MARKETING CASE STUDY: WARBURTONS BAKERY

The Warburton family has been involved in bread baking for five generations and, although experts in quality baking with top performing products in the morning goods sector, they need to be continuously innovative. To do this they have a marketing team, innovations team and NPD (New Product Development) team, their own test bakery and excellent technical back up. The company has discovered that all products follow a similar development known as the product life cycle:

The product life cycle

1. Introduction:
   • low sales
   • product bought only by open-minded customers ('innovators')
   • high advertising costs , as product awareness must be built rapidly.
2. Growth:
   • sales increase rapidly through product acceptance
   • competitors launch similar products.
3. Maturity:
   • mainly repeat purchases by loyal existing customers.
4. Decline:
   • falling sales
   • decision taken to revamp, de-list or replace product.

Market research

Before any product is launched, manufacturers carry out both quantitative and qualitative market research. Qualitative research is used when in-depth information is needed. It is usually carried out in homes with eight to ten people taking part. Quantitative research is used when statistically relevant information is required, for example to determine consumer preferences for white or brown bread. It is normally carried out on a much greater scale and helps identify who the product should be aimed at.

Even children are consulted if appropriate. Warburton's development of a children's product produced some interesting information about the kind of bread seven year-olds wanted in their lunchbox!

When establishing the price of a basic item such as bread, these factors are carefully considered:

• Selling price: the price obtained for a product needs to be high enough to make a profit to allow further business growth and development, while still attractive to the consumer.
• Cost: price must relate to the cost of production and the amount of profit required. In the bakery market just one penny can make the difference to a product being accepted by the shops and consumer.
• Demand: the price must reflect what the consumer is prepared to pay.
• Competition: the price must also take account of what competitors charge for similar products.

It is also possible to use a low price to promote products, including bread. However this is not a route actively followed by Warburtons since it does not fit in with their quality image.

Promotion/advertising

All producers aim to keep people aware of how good their bakery products are. Most employ an advertising agency to handle their TV, poster and newspaper campaigns. Other devices used to promote products are:

• bus shelter advertising
• trolley adverts
• on-pack offers
• recipe calendars
• exhibition stands
• trade shows and
• charity events.

Companies often use a public relations agency to keep in touch with local newspapers, radio and TV, and maximise the benefit of news stories such as the opening of a new bakery or new products launches. Charitable donations can also strengthen community links as well as generating further positive news coverage. Promotions, such as money off coupons or door drop campaigns can also be used to reward loyal customers and attract new ones.

New Product Development in detail

New Product Development (NPD) involves input from many people, from the Directors through to the sales and marketing team, the technical team and the staff involved in the day-to-day production process.

Whatever the product, the NPD team follow these steps:

1. Research
   This is a constant process to identify growth in the market, any gaps, range extensions etc. The ideas come from several sources including research and development, marketing, competitors and an internal 'knead your ideas' scheme.
2. Concept development
   A comprehensive product/project brief, detailing the product, consumer and timing is produced. This is passed to the development team to produce sample products.
3. Trials and research
   The concepts created by the development team are reviewed to decide which meet the requirements most effectively. The concept then moves to full-scale production trials. The team commissions consumer research into taste, pricing and packaging to refine the product. A variety of methods are used, including focus groups, consumer diaries and in-store research. This takes place all over the country, as it is important to understand the different attitudes of consumers in different regions. Consumer research is vital to the success of a new product. People are very emotive when it comes to food.
4. Product refinement
   Consumer focus group comments are interpreted and findings are worked in to the product if necessary. Refinements may involve taste, shape, texture and packaging.
5. Product confirmation
   The NPD team gets confirmation that the product will go ahead and it becomes part of the business plan.
6. Support/packaging development
   Packaging is developed and marketing support involving advertising, public relations and promotions, is organised.
7. Launch
   It is vital to have an effective PR and communications plan in place to launch the product successfully. Not all projects get through the process. Some ideas fail at the concept development stage. Getting a concept to market can take anywhere from two to 18 months depending on the complexity of the project.
8. Review
   The whole process is under constant review and benchmarking. The cross-departmental team responsible for NPD has a pre-launch meeting and also get together 12 weeks after the launch to review the success of the launch and product sales.

If the product is successful it becomes a standard product and responsibility moves from the launch team to the the marketing department to make any refinements to product, process and marketing.

Research into market information

Food manufacturers need good information on customer purchasing patterns. Warburtons use Electronic Point of Sale (EPOS) data from retailers to supplement other data received to gain a better insight into consumer buying and eating patterns.

1. Trends
   Customer spending on bakery is ranked 7th in importance.
   5% of total customer spending in supermarkets goes on bakery items.
   Spending on bakery items has grown 4.5% year on year.
   Branded vs supermarket Own Label: the total market is split 50/50 however the bakery sector is split 40% branded, 60% own label. This sector has the lowest percentage of branded share in the grocery market.
2. Merchandising
   The time it takes a consumer to make a purchasing decision can be as low as 3 seconds for bread, much less than the average of 30 seconds. Warburtons believe that current merchandising does not attract people to buy more bread. Poor replenishment in the bread aisle means that some items appear to be sold out. This helps to encourage substitution between brands bread/morning goods and speciality products – all of this could result in missed sales.
3. Who is buying?
   Families are the most significant bread buyers. They account for 29% volume sales of bread and 34% value sales. Everyone buys bread – household penetration is around 99%, however the average number of bread purchases has fallen from 55 times per year to 53 times per year, so people are buying bread on average once per week.
4. What do people buy?
   The wrapped bread market can be segmented into:
   Standard and Premium.
   The 2 main growth areas are premium and super premium.
   The whole category is worth £1.4 billion per year.
   The value of bread and morning goods (i.e. buns and rolls) is increasing.
   White bread is growing in importance and demand for wholemeal bread is static. This may be because white bread is merchandised better, it tends to be displayed by brand whereas brown/wholemeal bread presentation is less well defined.
   The biggest gain in market penetration has been for speciality products. The speciality bread sector grew 15% in value in 2001–2002.
5. Price sensitivity (or lack of it!) We spend proportionally less income now on food than ever before and consumers are becoming less price sensitive when it comes to food purchase. This is particularly true when it comes to the bakery category and hence the growth in premium/super premium products.

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