters, standees at supermarkets, retail points, buses, magazines, etc Kido foods with the Merino ice cream line has succeeded in building a unique character to represent these brand image products that will be associated with consumers' emotions and take advantage of the power of social media with fictional characters: Ice cream & Bear Merino has used effective tactics to help their fanpage reach a diverse audience In addition, Merino also focuses on utilizingamusing 2D TVCs based on two characters to promote the product By incorporating smart tactics along with prompt updates in marketing trends, it has helped Kido ice cream have very high brand awareness • Social media marketing KIDO found that 90% of users skip advertising on TV, thus, they cut down TV advertising and spend more budget on social media marketing, using product reviews on YouTube or Facebook to accelerate the purchase process of customers KDF frequently writes impressive contents to post on the social media such as Facebook, Zalo, Youtube, …to attract the attention of customers, so their fan page of Merino, Celano, Ice Cream & Bear (Kem Gấu), have hundreds of thousands of followers In order to reach the young customer segment, KIDO uses celebrities as brand ambassadors such as Quang Hai and Bui Tien Dung, or actress Nguyen Lam Thao Tam (Mat Biec film) for new product of Celano milk teacup to boost the sales • Sale promotion Kido applies various sale promotions to encourage consumers to buy their ice cream products For example: buy get free, scratch cards and valuable prizes (carts, bags, Bluetooth speakers, etc.); Merino and Celano co-organized the promotion program "Eat instant ice cream - Win instant gifts" (Moc Tra, 2019) The rule of the game is simple, customers just need to buy Merino or Celano ice cream, and then check the reward on the ice cream cone or ice cream cover Although the promotion method has been available for a long time, it has always been effective and has been a source of excitement for ice cream lovers; the program of “Delicious ice cream- exciting winner” in 2018 when football team of Vietnam U23 win runner-up prize at AFC U23 Championship 2018 • Public Relation Merino and Celano participated in social activities such as sponsoring Nguyen Huu Tho scholarship fund, donating charity houses, sponsoring flood victims, delivery of books, yogurt, ice cream to students, giving school stationery to children, New year's gifts for disabled children and Cham minority’s children, VND bus trip: sponsoring gifts for workers' children ect (Kdf.vn) *) Mr Nguyen Van Phong is disguided name Questions for discussion: Give comment for Mr Phong on his structure of marketing strategy? For example, is it lacking anything that a good marketing strategy should have? Analyse strengths and weaknesses of KDF for ice cream business? Analyse competitive advantage of KDF for ice cream business? What are the USP for ice cream of KDF? Reference: KDF (2019), annual report 2019/Báo Cáo Thường Niên 2019 - Lan Tỏa Vị Đam Mê, Accessed 23 July 2020 by: http://www.kidofoods.vn/Data/Sites/1/media/20200420_kdf_ar-2019.pdf, Đăng Lâm, 2017) Thị trường kem tan chảy theo nhiệt cạnh tranh [online] Accessed 10 July 2020 by link: https://doanhnhanonline.com.vn/thi-truong-kem-tan-chay-theo-nhietcanh-tranh/ Kido group; https://www.kdc.vn/en/gioi-thieu kidohttps://www.kdc.vn/en/nhan-hang/nganh-hang-lanh Le Nghia, Dang Phap, 2017, Kido frozen food (KDF), https://www.vcsc.com.vn/userfiles/others/KDF/KDF-20170508-NR.pdf, accessed Aug, 2020 Minh Son, 2017, Mảng kem đem tỷ đồng ngày cho Kido, accessed on 30/12/2020 by link: https://vnexpress.net/mang-kem-dem-ve-hon-3-ty-dong-moi-ngaycho-kido-3560482.html Nhã An, 2019, Chìa khóa” giúp Kido Foods chiếm lĩnh thị trường kem Việt, accessed on 30/12/2010 by link: https://baodautu.vn/chia-khoa-giup-kido-foods-chiem-linh-thitruong-kem-viet-d110588.html Ngọc Lâm, 2020 Thâu Tóm Kem Wall's Từ Unilever: Kido Không Ngờ Đây Lại Là "Phao Cứu Sinh" Accessed 11 July 2020 by link: Tri Tuc, 2020,Vinamilk KIDO thành lập liên doanh lĩnh vực nước giải khát – kem, accessed on Aug, 2020 by link: https://cafef.vn/vinamilk-va-kido-thanh-lap-lien-doanhlinh-vuc-nuoc-giai-khat-kem-20200609084339058.chn