PJ Smoothies

In the world of business we live in today, marketing has a crucial role. In the previous days, back in the first days of the industrial revolution, entrepreneurs believed that it only production that was important. All resources are dedicated to increase the capacity for producing good and services with little worries of whether the products were going to get sold. This sentiment lasted for decades because people in the past were still craving at the marvel of technology and mass production, which entrepreneurs have little care of the amount they produce, because generally, no matter how much they produce, the society absorbs.Of course, this is nothing like the present day. Today, mass production and technological advancements have become natural parts of people’s lives. There is no sense in producing without considering how much the market would be willing to absorb. There are times when people are easier to influence using many kinds of marketing efforts and ‘tricks’. However, people of the day have seemed to go pass that stage. Marketing jargons and propaganda can no longer dictate what people want. Consumes are more critical and selective. Today, marketers must be sensitive of where the market’s interest are growing today, and act upon it.Today, marketing should be the guide of any production decision. Moreover, marketing should be involved in almost all stages of product design and even pricing. This is important because in the end, only marketers have the most vivid idea of what consumers want and how much they will pay to obtain it. This concept is well known and there are many companies turn into market-based companies. However, there are those that get tangled-up in the complexity of their own businesses and deviate from their existing market niches.Within this paper, I will discuss the marketing strategy that is appropriate for smoothies, the new trend of drinking in United Kingdom. The paper will contain suggestions of strategic position and the appropriate marketing mix to support that strategic position. II.                 Product and Corporate BackgroundII.1      Product BackgroundSmoothies are the new trend of drinks in United Kingdom. In simple definition it is a fruit drink. Some may refer to it as a fruit juice, but PJ refer to them as crushed fruit. There is a rather different understanding regarding the two definitions. The first is smoothies made of juiced fruit, which has more of a juice-flavor and nutrient contents. On the other hand PJ smoothies are made out of concentrated fruit juice, which is closer to the ‘crushed fruit’ definition and sets the differences between ordinary juice and smoothies. Other characteristics that created differences between smoothies and juices are that smoothies uses yogurt as a mixed ingredients along with the various fruits (‘Pulp Friction’, 2004).The drink became popular because it has a recreational sense within it and it is in line with the health sentiment to have at least five portions of fruit and vegetables daily. Nevertheless, there are also analysts who stated that PJ Smoothies are rich with natural sugar and has a low proportion of fiber. In other words, other supplements of fruity vitamins are still necessary despite having a bottle of PJ Smoothies a day. The inventor, Harry Cragoe, stated in his defense that the drink is not meant to be an exclusive and expensive health drink, but rather an affordable healthy drink.As mentioned previously, the trend of Starbucks have gained new competition as the society looks for a healthier ‘fun’ in their drinking habit. The product has been around for a long time in the United States, but has recently been popular in United Kingdom. The UK smoothies market was created no longer than 12 years ago in 1994, when Harry Cragoe decided to import the products to UK markets because he was surprised not to find this delicious treat anywhere in UK. He had to sell his flat as a part of financing the business at first. Afterwards, in 1998 the company purchased a former bottling facility in an industrial estate in Newark, and began to make smoothies in the United Kingdom (‘How to Make’, 2004).The smoothies industry has developed from zero to a £ 33 million business in just 10 years. PJ are still the market leader in respect of volumes in 2002, but sometimes, their tight competitors, Innocence, took over for several months. The competition is tight as both has controlling shares of the UK smoothies market (about 40% each)II.2      Corporate Background ‘Pete and Johny Smoothies’In its first years of production, the company gained tremendous profit because of the lack of competition. However, after the year 2000, the prices have come down to a competitive level, leaving the company with decreasing profitability. The decreasing profitability continued as competition gets tighter with Innocence. By 2003, the company already reported losses instead of profits, despite its increase in sales number (John, 2005).In early 2005, the company sells itself in efforts of gaining capital to repair and develop the business. The buyer was Pepsi, who has similar market segment with the brand named Tropicana and Copella. Many considered this as a good step to restructures and further develop the business. Nevertheless, Innocent was pessimistic toward the deal. They doubt if the combination could help enhance a business with such a low profit margin (John, 2005). However, they are also taking the positive side that the deal would help the UK smoothies market to grow (‘PJ Smoothies Sells’, 2005). After the purchase, Pepsi sent its representative to help develop the product personality of the brand (‘Landor’, 2006).III.              Strategic Positioning SuggestionsIn order to provide this paper with a more analytical structure, I am using the Porter’s five forces analysis and the SWOT analysis to help develop a deeper understanding of the smoothies industry and what competitive advantages doe PJ Smoothies have. The results of this analysis are suggestions of what PJ Smoothies should do or should be aware of in the near future. The final suggestion will be made in the four Ps marketing mix form.III.1    Porter’s Five Forces AnalysisIII.1.1. RivalryAs revealed previously, the company –which has been a separate company owned by Pepsi- currently in tight competition with Innocent, its only worthy rival. The UK Smoothies industry has a highly concentrated market with only two large companies holding up to 80 % of the entire market share. However, the competition between these two is tight. In early years, PJ, who had the first start, led the way by 70% of the market. However, the last development reveals that the company is losing in terms of market share to Innocent. The latest available information revealed that innocent now has 46% of the market, while Smoothies has only 33%.I believe that rivalry is the most important factor that will influence the condition of PJ Smoothies in years to come. Although some stated that harsh competition might scare away customers, but acknowledging the threat is necessary nonetheless. Competition should not be sees as a way to knock each other down; rather it is a way of learning from each other. I believe that PJ Smoothies have a lot to learn from this competitive atmosphere.III.1.2. Threats of SubstitutesSubstitutes are products of another industry or from the smoothies industry itself that consumers could use as a replacement of the original smoothies. The substitutes generally have lower level of quality and smaller cost structure that allow cheaper prices. However, it might not contain all the nutrients that are offered by the original smoothies. Regarding the smoothies’ product, substitutes come from fruit juice drinks products.The low cost of production allows just about anyone to produce fruit juice by themselves. The threat of substitutes does not necessarily come from companies of PJ’s scale. Rather, a small-scale stores or restaurant that sold good blend of fruit juice could take away market share from the company. There are many shops in UK that provided such fruit juice, and they have daily basis customers. In respect of this condition, it is largely necessary to differentiate the product in prices and flavors. I believe distinctive flavors and product personality are crucial for PJ Smoothies to gain a place in the market.III.1.3. Buyer PowerThis factor represents the threat that comes from consumers that overpowers producers. In some industries, due to the small amount or concentrated consumers, they posses a strong influence to the producers. Regarding the smoothies product however, such threats do not exist because consumers are from various level of social and economic stature. They are many and fragmented in nature. There is no sense in thinking that customers would integrate themselves and pose as a new threat to PJ Smoothies.III.1.4. Supplier PowerSupplier powers are the extent of influence possessed by providers of materials and equipment of the company’s production facility. They would have considerable influence if they are small or concentrated in number, or the materials are unique in nature. This factor also hold no threat toward the company. The business has simple ingredients structure and there are many providers. The type of tools and equipment necessary to produce also has numerous providers in such market as the United Kingdom. Thus, the supplier holds little influence. III.1.5 Barriers to EntryThis factor, on the other hand, has significant influence in the business. There are considerably small factors that could prevent anyone form entering the industry. The cost of capital to start the business is comparatively small and there are no restrictions form the government or patents that pose as a significant barrier. Technological issues pose some but insufficient barrier to keep competitors away. In other words, there is little reason to think that competitions would not appear out of nowhere and take portions of the market share. If PJ smoothies prefer a room for growth in the UK markets for the future, it must move fast to create a brand that has the capacity to obtain stronger consumer basis in most of the markets in UK.III.2    SWOT AnalysisIII.2.1 StrengthsOne of the strengths of the product came from the fact that there are few, or even non of similar products in United Kingdom. However, this advantage has passed away as innocent enters the market. Furthermore, due to the lack of notable barriers to enter the business, there is no reason to rely on the non-existence of competition. Other strength of the company is its place as the original smoothie maker in United Kingdom. PJ brings the product to the country and redesign them in its Newark production facility.The most powerful competitive advantage of the product is its promotion toward healthy living. The product is a way of creating joyful as well as healthy lives at the same time. In the middle of a society, that has grown great consciousness toward health and a healthy life, the product has found a good place in people’s heart. The company has taken advantage of this fact by inserting the health image into the product personality designIII.2.2 WeaknessesOne of the weaknesses of the product is related to its strength. The drink is fill with natural ingredients. Harry Cragoe, the inventor, is proud of the fact that the drink does not have any preservatives as a part of its ingredients. However, fresh fruit means shorter life span, and shorter life span could only lead to shorter shelf time. The company should have rather precise market estimation because a short estimation will cause customers to loose trust over the product and a long estimation will cause the products to be unproductive expenses.Other type of weakness that I would like to underline is the weak differentiation strategy of the product. As mentioned previously, the product would receive considerable competition from its surrounding environment and the only way to face such threat is by developing a strong differentiation strategy. The product must be distinctive and deliver unparalleled value to consumers (Doyle, 2000).Currently, the strategy of the company is not to be an elitist drink. In a way, the company directed its product to foster simplicity that would create the image of everyone’s drink. Concerning the importance of having a differentiation strategy as mentioned above, this simplicity image is not a good idea at all. People would see it as another drink in the market and they will go for competitor’s product who manages to deliver a high class and attractive image with competitive prices.The third weakness is the fact that the industry seem to have a very low selling price and a considerably high cost structure. The profit margin within the business has apparently been lower than expected. This could pose as a great threat as the product expands to larger volume of production.III.2.3 OpportunitiesOpportunities for the company come from its reputation and its new market all around the United Kingdom. Articles of various newspaper stated that smoothies is the new trend after Starbucks. This type of publication will keep people curious of how the product really taste. If the company manages to provide new consumers with quality that fulfill their expectations, the company will gain new daily customer as a result.The second opportunity is the children market. There is a great chance that the product will receive a good welcome by the children market because of its healthy traits. Parents would be glad to give their children a healthier drink compare to soft drinks or any other lack-of-nutrition drinks. However, this would only work if the company is able to insert some element within the product personality that is appealing to children. The sense of fun, friendly and cheerful in the products is important to obtain such achievement.III.2.4 ThreatsOne of the most apparent threats seems to attack the strength of the product itself. Some analysts claim that PJ smoothies have a high content of natural sugar and low fiber, which means that the health-promoting role is not as dominant as the company might want. The second threat comes from competitors like Innocent. If the company fails to deliver the right product image and make a worthy distinction out of itself, there is little chance that PJ will be able to maintain its 30% share of the smoothies market.IV.              The Marketing MixIn spite of the various factors of strategic positioning mentioned above, marketing decision eventually comes down to four types of decisions. They are called the marketing mix. They are tools to help marketers implement their strategic considerations into more actionable forms (Borden, 1994. Lauterborn, 1990). It is considered the final step of designing a marketing plan. In this paper, these four aspects of marketing strategy are the outcomes of the considerations mentioned in previous chapters.IV.1    ProductThere are several aspects of the product’s characteristics. The first is the name. Pete and Johny are not real names. They are fictional character created by Harry Cragoe to create the image of simplicity toward the product. He wanted the product to provide the sense of closeness to its consumers, away from exclusiveness and anything that will cause consumer to feel not at home. Prior to the buyout with Pepsi, the packaging and styling of the product is designed with similar intention. It was design to be simple and away from any image of an elitist drink.In a review of the competition between PJ and Innocent, Innocent stated that instead of mixing yogurt with pure fruit juice, PJ mixed concentrated juice as the primary ingredients. Many considered this would reduce the flavor of the drink, but Harry Cragoe said that it suit his statement that he is selling crushed fruit instead of fruit juice. This unpopular choice is also a part of Cragoe’s plan to maintain a certain image simplicity of the product.As a part of my conclusion within this paper, I believe that the simplicity and the ‘drink for all’ image is not working as good as Harry Cragoe might have expected. As said in several magazine articles, the company never performs adequate marketing research prior to determining the product strategy. The product strategy started the moment PJ Smoothies open their producing facility in Newark. The strategy worked for several years because their competition, Innocent, has not fully developed their strategy yet. After Innocent revealed their ‘more exclusive’ strategy, the market seemed to turn to Innocent instead of PJ.Therefore, as a part of the new marketing strategy for PJ Smoothies after the acquisition by Tropicana, I believe that the company should design a bolder strategy. One that would involve a much more recognizable, attractive and outgoing packaging. This could also work with the new children market. The image of simplicity is unattractive and rather boring. The image should turn from simplicity to fun and popular, an image that make people see PJ Smoothies as what the newspapers said about them these days, the new drinking trend that replaced Starbucks.IV.2    PriceAs mentioned previously, the product seemed to have a much smaller profit margin than expected. The profit margin stumbles as a result of the tight competition with Innocent. Harry Cragoe stated that the company was trying to deliver consumers with the drink-for-all smoothies. This unavoidably means cheaper prices as well. Nevertheless, in spite of having cheaper prices than Innocent has, the competitor still took away market leadership by 2003. This revealed the fact that price was not the sole factor that contributes to sales number.As a part of the new and bolder strategy, I believe that the company should focus on changing the image of the product first. If the change is performed with adequate marketing research and consumer behavior considerations then the price of PJ Smoothies will rise along with market share (Culliton 1968).IV.3    PromotionDue to the new nature of the product and the wide range of ‘untouch’ market available, promotion has a crucial role in the development of PJ Smoothies, especially to target the upcoming children market. By experience, the most effective method to introduce such product is by giving free trials to people. Beside free sales promotions, aggressive marketing using billboards and advertisements is also important to keep the product in people’s mind (Frey, 1961).IV.4    PlacementSince there are many people in Britain that have not had a taste of PJ Smoothies, the product has a wide range of area to cover. Moreover, as stated previously, it is important to develop presence in most market of the United Kingdom to ensure brad loyalty and make it easier for future expansion of the brand. The company has only 25 days of shelf time, which demanded a quick delivery system to prevent deterioration. The product also need to be frozen in delivery, thus, the delivery system will cost the company a little more than other companies.To safe money and shelf time, the product should be delivered directly from the Newark factory to retailer’s stores rather than converging them into distribution warehouses in each area. Therefore, transportation is an important element of PJ Smoothies’ distribution system. There are two choices of distribution model. A private distribution model, which requires the company to have its own delivery fleet, and an outsourcing distribution model, which involves external transportation services in delivering the products. In a small scale, outsourcing would be a preferable distribution strategy. However, after the merger with Pepsi, the smoothies segment would most likely collaborate with distribution system of other Pepsi brands (Klinger, 2005).


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