This is an individual assignment. It should be presented in the form of a report to the Marketing Director and Chief Executive of Shepherd Neame.
Shepherd Neame is a small UK brewer of ales and lager. The lager market is one of the few major drinks categories to have enjoyed continuous volume and value growth and will be worth an estimated 11.3 billion in 2005, having risen 17% over the 2000-2005 period. Demand for premium lager has driven the price differences between premium and standard lager closer.
Shepherd Neame’s reputation has been built on traditional ales and bitters such as Spitfire and Bishop’s finger. In recent years the company has introduced a range of lagers, brewed under license for foreign brands. This range included Holstein Pilsner and Kingfisher Larger. Although Sheperd Neame has had some success with these brands, it is looking to extend its share of the lucrative larger market by developing its own larger brand. The Company is hoping to secure a defendable market niche by targeting this new brand specifically at students. The Company has collected data from a group of student selected at random from UK universities.
Part 1
Conduct a statistical analysis of the data, and using any other information that you feel is appropriate:
- Evaluate the attractiveness of UK students as potential target market.
- In order to inform the positioning of the new brand, develop a profile of the ‘typical’ student, based on an analysis of their lifestyle, personality, spending habits etc.
- Identify further research that should be conducted to develop a clearer plan for the launch of the new product.
Part 2
Conduct a comparative analysis of the performance of Shepherd Neame and Scottish & Newcastle (the largest UK brewer) on the basis of their published financial reports for the past 3 years supplemented with other relevant information where available and appropriate.
Part 1: Statistical Analysis
1.0: Introduction
In this part of the report a through statistical analysis of the sample data collected on the student target market is conducted to identify the market potential for a new Lager brand targeting the student niche market by Shepherd Neame – the company under debate.
2.0: Attractiveness of UK students to alcohol
The attractiveness of the students to alcohol compared to their preferred meal (first choice meal) reveals that the students give equal value for both alcohol and first choice meal. This is clear from the significance level in the Bi-variate correlation conducted, the results of which is presented in table 1 below
Table 1: Bi-variate Correlations
|
Pounds spent on alcohol per month |
Preferred meal |
||
|
Pounds spent on alcohol per month |
Pearson Correlation |
1 |
-.189 |
|
Sig. (2-tailed) |
. |
.071 |
|
|
N |
92 |
92 |
|
|
Preferred meal |
Pearson Correlation |
-.189 |
1 |
|
Sig. (2-tailed) |
.071 |
. |
|
|
N |
92 |
95 |
From the table above it is further clear that the spending habits of the students are heavily dependent upon their eating habits, which is clear from the graph in Fig 1.
The graph not only justifies that the spending on alcohol varies depending upon the eating habits but also justifies that the alcohol spending by the students is high (in pounds) at all categories. Although the density of spending is high in the ‘Roast chicken and veg’ category, the quantity spent is consistent in all the categories thus justifying the potential for a new brand Lager in the student market.
The plot of the categories vs. the spending level on alcohol further reveals that the market demand for alcohol in the UK student market is high as well as a lucrative option for investment. This is mainly because of the fact that the students prioritize drinks as much as their preferred meal which is established in both the bi-variate correlation and the Drop line plot in graph above.
The argument of Philip Kotler and Kevin Lane (2005) that the marketing strategy is highly dependent upon the demand in the target market for its success, which is clear from the above arguments.
A linear regression analysis on the spending level of the students on alcohol against their age, and preference on food has also revealed high level of significance justifying the investment in the new brand targeting the students market.
The results of the Analysis of Variance (ANOVA) in Table 2: below provides a comprehensive interpretation of the significance level for the cases considered.
Table 2: ANOVA
|
Model |
Sum of Squares |
df |
Mean Square |
F |
Sig. |
|
|
1 |
Regression |
29924.861 |
1 |
29924.861 |
4.920 |
.029(a) |
| Residual |
516987.208 |
85 |
6082.202 |
|||
| Total |
546912.069 |
86 |
||||
|
2 |
Regression |
35421.736 |
2 |
17710.868 |
2.909 |
.060(b) |
| Residual |
511490.333 |
84 |
6089.171 |
|||
| Total |
546912.069 |
86 |
||||
|
3 |
Regression |
46170.754 |
3 |
15390.251 |
2.551 |
.061(c) |
| Residual |
500741.315 |
83 |
6033.028 |
|||
| Total |
546912.069 |
86 |
||||
|
4 |
Regression |
51364.306 |
4 |
12841.077 |
2.125 |
.085(d) |
| Residual |
495547.763 |
82 |
6043.265 |
|||
| Total |
546912.069 |
86 |
||||
|
5 |
Regression |
73859.756 |
5 |
14771.951 |
2.529 |
.035(e) |
| Residual |
473052.313 |
81 |
5840.152 |
|||
| Total |
546912.069 |
86 |
- a Predictors: (Constant), Preferred meal
- b Predictors: (Constant), Preferred meal , Second choice meal
- c Predictors: (Constant), Preferred meal , Second choice meal, third choice meal
- d Predictors: (Constant), Preferred meal , Second choice meal, third choice meal, fourth choice meal
- e Predictors: (Constant), Preferred meal , Second choice meal, third choice meal, fourth choice meal, Age in years
- f Dependent Variable: Pounds spent on alcohol per month
- g Selecting only cases for which Units of alcohol per week ~= .00
An insight into the Sig column in Table 2 makes it clear that the ANOVA is significant with age and choice of preferred meal. This also justifies the arguments from the Bi-variate correlation where it was established that the students give equal priority to drinks as their preferred meal.
In order to analyze the frequency of spending on alcohol and its relativity to other items than food a two-step cluster analysis is conducted. The results are tabulated in tables 3 and 4 below.
Table 3: Two-step cluster combining age, food categorization and pounds spent.
|
Pounds spent on clothes per month |
Pounds spent on alcohol per month |
Pounds spent on CDs per month |
Pounds spent on food per month |
||||||
| Mean |
Std. Deviation |
Mean |
Std. Deviation |
Mean |
Std. Deviation |
Mean |
Std. Deviation |
||
|
Cluster |
1 |
43.6667 |
30.51097 |
130.1667 |
91.45833 |
150.5667 |
740.41990 |
87.1667 |
72.72626 |
| 2 |
49.5000 |
33.04681 |
103.9000 |
76.95937 |
18.9000 |
12.81620 |
73.5600 |
37.53103 |
|
| Combined |
47.3125 |
32.04964 |
113.7500 |
83.11385 |
68.2750 |
453.27958 |
78.6625 |
53.47138 |
|
Table 3: Two-step cluster with age and pounds spent
|
Pounds spent on clothes per month |
Pounds spent on alcohol per month |
Pounds spent on CDs per month |
Pounds spent on food per month |
||||||
| Mean |
Std. Deviation |
Mean |
Std. Deviation |
Mean |
Std. Deviation |
Mean |
Std. Deviation |
||
|
Cluster |
1 |
51.3793 |
33.10957 |
92.5862 |
56.21421 |
15.1034 |
10.02976 |
76.7241 |
41.36674 |
| 2 |
45.0000 |
31.52777 |
125.7843 |
93.47391 |
98.5098 |
567.45221 |
79.7647 |
59.63073 |
|
| Combined |
47.3125 |
32.04964 |
113.7500 |
83.11385 |
68.2750 |
453.27958 |
78.6625 |
53.47138 |
|
The results in the tables above clearly show that the students of different age groups spend more on alcohol than on the other categories of pound spent like clothes, CDs and food. A detailed tabulation on the frequency distribution and the two-step cluster analysis is presented in the SPSS section of the report.
From the above analysis it is not only clear that the spending on the students in the UK is not only relatively higher on alcohol but also increasing the demand tremendously thus justifying that a new brand Lager will succeed through targeting on students.
3.0: Typical Student Profile
The results from the analysis conducted in the previous section also provide vital information on the typical student profile. This is essential in order to identify the average customer in the market for the product only when the company can successfully enter the niche market (student market) with their new brand. This is indistinguishable to the arguments of Frances Brassington and Stephen Pettit (2003) that the knowledge upon the customer demands and profiling of the customers is essential for the success of a brand. The fact that a brand not only attributes to quality but also to emotional and sentimental elements of the customer as argued by Philip Kotler (1988) justifies the above statement.
From the analysis the profile of a typical student in the target market for drinks is presented below in Table 5.
Table 5: Typical Student profile
|
Variable |
Characteristic |
|
Age |
22-27 years |
|
Preferred meal |
Roast Chicken and veg |
|
Pounds spent on clothes per month |
47.35 |
|
Pounds Spent on Alcohol per month |
113.75 |
|
Pounds spent on CDs per month |
68.275 |
|
Pounds spent on food per month |
78.66 |
|
Average nights out per week |
3.5 |
|
Brand awareness |
3 |
|
Pounds spent on rent |
255 |
|
Fashionable or conservative |
Fashionable |
From the above it is clear that the typical student will try the new brand since his/her expenditure per month is more on alcohol than other categories as well as give importance to brand image. This makes it clear that the launch of the new brand lager targeting on the student market will be lucrative.
4.0: Further research
The analysis conducted for this research was using a sample data with a limited set of attributes (or variables). In order to accomplish broader research as well as achieve concrete information on the market segment it is recommended to carry out the research over a broader segment of the student community (i.e.) use a bigger sample size of target market for research.
Furthermore, it is essential to analyze the demographic elements critically in order to position the brand in the target market. This requires further analysis in within the student market itself through segmentation. It is thus recommended to sample information through collecting information on specific segments within the student market so as to identify specific segments to target the brand upon within the student community itself.
Part 2: financial Analysis
The profitability ratios for Shepherd Neame and Scottish New castle are computed. The calculations are presented in appendix 1 and the results are tabulated in tables 6 and 7
Table 6: Profitability ratios for Shepherd Neame
|
Ratio Type |
2003/04 |
2004/05 |
|
Return on Owner’s Equity (ROE) |
15.78 % |
18.35 % |
|
Return on Capital Employed |
40.81 % |
40.81 % |
|
Net Profit Margin |
11.66 % |
13.26 % |
|
Gross Profit Margin |
4.97 % |
5.45 % |
Table 7: Profitability Rations for Scottish and Newcastle
|
Ratio Type |
December 2003 |
December 2004 |
|
Return on Owner’s Equity (ROE) |
8.02 % |
5.59 % |
|
Return on Capital Employed |
24.4 % |
23.34 % |
|
Net Profit Margin |
9.45 % |
7.19 % |
|
Gross Profit Margin |
3.11 % |
1.72 % |
Peter Atrill and Eddie McLaney (2003) argue that the profitability ratios provide a clear insight on the level of success of the business through researching upon its profitability.
From the table 6 above it is clear that the company has increased its overall profitability whilst staying constant on the Return on Capital Employed, which is popularly known as Return on Investment (ROI). This stable nature of the ROI justifies that the company has a strong market base as well as established strong relations with the investors as well as the customers.
The profitability rations of Scottish and Newcastle on the other hand reveal that the company has not performed effectively in year ending December 2004 compared to that of year ending 2003.
Even though the group turn over has increased considerably, the fact that the increase in the liabilities has reduced the efficiency of the company is evident from the data presented in table 7. It is further clear that the company not only had a poor performance but the steep reduction in Gross Profit Margin since year 2003 is the signal to re-assess the company strategy and financial commitments. Comparing this to our company under debate it is clear that Shepherd and Neame has performed effectively and future investment can guarantee profits.
Furthermore the increase in Net Profit Margin clearly justifies that further investment and funding for new projects can be encouraged since the business has performed effectively through gaining higher level of profitability. The decrease in the net profit margin in Scottish and New castle compared in the year ending 2004 further makes it clear that the company under consideration in this report has an effective financial performance compared to the UK’s largest brewer.
This justifies that the Shepherd Neame can invest on a new brand to increase its market base.
Conclusion:
The statistical analysis in part one of this report has established that Shepherd and Neame can venture in to the new brand and that the potential for investment is high in the UK student market. Alongside, it is also clear from the profitability analysis in part two comparing with the UK’s largest brewer that the company’s financial performance is indeed effective and further investment in new brands will increase the overall profitability for the company. Hence to conclude the report, it is recommended that the company invest on the new brand after conducting detailed market research as recommended in this report.
References:
- Andy Field (2005), Discovering Statistics Using SPSS 2nd Edition, UK: Sage Publications
- Frances Brassington and Stephen Pettit (2003), Marketing Management, UK: Prentice Hall Financial Times
- Peter Atrill and Eddie McLaney (2003), Accounting and Finance for non-Specialists 2nd edition, UK: Prentice Hall
- Philip Kotler and Kevin Lane Keller (2005), Marketing Management 12th Edition, UK: Prentice Hall
- Philip Kotler (1988), Marketing Management: Principles and Practise, UK: Prentice Hall