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TMA 04 Part 1 questions
1. From the information contained in the case, what is the marketing mix employed by Bottle Green? (25 marks)
2.Assume that Simon Speers has decided he wants to strengthen the ‘marketing communications’ element of the marketing mix. What are his available options and which elements of the promotions mix do you think he should concentrate on? Give reasons for your answer. (25 marks)
3.Explain to Simon Speers what digital marketing is and how he could use it to grow the Bottle Green business? Give reasons for your answer. (30 marks)
Steve Scutt – Case Study Assignment 04
Case study
Cordial company’s blue-sky thinking: A sunny summer could be the beginning of the future for elderflower drinks maker Bottle Green as it looks to expand
SIMON Speers is dreaming of a long, hot summer. People are more likely to flock to the supermarkets and pick up bottles of elderflower cordial when the sun is shining, he says.
That increased demand will not only translate to higher income and profits for Stroud-based Bottle Green, but will allow Speers to meet his target to repay a large bank and venture capital debt within two years. Then, with the freedom to finance greater brand awareness, Speers aims double income. But he is nervous. “We were left very tight for money on the back of three rubbish summers,” he says.
Bottle Green produces a range of cordial drinks, the bulk containing elderflower. The taste, says Speers, is like a Muscat wine. “It’s very floral and delicate but with a sweetness.” The range is growing. “Pure elderflower is our flagship brand but we also have others such as ginger and lemon grass or Cox’s apple and Victoria plum.”
It’s a niche product but demand is there – proven by the increasing competition. As well as other small independent producers, supermarket own-label brands are vying for a slice of the growing market.
The bulk of Bottle Green’s elderflowers come from the company’s own farm in Gloucestershire with the rest imported from Hungary. The drinks are made by steeping the elderflower heads in a sugar syrup compound – the flavours infuse and the sugar forms the basis of the condensed drink. But that poses another potential risk to Speers’ plans.
“We buy sugar at the euro sugar price, which is higher than the world sugar price,” he says. Bottle Green has limited its exposure to currency rate fluctuations by fixing the price until October, after which it will be looking to fix for a further period. But any movement in the wrong direction on the foreign exchange markets will mean Bottle Green paying more for one of its basic ingredients.
Former Britvic man Speers joined Bottle Green in 2002 to help founders Kit and Shireen Morris prepare the then 13-year-old company for sale. He then staged a management buy-out. “As the old ad says, ‘I liked the company so much, I bought it’,” says Speers. The Morrises still own the company’s site where most of the bottling is done. Distribution is outsourced.
At the time of the MBO in March 2007, Bottle Green was a cash-rich company with a turnover of around £9m, says Speers. Today, the now cash-poor business with a staff of 40 is selling just over £12m of drinks and makes a modest profit but is carrying a debt just shy of £10m. “It’s a hefty amount for a small company – it keeps me awake at night,” adds Speers.
Servicing that debt is the number one priority at Bottle Green. “The interest rate on the VC funding is fixed but we are paying a variable rate on the bank loan. If it went up we could cover it but it would hamper our ability to pay back faster,” he adds. “I expect we will be able to pay off the bank loan within a year,” says Speers, 49. “A bit earlier if we have a decent summer.”
Settling up with the venture capitalists will take a tad longer. But then, once free from the burden of financing such loans, Speers wants to build Bottle Green, including boosting sales overseas. It currently exports to Sweden and Canada. France is on the radar and the Middle East, Australia and New Zealand are also likely markets. But it’s the home market where Speers initially wants to focus growth, building on that premium brand image.
Bottle Green sells via the main supermarkets as well as small outlets such as tea shops. A bottle of concentrate elderflower cordial costs just under £3. With its chic bottle, Speers hopes its elderflower drinks will make it on to the dinner tables of the nation’s middle classes. “We want people to be proud to put the bottle on the white tablecloth. I think of it as the champagne of soft drinks,” he says. It’s an aspiration helped by run-away success in Waitrose. “Waitrose is our single biggest customer – it lists every product we do and our elderflower cordial outsells all other cordials and squashes, be its own-label, Robinsons or Ribena.”
With extra funds, Speers would boost brand-building. “We would like to run more sampling sessions at food and drink events. There are very few people who have sampled our products who don’t like it. It’s about awareness and trial. We want people to discover and talk about us,” he says.
“But we are not a brand to go blazing on the TV. We don’t think our consumers would respond to that. Our consumers like to discover us and tell their friends about us. We also send a lot of samples and recipe ideas to TV chefs. They are key influencers. Delia Smith is a fan of Bottle Green, as is Jamie Oliver. If they say anything positive about us we see the sales spike the next day.”
Janine Woodcock. Managing partner, Indicia: Without taking the mass marketing approach to building awareness, Bottle Green needs to concentrate on creating engaging stories for people to talk about in reference to its products. To do this, it needs a clear understanding of its core values (which it already has) and it needs to understand its core demographic.
Bottle Green has a great social media profile on which to tell its story and I would advise it to use this as part of its customer relationship management strategy.
It should proactively engage and involve its current customers, establishing their interests and behavioural patterns, building a continually deepening understanding. I think it then needs to own a “Bottle Green” occasion, possibly sponsoring a typically British, unique and authentic event such as May Day fairs. This approach will lead to customers interacting with the brand more, meaning awareness will grow organically and consequently their business too.
Robert Allison. Managing director, Expense Reduction Analysts: It’s good Simon Speers is thinking of debit and foreign exchange like any other direct business cost.
These are often neglected when focus is on sales and market share. Mr Speers can reduce risk by taking up forward contracts with banks or specialist providers for the sale or purchase of currency. These can be set up on an option basis, meaning the downside risk is contained, and the contract can be closed (for a small fee) if rates move in the client’s favour.
With outgoings and incomings in the same currency, a bank account in that currency will mitigate losses when switching in and out of sterling. Banks can set these up, and interest can be earned on balances. As international plans are achieved, Mr Speers should consider if costs are in one currency and income is in another and neither is sterling. Currency accounts save paying the bank multiple exchange rate margins when switching into and out of sterling.
(Source: Smith, 2010)