Marketing analysis on the energy bar industry

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THE ENERGY BAR INDUSTRY

In 1986, PowerBar, a firm in Berkeley, California, single-handedly created the energy bar category. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source.

Six years later, seeking to provide an alternative to the sticky, dry nature of the PowerBar, a competitor, also located in Berkeley, developed an energy bar with superior taste and texture and branded it the Clif bar. About the same time, another competitor introduced the Balance bar, which offered a blend of protein, fat, and carbohydrates based on the nutrition formula associated with the “Zone diet.” Faced with these challengers, PowerBar responded with Harvest (a bar with a much more accessible taste and texture) and ProteinPlus (an entry into the high-protein subcategory closely related to that defined by Balance).

The makers of the Clif bar observed that many women were athletes and many more were involved in fitness. They further observed that this half of the population had unique needs in terms of vitamins and supplements and that the energy bar industry had yet to recognize or fill them—a classic case of unmet needs. As a result, they introduced Luna as the first nutritional (not energy) bar for women, using media and promotions targeting active females. The bar had a light, crunchy texture; came in flavors like “lemon zest” and chai tea; and contained nearly two dozen vitamins, minerals, and nutrients. The target market consisted of time-strapped women who wanted both taste and nutrition and would appreciate a bar tailored to their needs.

Both in reaction to Luna's success and to expand the segments for which the category was relevant, PowerBar studied why women did not buy its products, which the firm considered to be nutritious, convenient, tasty, and able to provide a quick pick-me-up in mid-morning or mid-afternoon. One answer was that the calorie hit from any member of the PowerBar family was simply too great. In response, the firm created the almost indulgent PowerBar-endorsed Pria. With only 110 calories, Pria was designed to respond to Luna while attracting new users into the category.

The Balance strategy was to introduce a series of products, all of which stuck to the original bar's 40/30/30 nutritional formula but had different taste and textures. These spinoffs included Balance Plus, Balance Outdoor (with no chocolate coating to melt), Balance Gold, Balance Satisfaction, and the Balance-endorsed Oasis, a bar designed for women. The big success was Balance Gold, which was positioned close to the candy bar category (indeed, its tagline was “like a candy bar”) by containing ingredients such as nuts and caramel. Such a bar probably risked some of Balance's perceived authenticity as being an energy bar. However, because Balance entered the category from the diet perspective anyway and probably was never considered in the center of the energy bar world, the risk may have been acceptable.

In addition to the major brands, challengers from a variety of small and large firms advanced subcategories by positioning themselves around such factors as age (bars for seniors and kids) and health (products to fit dairy-free, diabetic, and heart-conscious diets), to say nothing of numerous textures, flavors, sizes, and coatings. Over a 10-year period, some 450 products were introduced. For example, the popularity of low-carbohydrate diets has prompted a host of entries, including Atkins Advantage, developed by the Atkins organization, which gained a substantial market share that peaked in 2003 and fell off sharply thereafter. Other participating brands include Zone-Perfect, Met-Rx, GeniSoy, EAS, CarboLite, Carb Solutions, and Gatorade energy bars. Masterfoods' Snickers Marathon—a candy bar with a blend of vitamins, minerals, and protein—has blurred the division between candy and energy bars by seeking to gain share in the latter market. One concern of the energy bar industry is the skepticism among some quarters as to how qualitatively different its products are from candy bars in the first place.

The motivation for using an energy bar is primarily to provide a convenient energy boost. The original heritage of being a product to enhance the performance of top athletes engaged in demanding physical activities (like Lance Armstrong, a PowerBar endorser) created credibility and self-expressive benefits in the category's early years. Because household penetration was still under 20 percent, however, the major firms worked to generalize “performance” to be relevant to anyone who needs to perform well during the day. In fact, the industry dream is to get people to label the category “performance nutrition” and think of it as enhancing one's ability to complete any task.

New products in the category are going in several directions. A trend toward indulgent icings, coatings, and coverings has led some to morph toward candy bars. Others go the opposite way, using whole-grain ingredients for products somewhat like the original Clif bar and Quaker's Oatmeal Squares for women. The makers of the Clif bar also have introduced a Mojo line of salty snack bars to provide alternatives to sweet-tasting bars and the Clif Nectar bar, an entirely organic nut and fruit bar. PowerBar introduced Nut Naturals, a low glycemic index bar. There are bars positioned around ingredients such as protein or soy bars. A major Japanese brand of soy bars, SoyJoy is now in the market with a dry bar that will not be confused with a candy bar.

The energy bar category has gone mainstream, moving from the bike shops to the grocery stores and exploding from just over $100 million in revenue in 1996 to an estimated $2 billion or more a decade later, with expected future growth exceeding 10 percent per year. It is fueled both by the confluence of trends toward low-carb, portable, nutritious snacks and meal replacements (along with a general concern for health and weight control) and by the introduction of new products. Along the way, it became large enough to attract the attention of major packaged-goods firms. In 2000, Nestlé purchased PowerBar, which has remained the leading player, with the Clif bar (which has remained independent) emerging as its most formidable competitor. The Balance line of products was bought by Kraft, also in 2000.

Energy bars can be considered a part of a larger food bar category which is also growing rapidly. The market is divided fairly equally between granola bars (positioned as a snack food that is healthier than candy bars), breakfast/cereal/snack bars (used as a meal replacement), and energy bars. Energy bars have a far lower household penetration than the other food bar forms. The top marketers of food bars are Kellogg's (Nutri-Grain), Quaker Oats, General Mills, and Slim-Fast.

Reference:

Aaker, David A. Strategic Market Management, 10th Edition. Wiley, 2013-10-11. VitalBook file.

ASSIGNMENT:

Conduct a thorough analysis of this category’s customers, competitors, market, and environment from the perspective of PowerBar.

In particular, address the following issues:

a. How is the market segmented? What are the key customer motivations and unmet needs? What are the similarities and differences among the segments? How might a company link customer motivations to value propositions?

b. Identify the competitors. Who are the most direct competitors? The indirect competitors? Substitute products? What are the strategic groups?

c. Develop and justify a position on the issue of customer segmentation. What are the alternative views that may exist?


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Explanation & Answer

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Outline
I.

Introduction

II.

Conclusion

III.

References


Running Head: MARKETING ANALYSIS ON ENERGY BAR INDUSTRY

Marketing Analysis on Energy Bar Industry
Student’s Name
Institution’s Name

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MARKETING ANALYSIS ON ENERGY BAR INDUSTRY
Marketing Analysis on Energy Bar Industry
When PowerBar energy bar launched back in 1986, it brought a new industry and a
product to the market. Something that did not exist before PowerBar created it. Initially, there
was no competition because no other company was making energy bars beside PowerBar.
PowerBar’s monopoly status lasted only six years before other energy bars came along (Aaker,
2014).
Markets and Customers
When PowerBar came into existence, it identified its market as being made up of athletes
and other people who require large amounts of energy. For this reason, it sold to bike shops,
gyms and at events where biking and running competitions were expected. This market segment
was very narrow compared to later markets.
As is the norm in any industry, when there are several makers of a product, they must
find new markets or market segments (Dibb & Simkin, 2013). A market base can be expanded or
grown by modifying the existing products to suit the tastes and preferences of potential users.
These potential users become the new market segment for which products must be made. In this
case, markets segments were increased when new players came into the industry (Dibb &
Simkin, 2013). After Clif bar’s entry into the market with Luna, the market segments increased
from one to two. This is because Luna was not a traditional energy bar targeting athletes or
people with significant energy requirements, but it was nutritional bar targeting women who did
not require a vast amount of calories that were found in the energy bars (Aaker, 2014).
This...


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