Arnott Marketing Plan

Arnott’s MARKETING PLAN
EXECUTIVE
EE SUMMARY
Arnott’s Biscuits Limited is the biggest biscuits company in Australia and combined
with its largest shareholder, Campbell Soup Co, makes Arnott’s the fourth largest
biscuits company in the world. Obviously, Arnott’s is the market leader in the biscuits
market as well as in chocolate-biscuits category market with shares of 64.5% and
51.5%, respectively.
Arnott’s is found to possess both brand strength and strong financial position. These
two strengths are indeed contributed a lot to the success of Arnott’s in the biscuits
industry. However, there are two other critical success factors that Arnott’s needs to
improve and are identified to be as important to Arnott’s success. These factors are
new product development/innovation and vast/solid distribution channels.
Marketing objectives are formulated to gear Arnott’s towards maintaining its

leadership position in the biscuits industry. The marketing performance objective is to
increase market share of chocolate biscuits category by value from 51.5% to 65.5% in
five years by year 2000. The key strategies in achieving this objective which apply to
all the three segments: children, regular and premium of chocolate biscuits market are
as follows:
 Enhance the brand name image and increase brand loyalty by intensifying
promotional activities;
 Develop new products and upgrade the existing products and their packaging;
 Position Arnott’s chocolate biscuits as a high quality, value-added product;
 Maintain strong alliance with retailers, vendors, suppliers and customers; and
 Quickly response to the competitive position.
With satisfactory marketing effort, Arnott’s net profit before tax in chocolate biscuits
is projected to increase from $10.51 million in 1996 to $45.19 million in year 2000.
Marketing cost in 1996 is $24.30 million and estimates to increase by 20% each year.
Details on marketing budget and action plan for Arnott’s are included in this plan.
Steps in evaluation and control system of the marketing plan are also discussed.
MBA 5310 Marketing 1

1. SITUATION ANALYSIS
1.1 Business Definition
The beginnings of Arnott’s can be traced back to 1865 when William Arnott, a
Scottish emigrant, set up business in a small rented corner shop in Hunter Street,
Newcastle. Today, Arnott’s celebrates its 130 years of operation, and is considered as
the largest biscuits company in the Asia Pacific region with its 64.5 % share in the
Australian biscuit market. Arnott’s has moved into the macro market seeking out and
creating new opportunities by carrying on their tradition of greater sales growth,
efficiency and value.
Arnott’s has been competing for biscuit market in the $4.9 billion snack market with
the major category of sweet, chocolate, savoury nibbles, and plain. In the snack
market’s sweet category, worth $1.1 billion, biscuit only account for 40%. In
chocolate category, worth $1.3 billion, biscuits account for only 17%, compared with
blocks (22%), bars (34%) and boxes (9%). The lion’s share of the $0.7 billion
savoury nibbles category goes to chips (51%) with biscuits and nuts only accounting
for 13%, while the $1.8 billion plain category is dominated by breads (92%) with
crackers and crackers breads only accounting for 8%.
Arnott’s has also penetrated the Asian market, such as Taiwan (with a range of 10 of
its products), Hongkong (with 30% of its target market), Singapore, Malaysia,
Indonesia, South Korea and Papua New Guinea as well as New Zealand.
Together with the broader opportunities in the snack market, Arnott’s has identified
“indulgence” consumption as being the key consumer opportunities in the 1990s.
Since 1965, the company, in conjunction with the C.S.I.R.O, have developed a high
protein biscuit. Therefore, the product was created based on milk protein co-
precipitate with the world wide need for protein and nutrition in mind.

Figure1.1 shows that Arnott’s Corporate % Shares in the

corporate shares on the biscuits market Biscuit Market Arnott's
so far accounted 64.5% (the biggest) of 12%
5% Westons
the grocery value of $778.2 million, 2%
Lanes
followed by Westons, Lanes, Players, 7%
Players
Housebrands/generic, and other brands 64%
10% Generics
(Retail World, 6 Nov 1995)
All others
Arnott’s has penetrated all product market segments with full range of products as
shown in table below.
Product Market Segments Key Brands
Crackers Jatz, Savoy, Sao, Water Cracker, Cheds, Sesame Wheat.
Chocolate Tim-Tams, Mint Slice, Gaiety, Fruit&Nut, Obsession, Tiny

Teddy, Choco-Saurs, Chocolate Monte, Tee Vee Snacks,
Cavetto
Crispbread Salade, Vita-Weat, Cruskits, Saltine.
Cream Assorted Creams, Classic Assorted, Kingston, Shortbread

Cream, Monte Carlo, Custard Creams Gold’n Cheese,
Orange Creams, Casino, Lemon Creams, Malt.
Cookies Fambake, Butternut Snap, Butternut Cookie, Chocolate

Chip Cookie, Maryland, Premier, Mint Slice, Rockies.
Flavoured Snack Shapes : BBQ, Savoury, Pizza, Nik Nax
Fruit Tartles, Spicy Fruit Roll, Full O Fruit, Rasbery Shortcake.
Plain Family Assorted, Milk Arrowroot, Milk Coffee, Granita,

Shredded Wheatmeal, Gingernut, Marie.
Shortbread Scotch Finger, Glengarry, Arnott’s Shortbread.
Topped Iced Vo Vo, Venetian.
Wafer Triple Wafer, Tina Wafer.
This report is going to concentrate on developing a marketing plan for chocolate

category product line, focusing on its six brand names.
1.2. The External Environment Analysis

The analysis will cover two areas : the macro environment analysis and the industrial
level analysis. Summary analysis in term of opportunities and threats to Arnott’s with
ranking system will also be concluded.
1.2.1. The Macro Environment Analysis

 Economic Outlook
The economic growth of Australia based on the Gross Domestic Product (GDP) has
decreased from 3.7% in 1994-1995 to 3.2% for the current financial year of 1995-
1996. Looking further ahead, the treasurer refused to forecast the 1996-97 growth,
but the optimists expect a growth of at least 3% per annum, with the expected highest
growth in Queensland, West Australia and Northern Territory (ABS, 1996).
However, another optimists predict that if the world remains favourable and the key
players act sensibly, the growth should soon accelerate to between 4 and 5 per cent
and so increase competitiveness and investment level and decrease unemployment
rate.
The food CPI inflation rate was 3.3% last year and drop further to 2.9% in the last
quarter of 1995. While average individual earning increased by 1.7%, private final
consumption expenditures have slowed down from 6.7% to only 4.3% between 1994
and 1995. Most analysts expect that business investment to be lower over 1996-97,
with the AFR poll showing a fall to 5%. However, the trend estimate of expected
expenditure for 1996-1997 is $37,458 million, and even better for 1997-1998 which
increased by 27% (ABS, 1996).
The average unemployment rate has fallen from 8.9% in the third quarter of 1995 to
8.25% at the end of June 1996. The employment figures have also risen by 0.1%
since the last quarter of 1995. Estimate of male full-time employment continues to
rise and have reached 4,224,300. On the other hand, estimate of female full-time
employment, which has been generally rising since August 1992, fell for the fifth
consecutive month and now stand at 2,054,400. Apart from this fall in mid 1995,
trend estimates of male and female part time employment have risen since April
1993, and in June 1996 stood at 518,500 and 1,542,000, respectively.

Various range of measures designed to encourage both local and foreign business
investment in Australia has been introduced by the government. These includes a
reduction in the company tax rate; a temporary development allowance of 10% for
certain large-scale projects; a concessional tax rate of 15% on the income of Pooled
Development Funds and the establishment of National Investment Council.
Over the past two years, both short-term and long-term interest rates ended their five-
year fall at 7.5%. Most commentators expect rates to remain basically steady over
1996, or fall slightly.
Recently, Australian dollar is appreciating against other currencies. It went up to

$0.80 US dollar which is the highest rate in the past 4 years. The prediction is that
the Australian dollar will strengthen over 1996 reaching US$0.86 by the end of 1996.
It then expects the Australian dollar to fall over 1997, reaching US$0.75 by the end of
1998.
The above analysis can be interpreted as having the following impact on Arnott’s :
1. Increased in employment level, higher wages and lower interest rate will
increase purchasing power and consumer spending which then will lead to
higher sales revenue.
2. Relatively low interest rate on business loans means an opportunity to reduce
business cost from borrowings and/or to get favourable financial fund.
3. Slow economic growth may restrict business expansion and business growth.
4. Rising prices and wages may lead to higher operational costs. Since inflation
is coming mainly from the cost-push factors such as wages, Arnott’s should
concentrate on it’s pricing strategy.
5. Much better estimation on the expected expenditure for 1996-1997 will give
Arnott’s the opportunity to expand its market share and increase sales
6. Government policies regarding the encouragement of foreign business
investments and small businesses have elevated the threat of competition in
the market for Arnott’s.

7. Appreciation of Australian dollar would be a threat to Arnott’s. This will

increase the price of Australian export products which in turn will also affect
Arnott’s competitiveness abroad.
 Social Trend - Demographic Factors

The total population in Australia has increased by 5.7% between the year of 1990 to
1995. It recorded at 18 million in June 1995, and based on the forecast it will reached
18.21 million by end of 1996 (ABS, 1996).
STATE POPULATION
(in million)
NSW 6,115.1
VIC 4,502.0
QLD 3,277.0
SA 1,474.0
WA 1,732.0
TAS 473.0
NT 173.9
ACT 304.1
Figure 1.2
As it is shown by Figure1.2 above highest distribution of population by state is in

New South Wales, followed by Victoria and Queensland. By the year 2007, the
population in those areas will increase by 10, 8 and 22 per cent respectively, based on
estimation from ABS. This will make the total increase in population estimated at
12% between the year of 1985 to 2007. Further prediction stated that between 1995-
2002, the total population is expected to grow by 12.48%. It will reached 20,272
million by the year 2006. By looking at Figure1.3 below, Arnott’s should
concentrate most of its resources in NSW, VIC and Queensland since the population
in these areas are higher and also growing.

Estimated Resident Population by State
8000
6000
people(000) 4000
1995
2000 2007
0 NSW 2007
VIC 1995
QLD
SA
WA
TAS
NT
ACT
STATE
Figure1.3 Source : ABS-1995
Current population by age group and its projection are illustrated in Figure1.4 below.
It can be seen that in 1995 the largest population group is the 30-39 yrs old age group,
followed by the 20-29 and 0-9 age group. However, in 2002 the largest population
will be the 40-49 age group, followed by the 20-29 age group. Further observation of
the graph clearly indicates a declining in ‘youth’ population in Australia between the
year of 1995 to 2007 ; the 0-9, 10-19, 20-29 and 30-39 age group. The older
population particularly in the 50-59 and 70+ age groups, are increasing over these
years, as a result of decreasing mortality rates. In addition to this, the trend of median
age since June 1990 has changed from 32.1 years old to 33.4 years old (ABS, 1995)
and overall, baby boomers still represent the majority of population.
Population Structure By Age Group
16
14
12
10
Percentage 8 1995
6
2002
4
2 2007
0
70+
0-9
10-19
20-29
30-39
40-49
50-59
60-69
Age Group
Figure.1.4: Population Estimates by Age Groups in Australia

Source: ABS-Internet March 1996
The implications for Arnott’s :

1. Arnott’s should allocate more of its resources in New SouthWales, Victoria

and Queensland, since the population in these areas are higher that other
states. Nielsen Reports (R/W November 6, 1995) have revealed that Arnott’s
has put its marketing efforts in those areas and gaining their shares of the
market by 32.7%, 27% and 20.3% respectively.
2. With regard of market expansion and sales growth, Arnott’s has to put more
effort for the market segment of 30-39, 20-29 and 10-19 age group since they
represent the largest population group.
3. In the future, older population who are more healthy conscious can be a
potential market for Arnott’s. However, in the same token it could become a
threat to Arnott’s since biscuits, chocolates and most of snack food products
has been perceived as ‘junk’ food.
4. The overall prediction of the population distribution may enhance Arnott’s

opportunity in the future to expand the market and increase market share. It
allows Arnott’s to have a better control on the allocation of it’s marketing
effort.
 Social Trend - Life Style

Increasing of health consciousness of the Australian people results in higher life
expectancy for both male and female. According to the Social Trend Report, in 1993,
the trend of male and female life expectancy has increased by 2.9 and 2.1 years
respectively since 1983 (ABS, 1995). With the awareness of the health consciousness
issue, the total health expenditure has increased since 1990 from $1,710 to $1,770 in
1993. This is depicted in Figure1.5 below:

Health Status in Australia 1990-1993
82 1780
Health Expenditure
80 1760
Male
78 1740
Age
76 1720
Female
74 1700
72 1680
Total Health
70 1660 Expenditure
1990 1991 1992 1993 Per person
Year
Figure. 1.5 Source: Social Trend ABS,1995
Since 1990, the average amount of fats consumed per person decreased by 4.4% in
1993. This may cause a threat to Arnott’s chocolate products since they content
certain percentage of fats.
Another very important issue on consumer behaviour is the so called trend of a “new”
breed known as the ‘Street Mart’. This type of consumers are more discerning,
demanding, price sensitive and well informed about quality and retail prices. They
prefer to argue on price and delay major purchases until goods go on sales. In
addition, this type of consumers are not overly impressed with the corporate image-
based campaigns. They want facts and savings (R/W April 1995). This phenomena
would have an implication to Arnott’s on advertising, visual merchandising, pricing,
point-of-sale promotions and the standards of service provided to customers.
 Social Trend - Pattern of Expenditure

An important determinant on pattern of household expenditure is income. Between
the year of 1993-1994, the proportion of household total expenditure on food
generally declined as income increased. Households in the low income group bracket
allocated 20% of their expenditure on food and compared to 17% of households in
the higher income bracket. In contrast, the proportion of income spent on other non-
food product such as clothing, footwear, transport, recreation, etc., generally
increases as income increases
The implications of the trends for Arnott’s are as follows:

1. To cope up with the ‘healthy conscious’ trend of the Australian people,

Arnott’s has to put more effort on Research and Development in developing a
better, nutritious and healthy chocolate biscuits.
2. Arnott’s should put more efforts in advertising to show that Arnott’s biscuit is
a healthy biscuit as it is known to have been developed through joint research
with C.S.I.R.O. This may creates positive consumer’s perception and attitude
on Arnott’s products.
3. The trend also has an effect on the ingredients of Arnott’s biscuits, such as fat,
sugar and other “unhealthy” contents to be considered.
4. The ‘street mart’ customers would have an impact on Arnott’s marketing
strategy in terms of pricing, packaging and labelling, promotions and
distribution policy.
5. The household expenditure pattern will also affect the choice of who is going
to buy Arnott’s biscuits.
 Natural Environment
The Climate
The continuos decline of worldwide wheat production (including Australia) from 561
million tonnes in 1993 to 559 million tones for 1994-1995 and estimated 540 million
tonnes for 1996-1997, due to the uncertain climate conditions, will increase the
market price for wheat.
Ecological factors
The consumer attitudes towards environmental issues have substantially improved.
Since 1986, public focus has shifted to issues such as depletion of the ozone layer and
‘the green house effect’ (BRW, August 1993). This trend has impacted on the
consumer buying preferences. Consumers are more inclined to purchase the
environmentally sound product. As a result, recycling and environmentally safe
packaging are adopted by increasing number of marketers (Assael et. al., 1995).
The corporate social responsibility is currently a big issue in business environment.

To be seen as an “environmental concern company”, a business needs to be socially
responsible and producing only the environmentally save products.

In term of opportunities and threats to Arnott’s, the above analysis means:

1. A shortage of vital ingredients for manufacturing biscuits, such as wheat,
would increase the price of wheat thus Arnott’s production costs of biscuits.
This in turn, would reduce profit.
2. The environmental issues provide an opportunity to promote the
environmental company to the society to enhance the image and consumer
loyalty. However for Arnott’s this means extra cost for research and
development, and advertising campaign.
 Technological trends
Customers can now scan their own groceries, accelerating the checkout process with
the innovation of PPS (Portabel Personal Scanning) from Symbol Technology. The
PPS speeds up the process by removing the necessity of unloading and loading
groceries .(R/W February,1996)
A new computer program developed by Queensland University called ADAPT

(Active Demographic Analysis And Population Trends) provide marketers with an
up-to-date information on specific population forecasts and demographic analysis for
business within a week or even less.(R/W February,1996)
The impact of technological trends on Arnott’s :

1. The use of PPS could speed up the check out process in the grocery stores and
eliminates the queuing time. This in turn, makes customers to come and go
only to buy some specific goods more regularly. Thus, Arnott’s may benefit
from this technology to increase sales.
2. The ADAPT technology, definitely could improve Arnott’s marketing
strategy on market segmentation.
 Legal factors

Australian government regulation to disclose the information of all food products

concerning their performance, composition, contents, packaging and labeling has
affected marketing activities in many ways.
A new Voluntary Codes of Conduct practices have been applied under TPC (Trade
Practice Commission) in response to the lack of food labeling guidelines in the
existing Food Standards Code. It is essential to redress the “truth” in labeling issue
(R/W April, 1995).
In response to a high complaint from consumers regarding the representations made

by producers particularly on catalogue, TPC has launched two guides books entitled
“Two Price Advertising” and “Qualifications in Catalogue Advertising” (R/W April
1996).
The implications for Arnott’s:

1. The Voluntary codes of conduct would affect the way of Arnott’s labelling the
products.
2. Arnott’s should give more attention to advertising activities since consumers
are very sensitive to information they receive.
1.2.2 THE INDUSTRY LEVEL ENVIRONMENT ANALYSIS
1.2.2.1 MARKET AND INDUSTRY REVIEW

 Market Definition
Arnott’s competes in the $4.9 billion macro snack market. The macro snack market is
divided into four categories:
Category Worth Biscuits account for

($ billion) (%)
Sweet 1.1 40
Chocolate 1.3 17
Plain 1.8 8
Savoury Nibble 0.7 13

In the biscuit market Arnott’s competes in sub category: chocolate, plain, crackers,
creams, flavoured snack, crispbread, cookies, shortbread, fruit, tapped and wafer.
Biscuits Market Segment by Share(%) Growth

Product Category (%)
Chocolate 19.2 +9.5
Plain 15.9 +0.1
Crackers 14.7 +0.02
Creams 14.4 +2.1
Flavoured Snacks 12.7 -2.0
Crispbread 8.5 +3.7
Cookies 4.5 +1.1
Shortbread 4.1 -5.1
Fruit 2.8 -9.2
Tapped 1.6 -5.2
Wafer 1.6 +20.6
Source: Food week Industry Yearbook 1996
 Market Trends
The domestic biscuit market is in its mature stage of product life cycle (see
Figure1.6). Per capita consumption of biscuits has declined over the past decade
eventhough Australia’s per capita consumption of biscuits which is 7kg (in 1996) is
relatively high compared to other western country. The decline in per capita biscuit
consumption reflected a failure to respond to change in eating habits which took place
in the 1970s and 1980s.
Product Life Cycle
40 Arnott’s
30
20
10
0
S1
Introduction
Growth
C.Turbulence
Maturity
Decline
Figure. 1.6

The key factors that determine the decline in per capita biscuit consumption are:
 changing eating habits of Australians. Australian now spend an estimated 34% of
their food budget eating outside the home compared to 10% in the late 1970.
 increased competition from other categories of snack foods.
 declining in consumption of hot beverages that traditionally associated with eating
biscuit.
 conscious of healthy foods.
In 1995, however, the value of biscuit sales increased by 3.1% (from $754.50 to
$778.20) from the previous year, with imports and generic products accounting for
around 16.8% (R/W, Nielson Report, Nov 1995)
Improving operating performance such as cost saving and new products innovations
are very important in order to re-shape the product life cycle and hence widen the
prospects for sales growth. In addition, there is a bigger opportunity for Arnott’s in
the $4.9 billion snack market. Moreover, the product category in the biscuit market
and the macro segment market are almost similar, so, it substitutable from one
another as it perceived by the customers.
 Market Attractiveness
As mentioned earlier, the biscuit market is in its mature stage of product life cycle
with a moderate growth labels for most products. However, in 1995, the sales value in
retail grocery of $778.2 million or an increase of 3.1% from previous year shows that
there is an opportunity to grow.
Biscuit Sales in Value
1000
900
800
Million
700 732
754.5 Value
600 778.2
Value
500
1993
1994
1995
year
Figure1.7 Source:Retail World, Nov, 1995.

Changes in demographic composition such as decreasing youth population and

increasing older population as well as increased interest in healthy foods and ‘eating
out’ habits of Australians may affect the market. Consumers prefer snack/biscuits
which is not only ‘tastes great’ but also ‘better for them’ in terms of being healthy,
low-fat, nutritious and low price. This increasing demand for healthy foods with
delicious taste would in return increase the fruit, crispbread, chocolate and plain
segments. Arnott’s success last year was proven by launching Fruitfuls healthy, low
fat, relatively low price in the sub category fruit. This product has successfully
immersed into the market, achieving $8.4 million in retail sales. Arnott’s has also
launched Fruit&Nut and Peanut Gaiety which were released in bar size to meet
‘eating out’ trend.
Competition in the market has been intense with more attention given on consumer
health conscious issue. For example, Arnott’s Savory biscuit is facing a threat from
Manassen Foods’ Rice Snack which fat content is only 5.6% compared to the average
fat content of 28% of Savory biscuits (R/W, March 1996).
Cost of production is very much affected by the increase in the market price of raw
materials. With the shortage of supply of wheat, an important raw material for biscuit
production, cost of production would definitely be affected which in return would
affect the profitability of the company.
Since the growth of biscuit market is moderate, developing new products is very
important to reshape the product life cycle. As such, product innovation, improved
distribution channel and cost control would be the main factors to increase company’s
competitive advantage in the market. The biscuit market is still attractive since
Arnott’s is the market leader that has many leading brands. Further support by its
cost-effective production technology and strong channel of distribution as well as its
research and development for product innovation. These competitive advantages will
equip Arnott’s for the intense competition in the broad snack market. Moreover,
83.5% of the market share belong to three major players; Arnott’s (64.5%), George
Weston Foods (12%) and Lanes Biscuits (7%), and this will provide a barrier for new
entrants to enter into the market.

The above market review could be interpreted as having the following impact in term
of opportunities and threat to Arnott’s as follows :
1. The decreasing trends of per capita consumption of biscuit becomes a threat to
Arnott’s
2. The growing consumer trends of eating healthy foods and eating out, would
open new opportunity for Arnott’s to develop new products to meet those
trends.
3. Cost of production is high due to drop of wheat and orchards production. It
means a threat for company to increase profit.
4. The mature stage of the biscuit market in product life cycle has become a
threat to Arnott’s. Thus, it is important for Arnott’s to control the production,
marketing cost and distributions as efficient as possible. Concerning the need
for efficient marketing distributions, Arnott’s has a significant bargaining
power regarding shelf position and in-store promotions for its products since it
is the market leader. New product innovations by Arnott’s also benefit from
the existing distribution networks, hence new items can be introduced more
quickly and cheaply.
5. As market growth is only moderate and competition for the market share
intense, sales growth for individual companies tends to be at the expense of
competitors’ market shares or through new products. Effective advertising and
strong merchandising are required to launch new products and maintain
market share of existing brands.
1.2.2.2 COMPETITIVE REVIEW
 Market Share and Sales

Arnott’s is the market leader in the biscuit market with a share of 64.5%. The major
competitors are George Weston Food with 12% of market share, Lanes Biscuit with
7% shares, Players biscuit captures 1.9%, Housebrand/Generic with 5% share and
others 9.6% ( Australia Grocery Industry Marketing Guide 1996).

CORPORATE % SHARE THE BISCUIT MARKET
10%
5%
1.9% Arnott's
7% Westons
Lanes
Players
12% Generics
64% All others
Figure1.8 Source: Retail World-Nielsen Report,Nov,1995
The Australian Biscuit Market Share by Manufacturers for 1994 & 1995:
Manufacturers Market Share Market Share Change from

(%)- 1995 ( %) - 1994 1994-1995
Arnott’s 64.5 63.2 +1.3

George Weston Food 12 11.1 +0.9
Lanes Biscuit 7 6.6 +0.4
Players Biscuit 1.9 2.7 -0.8
House brand/ Generic 5 5.4 -0.4
Others 9.6 11.0 -1.4
Total 100 100 -
Source: Retail World(1994-95),”Annual Report: market Sizes and Shares
 Competitors Strategy
1. George Weston Foods

Weston is a public company formed in 1962 with 78.75% of its share owned by
Associated British Food Ltd, UK. Its activities include manufacturing, distributing
and marketing flour, starch & related products, bread & other baked goods, biscuits,
cakes & pastry, specialty food ingredients, stock feeds, harms & smallgoods, dairy
products and chemical products.
In 1994, the company profit fall by 0.1% that is from $52.4 million to $52.3 million.
This was due to the increase in upgrading costs and major costs associated with

reorganisation of the group's distribution system. As the result of the improvement

programs, its market share has increased from 11.1% to 12% in 1995.
Westons also put its effort in product innovation as can be seen from the launching of
Oskar and Charleston biscuits and the new range of Weston’s Internationals chocolate
biscuits with variants including French Praline, Aussie Macademia, Turkish Delight
and English Toffe. Since Internationals was introduced last year, Weston’s total share
of the chocolate biscuits catetofy has inched up from 19% to 20.1%. Internationals is
the first successful new product from Weston in several years.
To achieve maximum effectiveness for its new operations, Westons has installed new
technologies in New South Wales warehousing. It has also substantially upgraded its
Ernington site to provide a modern and efficient warehouse and distribution center.
Other factors that may threats Arnott’s are:

 the launched of Westons’ ‘cheese and biscuit in one’ namely Sangers in savory
segment, against Arnott’s Flavoured Snacks Shapes.
 Westons involvement in Flour Milling business gives Westons the cost advantage
in the raw material.
2. Lanes Biscuit
Lane’s Biscuit Pty. Ltd is owned by Brompton Group Limited (NZ). Their share in
the market is 7% that is an increase of 0.45% from last year. Lanes’ range of
production is not as many as Weston and their production is only focus on biscuit.
Lanes' brands are Chocolate Mousse, hey Day, and Stripes Ahoy. In 1994, Lanes
released children categories such as Spookies, Traffic Lights, Rascals & Koala
cookies. Lanes expect their market to grow around 20-25% this year.
Last year, Lanes introduced its 97% fat-free premium Crackers & Chockles
Chocolate biscuit in order to meet the trend of healthy & non fat foods (R/W,

March,1995). Together with Clarke’s company, Lanes are continuing to develop new
products using autobake division’s special cooking technology. Lane’s will launch a
$3 million dollar budget for campaign in 1996 to become a bigger contender in
Australia. They are aiming their products at people who feel young and have a
younger outlook on life (AFR, June1996).
Lanes’ strategy at the moment is to be number two in the market. Hence, Lanes
strategy is that of a follower.
3. Players
Players parent company is Jack Chia-MPH Ltd, Singapore. It is holding 1.9% of the
biscuit market share, a decrease of 0.8% from previous year. Their brands are Fiesta,
Home brand, Twin Tattles, Choc Bi Keie, Choc Wheat, Mini Mates, Switsh, Wafers,
Scotch finger and Kavli.
In 1994, they have lost around $ 5.78 million and this year they expect to gain profit
with better distribution system and product range revised. However, since Arnott’s
took over the company, it is no longer a threat to Arnott’s market share.
4. House brand /Generic

House brand is now a growing competitor. Their share of the market is now estimated
at 5%. Their strategy to penetrate the market is through advertising campaign and a
“special made” food with their best ingredients (The Australian, Oct 31, 1995). This
strategy is based on the study by independent federal government-commissioned
study released on October 1995, that 74% of consumers preferred to buy Australian
products. They study revealed that 75% of consumers believed that Australian
products were better quality than imported products; 86% of consumers recognised
the Australian Made logo; 80% of business preferred to buy Australian products; and
60% were willing to pay more for locally made goods than to buy an imported
product. However, another study revealed that consumer intention and action is

different. A survey conducted by James Cook University researchers showed that

price, quality and value for money were the “overriding” factors in buying decisions.
The result showed that 70% of consumers believe Australian made goods are
overpriced compared with imported goods. While 92.8% of those surveyed believe
buying Australian products benefited the economy, only 47.2% choose an Australian
product in a sample buying exercise. This highlights a contrast between consumers’
intention and their actions.
In terms of opportunities and threat to Arnott’s, the above competitive review means :
1. Arnott’s is a market leader in biscuit market. This is an opportunity to develop
Arnott’s image as Australia’s top selling brand of biscuit.
2. Arnott’s biscuits is number thirty two on the Top 100 best selling grocery brands
(R/W Nielson Report, Nov 1995). This is a good opportunity to increase sales.
3. Weston will become a bigger threat to Arnott’s. They have improved their
production efficiency using new technology. In addition, they have also improved
their man power through empowerment programs, and also they have intensified
their product innovation program.
4. Even though Lanes is a follower, it can be a threat for Arnott’s because of its
collusion with Clarke’s company in using autobake division’s special cooking
technology. This will enable them to be well represented in all categories of the
market.
1.2.2.3 DISTRIBUTION CHANNELS AND BUYERS
To compete in biscuit market, Arnott’s and its competitors need to expand their
distribution channels. According to Food Week Industry Tearbook 1996, 90.6% of
biscuit passed through grocery, 0.6% through route trade, 1.5% through food service
and 7.3% through cash and carry and distributors.

Channel of Distribution in 1995
100
80
60
40
20
0 S1
Grocery
Route trade
Food Service
cash & carry

Distributors
Figure1.9 Source: Food week Industry Yearbook 1996
1.2.2.4 CONSUMER TRENDS

1. Consumer are more aware not only on the taste but also the healthy aspects and
nutritious content of the product they consume. Increased buying on weekly
basis and buying more often but less quantity is also noted as significant
trends.
2. The trend of environment conscious of customers have also to be considered. For
example Australian and Asian market prefer to buy in carton. They perceived
that it can be easily recycled, and in addition, it better value for money.
3. Consumers are loyal to their favourite brands and are willing to pay at whatever
price for the products. This indicates the success of existing brands.
4. The increasing trend for old people would also be an opportunity to increase
market expansion, since they spend more time at home than the youngster.
5. “Eating outside” is a growing consumer trend. People spend more time outside
their home.
6. A ‘new’ breed known as ‘Street Mart’ is type of consumer who prefer to
argue on price and delay purchases until goods go on sale. They also are not
overly impressed with the corporate-image based campaigns.
1.2.3 SUMMARY OF OPPORTUNITIES AND THREATS

Below are the summary of opportunities and threats identified in both the external
environmental analysis and the industry level environment analysis. In order to
determine its significant level, a rating ranging from 1 to 5 is given to each
opportunity and threat.

OPPORTUNITIES RATING OF
SIGNIFICANCE
Market leader in biscuit market 5

Increase of total population 5
Opportunity in bigger snack market 5
Healthy food concern 5
Economics growth 4
Technology advancement 4
Increases in the employment level 3
Environmental issue on environmental safe products 3
Expected increases of older population in the future 3
Expected increases of estimatedexpenditure in the future 3
“Street Mart” consumers 3
Low interest rate 2
THREATS RATING OF
SIGNIFICANCE
Strong competitors in snack market 5

Maturity stage of biscuit market 5
Reduce trends of biscuit per capita consumption 5
“Eating outside” habit 5
Healthy food concern trends 4
Shortage of wheat 4
Declining in the young population in thefuture 3
Government regulation to encourage foreign business investment 3
Environmental issue on environmental safe products 3
Appreciation of Australian dollars 3
“Street mart” consumers 2
Inflationary pressures 2
Indirect substitution 2
1.3 INTERNAL CLIMATE
1.3.1 Management
In October 1992 Campbell Investment (Australia) Pty Ltd made a takeover offer for
the company and since then it has gained a 70 % interest in Arnotts. Campbell Soup
Co chief executive David Johnson, an Australian-born said the US-based company
had no plans to buy the remaining 30% of Arnotts that it does not own (Reuter,
16/6/96). He stressed that Campbell is committed to Australia and this combination

with Arnotts will derive long-term export earnings for Australia. Campbell Soup’s
early history parallels the history of many of today’s great companies include Arnotts.
Campbell Group, the 82nd largest company in the USA (Fortune 500 Survey of
20/4/92), is a global manufacturer and marketer of branded consumer food products.
Its financial record for the fiscal year ended up July 30, 1995 shows that its net sales
climbed 9% to $7.278 million while net income rose 11% to $698 million. Arnotts
alliance with Campbells will be a boost to the company’s operations. Bill Purdy,
Arnotts chairman, has stated that the management of both Arnotts and Campbells are
committed to work harmoniously together towards to promote the growth of Arnotts
into a ‘major succcesful global biscuits company’.
The globalisation of the worldwide biscuits means Arnotts needs an effective

international partner to suceed in Asia against strong international competition.
Arnotts’ position both domestically and international markets, will be significantly
enhanced by a combination with Campbell.
Concern with quality has always been a priority at Arnott’s. Quality has been so
much part of the Arnott’s culture and is the driver behind Arnott’s staff and
management initiatives. Quality in relations with customers is another priority.
Arnott’s is one of a few major food companies that does direct store delivery. The
ownership of the supply chain from the point of manufacture to point of sale is a
major strength. Arnott’s quality customer service was also enhanced by the
installation of radio frequency technology into its warehouses. The quality of the
Arnott’s fleet is also well recognised and has always been a source of much company
pride.
In its 1996 Annual Report, the management emphasizes few key strategies to achieve
its long term objective, which are:
 continue revitalisation of domestic businesses;
 continue to introduce snacking formats of successful products;
 further increase advertising spend;
 progressively increase the number of products packed in cartons and continue
packaging upgrade; and

 development of Asian market
Arnotts is set up operationally with businesses focusing regional groups within five
business units:
ARNOTTS LIMITED
MANAGING DIRECTOR
NSW VIC/TAS QUEENSLAND SA/WA ARNOTT’S

DIVISION DIVISION DIVISION DIVISION BISCUITS NZ LTD.
FINANCE SALES MARKETING ADMIN. R&D
MAC FARMS
CONTROLLER ENGINERING
HUMAN
SECRETARY RESOURCES PRODUCT
TREASURER DEVELOPMENT
INFORMATION
SERVICES
INSURANCE TECHNICAL
& SUPER. SUPPLY SERVICES
COMPANIES
INTERNAL
AUDIT ILLAWARRA LOGISTIC
JAMS
W&B ENGIN.
1.3.2 Financial Position

Arnott’s is the seventh largest biscuit company in the world. Combined with
Campbells it becomes the fourth largest biscuit company in the world. Besides that
Arnott’s is listed on the Australian Stock Exchange. For the year ended June 30,1995
Arnott’s sales revenue was up by 3% to $641 million and operating profit before tax
and abnormals increased by 4% to $121.2 million. Net profit before abnormals
increased by 5% to $84.7 million. This enables Arnott’s to increase paying dividends
to its shareholder with a significant amount. Dividends per share has constantly
increased, from 23 cents in 1990 to 32 cents per share in 1995.

Balance sheet of 1995 shows that Arnott’s total assets increased by 3.5% to $567
million while the total shareholders equity was up by 2.8%, showing the
shareholders’ commitment and confidence in investing their money in Arnott’s. From
these figures, we can say that Arnott’s has a strong and solid financial position in
term of its asset and capital structure. Arnott’s 1995 cash flow indicates that Arnott’s
net cash flow from operating activities was up by 2.5% despite the fact that cost of
upgrading plants and facilities increased by nearly 100%, from $22.8 million to $45.4
million.
As such, Arnott’s financial strenghts are reflected in its:

 improving profit margin,
 consistent earnings and dividend growth,
 high return on capital invested and
 strong reliable cash flow.
1.3.3 Production/Manufacturing Capabilities and Supply

In Australia, Arnott’s manufactures a wide range of biscuits and snacking products at
factories at Homebush in New South Wales, Marleston in South Australia, Virginia in
Queensland and Burwood in Victoria. The company also has biscuits manufacturing
and operations in New Zealand and Papua New Guinea, Macadamia operations in
Australia and Hawaii and a recent joint-venture operation in Indonesia.
Arnott’s production facilities have undergone a number of changes in the last four
years under its restructuring program to reduce costs and improve productivity.
Arnott’s has reallocated the production of many products to increase specialisation of
its factories in producing particular products. Cost improvement programs have been
established and action taken to reduce layers of management. In its Adelaide factory,
Arnott’s has established a short run speciality plan, doubled the floor space for
production, installed new handling and packaging systems, and upgraded its
processing facilities and other equipment. This upgrading that cost $30 million has
dramatically improved its performance. Besides cost reduction program, Arnott’s also

ensures tthat quality does not suffer. It has supplemented the quality audit conducted
by its technical services group with a monthly consumer communication review.
On January 15, 1996, Arnotts has announced its plan to proceed with a $190 million
investment in a world-class biscuit factory at Huntingwood in Sydney’s west. The
Huntingwood factory will replace the Homebush site which was built in 1908 and
will have the capacity to produce 45,000 tonnes of biscuits per annum. The
construction of the new factory with robotics equipment will be completed early to
mid-1997. When operational, it will provide cost savings of between $18 and $20
million dollars per year. With capital expenditure of $25 million, Arnotts is
continuing upgrade its Burwood factory in Victoria which is expected to be
completed by mid/end of 1996.
A national logistics approach was introduced incorporating distribution, purchasing,

and production scheduling. The objectives are to reduce purchasing costs nationally,
to reduce manufacturing, transport and inventory costs through improved planning
systems, and to reduce warehousing and distribution costs while maintaining
competitive advantage and superior customer service. Arnott’s has expanded its
distribution channel substantially during the last couple of years. Arnott’s famous
parrot brand mark can not only be found in supermarket and grocery but also in
cinemas, vending machine, milk bars, sandwich shops, newsagents, school and office
canteens, petrol station, takeaway food shops, community centres and other small
retail outlets.
1.3.4 Human Resource

At 30th June 1995, Arnott’s employed 4,286 people in Australia, New Zealand,
Papua New Guinea, United States and Asia. Arnott’s long history of good industrial
and employee relations has always been a positive factor in the company’s success. In
1995, the second round of enterprise agreements was negotiated. These agreements
build on the successes of its first enterprise agreements and structural efficiency
programs. They ensure that flexible work practices, continuous improvement and
constructive and cooperative relationships between the company, employees and the
unions are maintained.

Over 200 Arnott’s employees from Australia, New Zealand and PNG participated in
an in-house team leadership development program. The essence of the program is to
develop better leadership skills and a greater understanding of the leadership process.
This was just one of the many training activities during a year in which Arnott
continued to increase its investment in training. There were numerous other internal
and external programs, designed to further enhance and upgrade our employees’
capabilities.
With Campbell acquiring a majority of outstanding shares of Arnotts Limited, it is

inevitable that there will be some adjustments and changes in policies/strategies and
existing management. The changes may in short period affect the morale of
employees and perhaps may provoke management and union unrest.
1.3.5 Research and Development

Concern with quality has been the driving force behind many of the company’s
developments. It led, importantly, to the establishment of a laboratory at Arnott’s,
when in 1926 it was decided that something must be done to overcome variation in
biscuits quality. A small laboratory for testing raw ingredients used in production was
established. The lab expanded and by the 1930s, applied research into sugar inversion
had begun and the Arnott’s laboratory had become a leader in flour research in
Australia.
The present Research Centre, located at Homebush, and still a leader in flour
research, was opened in 1977 and incorporated Arnott’s first microbiology
laboratory. In1995, the Research Center made substantial progress on a number of
technical projects, including investigation into low-fat/no fat-products, as well as
innovative dough handling techniques. On average, Arnott’s new product sales acount
for about 3.5% of its total sales volume. The product development section is
responsible for developing new product lines, improving existing product, keeping up
with overseas trends, and maintaining contact with suppliers of new raw material and
flavours. At this Homebush research centre, a group of over 40 staff try out new
formulations, ingredients and taste combinations and convert product ideas into

reality. Arnott’s reinvest about 50% of its after tax profits back into business each
year and this is used to upgrade production facilities and on research and
development.
Arnott’s has also formed a joint research project with Macquarie University and this
research project aims at eliminating inconsistencies in the manufacturing of biscuits.
The main subject of the research is to ensure consistent colour in biscuits by using
artificial neural networks and digital images (the Australian, 24/5/1994 pg 34).
Besides that, Arnott’s is one of the participants to assist the Australian wheat industry
develop high-quality wheats.
1.3.6 Competitive Position

Arnott’s is Australia’s largest biscuits manufacturer and at the moment has a share of
64.5% of the biscuits market. Indeed, Arnott’s is detemined to retain its position as a
market leader in this market. However, over the past ten years, per capita
consumption of biscuits has declined. ‘Away from home’ snack market has become
the fastest growing segment in Australia food market due to changing lifestyles.
Arnott’s major competitors in salty snacks, confectionery and muesli bars have been
growing quite strongly through the 1980s because they have capitalised on the trends
towards convenience and snacking, whereas biscuits have traditionally remained an
in-home product. Arnott’s is determined to capture this ‘away from home’ snack
market. It sees its competitive framework not just the biscuit market but rather the
broader macro snack market, which in Australia today is worth around $4.9 billion,
compared to $800 million for biscuits.
The product introduced during the year not only positioned Arnott’s in the broader
snack market but also responded to both of these consumer trends. During 1991/1992,
it introduced multipacks varieties to cater for the growing consumer trend of ‘eating
out’. At the same time, Arnott’s launched its Nik Nax range, which targeted against
salty snacks on the premise that they are ‘less bad for you’ because they are baked not
fried. Its sales after 20 weeks showed that there were increasing in volume. Retail sale
for Nik Nax during 1992/93 was around $20 million. In June 1993, Arnott’s launched
a range of 12 new products into small snack outlets in New South Wales and Victoria.

This move is a great strategic significance for Arnott’s future in the macro snack
market.
Cadbury, Nestle and Smith Snack Food Co. Ltd are the three biggest competitors in
the snack market. These companies are expected to launch new product and to extend
existing lines in the year and to increase their marketing and advertising budgets
accordingly. With the failure of its Scout snack bar which was released in 1993,
Arnott’s immediate concern is to review its marketing and distribution strategies in its
bid for the snack market.
1.3.7 Marketing
In 1990, Arnott’s sales and marketing department were split and this was to enable
the company to focus better on account and category management. Arnott’s
marketing strategy for the 1990s is to put ‘an Arnott’s within reach’ of every
Australian. For the launching of Nik Nax in 1992, Arnotts spend $2 million on
television campaign and the result was one of the food industry’s most successful
launch during the year. In 1993, Arnott’s launched a range of 12 away-from-home
snacking products in Australia, introduced a number of new products such as Scotch
Finger, Blackberry Monte Carlo and Sao with wholemeal and repackaged its
chocolate range.
In dealing with the retailers, Arnott’s has changed its approach to a ‘how we can both
win’ mentality. This approach is working with the retailers as a team to improve its
leverage in negotiating shelf space, layout and promotion.
In seeing itself in the context of the broader snack market rather than the biscuit
market, Arnott's has implemented a number of strategies which among them are
increased its advertising spend by 40%, introduced new products and line expensions,
and improved its packaging, redesigning the graphics to give its products a
contemporary look, without losing its sense of heritage.
Sales growth of Arnott’s total chocolate biscuits category is 22.5%. This high
increased in sales of chocolate category was due to the success of Arnott's chocolate

summer promotion as well as the launch of its four new chocolate biscuit products in
March 1995.
One of Arnott's fundamental strategies is to have a snacking version of all its major
lines so that consumers are able to buy products at any time of the day. The snacking
range, which accounts for approximately 6% of its domestic sales, now represents a
very good cross-section of convenient formats of Arnott's major selling lines.
1.3.8 STRENGTHS AND WEAKNESS SUMMARY
This summary will provide a ranked listing of the strengths and weakness diagnosed
within Arnott’s with a ranking between 1 and 5, 1 means not significant, 3 means
moderately significant, 4 means quite significant and 5 means highly significant.
Strengths Rating of
Significance
Strong brand name 5
Strong financial position 5
Management commitment to retain market leader position in 5
biscuit market
Vast and solid distributions channels 4
Cost-effective 4
Advertising 3
Research and development 3
Collaboration with Campbells 2
Weaknesses Rating of
Significance
Small player in snack & confectionery market 5
Relatively new and little experience in macro snack market 4
Management and employees unrest (short term) 2
70% of the share belongs to Campbells 2
1.4 PROBLEM AND OPPORTUNITIES

The information gathered in the SWOT analysis will be interpreted to draw

conclusions about the organisation’s situation.
1.4.1 Critical Success Factors

Factors that are critical to the success and strengths of Arnott’s are listed in order of
importance as follows:
 Brand Strength
Strong brand name represents a significant barrier to entry for new entrants. Biscuits
are a low involvement purchase and visibility on retail shelving with brand
recognition is critical to capturing a sale. The brand also needs to be tightly coupled
with consumer's expectation of good taste and quality, something that will be
achieved through many years of brand building and constant advertising and
promotions. Arnott’s is very well placed in this regard .
 Financial Strength
Arnott’s has a strong financial position and this position is strengthen with its
collaboration with Campbell’s. The scale in financial strength is essential to support
R&D and for funding a high advertising that is needed to support a low involvement
product and to regularly launch new product.
 New Product Development/Introduction

As biscuit is in its mature stage of product life cycle, new product development/
introduction is the best way to stimulate the market and to try and coax renewed
interest from consumers.
 Distribution
A vast and solid distribution through all channels is one of the important element in
determining the success or failure of a product and in gaining competitive advantage
over the rivals
1.4.2 Arnott’s Capabilities in relation to the CFSs

In terms of brand strength and strong financial position, Arnott’s has very good
capabilities in these regard. Experiencing flat sales, Arnott’s has in early 1990s

introduced new range of products and until now still improving its new product
development and advertising strategy. A strong in-house distribution operation has
been part of Arnott’s success with delivery direct to high volume outlets such as
supermarkets in high profile red van. This has minimised warehouse stock holdings
and breakage. However, Arnott’s experience in other channels of distribution such as
route trade is less well established. With the recent failure in its Scout bar, Arnott’s
ought to improve its other channels of distribution and not just restricted to
distribution through grocery.
1.4.3 Opportunities - Existing Capabilities
Significant Opportunities Significant Strengths
Opportunity in a bigger snack market Strong brand recognition

Increasing purchasing power and consumer Management commitment
Product-line expansion and innovation Strong financial position
‘Eating-out’and healthy foods trends Research and Development
1.4.4 The Most Significant Threats

The most significant threats for Arnott’s are the strong competitors in the broad snack
market as well as being a small player in snack and confectionery market with
relatively new and little experience.
2. MARKETING OBJECTIVES
2.1. CORPORATE OBJECTIVES
The main objectives of Arnott’s limited is to concentrate in the existing product lines
and to maintain its leadership position in the chocolate biscuits market. These
objectives can be achieved by continually producing high quality and innovative

products and by maintaining strong relationship with retailers, vendors, suppliers and
customers.
2.1.1. MISSION STATEMENT
Arnott’s Biscuits Limited is committed to satisfy and serve every consumer’s need
ranging from children to adults, to provide a superior growth and return to its
shareholders, to establish and maintain good relationship with its network, to provide
a stimulating and satisfying environment for its employees, and finally, to be the
leader in every segment of biscuits market through its high quality and innovative
products.
2.1.2. PERFORMANCE OBJECTIVE
 To increase market share by 14% by year 2000.

 To increase return on revenue from 9.12% in 1996 to 12.92% by the year 2000.
 To increase the R&D budget by 0.7% of the total turnover.
 To increase marketing communication budget by 20% each year.
 Maintain strong alliance with retailers and vendors at a lower cost, with suppliers
at a better deal.
2.2. MARKETING OBJECTIVES
2.2.1. MARKETING STANCE

Arnott’s aims to maintain its market leader position in the chocolate biscuit category.
To achieve this, Arnott’s must anticipate competitors’ actions and attempts by using a
proactive strategy. This include market expansion strategy and market share
protection strategy.

By employing a market expansion strategy, Arnott’s is targeting new segments. For

example, Arnott’s has expanded its market to children segment by launching Tiny
Teddy and Choco-Saurs chocolate biscuits.
By employing a market-share protection strategy, Arnott’s is protecting its current

market share in the chocolate biscuits market through intensive advertising. This
intensive advertising will drive both brand and category awareness.
The following are ways for Arnott’s to achieve its objectives;

 Maintain and further improve standards, providing constant market attention to
preserve the competitive edge with strong brands, high quality products to suit a
diverse range of consumers.
 Increase more value and nutrient to its product.
 Ensure that prices are competitive.
 Be innovative in developing new product or in upgrading the existing products.
 Fully utilise Arnott’s strongest assets, that is, its expertise in biscuit making and
its powerful brands.
 Carry out manufacturing, distribution, R&D and marketing activities efficiently.
 Maintain strong alliances with retailer, vendors, suppliers and customers.
 Develop the effective and attractive advertisement to attract and communicate
with the right target audience and build good product image in customer’s mind.
 Quickly response to the competitive situation.
2.2.2 MARKETING PERFORMANCE OBJECTIVES

Arnott’s marketing performance objectives in the chocolate biscuits segment are
carried out in terms of quantified, measurable and achievable performance target set
within a stated time frame for its achievement.
Arnott’s expects to increase its chocolate biscuits market share from 51.5% to 65.5%
by the year 2000. To achieve this, company annual sales should increase by 20.5%
each year. This is calculated, assuming that the market size of chocolate biscuits
grows by 9.5% per year during the year of 1996-2000.

Marketing performance objectives can be set by the Ansoff Product/Market Matrix as

shown in Figure2.1 below:
PRODUCTS
Existing New
M
Existing
A 1. Market Penetration 2. New Product Development
R
K
New
E 3. Market Development 4. Diversification
T
S
1. Market Penetration - Existing products for existing markets
Market penetration is applied to stimulate existing consumers to increase their

consumption and to maintain or grasp more market share by extensive promotion and
product expansion..
With its 51.5% share in a chocolate biscuits market, Arnott’s acts as a market leader.
In order to maintain or grasp more market shares and stimulating the existing
consumers to increase their consumption, an aggresive and attractive Television
commercials and promotion programs had been introduced. For example, the thirty
second TV commercials about the ‘3 wishes’ of Tim Tam had enhanced the image of
the popular Tim Tam chocolate biscuits. This is followed by the ‘on-pack’ chocolate
biscuits promotion where consumers must mail on-pack ‘Wish’ tokens from Tim Tam
chocolate, caramel and hazelnut plus Mint slice, accompanied by bar codes from
other Arnott’s chocolate biscuits in order to win the $10,000 cash, a $7500 diamond
setting ring and a Royal Albert dinner set. Another type of ‘an on-pack’ promotion
program such as a free Choco-Saur tattoo in each pack of the new Choco-Saurs
chocolate biscuits, and giving 600 children the chance to win Choco-Saur pyjamas
have also been introduced.
2. New Product Development - New products for existing markets

New product development means providing new products into the existing markets.
A strategy of new product development has resulted in a significant increase in
volume of the Arnott’s chocolate biscuits product range. Arnott’s has responded to
the following new product development strategies.
 Product Innovations - As consumers prefer new and innovative products, Arnott’s

products are designed to satisfy the need of consumers for nutritious products
without sacrificing the taste. This can be done by developing new variety for the
existing brands and adding more added value. For example, new lines called the
Obsession Chocolate Assortment containing six chocolates varieties: Tim Tam,
Mint Slice, Monte, Gaiety, Cavetto and Fruit & Nut, aiming to meet what
Arnott’s says is a strong consumer need for more varied assortment
 Product Extensions - This include product revision such as adding little touches to
existing lines and pack size analysis. For example, Peanut Gaiety is an extension
of the Gaiety chocolate biscuits. By adding peanuts on the Gaiety chocolate, it
will gives the enjoyment and variety to the existing Gaiety chocolate biscuits line.
While Choco-Saurs is introducing honey flavour to its existing brand, the
introduction of the 45 gram Tim Tam chocolate biscuits bar and Tim Tam
caramel add more size and taste variety to the existing Tim Tam product line.
3. Market Development - Existing products for new markets

Chocolate is the fastest growing category in biscuits market, and Arnott’s is the
market leader on this category. To maintain and to increase it’s market share,
Arnott’s is continually looking for new target market. For example, Arnott’s Fruit &
Nut 40g chocolate bar is one of the company’s growing stable of single serve ‘Away
from home’ products designed to meet today’s consumers growing trends of ‘out-of
home’ consumption.. The other potential growth is children segment. Arnott’s

launched Tiny Teddy and Choco-Saurs chocolate biscuits with different flavours to
provide the children with different kind of chocolate biscuits’ taste.
4. Diversification - New products for new markets

So far, Arnott’s has not entered into new markets with new products (R/W March,
1996) but considering the huge existing market in macro snack market where biscuits
only account for 16% of the total market, Arnott’s is going to compete and focus
more on this macro snack market as one of its long term strategies. It has set up its
key strategies to maintain volume growth through advertising and investment in key
brands to exploit full market potential of snacking category and to maintain brand
relevance and excitement through on going new flavour extensions
3. MARKETING STRATEGIES
3.1 POSITIONING STRATEGIES

Arnott’s has decided to compete in the mass market with a product range to cover a
wide variety of customer needs and wants. In pursuing this strategy, Arnott’s adopts
market segment approach to cater for the different segments of the market.
3.1.1 Market Segmentation
The chocolate biscuits market is segmented as follows:
Segmentation Regular Children Premium

Segment Segment Segment
1. Analysis of what
and where?
 Prod. Attributes Snack food that can be Fun, animal shape choc Luxurious exotic and
eaten at anytime and biscuits and can be unique varieties
anywhere eaten at anytime and
anywhere
 Price Value for money Low Price Premium Price
Supermarkets and other Big & Small Supermarkets

 Distribution Outlet route trade distribution supermarkets,
Milkbars
2.Analysis why they

buy?
 Product Benefit - Good taste and high - Nutritious - Good tasteand high
quality - Presweetened quality
- Satisfied hunger - Satisfied hunger - Good as gift
- Non artificial ingredient - Good taste and high - Good to serve to
- Good to serve to quality guests/party
guest/party - variety of
- ‘Away from Home’ assortments
consumption
3. Analysis of who
the customers?
 Demographic All ages Children Adult
4. Types of Choc -Tim Tam Hazelnut - Tiny Teddy Half - Obsession Choc
-Tim Tam Caramel Coated Assortment
Biscuits -Tim Tam Dark Chocolate - Tiny Teddy
- Mint Slice, Fruit&Nut Flavoured
- Peanut Gaiety Choc - Choco- Saurs
3.1.2 The Nature of the Competitve Conduct

Arnott’s adopts a low relative cost and high degree of differentiation strategies. With
these strategies, Arnott’s can achieve high margins by pricing either at or just above
its competitors. Furthermore, high degree of differentiation of its products from
competitors would help Arnott’s to retain and increase its market share. However, the
danger of this strategy is that as the industry matures, the products tend to be

increasingly regarded by the market to be generics or commodities (Reed, 1992).

Consequently, there are no added value for consumer to buy the products.
As the market leader, Arnott’s competitive position strategies are market share
protection and market expansion. Arnott’s would react to competitive challenge by
launching a new product to offset the attacker, bettering the price offer and/or by
using advertising or sales promotion.
3.2 CONCEPTS AND TECHNIQUES THAT CAN AID

MARKETING STRATEGIC DECISION-MAKING
In assisting the marketing strategic decision making process, two concepts and
techniques will be disscussed. There are the product life cycle and Boston Consulting
Groups Growth/Share Matrix. It is important note that these tools should be regarded
as aids for decision making, not prescriptive mechanisms (Reed, 1994).
3.2.1 The Product Life Cycle Concept

Based on the characteristics of the Product Life Cycle stages, the biscuit market is in
the stage of maturity where peak sales cyclicality sets in, profits per unit is average
and prices are low. However, chocolate biscuit category is in growth as its sales
rapidly rising (BRW, September 1996). Arnott’s chocolate biscuit category is in
growth stage of PLC. Marketing objectives for this category are to increase the
market share and to attract new users. These objectives are pursued by applying
strategies as offering extensions, features or service to the products, maintaining the
prices, building intensive coverage, stimulating wider trials and emphasizing brand
loyalty.
Figure3.1 Product Life Cycle Pattern for Arnott’s Chocolate Biscuits Category
Product
category
sales Arnott’s Choc Biscuits
(in real $)

Growth C.Turb Maturity
Intro Time (year)
3.2.2 Boston Consulting Group Growth/Share Matrix

BCG model, a two-dimensional matrix based on market share and market growth, is
used to analyse Arnott’s chocolate biscuit's portfolio. The portfolio matrix is divided
into four cells: stars, cash cows, wildcats or problem children and dogs.
RELATIVE MARKET SHARE
HIGH LOW
M
A Star Wildcats
R H Tiny Teddy
K I Tim Tam Obsession
E G Mint Slice Gaiety
T H Fruit and Nut
G
R Cash Cow Dogs
O L - -
W O
T W
H
Figure3.2 BCG Product Portfolio Model
Stars: ‘Invest for growth’
Both Tim Tam and Mint Slice have a high market share and growth. TimTam is the
most successful chocolate biscuit product in the biscuit market. Sales growth of
Arnott’s total chocolate biscuit category is 22.5% in value, with Tim Tam up 28.5%
and Mint Slice sales up by 19.4% (R/W March 1995). Specifically, Tim Tam will

seek to maintain its leadership in the chocolate biscuit market and also attract some
sales away from traditional confectionery bar and muesli bar products on the basis of:
 Tim Tam’s wholesome delicious taste compared with confectionery bars;

 Tim Tam’s similarity to other popular Arnott’s product although chocolate
coated;
 the comparative suitability of Tim Tam for people eating snacks leisurely or on
the run to save time and as ‘away from home’ snacked and
 Arnott’s strong brand reputation for quality.
In maintaining consumer interest, Arnott’s has and will carry on introducing new
innovations and expansion of Tim Tam with different flavour. TimTam has been
aggressively advertised.
Wildcats: ‘Opportunistic development’
Tiny Teddy and others such as Choco-Saurs that are under children segment have a
low market share in a high market growth. This segment is highly market attractive
but it is still at a very early stage in its development. Arnott’s is investing heavily in
this segment by spending on product promotion.
Gaiety, Obsession and Fruit & Nuts have relatively low market share but there is
great potential for growth. Aggressive advertising campaigns, aiming to create high
brand awareness have been prepared to support these products.
Cash Cow: ‘Manage for earnings’ and Dogs
From the information gathered, to date, none of the brands under chocolate category
is identified to be under these two cells. This perhaps due to the facts that chocolate is
the fastest growing category in biscuits (R/W March 1996). However, most of

Arnott’s other brand names such as Family Assorted and Milk Arrowroot which are
under plain category are considered as cash cows. They have high market share and
low market growth. These brands are the cash generators.
4. MARKETING MIX STRATEGIES
4.1 PRODUCT STRATEGY

Discussion on product strategy decisions will include Product item decisions and New
product development.
4.1.1 Product Item Decisions

To attract and increase consumer’s appreciation, the value of Arnott’s products is
extending well beyond its physical characteristics. Three essential elements that
comprise Arnott’s product are:
 The Core Product Dimension

Core needs that Arnott’s chocolate biscuits can satisfy/provide are their great
delicious taste and high quality. They are also very convenient because they can
be eaten virtually every hour of the day - prepared for school lunches, enjoyed for
morning tea, cracked open at lunchtime, nibbled on in the afternoon and snacked
on at all hours. Besides, they are hunger satisfying snackfoods.
 The Tangible Product Dimension

This dimension is the physical product surrounding the core need. Physical
characteristics that Arnott’s products can offer:
1. “Famous Arnott’s” brands, a top selling brand of biscuit, guarantees high
quality and excellent taste to satisfy a variety of consumers’ needs.
2. Portability, convenience and portion control are the major factors that will
drive Arnott’s packaging formats. Packaging size are differ with distribution.
In the convenience route, they are packed as bar format with about the same
dimensions as a confectionery bar product to appeal to the impulsive buyers.
In groceries and supermarkets, the twin packs are available, and also value
packs of 200g of twin packs loose packaged in a larger bag. This is important
because grocery shoppers are provisioning (buying for a family, a party or
otherwise stocking up a cupboard) and looking for bulk value.
3. Arnott’s improved packaging by redesigning the graphics to give its products

a contemporary look without losing the company’s sense of heritage. The
designs are meant to catch the shoppers’ eyes to the shelf.

 The Augmented Product Dimension

Arnott’s provides a free-call customer service number disclosed on the packaging
as to enable customers to contact them. This enhances consumers perception of
Arnott’s products quality. Besides that Arnott’s does direct delivery of the
products to its retailers, particularly big supermarkets. This helps to ensure
delivery of fresh product with minimal handling and therefore breakage.
4.1.2 Positioning
Positioning relates to the way customers categorise products and rank various brands
in their minds (Reed, 1992). Arnott’s positioning strategy is to make consumers
perceived its products as the ‘famous brand’ product of high quality, nutritious and
excellent taste.
To achieve this, Arnott’s emphasizes the high quality and great taste of its chocolate
biscuits. Its motto of “There is no Substitute for Quality” is printed on each of its
products packages. When consumers think of Arnott’s brands, they visualize the
image of quality, good taste and convenience. In addition, Arnott’s produces a wide
range of products that satisfies and serves every consumer’s need ranging from
children, teenagers, adults, older population, ‘eating-out’ habit and so forth.
4.1.3 Product Differentiation (Competitive Advantage)
One of the main strategic options for Arnott’s is to differentiate itself from its
competitors. Arnott’s product differentiation is effectively achieved through:
 Aesthetics

Arnott’s chocolate biscuits are of great taste and high quality. They also satisfy
consumer the need for convenience and portability. Concern with quality, Arnott’s
has supplemented the quality audit conducted by its technical services group with a
monthly consumer communication review. In addition, throughout production process
the quality is assured: the biscuits are examined for taste, texture, colour, appearance,
dimensions, width, moisture content and so forth.
 Servicibility
Arnott’s focuses on customer satisfaction by working closely with consumers and by
conducting periodic market research surveys. It also responds to customer complaints
better and faster than competitors.
 Perceive Quality
In many cases a customer makes jugdement based on perception rather than reality
about a product’s quality (Reed, 1992). Arnott’s has an advantage in building the
perception because of its strong brand names and image, further, strengthen with its
intense advertising campaign. Moreover, Arnott’s history in biscuit market goes way
back to late 1800s. Most Australians grew-up knowing Arnott’s biscuits and it have
been part of their life. The well-established brand name ensures customer awareness
and loyalty.
4.1.4 New Product Development
In order to maintain its position as market leader in chocolate biscuit market as well
as to have a balanced portfolio of products, Arnott’s employs the new product
development strategies.

In March 1996, Arnott’s has launched new variant of Tim Tam called Dark Chocolate
Tim Tam. The release of Dark Chocolate Tim Tam responded to research showing
20% of Australians “love their chocolate to be dark”(R/W March 1996) Other
variants of Tim Tam include Tim Tam Hazelnut and Tim Tam Caramel.
In aiming to meet consumers need for more varied assortments, Arnott’s introduced
Obsession Chocolate Assortment which contains six chocolate varieties: Tim Tams,
Mint Slice, Monte, Gaiety, Cavetto and Fruit and Nut. With almost 60 per cent of
consumers choosing peanut confectionery/biscuit product frequently (R/W March
1995), Arnott’s has released Peanut Gaiety, an extension of Choc Gaiety. After being
released as a single serve ‘Away from Home’ bar, Peanut Gaiety is being released in
a grocery pack. Peanut Gaiety contains of a delicious wafer and peanut cream,
covered with peanuts and smothered in mild chocolate.
The children segment product line has been expanded by adding the new chocolate
half-coat Tiny Teddy and new Choco-Saurs, a choc version of the successful honey
variant. This release is to capitalise on the growth of children’s biscuits as well as the
half-coat segment.
4.2 PRICING STRATEGY
4.2.1 The External Factors
 Price Elasticity of Demand

The demand for Arnott’s chocolate biscuits product under premium market segment
is price inelastic. It means that demand will not be significantly affected either by
price reduction or by price increase. This is due to the fact that consumers of this
market segment are concern with the superior quality, luxury and the great taste of the
product. They are also aware that there are not much direct or indirect substitution of
the product.
Therefore, in this segment it is proposed that Arnott’s should either maintain its price
to maintain its market share or increases its price to increase sales revenue and still
maintain its existing market share.
However for the regular and children market segments, the demand for chocolate
biscuits product are price elastic. It means that demand is very sensitive to changes in
the product’s price. There exists many competitors which offer variety of substitution
for consumers.
In these market segments, it is proposed that Arnott’s should be price competitive.

As such, decisions have to be made on whether Arnott’s should match the
competitors price in order to maintain its market share or reduce the price lower than
its competitors in order to gain more market share.
 Competitive Factors
Based on the observation in the supermarkets, the price of Arnott’s chocolate biscuits
for the standard and premium market segments are mostly higher than it’s
competitors. However, for the children segment, the price of Arnott’s Tiny Teddy
and Choco-Saurs chocolate biscuits are lower compared to both Lanes (Spookies,
Bumble Bee, Traffic Lights) and Weston (Wagon Wheel) products.
High price
Figures 4.1 and 4.2 below illustrate a competitive positioning map based on price
Arnott’s
and quality.
Westons
Others Player
Low quality High quality
Housebrands 47
MBA 5310 Marketing
Low price
Figure 4.1: Price and Quality product positioning for premium and regular segment
High price
Lanes
Westons Arnott’s
Others
Low quality High quality
Housebrands
Low price
Figure 4.2: Price and Quality product positioning for children segment
4.2.2 The Internal Factors
 Skimming Pricing Strategy
A skimming pricing strategy is employed for the premium segment of Arnott’s

chocolate biscuits such as Obsession. The demand for the product in this segment is

highly price inelastic where the consumers main concern is quality. Thus, a high
price creates a high profile image among the consumers.
 Penetration Pricing Strategy
Because of the strong competition in the chocolate biscuits market particularly in both
the standard and children segment, the penetration pricing strategy should be used. In
the market segment where the demand of the product is very price sensitive, this
strategy can push the sales. However the prices will not be set as low as those of
housebrands since Arnott’s will not compete in the low-end market. In addition,
break-even analysis should be performed to find break even point where the average
revenue is equal to the average cost of production. This is to ensure that Arnott’s can
still at least cover its average fixed cost and earn a normal profit during the
implementation of its penetration pricing strategy.
4.3 DISTRIBUTION STRATEGIES
Arnott’s distribution strategy is intensive distribution whereby a wide variety of

wholesalers and retailers are chosen to sell its products. Arnott’s pursues this strategy
due to the fact that it is competing in a mass market and that the natures of its
products are considered relatively low cost and frequently purchased convenience

goods. With this strategy Arnott’s needs to ensure the availability of its product at
every outlet.
4.3.1 Distribution Structure
Arnott’s distribution channels are as follows:

1. Arnott’s Retailers Consumer
2. Arnott’s Wholesaler Retailer Consumer
Majority of Arnott’s products is distributed through first distribution channel. Here,

the retailers are particularly big supermarkets such as Coles, Safeway and Franklin.
Arnott’s would do direct delivery to these is supermarkets’ warehouses in its high
profile red vans.
In the second distribution channel, Arnott’s use the wholesaler to serve the other
retailers which are the route trade and the other smaller supermarkets. With the
development of its ‘Away from home’ products, Arnott’s needs to extend its sales
based beyond supermarket distribution channels. Arnott’s is less well established in
the route trade distribution, this is proven by the failure of its two brands: Scout and
Fruitables.
The distribution network of Arnott’s to every state in Australia is illustrated in

Figure4.3 below:
ARNOTT’S BISCUITS
LIMITED
WAREHOUSE IN EVERY STATE
BIG SUPERMARKETS: WHOLESALERS

COLES, SAFEWAY,
FRANKLIN, ETC
OTHER ROUTE TRADE

SUPERMARKETS

VENDING CINEMA MILKBARS OTHERS

MACHINE
4.3.2 Channel Management

Arnott’s has a strong supermarket distribution network. It has captured so much shelf
space in the top supermarkets compared to its competitors. Arnott’s gains this
competitive advantage because of its large and diverse line of products. This is indeed
strengthen Arnott’s chances of winning customer loyalty.
In July 1993, Arnott’s launched its new range of snackfood products exclusively for
the route trade. Knowing that it did not have a sales force calling on the route trade,
Arnott’s used Spring Valley Fruit Juices (owned by Campbells) to act its selling and
distribution arm (Assael et. al 1995)
Distributors support is important to have an overall effectiveness of a marketing

program. This means that Arnott’s need to provide support services to its distributors
to help them in their task of pushing the products through the pipeline (Reed, 1992).
Arnott’s so far has adopted ‘pull strategy’ whereby it has intensively advertised its
products and has consumer promotions in order to create consumer awareness and
demand. In addition, Arnott’s can use a ‘push strategy’ such as sales promotional
incentives to encourage distributors to take on a product.
4.4 MARKETING COMMUNICATION STRATEGIES
Synergy is created in marketing communication when two or more elements combine

to create a powerful impact on the target audience (Reed,1992). Arnott’s combines a
number of elements of marketing communication mix in promoting its products in the
market. These elements play an important roles in determining consumers’ awareness
of Arnott’s products.

The promotional mix will include :

 Advertising
 Sales promotion
 Publicity
 Event Marketing
4.4.1 Marketing Communication Goals
Arnott’s will base on the hierarchy of effect concept to develop its marketing
communication strategy. According to this concepts, Arnott’s products fit into the
Law Involvement Hierarchy ( Learn-Do-Feet) model. The communication stages of
this model are as follows:
Awareness-Comprehension
Action
Conviction
Based on above model, Arnott’s must focus on the following marketing

communication goals :
 Maintain and develop brand awareness of Arnott’s products.
 Develop awareness of the brand differentiation under Arnott’s.
 Emphasize product benefits and high quality to existing and potential consumers.
 Strengthen perception of Arnott’s as number one in Australian chocolate biscuits
market.
 Create awareness among consumers that Arnott’s biscuit is healthy biscuits as it is
known to have been developed through joint research with C.S.I.R.O
4.4.2 Marketing Communication Budget

The marketing communication budget is set by using the percentage of sales method.
It is assumed that Arnott’s allows a fixed percentage of 12% each year. In 1994-1995,
the total sales of Arnott’s chocolate biscuit in Australia was $187.97 million. As the
marketing objectives is to increase the sales by 20.5% per year, the expected retail
sales in 1996 is $ 219.42 million. Assuming the mark up within distribution channel
is 35%, the marketing communication budget of Arnott’s is calculated as follows:
12% x $ 219.42 million/1.35 = $ 19.5 million
So, the marketing communication budget for Arnott’s in 1996 is $19.5 million. For
the following years, it will be set based on use the same method.
4.4.3 Advertising Strategy
As Arnott’s employs a multi-segmentation strategy it should accommodate for every

target segment with different positioning strategies. To increase brand and category
awareness among consumers, the following strategies are set:
Regular Segment
 Products : Tim Tams - Hazelnut, Caramel, Dark Chocolate,
Mint Slice,Chocolate/ Peanut Gaiety,Fruit & Nut.
 Target Audience : Male/Female all ages.
 Objective : Strengthen brand awareness and increase consumption.
 Positioning : Can be eaten anywhere and anytime.
 Highlighted benefit: High quality, delicious taste (rich, smooth & irresitable)
 Execution : Happy, fun and energetic situation.
 Media : Television, radio, magazine and cinema
Children Segment
 Product : Tiny Teddy Half Coated, Tiny Teddy Chocolate
Flavoured Biscuit, Choco-Saurs half coated.
 Target Audience : Children
 Objective : Increase awareness of brands, benefits and increase
consumption.
 Positioning : Children delicious chocolate biscuits with fun image.
 Highlighted benefit: Nutritious and delicious chocolate biscuits that suitable
for snacks or part of main meal.
 Execution : Cheerful situation, children creativity, fun and exciting
 Media : Television, Family/children magazine, in-store tasting.

Premium Segment
 Product : Obsession
 Target Audience : Adults
 Objective : To strengthen brand recall and increase consumption.
 Positioning : High quality and up market image chocolate biscuit.
 Highlighted benefit: Exotic, excellent taste, variety assortments and good as
gift.
 Execution : Luxurious lifestyle with emotional theme and classical
theme.
 Media : Television and magazine.
4.4.4 Sales Promotion Strategy
The sales promotion strategy will help Arnott’s in increasing and maintaining its
market share in the three chocolate biscuit segments. Arnott’s can employ the
following types of sales promotion:
 Consumer Sales Promotion

The objectives of consumer sales promotion include:
1. Maintaining brand loyalty,
2. Encouraging non-users to try Arnott’s chocolate products,
3. Encouraging existing users to buy more frequently, and
4. Encouraging users to switch brand to Arnott’s.
These objectives can be achieved through the following sales promotional tools:
Reducing Price:
1. Discount coupon : given by retailer which is valid for Arnott’s products. This
can be done by manufacturer by inserting coupon in food magazine,
newspaper or distributing directly to supermarket, cinema, schools and other
channel of distribution.

2. Price off deals: A certain amount of money off the regular price. This is only
applied for Arnott’s products which are slow in sales. For example, Fruit &
Nut will be offered $0.10 off each bar in order to push sales.
3. Bonus pack: offering the extra amount at the same pack. This is applied for
regular segment such as Tim Tams, Mint Slice to encourage the heavy users to
buy more of the products.
Rewards:
1. Recently, Arnott’s is offering “Bingo $200,000” and 20 prizes of $ 10,000
cash to be won. It can be done by finding two bingo numbers and one bonus
symbol in specially marked packs of Arnott’s biscuit. Over 25 different
Arnott’s biscuit packs will be carrying this special design (New Idea
Magazine, August 1996).
2. Arnott’s can offer gimmicks such as scratch and win prizes for a purchase of
multi-pack bags and free give away printed at the back of the single bar
wrapper. This prizes perhaps include family dinner at five stars hotel, home
entertainment units, tv- set, kitchen set and so forth.
 Trade Promotion
Arnott’s need to use trade promotion to:
1. Encourage retailer and wholesales to stock its products,
2. Maintain and build customer loyalty,
3. Reimburse retailers for in-store support of Arnott’s products such as window
displays,
4. Push current sales volume,
5. Gain access of the distribution channels, and

6. Gain more space in supermarkets.
Trade promotion techniques to be used to achieve the above strategies are:

Cash Allowances:
1. Offer discount prices to retailers if they purchase Arnott’s products at certain
quantity. For example, if the retailers purchase more than 100 packs of
chocolate Obsession, they will get a discount of 5% each pack.
2. Free gift. For instance, Arnott’s can offer free trips such as 10 days tour to
Europe or Asia to the retailer or wholesalers if they can sell any kind of
Arnott’s chocolate products at the total amount of 1 million within six months.
4.4.5 PUBLICITY
Arnott’s can use publicity in the mass media as one of its promotional tool. The main
publicity tools that are recommended are as follows:
1. Editorial information in the media: Example is press release of Arnott’s social
activity.
2. Event/Sponsporship: Arnott’s can involve in sponsporship or fund raising. For
example, Arnott’s may sponsor sporting events such as The Australian Tennis
Open and Melbourne Cup or fund raising for AIDS, Disable people, etc.
5. BUDGET
Arnott’s chocolate biscuits budget is as follows :
1996 1997 1998 1995 1999 2000

Market Size (000) 426065 466541 510862 389100 559394 612536
Arnott’s market size(%) 48.31 54.69 58.08 51.5 61.69 65.51
Arnott’s market size(000) 219423 255165 296729 187974 345063 401270
Sales Value (000) 165917 199929 240915 137690 290302 349814

Cost of Production (000) :

Raw Material &Labour 114482 137951 166231 95006 200309 241372
Fixed Cost 12000 12000 12000 12000 12000 12000
Total Cost of Production 126482 149951 178231 107006 212309 25337
Marketing Expense (000) :
Advertising 11116 13395 16141 9225 19450 23438
Sales Promotion 1659 1999 2409 1377 2903 3498
Retail Support 4148 4998 6023 3442 7258 8745
Sponsor Event 1659 1999 2409 1377 2903 3498
Marketing Research 1244 1499 1807 1033 2177 2624
Entertainment & Travel 830 1000 1205 688 1452 1749
Maintenance of sales 332 400 482 275 581 700
Others 3318 3999 4818 2754 5806 6996
Total marketing Expense 24307 29290 35294 20172 42529 51248
Net Profit Before Tax 15127 20688 27389 10512 35464 45195
(000)
Return on Revenue (%) 9.12 10.35 11.37 7.63 12.22 12.92
The Arnott’s budget for 1996-2000 has been calculated. The calculations are based on
the actual and assumed figures (where not available). The assumptions are as follows:
 Growth of market size is 9.5% p.a.
 Growth of Arnott’s market share is 6.2% p.a
 Raw material and labour cost is 69% of sales value
 Maintain Fixed cost
 Advertising cost is 6.7% of sales value
 Sales Promotion is 1% of sales value
 Retail Support is 2.5% of sales value
 Sponsor Event is 1% of sales value
 Marketing Research is 0.7% of sales value
 Entertainment & Travel is 0.5% of sales value
 Maintenance of sales is 0.2% of sales value
 Others refer to marketing department expense such as salaries,electricity,medical
expense etc.
6. MARKETING PROGRAM
6.1 IMPLEMENTATION (ACTION PLAN)

This marketing plan has identified Arnott’s objectives for the next five years as being:
1. To maintain a strong position for the company as a market leader in the chocolate
biscuits category and this is achieved by :

 Maintain and further improve standards, providing constant market attention to

preserve the competitive edge with strong brands, high quality products to suit a
diverse range of consumers.
 Increase more value and nutrient to its products.
 Ensure that prices are competitive.
 Innovative in developing new products or in upgrading the existing products.
 Fully utilise Arnott’s strongest assets, that is, its expertise in biscuit making and
its powerful brands.
 Carry out manufacturing, distribution, R&D and marketing activities efficiently.
 Maintaining strong alliances with retailer, vendors, suppliers and customers.
 Develop the effective and attractive advertisement to attract and communicate
with the right target audience and build good product image in consumer’s mind.
 Quickly response to the competitive situation.
2. To increase the company’s market share in the chocolate biscuits category to
65.5% by the year 2000
3. To achieve an increase in sales value as outlined in the following schedule:
Year $ million Percentage
Year 1 (1996) 16.59 20.5

Year 2 (1997) 19.99 20.5
Year 3 (1998) 24.09 20.5
Year 4 (1999) 29.03 20.5
Year 5 (2000) 34.98 20.5
Action Plan below listed all the steps necessary to implement the marketing program
with timing and responsibilities clearly stated.
6.2 EVALUATION AND CONTROL
Arnott’s need to have an evaluation and control system to make sure that it will
achieve the objectives of this marketing plan. Control will direct or redirect Arnott’s
actions to ensure that they meet objectives and evaluation will determine whether
results are on target. Evaluation is a necessary adjunct of control because any time
Arnott’s actions are controlled, they must first be evaluated (Assael et. al 1995).
Steps in evaluation and control model are as follows:

6.2.1 Identify Performance Criteria
The primary criteria to evaluate marketing performance are sales value, market share,
profits before tax and return on revenue. These criteria will be useful in identifying
deviations and as such ensuring remedial action will be taken.
6.2.2 Develop Performance Projections
The performance are shown in the table below:
Performance criteria 1996 1997 1998 1999 2000
Sales Value ($ Million) 16.59 19.99 24.09 29.03 34.98

Growth in sales value (%) 20.5 20.5 20.5 20.5 20.5
Market Share (%) 51.5 54.7 58.1 61.7 65.5
Net Profit before tax ($ Million) 15.13 20.69 27.39 35.46 45.19
Return on Revenue (%) 9.1 10.4 11.4 12.2 12.9
The above serves as a performance yardstick. The comparison of actual performance

to projected performance will give Arnott’s a basis for determining whether
corrective action is necessary to get performance on target.
6.2.3 Evaluate Marketing Performance
Once identified problems through the measurement of performance, next step is to

determine the cause of the problems. Arnott’s can examine the following possible
causes:
 Unsatisfactory marketing effort and
 Changes in the external environment

With the identification of problems and their causes, Arnott’s will make some
modifications to performance and objectives:
 Performance modifications refers as steering control system. This is a reactive
system that detects problems and implements corrective action during the
planning period under review. As such, corrective action can be taken before
condition is getting worst.
 Objective modifications refers as adaptive control system. This is a proactive
system that applied if the problem occurred as a result of changes in the
environment. In this case the objectives and strategies should be modified to suit
the new situation.
6.2.4 Corrective Action
Corrective actions will be taken whenever necessary and appropriate, especially if

Arnott’s facing performance variance (the difference between objectives and
performance) and forecasting variance (the difference between the original objective
and the new objective). Arnott’s should not regard the necessity for corrective action
as a failure of the marketing planning process. Corrective action prevents problems
from getting bigger and from effecting other areas of the plans. Moreover, it reflects
the need to keep a pulse on constantly changing marketing environment and adapt
plans accordingly.

Arnott Marketing Plan

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What are Arnott's objectives for its marketing plan?

What are Arnott's objectives for its marketing plan?

What strategies does Arnott's plan to use to achieve its objectives?

What strategies does Arnott's plan to use to achieve its objectives?

Arnott’s MARKETING PLAN

Marketing objectives are formulated to gear Arnott’s towards maintaining its

MBA 5310 Marketing 1

1.1 Business Definition

MBA 5310 Marketing 2

Figure1.1 shows that Arnott’s Corporate % Shares in the

Product Market Segments Key Brands

Crackers Jatz, Savoy, Sao, Water Cracker, Cheds, Sesame Wheat.

Chocolate Tim-Tams, Mint Slice, Gaiety, Fruit&Nut, Obsession, Tiny

Crispbread Salade, Vita-Weat, Cruskits, Saltine.

Cream Assorted Creams, Classic Assorted, Kingston, Shortbread

Cookies Fambake, Butternut Snap, Butternut Cookie, Chocolate

Flavoured Snack Shapes : BBQ, Savoury, Pizza, Nik Nax

Fruit Tartles, Spicy Fruit Roll, Full O Fruit, Rasbery Shortcake.

Plain Family Assorted, Milk Arrowroot, Milk Coffee, Granita,

Shortbread Scotch Finger, Glengarry, Arnott’s Shortbread.

Topped Iced Vo Vo, Venetian.

Wafer Triple Wafer, Tina Wafer.

This report is going to concentrate on developing a marketing plan for chocolate

1.2. The External Environment Analysis

MBA 5310 Marketing 3

1.2.1. The Macro Environment Analysis

MBA 5310 Marketing 4

Recently, Australian dollar is appreciating against other currencies. It went up to

MBA 5310 Marketing 5

7. Appreciation of Australian dollar would be a threat to Arnott’s. This will

 Social Trend - Demographic Factors

As it is shown by Figure1.2 above highest distribution of population by state is in

MBA 5310 Marketing 6

Estimated Resident Population by State

Figure1.3 Source : ABS-1995

Population Structure By Age Group

Figure.1.4: Population Estimates by Age Groups in Australia

The implications for Arnott’s :

MBA 5310 Marketing 7

1. Arnott’s should allocate more of its resources in New SouthWales, Victoria

4. The overall prediction of the population distribution may enhance Arnott’s

 Social Trend - Life Style

MBA 5310 Marketing 8

Health Status in Australia 1990-1993

Figure. 1.5 Source: Social Trend ABS,1995

 Social Trend - Pattern of Expenditure

The implications of the trends for Arnott’s are as follows:

MBA 5310 Marketing 9

1. To cope up with the ‘healthy conscious’ trend of the Australian people,

The corporate social responsibility is currently a big issue in business environment.

MBA 5310 Marketing 10

In term of opportunities and threats to Arnott’s, the above analysis means:

A new computer program developed by Queensland University called ADAPT

The impact of technological trends on Arnott’s :

MBA 5310 Marketing 11

Australian government regulation to disclose the information of all food products

In response to a high complaint from consumers regarding the representations made

The implications for Arnott’s:

1.2.2 THE INDUSTRY LEVEL ENVIRONMENT ANALYSIS