The Market

The Market

The ehocolate confectionery market is concentrated, stahle and very competitive. The leading suppliers are Cadbury (28 per cent market share), Nestle Rowntree (25), Mars (21) and Terry's Suchard (5). KitKat has the biggest advertising expen­ diture in the UK confectioner;' market. The £1.5 billion confectioner;' snack market, including eountlines and chocolate blocks, is 38 per cent of the confec­

tionery market. This market has grown by 20 per cent over the past five years, following the rise in popularity of' snacking. Growth in both the countline market and the CBCL sector has now stabilized. As market leader, KitKat has retained a

price premium and set prices for its competitors to follow. There is a risk to volume if the market does not follow. The market share for KitKat four­finger was

7 per cent within the general countline market. KitKat four­finger had lost some of its market share to Mars Bar (Exhibit 1.7). However, it still remains a weak no. 3, competing with two other Mars products, Twix and Snickers.

EXHIBIT 1.7 BRAND SHARES

VALUE

VOLUME

BRAND

% POINTS CHANGE

% POINTS CHANGE

KitKat 4­finger

Mars Bar

Snickers

Time Out

Drifter

SOURCE: Nielsen (eountlines and filled blocks excluding CFiCL multis).

New­product development, which fuelled eountfine growth, has seen a number of new entrants. Firstly, the GBCL market has seen the entrance of Fox's Rocky bar. Rocky has claimed 4.1 per cent of the market. The second major new­ product development has been made by Cadhury. It launched the Fuse bar ­ a mixture of chocolate, fudge and raisins. It cost £7 million to create, sold 40 million bars in its first week and was becoming the second most popular chocolate bar in the UK.

Pressure will continue to be on the countline market as the population of 15­ 24­year­olds declines. The KitKat two­finger sales are biased towards the Cl and C2 socioeconomic and the 35­44 age groups. There is also a high penetration of very young consumers, particularly in the 12­15 age group. The four­finger format

has a smarter image, inclines more towards 'chocolate occasions' consumption, and is consumed on the street. Consumption is heavily biased towards female buyers.

The two­finger format ads aim at the 35­44 year olds through morning television. Children are not specifically targeted. The four­finger format ads target the 16­

24­year­olds through TV and youth press. The ad strategy for this format is different from that of the two­finger. The company puts an emphasis on updating

KltKat's brand image by making it appeal to the younger generation through advertising in trendy and young people's magazines and independent radio.

The promotions for the two­finger format are value­ and grocery­trade­ oriented (for example, 'one bar free' activity, or repeat purchase incentives). For the four­finger format, the promotions are different because of the different segments targeted (for example, Ip off). However, there is an annual pan­

Overview Case One: KitKat • 137

promotion for KitKat as a whole that consists of big promotions, price and emphasis on brand awareness. There is a price differentiation between the two formats. KitKat four­finger is 'twin­priced' in parallel with Twix, and 2p below the Mars Bar. This is because KitKat is 'snaclw' and not as hunger satisfying as the Mars Bar. If the company deviated from this pricing strategy, its volume share

might drop. The two­finger format is not as price­sensitive as the four­finger. As a market leader within the CBCL category, it can more or less dictate price. Thus

its competitor Penguin is priced 2p below KitKat two­finger. According to Nestle brand managers, 'The objective for KitKat is to maintain customer loyalty by being innovative, and to remain the number one UK confectionery brand.' There

is evidence of relative brand loyalty for KitKat. However, people who buy KitKat two­finger will also be likely to buy other brands, such as Classic, Club Orange, Penguin. Twix, Blue Riband and Gold. According to Brian Ford, the brand manager for the KitKat two­finger: 'Although Nestle has tried to differentiate the two formats of KitKat in its segmentation and positioning strategies, the consumer

sees no difference in the total brand.' In light of the recent developments, KitKat has worked hard to maintain its position as the market leader. In the spring of 1996, the UK's favourite confec­ tionery brand took on a new taste. Nestle launched KitKat Orange, the first flavour variant in its 59­year history. However, the variant was launched as a limited edition and the product was released for only one month. The success of the product was so phenomenal that customers were writing letters to have the

product re­released. On 31 January 1997 a Nestle press release revealed that Nestle was launching a limited edition Mint KitKat. This new variant was even more popular in trials than KitKat Orange.