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Executive Summary
Company Profile
Two men who came together established the Tasty Baking Company in 1914 to introduce the
World’s first ever individually wrapped lunchbox size pies. Tastykake has a solid foundation with five key building blocks that has been driving the company to earn sales in excess of $250 million through over 100 different products. The Tasty Baking Company is a small company that is growing by leaps and bounds every year.
Situation Analysis
The United Kingdom is a melting pot of cultures in modern day and has one of the most stable and successful economies in the free world. Recent political action and historic worldwide events have assisted in establishing a “special relationship” between the United Kingdom and the
United States of America. Although several culture differences lay between these two countries there are several aspects that are similar between the two.
With 88% of adults living in the United Kingdom snacking between meals, it is easy to see why the Tasty Baking Company is seeking to capitalize on this growing trend. As snacking continues to increase due to demanding lifestyles and time constraints, current cake manufacturers are faced with the task of innovation in order to produce snacks that are more convenient, while maintaining some semblance of nutritional value. Cakes and biscuits come in as the number two snack of choice in the United Kingdom, which puts the Tasty Baking Company, with its tried and true product lines and years of experience, in a prime position to introduce ground-breaking products into this thriving global market.
Place
Tasty Baking Company will employ contract manufacturing when entering our product,
Tastykake, into the United Kingdom market. Our focus is to internationally maintain control of sales, marketing, promotions and distribution. We will select the Nestle Factory in Tutbury for their south central location to manufacture our product and will have an extensive distribution density throughout the southern UK region. The third party logistics provider, Wincanton, will provide our transportation and warehousing services. We are gaining more control of our channel and sales by owning our own direct sales force and will provide our retail locations, sales force and supply chain with incentives.
Product
When it comes to our product decisions, features, positioning, and branding there are three key ideals The Tasty Baking Company keeps in mind; freshness, great taste, and giving the customer what they want. We’ve built our products on these standards and that has made us successful in the US. These qualities set us apart from the competition. Through careful execution of the product, we can carry this same “Tasty” tradition into the UK.
Price
TastyKake Baking Company will be implementing a multi-phase, hybrid pricing strategy. The overall strategy will involve a careful combination of both EDLP (Every Day Low Pricing) and
High-Low approaches. The initial phase will focus on price penetration, with low prices and strong emphasis on the product benefits. The second phase will focus on raising prices to meet our competition while introducing occasional promotions. The last phase will be a leveling off
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of both strategies to arrive at competitive prices and frequent, intriguing promotions. TastyKake will also be utilizing line pricing for their products, whereby the range in prices directly reflects the level of benefits in each part of the range. In conjunction with the line pricing, the promotional pricing strategies will involve BOGO (Buy One Get One) and Bonus Packs to outpace the competition.
Promotion
TastyKake has built its U.S. market on the quality, freshness and convenience of its products. In order to effectively build brand awareness and communicate these brand messages in the U.K.,
TastyKake has decided to use advertising and sales promotion to introduce their products into the market. Advertising will consist of a mass marketing strategy and two segmented strategies:
Parents with Children and Older Consumers. In addition to advertising, the sales promotions will include value-added purchases and off-shelf displays in hopes to encourage impulse purchases. Lastly, TastyKake will try something that they currently do not do in the U.S., character merchandising. The character that is licensed for the U.K. promotions is Shrek©.
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Company Profile
History
The Tasty Baking Company (TBC) was founded in 1914 by Philip J. Baur, a Pittsburgh
Baker, and Herbert T. Morris, a Boston egg salesman. These men joined together in
Philadelphia to produce high quality baked goods using only the finest ingredients. Morris and
Herbert revolutionized the pastry industry by introducing the first ever individually wrapped lunchbox size pies. Tastykake is a baking company focused on providing their customers with a variety of fresh pastries in convenient locations at a reasonable price.
Foundation
The Tasty Baking Company is supported by their building blocks that are the driving forces of this successful company.

People: Involvement in the lives of the employees, consumers and the community.

Brand Equity: Positioning the Tastykake brand through several media vehicles.

Product Innovation: Creating nearly 100 products in nine specialized product families.

Core Routes: Enhancing the distribution routes while staying true to the freshness and quality.

Operational Excellence: Operating in an efficient manner to provide reinvestment opportunities and support the shareholders.
Product Line
The Tastykake product line includes a variety of different individually wrapped pastries to satisfy any desire at any time including Cupcakes, Donuts, Honey Buns, Juniors, Kandy
Kakes, Kreamies, Krimpets, Pies, Sensables, Snack Bars, Tasty Kookies, and several other mainstream snack items such as pretzels, brownies and wafers.
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Financial
The revenues for the Tasty Baking Company were significantly higher in 2004 compared to the past three years, but unfortunately the most recent quarterly earnings produced only a fraction of what was projected. Compared to their current competitors in the market, the Tasty
Baking Company controls only a small portion of the market, mainly because their primary market is located in Pennsylvania, New Jersey, Delaware, and Maryland. The Tasty Baking
Company earned approximately $150 million in sales in 2004 but ended the year with a net income of only $1.2 million.
Corporate Enhancement
Tastykake celebrated their 90 th
birthday in 2004 and decided to make several key enhancements to the corporate structure. They began with their first new slogan in ten years,
“Now that’s tasty”. They restructured several departments such as marketing, sales, and key account teams while also integrating several employee focused benefit programs. Tastykake expanded their distribution routes into the Midwest beyond Pittsburgh into Ohio and developed a program to work more closely with Independent Sales Distributors. Internally, Tastykake recently implemented a new ERP system that will integrate all critical areas of the business from sales and marketing to distribution and accounting. Each of these corporate enhancements plays a crucial role in the success of the Tasty Baking Company.
Situation Analysis
Country Profile:
Demographics
The United Kingdom (UK) is actually a combination of four nations, England, Scotland,
Whales and Northern Ireland. Of these nations, England, Scotland and Whales combine to form
Great Britain. The population of the UK is approximately 60 million, which marks it as the third
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largest in Europe and 18 th
largest worldwide. Nearly one third of the UK’s population lives in
England and approximately 7.1 million are located in the prosperous capital of London.
The general population consists of 82% English, 10% Scottish, and about 4% either Irish or
Welsh. The UK is home to immigrants from all over the world such as Africa, South Asian, the
Caribbean, and the Middle East. From a religious perspective, the UK is a melting pot of several different religions including Roman Catholics, Muslims, Sikhs, Hindus, and Jews.
Approximately 99% of the population over the age of 15 are literate mainly due to the fact that schooling is mandatory from ages 5 through 16. Close to 20% of all British students go on to receive post-secondary educations.
Economics
Despite the economic activity surrounding the global economy, the UK has made great strides in the past several years. The GDP growth has averaged at 2.8% in the past decade and cut their unemployment rate by 50% to 3.1 percent in 2003, which was the UK’s lowest in over
25 years. The inflation rate has maintained relative stability, around the three percent range, and interest rates have been dropping since 2001. As of 2003 the UK had exports in excess of $304 billion and imports of approximately $363 billion. The Great British Pound (GBP) remains as the primary form of currency within the UK. The exchange rate between the UK and the United
States is 1 GBP to 1.86570 U.S Dollars. Controversy still surrounds the issue of whether or not the UK will join the surrounding countries and implement the widely used Euro.
Politics
The UK is lead by Tony Blair, recently elected to his third term as Prime Minister, and
Queen Elizabeth II, Head of State since 1953. The UK is a member of several different international organizations including the European Union (EU), the North Atlantic Treaty
Organization (NATO), the International Monetary Fund (IMF), and the World Trade
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Organization (WTO). The UK is also considered as the international bridge between the United
States and Europe, playing an integral role in international relations. As a result of the
September 11 attacks in the United States, a “special relationship” has formed between the UK and the United States. Prime Minster Blair has been a firm supporter of the Bush administration and the War on Terror.
Culture
The European culture is significantly different from popular American Culture in several aspects. First and foremost is the importance of history. Anything more then three to five years old is considered aged and irrelevant in the U.S., on the contrary, in the European culture, historical events play a great role in the business world. Another critical difference is the misconception of land and natural resources. In the United States land, energy and natural resources are considered unlimited, but in Europe all of these factors are not taken for granted and supply is limited. This can be depicted in the size of cars, equipment, and the consumption of natural resources.
Fortunately there are several similarities between the United Kingdom and the United
States. According to the Hofstede Measure of Cultures both countries are relatively similar scores in power distance, individualism, masculinity, and uncertainty. The United States and the
UK have a solid foundation for business and political relations. Aside from certain cultural differences and the concern for environment and natural resources, the UK is a diverse country with a large potential market.
Market Profile:
Current Buying Behaviors
It was recently discovered that 88% of adults snack between meals, while only 12% rarely or never do. This percentage of “snackers” is dominated by the female population, and
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also by younger generations. The most common foods people consume as a snack are fruit at
39%, chocolates and sweets at 38%, biscuits and cakes at 36%, and crisps and nuts at 32%. The high percentage of cakes equals high growth potential, which The Tasty Baking Company intends to capitalize on. Moreover, women and younger consumers were more likely to select sweet foods like cakes, biscuits, and chocolates than were men and older people. From this segmentation we can see that we would be best off to select a target market of young females between the ages of 18-35.
While consumers are most likely to snack at home, there is also a large percentage that snack at work, followed by those that snack in the car, at a bar or pub, etc. Ten percent of consumers snack as a result of having missed a meal because they were too busy. Sixty-six percent of those snacking to replace missed meals worked full-time, and almost fifty percent are under the age of 35. This clearly demonstrates the impact that modern time pressures have had on traditional meal patterns.
While 34% of people snack because they are actually hungry, still another 29% snack simply because they are bored. This becomes important when you look at the positioning and distribution of your product, ensuring that it is readily accessible in various places.
Snacks can be classified into three different categories dependent upon the consumer’s snacking habits:

Planned: These are foods that consumers are traditionally happy to eat between meals because they are healthy, such as fruit. These snacks are bought for this purpose.

Unplanned: These are foods that consumers are more remorseful towards than others.
They include sweets that are less healthy and that consumers therefore wish they had not eaten.

Rewards: These are small snacks, usually chocolate, that are used as a reward or indulgence for a specific achievement or occasion.
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Research shows that over 40% of all cake is purchased on impulse. This means that display is vital in achieving our maximum sales. Customers entering a shop need to be able to find products quickly and easily. TastyKake is looking to capitalize on all three of the abovelisted categories, with a diversified product line, including traditional recipes for those that are not planning their snack times, low-fat options for those that are, and highly decadent items for those that feel the need to “reward” themselves.
Trends
The traditional eating pattern of three meals a day is being replaced by snacking and grazing. There is an increasing sense of reliance on ‘others’ to prepare and cook food.
Expenditure on eating out is on the increase, and the younger generations are eating out more than older generations; bringing many changes to the way we eat. 25 to 34 year olds spend the greatest amount on eating out each week (£11.05), compared to older people who spend somewhere between £5.00 and £7.00 a week eating out.
Another important aspect of eating out is that it is dependent upon the time which people have available to go home and actually prepare a meal themselves. Working hours in the UK are among the highest in Europe. The most common length of the working week for men is 40 hours, followed by 60+ hours, while women tend to work less than 40 hours a week. Still more women work part-time than do men, but this is changing. If we look back to the buying behaviors we see that less free time means more snacking and grabbing food on the go; this is our area of opportunity.
Needs/Wants
As the number of households and sizes of those households change, the type of food people are eating and cooking is changing. There is a greater demand for smaller pack sizes, for
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“ready-to-eat” food, and for eating out. People are less likely than before to eat a formal meal and more likely to eat a number of snacks throughout the day.
More of the UK population is employed, with many working longer hours and with more people working part time and working at different hours of the day. Thus there is a demand for longer opening hours, for food that doesn’t take too long to prepare and for technologies that simplify life. Home delivery and home shopping are becoming more popular as people become used to receiving help from others.
The food offer is changing to reflect the way people live their lives. There is greater demand for food that takes less time to prepare. People want food that is easily available and that can be eaten on the move.
Market Segmentation

Snacking
More substantial cakes that satisfy when hunger strikes

Time Out
Cakes that help you unwind and make the most of ten minutes to yourself in a hectic day

Kids
Cakes that provide an extra layer of fun to keep your kids happy

Traditional
Family favorites that have always been and will forever be popular

Special Days
Extra special recipes that make the most of special occasions, e.g. Birthday Cakes
Understanding which customer you are dealing with is critical in maximizing sales. The
Tasty Baking Company will look to stock products that cover all of these segments. In particular, branded best sellers will be stocked most consistently because these products are what your customers are looking for and they provide the growth to be generated.
Target Market
Our target market will consist of females between the ages of 18-35. Through this target market we will be able to reach various other markets. While women, are more likely than men, to snack on sweets, they are also more likely to be doing the shopping for the household and therefore will be the purchase decision maker for the younger market, ages 0-15. Additionally, if
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the woman is the shopper in the family and the husband is on the go a lot with his job, he will be more inclined to grab something to eat from the kitchen rather than take time out of his busy day to make his own purchase.
Existing Competition
Manor Bakeries - The largest branded player in the cakes market. Manor Bakeries have driven new initiatives within the cake market, most significantly with the launch of new structural packaging for Mr Kipling fruit pies – see Mr Kipling page for further information.
The need for portable, non-messy snack products led to the development of an out of home product range. This range builds on the success of the Mr Kipling and Cadbury Cakes brands, and enables consumers to enjoy their favorite cakes any place, any time, any where.
Products:

Mr Kipling
Largest UK cake brand focusing on individual cakes for each member of the family.

Cadbury's Cakes
Largest chocolate cake brand focusing on kids and snacking sectors.

Lyons Cakes
The most popular choice for traditional cakes to share with family and friends.
McVitie’s
- The second largest branded player. A brand of United Biscuits, which is a leading European manufacturer of biscuits and snacks and is building on its success with a growth strategy. UB focuses on profitable branded growth through investment in priority brands and key markets. The business is accumulating an unrivalled portfolio of leading biscuit and snacks brands which will create a series of exciting growth opportunities through leveraging UB's natural advantages in scale, innovation and market reach.
Products:

Jamaica Ginger Cake

Homebake

Go Ahead!

Jaffa Cake

Penguin

Hobnob
InterLink Foods - Emerging non-branded supplier.
Market Entry Strategy
Contract manufacturing
Tasty Baking Company will introduce our Tastykake products to the United Kingdom by foreign production as opposed to exporting. Due to the nature of our product and shorter product
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shelf life, Tastykake products could not endure an overseas shipment and distribution and still provide the freshness that Tastykake stands for. We will utilize contract manufacturing so that we can still maintain responsibilities for sales, marketing, promotions and distribution of
Tastykake goods. We are not the only player in the convenience prepackaged baked good category so it does not merit constructing our own factory. The production technology of prepackaged baked goods is also widely available throughout the United Kingdom.
Plant Selection
Tasty Baking Company will select the Nestle factory in Tutbury in Strattsford Shire in the United Kingdom. Nestle manufactures four successful brands of cakes in their product line and has ten factories in the United Kingdom. Since “Food scares like BSE and E. coli have pressed manufacturers to renew old plants, with strong encouragement by the supermarkets”
(Food Manufacture, p5) , we wanted to select a well-known, established brand that would have a product measured by high standards. We sourced Nestle for their reputation of quality control and valued products and selected the Nestle Tutbury factory for its strategic location to London and its suburbs.
Distribution Density
Tastykake will have an extensive density of distribution. We are selling convenience foods so consumers are “less likely to exert much shopping effort” and they will buy “more frequently and in nearby outlets” (Global Marketing, p354). Our geographic sales area will be the southern UK concentrating on major cities, like Wales and London. A far-reaching network of southern UK retailers is ideal in this situation.
Channel Length and Alignment
Tastykake’s extensive distribution strategy will affect the channel lengths. Extensive distribution strategies reach more retailers and tend to have longer channel lengths, which mean
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there will be more intermediaries. We plan to offset the long channel length by strategically selecting the Nestle Tutbury Factory location. As opposed to Manor Bakeries factories in the north UK or other Nestle factories with locations by the water, our prime Tutbury location in south central UK will decrease our channel lengths.
Companies must make sure that channel members are aligned in their actions to achieve a unified result. Some companies may have little control over the local scene, where others companies become channel captains. In the UK, “there has been some significant consolidation in 3 rd
party logistics sector between the larger players, although as a whole the sector remains highly fragmented”( IGD, 1). Tasty Baking Company desires more international control of their product, and cannot risk a smaller logistics provider. We will choose a successful local third party logistics provider, Wincanton. Wincanton will provide us the flexibility we want in our inventory, and also the dependability in shipments.
Distribution Logistics
The Tasty Baking Company plans to distribute our Tastykake product to the Southern
UK region. The distribution of Tastykake product is strategic to our value of freshness. We need to ensure strong supply chain performance to have on time deliveries and freshness in our products.
We will be selecting the third party logistics provider, Wincanton, as our logistics and warehousing service. In order to compensate for our short product shelf life, we will employ a shorter lead time by method of trucking shipments. Inventory will be controlled, having a small number of days in supply rather than JIT. Just-in-Time is more effective when supplying larger items of less volume, not a high volume item. We will have to test out the market to determine the most optimal days of supply, based on our forecast.
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Tasty Baking Company will utilize a more technologically advanced order processing system with easy user capability, provided by Wincanton. Wincanton “has an enviable reputation as a leader in technology enabled logistics” (Wincanton, 1) and they develop a wide range of applications to suit each client.
We plan on consolidating our services and logistics by using the well-rounded Wincanton
Company. They are the second largest third-party logistics company in the UK. We will utilize their warehousing capabilities also providing a more streamlined process from orders to shipments. There are 37 warehousing locations in the Southern UK providing many options for strategic distribution centers to deliver to our retailers. They have triple the amount of warehousing locations in the UK compared to their #1 competitor, Exel. Wincanton provides predominately ambient warehousing, which is needed for our product. Since our volume is unable to fill a dedicated warehouse with product, they also operate with shared user basis.
Channel Members
TastyKake products will be sold by a direct sales forced owned by Tasty Baking
Company. We will manage our own direct sales force in order to maintain the effort exerted in the retail locations. Our sales force will be making face to face contact with our retailers and can provide the most accurate feedback on our sales and product image. The sales force will be divided into regions in the Southern UK and will be organized in a management hierarchy starting with Regional Manager, Divisional Manager, Area manager who ultimately oversees the retail manager.
Incentives
Incentives will encourage our sales force to reach for higher product volumes. Our incentive program will be mainly focused on monetary reward for performing higher than average gross margins and for Wincanton reaching over our target in Supply Chain Performance.
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This is the basis of our program, but we also provide fun incentives to better portray our fun corporate attitude. We will provide contests for our sales force to drive competition and meet sales volume and we will reward trips to our top-performing retail locations. We will also involve our retail locations in annual conferences and trade conferences to make them feel involved in our business. Tastykake products will have a heavy advertising and promotions campaign to also assist the sales force and distributors in sales.
Our sales force will visit our retail locations to develop relationships with our retail managers. This will make our retail outlets more receptive to change. In addition, they will ensure that our advertising, promotions, shelf space and layout is meeting the requirements set by
Tasty Baking Company. Tasty Baking Company will place a minimum requirement of sales to our retail locations, but our sales force will work hard to help them achieve the minimum and more.
Product decisions
Similar to our US product, we will coordinate with holidays in the UK. The list of UK holidays that Tastykake feels are appropriate to celebrate is as follows:

Lammas Day : August 1 The predecessor of Thanksgiving Day and Canada's Harvest
Festival
 Queen’s Birthday: a Saturday in the middle of June. This celebrates the birthday of
Queen Elizabeth of England.
Other Public Holidays throughout the United Kingdom that we can coincide with our products are New Year's Day, Easter Monday, May Day (1st Mon. in May), and Christmas. By celebrating the holidays in our international market, we can appeal more to our customers. In addition to relating to our international customers, there is the opportunity for our international customers to use these cakes at their holiday functions in place of the bakery products.
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Product decisions can also come from certain trends and fads in the market. For instance, in following with the low carb craze, we can create products to suit our more health conscious customer. Also, when thinking about product decisions for our customer, we have to think about people with health problems. For our diabetic customer, we will have cakes with icing made from Splenda, the fastest growing sugar substitute.
Another way we will make product decisions is through the voice of the customer. We need to hear their ideas. We will have a suggestions email on our website as well as a toll free number for customers to call. The closer we are to the customer the easier it will be to know what they want. Other ways to connect with the customer are by surveys and taste tests that we can do in areas where the Tastykakes will be sold. Hearing their likes, dislikes and suggestions on how to improve our product will be helpful when making product decisions. Making products that cater to a variety of different needs and wants can ensure that we will be successful internationally.
Features
When entering an international market, we have to make sure our products are a step ahead of our competitors. By being innovative, people will be attracted to our product.
Customers always want to try the new fresh item to hit the market. It is our job to make sure that after they try us they’ll never want to go back to any old packaged cakes.
Our number one feature that we focus on is freshness. We use real ingredients. It is like having a bakery fresh dessert at your local convenience store. Our only drawback to our freshness is the shortened shelf life. In our displays, we have our expiration date prominently placed so our customer knows it is fresh. Most of our products last only about a week in store, but that is what draws our customer to them. When comparing our Tastykake to another brand
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that has been sitting there for weeks, possibly months, it will be easy for our customer to make the right choice.
Another feature that the Tastykake brand is built on is taste. That is after all how we got our name in the first place. By using the freshest ingredients, we have the best tasting product.
Biting into a Tastykake, reminds you of your mother’s baking. Competitor products with a longer shelf life use processed ingredients that can stay on the shelf longer, but take away from the great flavor. When it comes down to brand loyalty, you’re going to choose the product that tastes the best. There are other factors that make a customer more likely to buy a product like which is less expensive or has a prettier package, but the one you will stick with is the most satisfying product. We take as much pride in our taste as we do in our freshness. These two features are most important when purchasing a food product.
Positioning
After looking at UK demographics, we have a variety of age groups as our target markets. We will develop products and promotions to cater to all of our age groups and their concerns. However, we will primarily focus on the females aged 18 to 35 since they are the primary decision maker in the retail locations where they are often buying for their children.
Branding
Tastykake has built our brand here in the US on freshness and taste. We want our name to be synonymous with those two words. Since we have a very short shelf life, we are only found in a certain part of the country. By keeping the brand hard to find makes people want it more. The desire for our brand makes us successful. We have to build the same brand reputation in the UK as in the US. After establishing ourselves in the UK, we want to be the brand you grew up on. When our international customers think or hear the word Tastykake, we want them to think of their favorite Tastykake dessert and want it.
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With our new more modern packaging, Tastykake has an updated look to bring to the
UK. Our packaging designers didn’t stray too far from our original look, but just gave it a fresh kick, more appealing to the eye. We make sure that the product pictures on our packaging are true to life, to avoid disappointment when actually opening the box.
Expected market share
Wrapped cake sales in the UK have grown steadily since 2000. Smaller companies have seen an increase of about 5% year to year. Larger companies have grown about 20-30% in similar years. When computing our expected market share, we took into account the small number of competitors in this industry, along with our potential to set ourselves apart. The
Tastykake brand should expect to see numbers somewhere in the 25-35% market share within our introductory year. After building our brand and making it recognizable, there are endless possibilities to what percent of the market we can capture.
Old Tastykake Packaging New Tastykake Packaging
Tastykake 2004 Business Stats
$ in millions, except per share data
(a) Percentages may not calculate due to rounding
(b) EPS for quarter and fiscal year may not agree due to rounding and
shares outstanding
2004 2003 % Fiscal Fiscal %
Q4 Q4 Change(a) 2004 2003 Change(a)
------- ------ --------- ------- ------- ---------
Gross Sales $63.1 $62.5 1.0% $259.0 $250.6 3.3%
Route Sales $47.8 $47.0 1.8% $194.5 $184.7 5.3%
Non-Route Sales $15.3 $15.5 -1.5% $64.5 $65.9 -2.1%
Net Sales $39.2 $39.0 0.5% $159.1 $159.1 0.0%
Gross Margin %27.9% 25.5% 2.4% 30.0% 27.2% 2.8%
points points
Net Income (Loss)
per Fully-Diluted
Share(b) $(0.01) $(0.22) N/A $0.15 $(0.29) N/A
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Pricing
Pricing is one of the most important factors to consider when deciding to expand into a new market. The difference between whether a product succeeds or fails hinges heavily on the pricing strategy the company chooses to employ. Although price is not the sole factor consumers consider when buying a product, it is a major player in the “Value vs. Price” equation.
Consumers consciously weigh the benefits and sacrifices of each purchasing decision, utilizing the product’s price to determine whether or not buying the item provides them a certain degree of value. Consequently, understanding consumer behavior and price sensitivity was paramount in devising Tasty Baking Company’s pricing strategy for entry into the European market.
Pricing Strategies
Research studies conducted by IGD, a UK-based market research firm, have shown that consumers in the United Kingdom overwhelmingly prefer two different pricing approaches. The first, called EDLP (Every Day Low Prices) focuses on offering the product at the lowest possible price at all times, with few or no promotions. The second, called High-Low Pricing, focuses on selling products at high prices most of the time but occasionally offering a variety of promotions that involve significant sales. Like most of our UK competitors, including Mr. Kipling, Tesco, and McVitie’s, we decided to adopt a hybrid strategy that utilizes facets of each pricing method.
Initially, we intend to enter the market with a price penetration strategy, whereby we intentionally set our prices slightly below our competition in order to encourage consumers to try our products and gain market share. To support this approach, we will pair our low pricing strategy with a strong emphasis on our advantageous product attributes. Emphasis will be put on our exceedingly high quality, which is characterized by the omission of any preservatives and our commitment to delivering fresh baked goods to the stores on a continuous basis. Our
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intention is that right from our inception into the market, we will be able to satisfy the value and price aspects of the consumer’s buying decision, thus establishing a positive brand image.
Once we are satisfied that we have built a strong foundation for our company, we will begin to migrate more towards a High-Low pricing strategy. In doing so, we will gradually raise prices to meet our competition and at the same time offer occasional promotions at significant savings. This approach will allow us to gain more revenues while ensuring that the consumer still sees our products as a great value for the price. The last phase of the pricing implementation will involve a leveling off of both pricing tactics, ultimately arriving at the hybrid strategy we anticipate we’ll use in the long run.
Price Level
Aside from our preliminary pricing plan, Tasty Baking Company has also taken into consideration how we will price the individual products within our product line. Believing it is important for consumers to maintain a positive value-versus-price judgment of our company, we have decided to utilize a line pricing strategy. In doing so, the range in prices of our products will directly reflect the benefits of each part of the range. The prices will be set based on many factors, including cake form, package count size, and degree of novelty. The line will range in price from 0.31£ to 0.53£ for individually wrapped products and from 1.16£ to 1.76£ for our multi-count boxes. Our competition, on average, sells products that are in the range of 0.35£ to
0.65£ and 1.35£ to 2.29£ respectively.
Although we would have liked to bring our prices down as low as possible for our initial entry into the market, the competitiveness of the grocery retail industry simply wouldn’t allow for it. In addition to all of the steps that already existed in the value chain for our product line, we were faced with slotting fees. The slotting fees, charged to manufacturers by grocery retailers in order to cover them from losing money to a failing product, forced us to bring our prices just
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below our next closest competitor. Nevertheless, we are confident that we will grow our market share in a timely manner and prove to the retailers that we can consistently provide a high quality product that consumers are interested in.
Promotional Price Variations
The final consideration in devising our pricing strategy was to come up with an enticing promotional strategy that would allow our retailers to move more product and our consumers to realize a cost savings. Most often, it is the retailer that is solely responsible for driving the creation and implementation of promotions for their respective stores. However, at Tasty Baking
Company, we believe in taking the ownership of that function. Our process is to develop pricing promotions based on various events like the introduction of a line extension or product enhancement, novelty items, holidays, etc.
Further market research provided by IGD confirms that consumers in the United
Kingdom respond most favorably to BOGO (Buy One Get One) and Bonus Pack promotions.
The BOGO tactic is just as it sounds; offering two packages for the price of one, while the Bonus
Pack tactic involves offering additional product in the existing package size at the same price.
Interestingly enough, the BOGO strategy is one that we utilize heavily in the United States, and ultimately the one that consumers here respond best to. Therefore, we have a lot of background knowledge in this area that will enable retailers to trust our judgment with initiating promotional opportunities for their stores.
Besides offering BOGO and Bonus Pack promotions on our multi-count boxes, we will also employ basic savings promotions on our individually wrapped cakes. Many of our competitors sell their individual products at small, yet still intriguing, discounts in various outlets aside from the grocery retailers. So we feel that in order to stay abreast of our competition, we
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too will provide discounts ranging from 10-20% off of the retail price to our non-grocery retailers.
In due course, Tasty Baking Company is convinced that the pricing strategies we have formulated will allow for a smooth transition into the European market. Our successes in the
United States have prepared us for any challenges that may result, and we are willing and ready to react to unforeseen challenges. We, as the Tasty Baking Company marketing team, understand that we are venturing into a dynamic market. However, the collective capabilities of our team will provide a sound knowledge base from which to reevaluate and reinitiate our objectives if need be.
Promotion
Brand Message and Promotions:
TastyKake has built its U.S. market on the quality, freshness and convenience of its products. In order to be successful in the U.K. market, TastyKake has decided to keep the same brand image.
1.) Quality is the most important aspect of the brand name. We want our customers to purchase our product knowing that they can be guaranteed a fresh and quality cake every time. We pride ourselves on knowing that every cake that we make meets or exceeds our customer’s expectation.
2.) Freshness of the products is another important feature of the brand. Even though the products are pre-packaged, we bake everything close to the distribution area so customers can enjoy a great fresh taste.
3.) Convenience is also important to the building of the TastyKake brand of products. These conveniences not only include the location of our product but also the convenience of
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including them in a lunch or eating them while on the go. With the busy schedules of parents today, making things easier can help them focus on something more important.
In order to effectively build brand awareness and communicate the brand message in the
U.K., TastyKake has decided on using print advertising and sales promotion to introduce the products into the market. For the print campaign TastyKake has decided to use Red Cell
Agency, to help develop campaigns, because of their strong efforts in introducing products in to the U.K. market and because TastyKake currently uses them for their U.S. promotions. As well as advertising, the sales promotions will include value-added purchases, off-shelf displays and character merchandising.
Advertising:
To build brand awareness the advertising campaign will focus strictly on print for the market entry. Even though there are specific customers that purchase our product, essentially any consumer that has a taste for cakes, can be targeted. Because of that, one campaign will focus on a mass marketing strategy, while two other campaigns will focus on segmented markets: Parents with Children and Older consumers.
The mass marketing campaign that was developed by TastyKake and Red Cell will be
“Something Fresh. Something New.” Since this will be the first time most of the consumers have heard of the TastyKake brand, we need to build some excitement and curiosity around our products. Given that this is a mass marketing message, we are planned to place the ad on 2 billboard locations. These billboards are seen by 10,000 people a day and we have purchased the space for one month with the option to extend. It will also be placed in the major newspaper in
London, The London Times, and we will be experimenting with the use of taxi advertisements.
Since our products are convenient and great for children’s lunches, our one segmented campaign focuses on Parents with Children. The cake consumption is greatest (72.8%) in
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households with children 5-9. This segment is the target market for most competitors in the snack industry. In order to effectively standout compared to our competitors, we came up with the campaign, “Something for everyone.” This campaign will feature our cakes, pies and healthier products not only for children but for the parents as well. There has been a growing concern over the past couple years on childhood obesity in London, so this campaign will not only focus on gaining market share but also let consumers know that we offer great tasting snacks that are healthy. The location of these ads will be focused in the newspaper, specifically in the main news and leisure sections.
Also through our research we found that a growing number of consumers aged 65+ should provide a boost, as this age group includes the highest concentration of avid cake eaters.
In order to capitalize of this growing market, our second advertising campaign will target older consumers. We want older consumers to feel young when they eat our cakes so we have developed the campaign “The Taste You Grew Up On.” The location for these ads will be found in the main news section of the newspaper and also The Sunday Times Magazine.
Sales Promotion:
To promote impulse purchases, TastyKake will be using the Buy-One-Get-One Free strategy in grocery and convenient stores. Not only will this cause impulse purchases but it will also give customers an incentive to purchase. The buy-one-get-one strategy will not only allow customers to get more for their money but also encourages them to share with other people. This will help get the brand and products into the hands of consumers that normally wouldn’t try new products.
As well as the buy-one-get-one free purchase strategy, we found that the use of characters can also enable new entrants to gain instant recognition. So, TastyKake has purchased the license to Shrek© to enter into the U.K. market. Shrek© is adored by children, and was one of
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the highest grossing movies in the U.K. Character merchandising focuses on building the
“parents with children” segment.
The last sales promotion we will use is off-shelf displays. Consumers may not always walk up and down every aisle at a grocery store, especially when they know exactly what they want. So to successfully get TastyKake products purchased, we have paid a premium to get a display at the end of most aisles in major grocery stores. This strategy will also help in getting impulse purchases. We will feature our most popular products that we currently have in the U.S.
If we find that other products are selling better in the U.K. we will switch the products that are put at the end of the aisles.
Promotional Timetable:
Promotion Type
Mass Marketing
Segment 1 – Parents
Segment 2 – Older
8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 10/10
S.P. – BOGO
S.P. – Off-Shelf
S.P. – Character
The tentative launch date for our product is 9/5/2005, which will coincide with the beginning of the school year in London. We feel that since our major market is children, this would be an ideal time to enter the market. The mass marketing campaign will run for a month before we launch our product in hopes that we start to get the buzz around the TastyKake brand of products. Since we have an option to renew, this campaign may stretch for a following month, depending on how the market reacts to TastyKake. As we get closer to the launch of the product, we will begin the Parents with Children campaign. This will give them a couple of weeks before children start school to gain some knowledge of our products. Since the timing of the Older Consumer campaign doesn’t matter, we chose to begin that campaign a week after the parents with children, and run it an extra week past the end of the Parents campaign.
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With the launch our product, both our Buy-One-Get-One free and Off-shelf displays will be used for sales promotion. Consumers need an incentive to make their first purchase, so giving them a cake for free will give some of the consumers on the fence an extra nudge to make the purchase. Again, since this will be the first introduction of TastyKake in the U.K., off-shelf displays at the end of the isles will allow consumers to see our product, even if they don’t go down the snack isle. Also at the launch of our products, some of our individual cakes will feature the Shrek© for our character merchandising promotion. This will create a high demand for children to have these snacks in their lunches, and also for parents to make the purchase to satisfy their children’s wants.
Budget:
Agency Fees
Character License
Billboard Space
Newspaper Ads
Taxi Ads
£50,000
£500,000
£300,000/2 locations/2 months
£238,500
£115,500/6 month
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