An Eigis Consulting Group Case Study
An international fast moving consumer goods (“FMCG”) megabrand, which enjoys the largest share of the margarine market in Indonesia, was faced with an interesting idea for product innovation—creating a new SKU line of scooped margarines. While the practice is less common in Malaysia, scooping for margarine as well as other consumables, such as spices and coffee beans, are commonplace in Indonesia. Consumers typically shop for scooped margarine at wet markets, where margarines are scooped from 15kg blocks, but consumers are able to purchase them from wholesalers as well.
A research manager within the B2B arm of the FMCG megabrand was tasked to investigate whether there was a market for scooped margarine among B2B customers. The hypothesis was that customers in the HORECA industries—hotels, restaurants, caterers—including bakeries, preferred scooped margarine over standard-packaged margarine and were purchasing them from wet markets and wholesalers. However, a few critical business questions needed to be answered before an informed decision could be made. How large was the market for scooped margarine? How much gross value was the market worth? Were sales of scooped margarine seasonal? And more importantly, which brands were customers buying from, how much, how frequently, and why?
The research manager obtained clearance to engage a team of external business consultants to study the scooped margarine market, in order to assess its potential before substantial investments into product innovation were made. The following approach was adopted. At the end of the 3-month study, the findings provided critical market insights that enabled the research team to finalize their recommendation.
(I) Market Research
Gaining insights into customers’ motivation and preferences for scooped margarine was a challenging endeavor. A customized market research approach was designed, incorporating a combination of observation, street intercept, and in-depth interview techniques, depending on one of the two survey targets—(i) consumers purchasing scooped margarine at wet-market stalls, and (ii) wholesalers who offer scooped margarine for sale. To complicate the challenge, there were thousands of wet-markets in the capital of Jakarta alone, and nearly a thousand wholesalers who may offer scooped margarine for purchase. Thus a sampling refinement process was carried out in order to narrow down the sampling frame, while maintaining the representativeness of the sampling frame intact.
(II) Market Sizing
The market sizing model for scooped margarine was constructed using a two-tier information structure. The first tier involved the estimation of the apparent margarine consumption in Indonesia. This was built using secondary data from established sources, consisting of import, export, and local production data of margarine.
The second tier, which involved the subsequent dissection of the apparent consumption of margarine into desired cross-sections, were used to establish the market size of scooped margarine, built using primary data gathered from market research. The market size of scooped margarine was broken down into the following cross-sections:
- By distribution channel (wet market and wholesaler)
- SKU weight (100g, 250g, 500g, 1kg, etc.)
- Demand sectors (hotel, restaurant, catering, bakery)
(III) Market Share Analysis
The market shares of five primary scooped margarine brands were triangulated using top-down data gathered from wholesalers and bottom-up data gathered from consumer research. A pricing analysis of the competing brands was carried out, which determined the average price per kg of scooped margarine across the brands. Examination of these two areas of information provided insights into the market positioning strategy employed by the brands.
(IV) Strategic Recommendations
The findings from the study provided a comprehensive understanding of the scooped margarine market and met the research requirements. Certain initial hypotheses about the scooped margarine market were found to be incorrect. In addition, the findings revealed new insights about the scooped margarine market, which introduced new strategic implications such as product cannibalization—significant enough to warrant careful consideration—among others.