LIMITATIONS AND DIRECTION FOR FURTHER RESEARCH

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

Table of Content EXECUTIVE SUMMARY BACKGROUND, OBJECTIVES AND SCOPE 2.1 Background 2.2 Objectives 2.3 Information needs 2.4 Scope METHODOLOGY 3.1 The study approach 3.2 Methodology in focus LITERATURE REVIEW 16 4.1 The possibilities of the market study 16 4.2 Organization of the market study 16 4.3 Elements of the market study 17 4.4 The qualitative quantitative dichotomy 20 4.5 Product positioning and perceptual mapping 20 4.6 Product diffusion process 23 4.7 Pricing survey techniques 26 QUALITATIVE PILOT FINDINGS 30 5.1 Coffee using and buying habits 30 5.2 Instant coffee mix usage, relative advantages and disadvantages 30 5.3 Brand awareness and attitudes toward brand choice 31 5.4 Preference on the product features 31 5.5 Product packages 31 5.6 Advertising awareness 31 5.7 Taste test 32 DATA ANALYSIS: CONSUMER SURVEY 36 6.1 Brand Awareness 36 6.2 Popularity 37 6.3 Estimated Market Potential 39 6.4 Where would the product sales volume come from? 41 6.5 Product positioning 44 6.6 Pricing points 51 6.7 Consumer using and buying habits 56 DATA ANALYSIS: TRADE SURVEY 60 7.1 Brand Awareness 60 7.2 Popularity 63 7.3 Profile of channel members 64 CONCLUSIONS AND RECOMMENDATIONS 70 8.1 Cannibalizing effect 70 8.2 Product positioning 71 8.3 Promotion mix issues 71 8.4 Placing issues 75 8.5 Pricing issues 75 8.6 Overall conclusion 75 LIMITATION AND DIRECTION FOR FURTHER 76 10 TABULATIONS: CONSUMER SURVEY 78 11 TABULATIONS: TRADE SURVEY 121 12 APPENDIXES 139 12.1 MODERATOR GUIDELINE 139 12.2 CONSUMER QUESTIONNAIRE 146 12.3 TRADE QUESTIONNAIRE 151 12.4 TRADE SURVEY: SAMPLE ELEMENTS 153 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 in 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 in 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 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 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 in 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 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-ofpurchase 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 Background, objectives and Scope 2.1 Background For about 2-3 years, instant coffee mixes consisting of instant coffee, non-dairy creamer and sugar have been present in the Vietnamese market As this seems to be a potential segment in the instant coffee complete mixes, we need to carry out a market study on the instant coffee mixes niche Our major consideration is wether the company should, or should not, launch a new product into this market niche The company’s product is Nescafe in coffee mix which has been successfully launched in some other Asian countries This brand has also been introduced on trial sales in HCMC market for a few months without much marketing support However, the product concept seems not to be appreciated much by Vietnamese consumers, especially the elder generations The company’s target consumers will, therefore, be the new generation of people whose lifestyle are changing in a more concisely-oriented direction toward the product’s global concepts 2.2 Objectives The overall objective of this market study was to evaluate the market potential and to determine success factors for our new product, a Nescafe in 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; • Certain efforts would be spent 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 optimal price point, indifferent price point and the acceptable price range are to gain maximum sales volume 2.3 Information needs In order to reach at these objectives, the market study must have to gather all the information needs described below: • Estimation of the market potential • percentage of population who use coffee • percentage of population who use instant coffee mix • time of consumption (on daily/weekly basis) • volume of consumption per time • What is the price point to gain maximum sales volume? • optimal price point • • • • • 2.4 • indifferent price point • acceptable price range Where the estimated sales volume come from? • cannibalizing the company’s existing products • competitors products • growing the market Awareness and popularity, unaided and aided asking for • have heard of • have ever used • use most often The product diffusion • What consumers perceive really relative advantages of the product? • What consumers consider difficulties and/or dissatisfaction about using the product? • How consumers know about the results of the other people’s use of the product Consumer attitude and behavior • How consumers rate specific attributes of the product? • Brand choice brand loyalty, brand switching • Brand satisfaction which brands consumers think they would buy next? Which others might they buy? Which brands would they not consider buying and why? • How would they learn about new brands and come to try the new brands or even other brands not their own? • Purchasing pattern How often people buy? How much they buy at a time? What are on their inventories? Where they buy? • People involving the product purchase and use Is the user the same person as the purchaser? If not, who does the purchase? Who decide on brand choice? (users or purchaser) Which consumers would likely buy the product? • By demographics Sex, age, occupation, income (personal and family), geographical residence Scope The scope of the study was in Ho Chi Minh City where is actually a greatest center of socio-economic development in the country The changing lifestyle of people in the city likely promises a potential for the product field Achieving its objectives, the study would assist the company marketing managers in pursuing their own strategies by making them better-informed about the critical issues which play the role of a survival guide to a new product development In launching new products, if thing can go wrong, it will go We also hope that the research result would help mangers make less-risky decisions Methodology 3.1 The study approach We planned to employ 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 study where people were not aware that we were conducting research on Nescafe in 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 3.2 Methodology in focus 3.2.1 Conduction of focus groups Qualitative measurement was mainly employed in this market study to compensate for its limitations on quantitative side, especially in deriving out key attributes for the product positioning We moderated two focus groups whose attendants were carefully selected among the current users of the product field Attendant choice criteria for the two groups were defined as follows: Group Current female users (7 persons) • Coffee drinkers • Age range: 18 to 30 • Upper and middle income classes • Occasionally and/or trial used instant coffee mixes Group Current male users (6 persons) • Coffee drinkers • Age range: 18 to 30 • Upper and middle income classes • Occasionally and/or trial used instant coffee mixes The group discussions were conducted in a professional room with one-way mirror and audio-video recording systems which enabled high level of accuracy in group analysis All transcripts were done in Vietnamese to minimize the language errors At the end of the process, the qualitative report was written in English 3.2.2 Configuration of the perceptual maps Much of our research efforts were organized to produce as much realistic perceptual maps as possible This would serve to obtain a picture of competitive products and help build a good positioning strategy Within the focus groups operation, certain key attributes of the product would be derived by using Preference method, one of the non-attribute base methods Attendants were asked to find out the similarities of all brands which they have experienced and/or were shown at site by the moderator In the quantitative phase, respondents were asked to rate on a set of attributes which were already defined through qualitative phase The perceptual maps are presented in multiple attribute maps The rating scores on different attributes for the competent brands were analyzed by Correspondence Analysis technique Firstly, raw data1 were reduced by Factor Analysis technique to determine which were key attributes and which were supplementary ones In figuring the perceptual maps, the key attributes play the role of active attributes which contribute to the shape of the map The supplementary attributes play the role of passive attribute which feature on the map but not contribute to its shape 3.2.3 Determination of pricing points We aimed to determine the optimal, indifferent price points and an acceptable price range by which the company may obtain maximum sales quantity Respondents were asked the four following questions2: • At what price point of this scale you begin to consider “expensive” about the product? • At what price point you begin to consider “too expensive” so that you will never buy the product? • At what price point you begin to consider “cheap” about the product? • At what price point you begin to consider “too cheap” so that you can doubt the product’s quality and therefore will not buy it? Then, price points and an acceptable price range are defined as follows: Acceptable range: the range of price is from the point of marginal cheapness to marginal expensiveness where consumers are least antagonistic People would feel the price is neither too expensive nor too cheap The acceptable range provides an adjacent to the indifferent point.3 Indifferent price point: where the two distribution curves “expensive” and “cheap” cross each other At which an equal number of people experience the product as cheap or as expensive It is a less stringent measure than optimal price point and generally represents the median price actually paid by consumers of the product.4 Optimal price point: where the two distribution curves “too expensive” and “too cheap” cross each other At which resistance against the price of the particular product is lowest and would alienate the least number of consumers.5 Another question “At what price point you consider about right?” was also employed to check the accuracy of the model Price points for the individual brands were gathered from those who have used the brands Particularly, Nescafe Deluxe’s price levels were asked to all the peolple Number of responses to Question 15 are listed below: See Question 14, Consumer Questionnaire See Question 15, Consumer Questionnaire See Chart i enclosed See Chart i enclosed See Chart ii enclosed 10 Attendant Note Sheet Focus Group # Date: .Jan., 1997 Attendant name: Cup number # Sample Description Aroma Sweetness Tasting flavor Bitterness Natural flavor Overall hedonic score Other remarks 145 12.2 CONSUMER QUESTIONNAIRE Q’naire # Introduction Hello I am , a student from HCMC University of Economics We are doing a survey on coffee products We would appreciate much if you could save a bit of your time to talk to me Your contribution is very important and valuable to improve the products offered to the people in the city Please be assured that your answers will be kept confidential and used for the purpose of this research only Screening Questions Q.1 Are you or anyone in your household working in the field of u Production and/or distribution of coffee products u Advertising, mass media and/or marketing research u None of the above Instruction: Keep on interviewing if “non of the above”, otherwise donot interview Q.2 May I get the name and ages of all members of the family (aged 18-60 years old) who are permanently residing in this household? Let us start with those who drink coffee, then with those who not drink Instruction: LIST ALL QUALIFIED PR IN THE GRID AND SELECT PROBABILITY RESPONDENT AMONG THE PEOPLE WHO DRINK COFFEE) No 10 11 12 Qualified Potential Responde nt Sex Age 1 1 1 1 1 1 7 Household Number 11 3 1 2 1 12 10 11 12 1 6 1 9 11 3 10 6 10 10 May I talk to (PR) if she/he around/or set an appointment with her/him for a brief interview if she/he is not available today PR: _ Sex: ( )Male ( )Female Age: Date of appointment: _ Completed ( ) original Date: _ Time: _ ( ) substitute Date: _ Time: _ Main Questions Q.3 Q.4 How many cups of coffee did you drink yesterday? cup(s) How many cups of coffee you drink in one week? cup(s) Instruction: If less than cups a week, go to Demographics Q.5 Where often you drink coffee? (Check all that apply) u At home u At working place u In coffee shops u At client’s office u In restaurants u Others, Instruction: If “At home” ask Q.6 and Q7; Otherwise go to Q.8 Q.6 a/ In your household, who does the purchase of coffee? u Yourself u The other u Not drink coffee at home Q.7 When you buy coffee for taking home, you would be most likely to buy it from (choose one only) u Department stores u Provision shops u Markets u Outlet along the streets u Supermarkets u Others, _ u Not buy coffee for taking home Q.8 Approximately, what percentage you drink the following kinds of coffee? u Ground coffee % u Instant coffee % u Instant coffee mix % Sum total = 100 _% Q.9 Please list the brands you drink most often (or the top brand if less than three) u (drink most often) u u u I don’t know the brand Q.10 Which attitude toward brand for your next coffee is most like how you think? u I already know which brand is best, and I will buy it b/ And who makes decision on brand choice? u Yourself u The other people u Not drink coffee at home 147 u I think several brands are good so I will get some more information on them before deciding on one of them u I think several brands are good, so among these I will buy the one with the best promotion u I don’t know much about any brands, so I will ask around and find out more information first u The brands are all similar, so I will buy the one with the lowest price Q.11 How likely is it you would get information from any of the following? Very Not likely likely at all Friends Store clerks / dealers Brochures in stores Advertising Others, Now we are talking about instant coffee mixes Q.12 a (Unaided) Which brands of coffee mix have you ever heard of? b (Aided) Which brands on this card have you ever heard of/used/often use? I have I have used this I use this heard of these brand a few brand brands times often Super Coffee 1 1 Indocafe 2 2 Mac Coffee 3 3 Vinacafe 4 4 Other, 5 5 Unaide Aided Aided d Q13 How each the following criterium of an instant coffee mix is important to you? Most Least important important Aroma Color of the coffee water Easy to prepare Natural coffee flavor Package Price Taste Time saving Other, 148 Q.14 Now, please rate the following attributes toward the brands which you have used, and the ideal brand of yourself Instruction: Use 5-point scale to rate = maximum level of the attribute = minimum level of the attribute Attribute Coffee substance is likely yellow Coffee substance is likely brow Strong aroma Sweetness Greasy Natural coffee smell Natural coffee taste Good-looking package Easily recalled package Durable package Easily handle package Package gives much information Others, Your ideal brand 5 5 5 5 5 5 Brand 1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3 4 4 4 4 4 4 Brand 5 5 5 5 5 5 1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3 4 4 4 4 4 4 Brand 5 5 5 5 5 5 1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3 4 4 4 4 4 4 5 5 5 5 5 5 5 5 Q.15 (AIDED) At what price point of this scale you begin to consider • “too expensive” so that I will never buy the product? • “expensive” about the product? • “about right”? • “cheap” about the product? • “too cheap” so that I can doubt the product’s quality and therefore will not buy it? Brand Too Expensive About Cheap Too Expensive Right Cheap d d d d d d d d d d d d d d d d d d d d Q.16 Which of the following statements best describe your likely usage of instant coffee mix? u I will use it in addition to the regular coffee I drink, so I drink more u I will use it to replace most of the regular coffee I drink u I will just try it, but I am not very interested in using it often u I will not try it Demographic Questions Q.17 Please tell me some information about Sex: Age Residence: Working sector: 149 (do not ask) u Female u Male Q.18 u less than 20 u 20-25 u 25-30 u 30-40 u elder than 40 District: Occupation: u State-owned u Foreign u Private Which of the following criteria best describes the monthly income of your Personal income Family income u Below 1,000,000 Dong u Below 1,000,000 Dong u million u million u million u million u million u million u More than million u More than million THANK YOU VERY MUCH FOR YOUR COOPERATION 150 12.3 TRADE QUESTIONNAIRE Q’naire # u Retailer u Wholesaler Hello I am , a student in the HCMC University of Economics We are doing a survey about coffee products We would appreciate much if you could save a bit of your time to talk to me Your contribution is very important and valuable to improve the products offered to the people in the city Please be assured that your answers will be kept confidential and used for the purpose of this research only Q.1 Q.2 Do you sell instant coffee in your own shop? u Yes If yes, u No How long have you been selling? If no, go to Demographics months When you purchase coffee, you would be most likely to buy it from u Manufacturers (or brand agents) u Wholesalers u Retailers u Others, please specify Q.3 How often you purchase coffee? u Everyday u 2-3 times a week u Once a week u 2-3 times a month u Just on occasion (less than 2-3 times a month) Q.4 Approximately, how much you handle on the basic of (_) month / (_)week Gross of instant coffee: Quantity: _ Unit: Unit description: The best-sell brand: _ The second best-sell brands: Gross of instant coffee mixes: Quantity: _ Unit: Unit description: The best-sell brands: _ The second best-sell brands: _ Q.5 Particularly talking about instant coffee mixes a (Unaided) Which brands of coffee mixes have you ever heard of? b (Aided) Which brands on this card have you ever heard of, sold a few times or often sold? 151 I have I have sold this I sell this heard of this brand a few brand brand times often Goldroast 1 1 Indocafe 2 2 Mac Coffee 3 3 Nescafe Deluxe 4 4 OWL 5 5 Parigold 6 6 Super Coffeemix 7 7 Vinacafe 8 8 Other, 9 9 Unaide Aided d Q.6 Which attitude toward brand for your next purchase is most like how you think? u I don’t want to change my product mix any more u I like to carry new brands to see if they will become popular u I only carry brands if they have desmonstrated demand u I will carry a brand if the supplier gives me some good incentives u Other, Q.7 Q.8 How likely is it you would get information about brands from any of the following? Very Not likely likely at all Advertising Distributors Friends Dealers Trade shows Customers Others, Record demographic information Site: Customer calls per day: Residence: m2 u less than 20 District: u 20-50 Employees: u 50-100 persons u 100-200 Year of started operation: u More than 200 19 Thank you very much for your cooperation 152 12.4 TRADE SURVEY: SAMPLE ELEMENTS MARKETS CENTRAL LOCATION AREA BEN THANH CHO CU THI NGHE THAI BINH BAN CO TRUONG MINH GIANG VUON CHUOI RACH ONG AN DONG BINH TAY HOA BINH KIM BIEN LAKAI HOA HUNG NGUYEN TRI PHUONG NHAT TAO BA CHIEU GO VAP TAN DINH TRAN HUU TRANG PHAM VAN HAI TAN BINH NANCY DAKAO PHU NHUAN HOANG HOA THAM LY THUONG KIET TRADING CENTER HUYNH VAN BANH DISTRICT 1 BT 3 5 10 10 10 10 BT GV PN TB TB 1 PN TB 11 WHOLESALER RETAILER PN 1 NGUYEN TRAI NGUYEN T MINH KHAI TRAN QUANG KHAI NGUYEN THIEN THUAT TRAN HUNG DAO PHAN VAN HAN NGUYEN DINH CHIEU VO VAN TAN DA NAM NGUYEN VAN CU NGUYEN BIEU NGUYEN THONG NGUYEN KIEM BAY HIEN 3 BT 3 5 PN TB 1 1 1 1 1 1 1 2 2 1 2 2 1 2 1 2 1 1 1 1 3 1 1 1 1 153 TOTAL 1 1 2 2 1 2 1 2 1 1 BA HAT 10 TOTAL 24 43 67 154 ... Such research includes defining what we understand well, and groping toward understanding what we not yet understand but need to know Then we must organize this information and lack of information... Brand choice brand loyalty, brand switching • Brand satisfaction which brands consumers think they would buy next? Which others might they buy? Which brands would they not consider buying and. .. stands for the ideal 34 35 See Factor Analysis Results enclosed with Table 14a and 14b See Data matrix 14a and 14b enclosed with Table 14a and 14b 45 brand The three brands Vinacafe, Indocafe and