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What are the potential growth opportunities for Treleaven Luxury Cornish Ice Cream
Company Ltd, given its current business model and the wider industry context?
Presented by:
Edward Cooke 120049902
In partial fulfilment of the:
Master of Business Administration (MBA) degree
Submitted for:
Business Mastery Project
Presented to:
Canan Kocabasoglu-Hillmer
Cass Business School
London
Word count 15,600
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Contents
Executive summary .............................................................................................................. 4
1. Introduction....................................................................................................................... 6
1.1 Company background ................................................................................................. 6
1.2 The production process..............................................................................................10
1.3 The business problem ................................................................................................11
2. Research design..............................................................................................................13
2.1 Ethnography...............................................................................................................14
2.2 Management workshop ..............................................................................................15
2.3 Interviews ...................................................................................................................16
2.4 Customer survey ........................................................................................................17
2.5 Website analytics .......................................................................................................18
2.6 Desk based ................................................................................................................19
2.7 What else could I have done ......................................................................................20
3. Literature review ..............................................................................................................20
3.1 The market .................................................................................................................20
3.1.1 Demographics......................................................................................................24
3.1.2 The conscious consumer .....................................................................................24
3.2 Strategy......................................................................................................................26
3.3 Operations..................................................................................................................29
3.4 Marketing....................................................................................................................31
4. Research analysis ...........................................................................................................33
4.1 Soft systems methodology .........................................................................................33
4.2 Market opportunities and threats................................................................................37
4.2.1 Porter’s Five Force Analysis.................................................................................38
4.2.2 7 Ps marketing matrix ..........................................................................................39
4.2.3 Positioning the brand ...........................................................................................39
4.2.4 Keeping up with the digital revolution...................................................................41
4.2.5 Moving towards a more sustainable business......................................................43
4.3 Customer orientation ..................................................................................................43
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4.4 Perceived Use Value (PUV) / customer matrix...........................................................45
4.5 Changes to operations ...............................................................................................48
4.6 A financial model........................................................................................................50
5. Conclusions and recommendations.................................................................................51
5.1 Recommendations .....................................................................................................52
Appendices..........................................................................................................................56
Appendix 1 Treleavens Luxury Cornish Ice Cream Ltd Income Statement Year Ended 31
January 2014....................................................................................................................56
Appendix 2 Financial model, including projected income statement, balance sheet and
cash flow ..........................................................................................................................57
Appendix 3 Current location of Treleavens Luxury Ice Cream Company production
facilities ............................................................................................................................59
Appendix 4 Factory floor, awards on show.......................................................................60
Appendix 5 Treleavens customer survey .........................................................................61
Appendix 6 Customer survey results................................................................................64
Appendix 7 Narver and Slater Market Orientation Questionnaire.....................................65
Appendix 8 Porters Five Forces Model ............................................................................67
Appendix 9 Marketing Mix 7 Ps........................................................................................70
Appendix 10 A rich picture of Treleavens’ current business state ....................................74
Appendix 11 Booths EH Foods Ltd. Interview with Gemma Addison. Frozen and Chilled
Foods Buyer.....................................................................................................................75
Appendix 12 Sainsbury’s Supermarket PLC. Interview with Matt Smith, Ice Cream Buyer
.........................................................................................................................................79
Appendix 13 Riverford Organic. Interview with Julia Collins, Marketing Director..............82
Appendix 14 Wieden + Kennedy. Interview with, Jennifer Lewis, Planner .......................85
Appendix 15 Movember. Interview with Juliette Smith, Global Marketing Director...........87
Appendix 16 YouGov / Sixth Sense Poll of Consumer Attitudes to Ice Cream.................89
Appendix 17 Price comparison between Treleavens and one of its biggest local
compeitors, Callestick ......................................................................................................93
Appendix 18 Ice cream components ................................................................................94
Bibliography.........................................................................................................................95
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Executive summary
This report is intended to support the management of Treleaven Luxury Cornish Ice Cream Ltd
(Treleavens) in developing its future business strategy. This is achieved through the provision of an
evidence based approach and recommendations on how Treleavens could position itself for growth
given the nature of the market, the company’s resources and capabilities, its purpose and values,
and what operational changes might be required to support change. I have also sought to highlight
some trends in the food production market where smaller businesses, because of their more
localised, transparent and manageable supply chains, can create a competitive advantage over
larger multinational businesses. In my opinion this is particularly important as consumers become
increasingly conscious of concepts such as provenance, authenticity and the social value of
corporations. I believe the question of how smaller businesses in the food production sector create
a competitive advantage over large global corporations in an increasingly open society, as the
internet continues to democratise knowledge, is an interesting area for further study, but beyond the
scope of this report.
For the purposes of Cass Business School’s BMP schema this report is classified as a consultancy
project, aiming to resolve a client issue using primary data, and aiming to offer commercial benefits
to the client. To some extent it also has case study or business plan characteristics as I am aiming
to produce a comprehensive diagnosis of the organisation and market in order to support the
formation of a plan for business development. In recognition of the fact I am undertaking this
project on behalf of Treleavens management I have ensured it contains a series of practical
recommendations, yet at the same time I have tried to ensure the study still has sufficient academic
rigour to meet Cass Business School’s requirements.
The report covers business management issues in the areas of operations management, strategy
and marketing. In addition from the accounting information I have been given I have created a
balance sheet and cash flow model which I have used to consider the validity of making further
capital investment in the business. This model could be built into Treleavens’ business operations,
as well as financial forecasting and strategic decision making.
From my detailed analysis I make the following recommendations to the company;
1. Focus on selling product to two key markets; catering and premium retail markets. The former
focussed on Cornwall and potentially Devon and the latter Cornwall and London. Initially sell to
premium retail in London through distributors such as Marigolds.
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2. Invest in a new continuous flow production process that allows higher volumes to be produced
to meet increased demand.
3. Maintain the existing production capability that will enable the business to continue to offer a
more customised option to some customers.
4. Make incremental changes to inputs in order to be confident of promoting Treleavens’ mantra of
being a producer of a luxury and premium product.
5. Create a clearer and differentiated brand proposition around quality, authenticity, innovation and
customisation.
6. Do not aim to sell through multiple retailers at this stage. Further, consider removing the Daisy’s
brand and move existing Daisy’s customers to Treleavens. With the new production process
this could be achieved with little impact on the product price paid by the customer.
7. Invest in staff, particularly on customer service training and the new production process.
8. Spend time improving the existing customer database, and incorporate the voice of the
customer into the business. Further, seek views from lapsed customers on what motivated
them to use new suppliers.
9. Invest in a digital media strategy, once the narrative is developed and agreed.
10. Explore the feasibility of running, or sponsoring, summer events as part of the brand positioning.
11. In the medium term open an ice cream parlour in central London which makes ice cream on site
and acts as much as a marketing channel for the brand as it does a means of generating sales.
It is worth noting that the company is a subsidiary of a parent company, Camel Back Limited which
has two subsidiaries. Harbour Brewing Company and Treleaven Luxury Ice Cream Company.
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1. Introduction
The objectives for this project have been scoped through various formal and informal conversations
with the company’s management team, main investor and principle advisor. As such I am clear that
the overall purpose is to understand how to develop this venture so that it grows in a sustainable
way, consistent with the company’s underlying purpose and values. Within this statement there are
immediately two assumptions. One, that we all have a common understanding of what its purpose
is or ought to be, and two what it is for a business to be sustainable. These two issues required
considerable thought if I was to support Treleavens in developing a new business strategy. As such
I have looked at some traditional strategy models, including Porters Five Forces, the customer
matrix and 7Ps but also overlaid these with Soft Systems Methodology (SSM) that is more focussed
at the role of human activity systems in problem situations rather than focussing on the market in
which a business is operating.
Operational effectiveness and strategy are both essential to superior performance (Porter, 1996). I
have therefore explored how operations need to change to support strategy and deliver improved
outcomes. The other area that I have considered is marketing, and particularly brand positioning
and digital marketing. According to Kotler et al. (2006) most small businesses do not establish
formal marketing groups or conceive of marketing as a broader way to position their firms.
Marketing concepts and initiatives often come from managers, the sales force, or an agency. Very
often they equate marketing with selling, but in fact there are those who would claim the purpose of
marketing is to make sales superfluous (Ducker).
1.1 Company background
Treleaven Luxury Cornish Ice Cream Ltd (Treleavens) is an established business based in Cornwall
with a turnover in 2013 of £344,0601
. This turnover has grown from £320,214 in 2012, an increase
of 7.4% from 2012 to 2013. In volume terms the business increased output from 70,736 litres to
73,305 litres, an increase of 3.6%2
. As can be seen from the figure below this was largely down to a
spike in sales over the summer period which can be largely explained by 2013 being the warmest
summer since 2006, and much warmer than a cool summer in 2012, according to the Met Office3
.
The weather dependency on sales of ice cream is an important factor to consider in making
recommendations on how Treleavens should grow its business.
1
According to the company’s sales data
2
NB. This is a figure for during the period 13 Oct 2012 to 12 Oct 2013 whilst the sales figures are January to
December 2013
3
The Met Office website http://www.metoffice.gov.uk/news/releases/archive/2013/early-summer-stats
accessed on 20 August 2014
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Figure 1 Treleavens’ Monthly Sales 2012 / 2013
Source: produced by the author with company sales data
Figure 2 below contrasts 2013 and figures up until August 2014, to give an impression of what
growth can be expected for the rest of this year. However, once again the weather could be a factor
given the relatively warm start to the autumn.
Figure 2 Treleavens’ monthly sales data 2013 and 2014 year to date
Source: produced by the author with company sales data
What is clear, and unsurprising from these figures is that from a process management perspective
one of the business’ process characteristics, as described by Slack et al. (2009), is a high variation
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Treleavens monthly sales 2013 and 2014 year
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in demand. This is something that can of course be managed, for example through forecasting and
pre-preparation of the most popular products and flavours. However, this has implications in terms
of the company’s ability to forecast and will depend, for example, on issues such as the relationship
between the company and its customers and their role in helping the business predict future
demand. This variation also impacts on operations issues such as storage capacity; is there
sufficient freezer space to store popular products to mitigate the impact of this high variation in
demand, for example.
The company has another brand called Daisy’s. Daisy’s is sold at a lower price than Treleavens,
but because of the existing production process at its factory it is largely made in the same way with
the same inputs. There are some minor differences in the way the product is finished, but ultimately
the unit margin on Daisy’s ice cream is between 11% - 24% lower than on Treleavens, depending
on which flavour of ice cream4
. Of the total litres of ice cream produced Daisy’s makes up about
12,000 litres of a total of 73,000, or 16.4%.
Turning to the accounts from 2013 (appendix 1) we can establish that the Gross Margin was around
46% in 2013, calculated as follows;
Gross Margin (%) = (revenue5
– cost of goods sold) / revenue * 100%
= (342,594 – 184,825) / 342,594 * 100
= (157,796 / 342,594) * 100
Gross Margin = 46%
Although the two companies are not comparable in terms of size, products or the market in which
they sell to (retail as opposed to catering) for guidance R&R’s, the biggest producer of ice cream in
Europe, Gross Margin in Q2 2014 was around 23.4%6
.
This figure represents the proportion of each pound spent that the company retains as gross profit
after the direct costs of producing the good have been taken into account. It is a good metric to
establish how efficient the businesses operations are.
4
Daisy’s 4.75ltr sales price is £17.30, and Treleavens for the same flavours at the same volume is either
£19.21 or £21.40.
5
The revenue figures in the accounts are marginally higher than they are in the sales figures given to me by
the company accounts team. In order to get a truer measure of the gross margin I have included a proportion
of the wage bill, which in the accounts (appendix 1) are not included in the cost of sales.
6
R&R Bondholder Information Pack http://www.rr-icecream.co.uk/media/41249/q1-2014-bondholder-
information-pack.pdf [accessed September 20 2014]
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Of the company’s total sales, 74.55% can be attributed to its top 20% of customers by size of
orders, as shown in figure 3.
Figure 3 Treleavens’ top 21 customers
When considering what next steps the business should take clearly these businesses must be
engaged proactively.
Currently the channels it sells its product through are; scooping locations, for example ice cream
parlours, beach cafes and a franchise in Looe called Treleavens Polperro Shop (fig 3); restaurants
where the product is on the menu, although the brand is rarely explicit; and, in tubs of either 120ml
or 500ml volumes - as a proportion of total volume, scooping accounts for the vast majority at
70.9%, restaurants for 28.7% and tubs only 0.4%7
.
Finally, another important contextual observation relates to the environment in which it produces the
product. The company is currently located on an industrial park on the outskirts of Looe, a town in
south Cornwall. Other businesses operating from the park include a gym, a mechanic and a sweet
production factory. The company has three units on the site, one where the production takes place,
one for ice cream storage and one for dry goods and ice cream storage. Images of the existing
production environment can be found at appendix 3.
7
The figures relate to 2013 and come from Treleavens company sales data.
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Treleavens key customers
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1.2 The production process
The basic steps in the manufacturing of ice cream are generally as follows;
Figure 4 generalised model of ice cream production process
Source: University of Guelph, Canada
Despite its relative simplicity in terms of production ice cream is quite a complex product. Dairy ice
cream contains milk fat and non-dairy ice cream contains vegetable fat combined with milk fat. All
ice cream will also contain non-fat milk components such as proteins and carbohydrates.
Sweeteners, flavourings, emulsifiers and stabilisers are added during processing. Ice cream
contains over 50% water from milk or other ingredients and air is incorporated into the product
resulting in finely-distributed air cells protected by a layer of fat globules. The amount of air in the
product gives it its consistency, and is called overrun.
Producing ice cream involves mixing the basic ingredients together. This process is followed by
pasteurisation, which reduces non-pathogenic bacteria. The product then goes through a process
called homogenisation allowing the distribution of fat into as many separate small fat globules as
possible. Treleavens does not homogenise its product, principally for taste reasons. Then the
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product is cooled and aged. The aging process lasts between 4 and 24 hours, and up 72 hours,
when the dry ingredients are hydrated and the fat is crystallised. The next stage in the production
process is for the product to be frozen in a continuous freezer and air incorporation takes place.
When the ice cream leaves the continuous freezer at -5ºC, approximately 50% of the water is
frozen. The ice cream goes through a process of blast freezing for between 30minutes and 1 hour -
this is in order to keep the product’s shape. The final process is hardening, which freezes out most
of the water at - 40ºC, although Treleavens freezes at - 22ºC8
.
Production of ice cream with high overrun means, other things being equal, that the cell walls
around the air cells are thinner and weaker. It is therefore at higher risk of a production run not
creating a stable, solid product when very high overrun ice cream takes place. Therefore a higher
concentration of emulsifiers and stabilisers is needed to manufacture an ice cream with high
overrun which will still be perceived as a high quality9
.
1.3 The business problem
The company’s sales growth has largely been organic without any significant investment in
production equipment, marketing or sales, since the initial purchase in 2011. The management
team of the business is focused on growing Treleavens at a faster rate in this latest stage of its
business lifecycle. The company has one main investor who has made about £500,000 available
(in addition to the initial investment into the business when it was purchased in 2011) to develop the
business. His expected return is 10%. Although the period over which this return is expected is not
clear for the purposes of this report I have assumed a 4 year period, and rather than calculate either
Return on Investment (ROI) or Return on Invested Capital (ROIC) I have used Return on Capital
Employed (ROCE), a financial ratio that measures the company’s profitability as well as the
efficiency with which its employs its capital, in my financial analysis (appendix 2).
Treleavens operates a value chain that aims to maximise quality of product, service and
customisation but at a high cost. The ice cream is made in a way that requires quite a lot of
intervention from employees, rather than running a production process that is more machine led and
on a continuous flow. This has consequences for its operational model. It does allow the company
to promote the ‘handmade’ value of the product, and the overrun is lower which gives a denser and
creamier texture. According to experts ice cream normally has around 100% overrun. What this
means is that air makes up 50% of the total ice cream volume. The amount of air incorporated into
8
Description taken and amended from The Dairy Council website
http://www.milk.co.uk/page.aspx?intPageID=389 [accessed July 2014]
9
Ludvigsen, H Manufacturing High Quality Ice Cream with High Overrun (February 2012) http://d-
nb.info/1020452676/34 [accessed 21 August 2014]
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the mix influences the sensory attributes of ice cream. If a lower amount of air is applied, the
resulting ice cream is more dense and heavy and if a higher amount is used, the texture is lighter
and softer10
. Treleavens has around 30 / 40% overrun.
Production of ice cream with high overrun is a tool used for cost saving, after all air costs nothing
whilst all other inputs have a quantifiable cost. In fact as a consequence of the range of overrun
used in the manufacturing of ice cream by different producers, a very lively debate is currently
ongoing about whether ice cream should be measured by volume or weight. According to a recent
article in The Telegraph11
much of the rest of the world is horrified that so much British ice cream is
made up of vegetable fat and air. Indeed in the United States it is illegal to use more than 100%
overrun in ice cream. No such legislation exist in the United Kingdom, but new European food
regulations come into force later this year and as a consequence The Department for Food and
Rural Affairs (Defra) and the Department for Business Innovation and Skills (BIS) will decide
whether to support the makers of Haagen Daaz, lobbying for a weight based approach, or Unilever,
owner of Walls ice cream brand, advocating one based on a volume measurement.
Clearly the perceived quality of the product by the consumer is a key factor in the choice of how
much air to use, something explored further in this report.
As far as Treleavens is concerned the relatively lower proportion of overrun in its product means
that its costs of production are higher and this is reflected in the price of the product. It is also is of
the opinion that this is the principle reason its products are sold at higher prices than one of its local
competitors, Callestick Farm. This may not be the only reason, for example the Callestick Farm
produces its own milk for its ice cream which presumably reduces this input cost12
, but nonetheless
from the price comparison I have undertaken (appendix 16) Treleavens is between 14% and 59%
more expensive per litre sold on popular flavours.
The business needs to establish the most appropriate route to market given its resources and
capabilities, how it wants to position the brand, the level of investment and return that investors
require. The options I have considered are as follows;
10
Hanne K. Ludvigsen, Product Manager, Ice Cream and Dairy Group, Palsgaard A/S [technical paper].
11
Wallop, H., The inside scoop on the ice cream war sending ripples through the industry The Daily Telegraph
(23 August 2014) [online] available at http://www.telegraph.co.uk/foodanddrink/11051783/The-inside-scoop-
on-the-ice-cream-war-sending-ripples-through-the-industry.html [accessed on 30 August 2014]
12
Callestick Farm websitehttp://www.callestickfarm.co.uk/ [accessed on 20 August 2014]
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1) Invest in a continuous flow system of production and grow the Daisy’s brand. Produce a product
with more overrun, and therefore cheaper, aiming to produce lower cost ice cream sold through
supermarkets. At the same time grow Treleavens with a particular focus on the restaurant market.
2) Invest in a continuous flow system of production and grow Treleavens, targeting restaurants and
high end supermarkets and other channels such as farm shops and delicatessens. Keep the level
of overrun low and quality of inputs high, to produce a high quality product which commands a
higher price.
3) Maintain the status quo in terms of production processes, and make an investment in marketing,
particularly brand positioning and digital marketing.
4) Maintain the status quo in terms of production processes, growing at around the same rate and
continuing to develop its local customer base.
2. Research design
My research methods were selected understanding the business problem and the need to identify a
series of explicit recommendations for the company. The methods were primary and secondary
data collection, and both qualitative and quantitative. I aimed to use different qualitative and
quantitative methods to ensure a triangulated approach that would enable me to provide meaningful
evidence based advice from my observations to the management of and investors in Treleavens.
Bryman and Bell (2007) note one of the benefits of qualitative research is that it enables the
researcher to see and understand the context within which decisions are made. Understanding
context is so important in terms of understanding why people act in the way they do, and therefore
talking to them is critical. Whereas the quantitative researcher trades context for the ability to
generalise across a population (Bryman and Bell, 2007).
Yin (2003) argues that the form of the research question is crucial in providing guidance for the kind
of research design needed to answer that question. He further refers to Cosmos Corporation
illustration of relevant situations for different research strategies, as depicted in table 1;
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Table 1 Research strategies versus characteristics
Strategy Form of research
question
Requires control
over behavioural
events?
Focuses on
contemporary
events?
Experiment How, why Yes Yes
Survey Who, what, where,
how many, how
much
No Yes
Archival analysis How, why No Yes / No
History How, why No No
Case study How, why No Yes
Source: from Yin (2003) / Cosmos Corporation
I initially interpreted my question as a ‘what’ form of research question, but then it also has
characteristics of how and why forms of question. What should Treleavens do? What phenomena
have I observed for me to conclude this? And hence why and how should it be done? The research
design, data collection techniques and data analysis conforms to Yin’s description of a case study
method that investigated a contemporary phenomenon within its real-life context and relies on
multiple sources of evidence, with data needing to converge in a triangulating fashion (Yin, 2003).
2.1 Ethnography
In order to understand Treleavens’ operations first hand I travelled to Cornwall in July 2014 and
spent two days with production and distribution staff, as well as senior management. Although
ethnographic research normally involves the researcher immersing themselves in the environment
being studied for far longer than the time I was able to spend with the company’s staff, this
approach was taken in order to achieve observations that would not be achieved through any other
research method. In my view this resembles an ethnographic approach and is as close to
ethnography as I was likely to be able to achieve given resource limitations.
Ethnography is a research method based on observing people in their natural environment. In order
to collect observational data this research technique employs three kinds of data collection:
interviews, observation, and documents. This in turn produces data such as quotations,
descriptions, excerpts of documents, imagery and results in one product, a narrative description of,
in this case, the business situation (Genzuk 2003). Being in the business situation also enabled me
to observe behaviour and conversations that informed other elements of my research method.
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2.2 Management workshop
I facilitated a management workshop with the four key members of the management team, and
applied the Soft Systems Methodology (SSM) approach to problem solving both in the structure of
the workshop and then the resolutions or recommendations that were generated as a consequence
of the discussion. SSM was developed by Peter Checkland in the 1970s. It is designed to
determine interventions in management, organisational and policy situations where there are no
straightforward problems or easy solutions. Systems thinking was developed in response to the
reductionist view that all knowledge and understanding can be acquired by breaking down
phenomena into its constituent parts. Systems thinkers see the world as systemic and therefore
social phenomena are understood as an emergent property of an interrelated world - understanding
social phenomena means looking out, not just looking in.
Working with Habib Lesevic, a tutor at Cass Business School in new venture creation, we agreed
the approach. This process of inquiry into human activity systems complements some of the other
more traditional strategy methods explored further below. Essentially the model is a seven stage
process;
1. Entering the problem situation
2. Expressing the problem situation
3. Formulating root definitions of relevant
systems
4. Building conceptual models of human
activity systems
5. Comparing the models with the real world
6. Defining changes that are desirable and feasible
7. Taking action to improve the real world situation
Engage with the problem and create
space for expression
Agree how things OUGHT to be
Compare what IS (current state)
with what OUGHT to be (future
state)
Actions to change the situation,
moving from IS to OUGHT
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This research method developed following the time I spent with management earlier in the summer,
and the observations I had made whilst with factory staff and management in July 2014. In
particular it allowed me to provide Treleavens’ management with the opportunity to explore what
each of them saw as the purpose of the business; what the barriers were to them collectively
developing it into something they were all pleased to be associated with; and, how they could
collectively move from where they are now to where they want to be.
2.3 Interviews
Face to face and over the phone interviews are a valuable source of qualitative information.
Telephone interviews are likely to be best when the interviewer has specific questions in mind, and
help address geographical barriers to data collection (Berg, 2007). The view of some members of
the management team is that one of the company’s potential sales channels should be through
shops, and specifically supermarkets. Given supermarkets generate around 49% of ice cream
sales13
this is not an unreasonable opinion. Therefore, in order to establish the viability of this
channel I created a questionnaire for supermarket ice cream buyers with the intention to use it in a
semi-structured interview procedure. To develop the survey I noted Berg’s (2007) guidance on how
to construct semi-structured interviews. For ice cream buyers the questions used industry
vocabulary, and included essential questions, extra questions, throw-away questions and probing
questions. Further, I checked the questionnaire with a contact who works as a buyer for a major UK
supermarket. The purpose of this was to sense check the questions for anything sensitive that
might discourage the people I approached from agreeing to be interviewed. In particular this elicited
some good advice on commercially sensitive questions, which I removed but then aimed to elicit
through the probing questions of the interview. I was able to secure interviews with the ice cream
buyers at Sainsbury’s, a major UK multiple with 1,200 stores across the country, and Booths, a
much smaller higher end supermarket with 29 stores in the north of England.
I also designed two other interview questionnaires for use in both face to face meetings with experts
and over the telephone where face to face was not possible. These questionnaires, although also
semi-structured, were less prescriptive in terms of their content as the respondents were not ice
cream experts, rather marketing professionals with experience of the wider sector. The full
transcripts, and edited where I was unable to record the conversation, are in appendices.
Generating expert opinion on marketing and branding, as well as trends in the organic dairy market
were invaluable sources of information upon which I was able to make my recommendations.
13
Canadean Market Focus: Trends and Developments in the Ice Cream Sector in the UK (2013)
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2.4 Customer survey
As mentioned the company sells almost all its product to catering companies, restaurants or cafes,
rather than to the retail market. These existing customers are of critical importance to Treleavens’
future growth. Therefore understanding their view of the company in a number of key areas, such
as quality of product, price of good, innovation and customer service, was an important element of
my research design. Working with the management team, and as a consequence of observations
made on my visit to the business, I developed a survey that ensured we got accurate and unbiased
responses to key questions. To ensure bias was removed we made the survey anonymous,
selected all customers rather than based on a measurement such as level of expenditure and did
not allow management to choose survey targets. Because of the quality of data kept on the
company database I was only able to extract 42 data points, an issue discussed later on.
One area of bias that we were unable to remove was that the survey was sent electronically and
therefore those without internet capability, because of skills or coverage, were excluded. This could
have been addressed by sending postal surveys, or undertaking phone surveys, however due to
time limitations this was not possible.
The survey was initially produced through DotMailer software which allowed for tracking of emails
delivered, recipients who opened the email, clicked on a link or forwarded it to another contact. Due
to a low initial response rate the survey was resent, and some of the language changed to
encourage take up. Although this did produce a couple more responses it was still not sufficient to
produce a meaningful sample of customer feedback. I then reviewed the approach and sent a
personal email to all those who had opened one of the two initial emails, which I was able to do
through analysing data captured on DotMailer. I further incentivised targets with the chance to win
£100 off their next order with Treleavens. This secured a few more responses, but still not
sufficient. I sent one further reply, this time making the Calls to Action (CTAs) and incentive even
more explicit and introduced a time incentive too. A couple more responses were received, with a
total of 8 customer responses to analyse from a total of 42 data points and about 100 customers.
Although not a big sample by any means, and therefore more useful as an exploratory function, it
does give Treleavens some useful customer insight and some learnings in terms of its database
development and management for the future.
I developed the survey with Likert scale characteristics, with a 1-5 type scale and a focus on
measuring quality. This method is probably the most dominant quantitative research tool in the
social sciences. Likert scale surveys have a number of benefits, which is why I chose this
approach. They are not binary, or either / or, allowing the respondent some scope for their own
subjective position and data from them is easy to collect and analyse. However this kind of scale
18. 18 | P a g e
has its limitations, such as central tendency bias whereby respondents tend not to choose extreme
options and acquiescence, where participants may respond in a way that is intended to please the
person undertaking the experiment. As this survey came from Treleavens, even though it was in my
name, and asked for comparisons with competitors, this potential bias should also be noted.
Fortunately, given the relatively low response rate, this method does not alone inform my analysis
and recommendations. It is thus just part of the analytical picture set out later on.
Further, an open ended comment box was included to allow the responder to contextualise their
responses and add further views on how the business could build on its client relationships.
Finally, I included a very specific question that was generated as a consequence of conversations I
had with Treleavens' management during the workshop I facilitated. The question was constructed
in order to establish whether the company might lose custom if it were to sell product through
supermarkets. I wanted to test this assumption by further qualifying whether some customers were
opposed to supermarkets of any sort, or perhaps just the national supermarkets, like Tesco,
Sainsbury’s, Morrisons and Asda.
2.5 Website analytics
Treleavens has a website, a Twitter page and a Facebook page. Although its business is currently
more business to business (B2B) the website is still its window to the world. Website data is clearly
measureable, and therefore the company’s digital presence was worth analysing to establish what
impact it might be having on business performance. Indeed what segments of customers are
visiting the site in order for the company to match this with other views on the type of customer who
might be interested in the Treleavens’ product and brand.
As defined in Kaushik (2010) Web Analytics is:
1. The analysis of qualitative and quantitative data from your website and the competition.
2. To drive a continual improvement of the online experience of your customers and prospects.
3. Which translates into your desired outcomes (online and offline)
On his blog14
Kaushik offers some useful advice on the tools businesses of different sizes might use
to improve the online experience of customers and potential customers, outlined below. He argues
14
Avinsh Kaushik blog site http://www.kaushik.net/avinash/best-web-analytics-tools-quantitative-qualitative/
[accessed on 20 September 2014]
19. 19 | P a g e
that depending on the company’s resources available, and what is impactful and achievable, the
priority order should be follow the prioritisation table below.
Table 2 Web analytics 2 order of execution
Web Analytics 2.0 Components and Order of Execution
ClickStream Outcomes
Voice of
Customer
Testing
Competitive
Intelligence
Small business 1 2 3
Medium sized
business
2 1 3 4
Large business 3 2 1 4 5
Source: Occam’s Razor blog by Avanish Kaushik
2.6 Desk based
In addition to the primary sources of information collected, I also researched numerous secondary
sources from industry reports that I was able to beg steal and borrow through contacts, the
company’s financial information kindly provided by Mark, the Managing Director, and Debbie, who
works in accounts, company and competitor trade sales pricing, government reports and data
(including from the Valuation Office Agency (VOA)), academic literature, newspaper articles and
websites. Finally, everyone has an opinion on ice cream as 9 in 10 people buy it15
, so I haven’t
been short of more anecdotal, but still useful, information too.
15
YouGov SixthSense, Frozen Foods Poll 2011
20. 20 | P a g e
2.7 What else could I have done
Due to time and financial resource limitations I was unable to undertake a number of other
approaches to understanding the business problem, and developing solutions. This research paper
would have benefitted from consumer research, ideally against the competition in terms of a blind
taste exercise test, focus group research or similar approach. We do however know that
Treleavens product is considered high quality given it has won a number of awards, including 11
Great Taste awards16
, and we have feedback from pitches to companies such as Halls for Cornwall.
Due to limited complete data I was only able to get input from eight customers, and all of them are
existing ones.
I recommend Treleavens reaches out to former customers to understand what motivated them to
use alternative suppliers, and look to produce a regular Net Promoter Score (NPS) as referenced
later on..
3. Literature review
This literature review covers some of the theoretical propositions from academic literature that have
informed this report, along with market information from consultancy reports and sources from
newspaper and magazine articles, both online and offline.
The focus of this project is on business strategy, operations management and marketing. This
literature review reflects my focus, and has been broken down as such.
3.1 The market
The UK’s Ice Cream sector was worth £1,642.1m in 2012 and is forecast to reach £2,009.4m by
2017, a Compound Average Growth Rate (CARG) of 4.3%. This growth reflects the UK’s busy life,
increases in population, innovation and the role ice cream plays as an affordable consumer
indulgence. Supermarkets were the most important retail outlet for ice cream accounting for 49% of
the UK’s retail value sales in 2012. However, this is much lower than their share of the overall food
market. This is largely as a result of them facing strong competition from artisanal producers, and
food and drinks specialists (Canadean, 2013).
16
Treleavens website http://www.treleavens.co.uk/ [accessed February 2014]
21. 21 | P a g e
Figure 5 The United Kingdom Ice Cream Market Value (GBP m) and Growth (Y-o-Y), 2007–17
Source: data from Canadean reproduced by author
Although the total ice cream market in the UK is worth around £1.7b, the impulse market is
worth around £640m and the artisanal market is worth just £60m. As it is currently positioned
Treleavens sits within the artisanal and impulse sections of the market according to the
definition provided by Canadean17
. Canadean describes artisanal ice cream as ‘Ice cream
manufactured by small local producers for sale on the premises. Includes impulse and take-
home sales, but not on-the-premises consumption’ and impulse ice cream as ‘Dairy or
vegetable oil-based ice cream products purchased for immediate consumption. Includes single-
serve ice cream tubs, packaged cones, ice cream sandwiches, and chocolate-coated ice
creams. Includes low fat dairy and oil-based products, but not frozen yogurt.’
The market is dominated by a small number of large global businesses, including Unilever and
R&R Ice Cream that between them account for around 75% of total consumer expenditure18
. In
addition there are hundreds19
of smaller businesses largely competing in local markets.
17
Canadean is the leading market research and analysis provider. It specialises in conducting online survey
panels, producing in-depth market insight reports through qualitative and quantitative in-country analysis as
well as offering clients a bespoke consultancy service tailored to address each client’s specific business
needs.
18
IBIS world, Ice Cream Production December 2013 (and taking account of R&R’s acquisition of Hendricks)
19
According to IBISWorld there are 248 ice cream businesses in the UK
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0.00
500.00
1,000.00
1,500.00
2,000.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
AnnualGrowth(%)
Value(GBPMillion)
GBP m Annual Growth (%)
22. 22 | P a g e
Figure 6 The United Kingdom Ice Cream Market Dynamics: past and future growth rates (2007–12 & 2012–17) and
market size (2007, 2012 & 2017), by Category, by Value (GBP m)
Source: from Canadean data, adapted by author
Getting data on the size of the restaurant, café and leisure (for example museums, theatres and
country houses) markets was not easy. As far as I could tell there was no single source of
information. As such I tried to assess the size of the market using Valuation Office Agency (VOA)
data for the Plymouth region. This extends throughout Cornwall and also as far as Cheltenham, in
Gloucestershire. By making a few assumptions20
and cutting the data based on these I have
produced what could be considered guidance on the number of premises that could be considered
the company’s market.
20
My assumptions were as follows; I removed 30% of the overall database of around 9,500 based on the size
of the rateable value (RV) of their properties, i.e. by removing the lowest 30% of RVs. By doing so I have
assumed those paying lower rents (upon which rateable values are based) are either too small to target (the
RV is low because of the size of the premises), or would not pay for a higher priced product like Treleavens
(using RV as a benchmark for ability to pay). Further I defined local as within a 2hr drive of Bodmin, being
near the current factory and in the middle of county, i.e. in between the north and south coast, and removed
all those with a postcode outside of that range.
0%
1%
2%
3%
4%
5%
6%
0
500
1000
1500
2000
2500
2007 2012 2017 2007 2012 2017 2007 2012 2017 2007 2012 2017
Artisanal Ice Cream Impulse Ice Cream Take-Home Ice
Cream
Overall
CAGR(%)
MarketSize(GBPMillion)
23. 23 | P a g e
Table 3 Guidance on the potential size of the ice cream market in the leisure and catering industries
Property type (VOA classification) Number
Public Houses and bars 1628
Restaurants 558
Cafes 370
Hotels 157
Garden centres and nurseries 112
Museums 97
Farm shops 84
Historic properties (including National Trust) 61
Theatres 27
Total
3094
Source: author’s analysis of the potential local catering and leisure market.
This is not the same as the number of businesses, but business premises. I have assumed that all
of these premises sell ice cream to some extent or other in the absence of any way of knowing if
they do. In reality a large number probably will not. However, applying a discount to this figure
would be pure guess work.
24. 24 | P a g e
3.1.1 Demographics
Older consumers, those aged 55 and over, constitute one third of the consumption for both men and
women, indicating opportunity for healthy product lines. Furthermore, over two thirds of
consumption is from better off or moderate income group which can be traded up for premium ice
cream products. Although older consumers eat ice cream less frequently than younger consumers,
the sheer population of close to 18m older consumers aged 55 and over means they constitute
around 33% of the market by volume.
‘Experience Seeking’ and ‘Quality Seeking’ consumer motivations has led to the growth of
premiumisation of ice cream which together with product innovation has led to the growth of Ice
Cream sector as a whole (Canadean, September 2013).
3.1.2 The conscious consumer
The growth in popularity of organic produce across all foods will extend to ice cream, encouraging
many manufacturers to comply, with the aim of capturing new demand. The recent introduction of
frozen yoghurt to the UK market will prove a significant threat to the industry, combining novelty with
perceptions of healthiness to create an alternative to ice cream (IBISWorld, Ice Cream Production,
December 2013).
Of the c. 13% growth predicted for the ice cream sector between 2014 and 2018, sales of premium
and luxury products and rising food prices are likely to be the major factors sustaining growth (Key
Note, Ice Creams and Frozen Desserts 2014).
However, according to IBIS World / Ice Cream Production (2013) despite the rapid growth of
premium ice cream ranges over the past decade, ice cream producers still need to invest heavily in
developing creative new product lines to really boost ice cream consumption. The same
consultants also argue that a lucrative niche market opportunity exists in the popular fair trade and
organic food movements. These are part of a broader sustainability movement that has heightened
consumer awareness about the potential harmful effects of artificial chemicals in food and ethical
issues surrounding food sourcing and production, particularly from foreign markets.
The food scandal in 2013 in the UK involving horse meat found in ready made foods sold in a
number of supermarkets led to a House of Commons Select Committee Inquiry who’s chair, Anne
Mackintosh MP said, when her Committee’s report was launched;
25. 25 | P a g e
“The evidence suggests a complex network of companies trading in and mislabelling beef or beef
products which is fraudulent and illegal.”
Clearly a different product, but nonetheless consumers’ awareness of complex global supply chains
is increasing, as is their desire to live more healthy lifestyles. Ice cream is evidently not a health
product, but an affordable indulgence. Therefore, there are both opportunities and threats from
trends in consumers’ changing attitude towards food.
This changing attitude has, though, led to the development of organic food ranges, for which
consumers are willing to pay a premium - according to Dairy Statistics 201321
organic milk sales
increased by 4.7% between April 2013 and April 2014. In my interview with Julia Collins she
supported this view, claiming that she was still finding there is strong demand for quality organic
diary. She further noted that the organic market is in growth, whilst sales of conventional food
through supermarkets declining. Also included in this trend of increased demand are dairy produce
cultivated without harmful pesticides or herbicides that are also fair trade certified to ensure that
multinational companies do not engage in exploitative negotiation methods when dealing with their
suppliers in developing countries. Ben & Jerry's, Marks & Spencer, the Co-Operative and Waitrose
have all launched fair trade ice cream ranges in recent years. Producers are likely to respond to
these trends by releasing more ice cream made from organic milk and certified as fair trade.
Planet Retail22
also supports the view that, fuelled by an increasing number of food scandals and
investigative media coverage, consumers increasingly want to know where their food comes from.
They want to be assured of the good origin of groceries. Further, shoppers increasingly demand
personalised products. Instore production means shoppers can acutally watch the individual
preparation of goods they are about to buy. This is not a new trend, supermarkets in the UK have
for some time dedicated space to in store food production to give it authenticity and a sensory
experince.
Shortly after Unilever (maker of Ben and Jerry’s and Walls ice cream brands) CEO Paul Polman
took over he launched its Sustainable Living Plan, insisting that running the firm with environmental
and social impact at its core, including the impact that business operations have on its employees
and those in its supply chain, was not an act of charity but of self-interest. The Sustainable Living
Plan aims to reduce Unilever’s environmental footprint and increase its positive social impact.
However, this is inextricably linked to doubling sales and increasing long-term profitability. Polman
21
Dairy Statistics 2013 An Insiders Guide http://www.dairyco.org.uk/resources-library/market-
information/dairy-statistics/dairy-statistics-an-insiders-guide-2013/#.VCmg85ru3IU [accessed 9 August 2014]
22
Klug, D, Trust and Transparency Planet Retail presentation April 2014
26. 26 | P a g e
argues that Milton Friedman’s view that business should focus on maximising shareholder value,
has been interpreted too narrowly23
. In the 1920s shareholder pressure eventually forced Unilever’s
founder William Lever to scale back his ambitions for his own environmental and social impact
programme. The Economist argues that Polman has been clever in moving away from quarterly
reporting and guidance to the markets about the firm’s next results, but rather he is trying to
encourage Unilever investors to think about the fundamentals of the business and its long term
prospects, which he strongly believes are improved by its sustainability plan24
.
3.2 Strategy
The word strategy is well known and often misunderstood. The subject is responsible for a
seemingly infinite number of books and management articles, without any concrete agreement on
what it means. Porter (1996), arguably one of the world’s leading strategy academics, describes
strategy as the creation of a valuable and unique position, made up of a set of activities – and
strategic positioning is about chasing a set of activities that are differentiated from rivals. Strategy is
about defining a unique position, making clear trade offs, or choices, in doing so, and then
tightening fit. He further argues that strategy retains continuity, whereas operational efficiency does
not, the latter being subject to continual change in order to improve performance.
Johnston et al. (2005) describe strategy as the direction and scope of a firm over the long term, thus
adding an explicit temporal element to strategy. The authors claim that this direction and scope
achieves advantage in a changing environment through its configuration of resources, and the aim
of strategy is to fulfil stakeholder expectations.
Barney (1991) describes strategy as a pattern of resource allocation that enables firms to maintain
or improve their performance. His approach is sometimes referred to as a Resourced Based View
(RBV) of strategy and is echoed in Barnes (2008) where he argues superior performance comes
from the way a company develops and allocates its resources and capabilities and thus operational
capability is crucial to a successful strategic outcome.
Operational effectiveness and strategy are both essential to superior performance (Porter, 1996). A
business should aim to establish a difference that it can preserve, by delivering greater value to
customers or delivering comparable value at a lower cost, or both. Porter explains that delivering
greater value allows higher prices to be charged, and clearly greater efficiency reduces unit costs.
23
In search of the good business (9 August 2014) http://www.economist.com/news/business/21611103-
second-time-its-120-year-history-unilever-trying-redefine-what-it-means-be [accessed 19 August 2014]
24
Ibid
27. 27 | P a g e
Denning in an article for Forbes Magazine in 2012 criticises Porter’s theories of creating sustainable
competitive advantage. He believes the initial mistake he, and others like Porter that look at the
market first, makes is that the purpose of strategy should not be about coping with competition, with
a focus on the contest in which a winner is selected from among rivals.
In the theoretical landscape that Porter invented, all strategy involves avoiding competition and
seeking out above-average profits protected by structural barriers. In this view strategy is all about
figuring out how to secure excess profits without having to make a better product or deliver a better
service. Denning argues that Porter’s theories of the 1970’s are based largely on evidence from
oligopolistic companies of the 1950’s, and times have changed. Consumers now dictate the
marketplace. As I referred to earlier, knowledge has become a democratised commodity, and given
the disruption caused by new technology, a cheap one25
.
Soft Systems Methodology (SSM) is a form of action research (Lester, 2008). The method
emphasises understanding the situation in which intervention is desired and on formulating the
action to be taken. Reason and Bradbury (2000) define action research as a ‘participatory,
democratic process concerned with developing practical knowing in the pursuit of worthwhile human
purposes, grounded in a participatory worldview….. It seeks to bring together action and reflection,
theory and practice, in participation with others, in the pursuit of practical solutions to issues of
pressing concern to people……’
Systems thinking proposes that each individual has a structure of interpretation that is a
consequence of their assumptions, values, beliefs and experience. These assumptions, values and
beliefs relate to ourselves, the world and our position within it. This is often referred to as our
Worldview.
Shared reality emerges from shared experiences and interpretations of reality. A consensus
depends on participants’ respective experience and interpretation of a situation and their respective
position relative to everyone and everything else. In systems thinking this relative position is also
known as context.
25
Denning, S, (20 November 2012) What Killed Michael Porter's Monitor Group? The One Force That
Really Matters Forbes http://www.forbes.com/sites/stevedenning/2012/11/20/what-killed-michael-porters-
monitor-group-the-one-force-that-really-matters/ [accessed 11 September 2014]
28. 28 | P a g e
Research undertaken by
Warwick Business School in
1992 concluded that SSM is a
practical and successful general
purpose methodology. SSM has
been used for a wide variety of
tasks, particularly common uses
being organisational structuring,
performance evaluation, and
information systems work, as
illustrated here in table 326
. For
the purposes of this report I
used SSM for problem
clarification and business
strategy purposes.
In my view there are also parallels with Lewin’s Force Field Analyses theory (1947), and the SSM
approach. Lewin focussed on how to increase the likelihood of a successful change outcome and
was the genesis of his theory based around an unfreezing, changing and refreezing process. He
was attempting to develop a model that aimed to increase the likelihood of a successful change
outcome by presenting to a group of individuals the benefits of change, recognising the potential
negatives of group dynamics on positive change outcomes. His model highlights opposing forces
working against one another, those promoting change and those protecting the status quo. By
setting out transparently driving and restraining forces, and ranking them by impact with the former
outranking the latter, it enables managers to communicate effectively to staff the motivation for
change, and identify staff attitudes to change.
26
Mingers, J., and Taylor, S., (1992) The Use of Soft Systems Methodology in Practice The Journal of the
Operational Research Society
Organizational design
- restructuring of role
- design of new organization
- create new organization culture
Information Systems
- defining information
needs
- creating IS strategy
- knowledge acquisition
- initial scoping/players
- evaluate impact of
computerization
Performance evaluation
- performance indicators
- quality assurance
- monitoring an organization
General problem solving
- understanding complex
situation
- initial problem clarification
Education
-defining training needs
- course design
- analysis of language teaching
- causes of truancy
Miscellaneous
- project management
- initial problem clarification
- business strategy
- risk management
methodology
- case for industrial tribunal
- personal life decisions
29. 29 | P a g e
Figure 7 Lewin’s change management model
Source: author’s interpretation of Lewin’s model with additional references to Kotter and Raspin
Although change management is not the focus of this report, given we are not looking at change at
a team level but a business level, the parallels with moving from the IS to the OUGHT state is worth
noting.
3.3 Operations
Barnes (2008) describes organisational success as being only likely if short term operations
activities are consistent with long term strategic intentions and make a contribution to competitive
advantage. He further supports the Resource Based View (RBV) that a venture’s allocation of
resources and its operational capabilities are critical success factors in the venture’s sustainable
competitive advantage.
Slack et al (2004) refer to five operations performance objectives, as set out in table 4 below;
Unfreeze
Pursuade people of
the need to change
from the current
undesirable status
quo, and establish a
sence of urgency to
do so (Kotter).
Change
Agree and adopt
new norms, and
communicate them.
Kotter in his parallel
theory talks of the
need to empower
broad based action.
Change mustn't be
seen as being
imposed from the top
down.
Refreeze
Reinforce new
behaviour through
rewards.
Recognise the
cultural web of an
organisation and
the levers (the
potential it has to be
a force for postive
change) and
blockages (its
distructive potential)
(Raspin).
30. 30 | P a g e
Excellent operations performance
in….
Gives the ability to compete on…
Cost Low price
Quality High quality
Speed Fast delivery
Dependability Reliable delivery
Flexibility
New products
Diverse products
Changing the volume of products
Changing the timing of products
Barnes (2008) referencing Slack et al (2004) argues that the success of a business strategy
depends on customers valuing the chosen competitive factors on which business strategy is based.
Although this may sound obvious and intuitive matching operations excellence to customers needs
is at the core of an operations based strategy.
Garvin (1984) argues that product quality is a key competitive advantage in a firms’ armoury. He
believes that managers should focus on the different dimensions of quality, and that markets should
be explored for untapped quality niches, and that on an operations level the company should be
organised to support the focus on quality. In Garvin’s view there are eight dimensions of quality;
performance; features; reliability; conformance; durability; serviceability; aesthetics and perceived
quality. A firm that choses to compete on the basis of quality can do so in several ways, rather than
target all eight of Garvin’s dimensions. Segmenting these dimensions and focussing on those most
important to the firm is a perfectly legitimate and sensible strategy.
Canan Kocabasoglu-Hillmer, Senior Lecturer in Operations Management on the Cass Business
School Executive MBA course, argues that a company must set its own definition of quality at a
level that exceeds its perception of customer expectation. This is largely as many customers have
varied expectations, which are not always clear27
. Kocabasoglu-Hillmer also goes on to make the
point that quality can be seen by some companies as an afterthought, something to work towards
once sales and profit are growing.
27
EMBA Operations Management Module 2013, Unit 6 Quality Management
31. 31 | P a g e
The Sandcone model of quality however proposes that quality is at the heart of successful
operations and should be targeted first. Quality is fundamental in supporting achieving cost control,
flexibility, speed and dependability.
3.4 Marketing
Marketing is a management process responsible for identifying, anticipating and satisfying customer
needs profitably (Chartered Institute of Marketers (CIM)).
CIM further describes marketing as a study of market factors and forces and how the company
positions itself to optimise the benefit from them. Essentially marketing is about getting the right
product or service (and increasingly product and
service) to the right customer, at the right price and at
the right time in order to satisfy the needs of that
customer. Successful business can identify the needs
and wants of a customer, and find a way to satisfy
them… and more. This view is consistent with
Denning’s view, referred to above, that purpose of a
business is to add value for customers and ultimately
society.
Further, Roger Martin (2010) argues that rather than
businesses fixating on creating shareholder value they
should instead aim to maximise customer satisfaction,
or the value that customers derive from the firm.
Drucker reinforces this notion in stating that the primary
purpose of a business is to acquire and keep
customers.
Can you maximise shareholder value, and customer
satisfaction? Not according to Martin (2010). Using
optimisation theory28
as the basis of his argument, he
claims that a firm can maximise shareholder value
given a minimum benchmark for customer satisfaction,
or maximise customer satisfaction given a minimum
28
Optimsation theory argues that there is no way to simultaneously optimise two different things
Johnson & Johnson, statement of purpose
which hasn’t changed since Chairman
Robert Wood Johnson created it in 1943.
Here it is, in abbreviated form:
“We believe our first responsibility is to
the doctors, nurses and patients, to
mothers and fathers and all others who
use our products and services....We are
responsible to our employees, the men
and women who work with us throughout
the world....We are responsible to the
communities in which we live and work
and to the world community as well....Our
final responsibility is to our
stockholders....When we operate
according to these principles, the
stockholders should realize a fair return.”
P&G’s statement of Purpose, Values and
Principles, written in 1986, describes a
hierarchy that is strikingly similar to J&J’s:
“We will provide branded products and
services of superior quality and value that
improve the lives of the world’s
consumers.
“As a result, consumers will reward us
with leadership sales, profit and value
creation, allowing our people, our
shareholders and the communities in
which we live and work to prosper.”
32. 32 | P a g e
benchmark for shareholders’ value appreciation, but you can’t do both.
Some statements of purpose are included from Johnson and Johnson, and Proctor and Gamble in
the box on the previous page that reinforce their focus on the customer, with shareholder value
created as a consequence.
Martin is right to state however that this focus on customers does not mean that the business will
lose cost discipline, or that the profit motive disappears. Of course it will not. Managers are
motivated by profit in the same way that shareholders are, because the more profits the firm makes,
the more money is available to pay managers and to invest in the businesses operations and
subsequent growth.
Reis and Trout (1985) were pioneers in understanding the power of positioning a brand in the mind
of the consumer. Prior to their seminal work Positioning. The Battle for Your Mind. In their book
they talk about the importance of how a product is positioned in the mind of the consumer, rather
than focus internally on the product and the benefits you as the firm think it has for the consumer.
This is particularly important in a commodity product category and in today’s 24 hour news
environment where brands and other agents, like news services, governments and charities, are all
battling for consumers’ attention and share of wallet.
Customisation29
is an interesting, and potential value creative trend for companies like Treleavens.
In a report by the Business Development Bank of Canada30
the authors concluded that consumers
have progressively moved away from standardised, mass-produced products in favour of custom-
made solutions that fit their specific needs. Customers are becoming more demanding and in part
have become more engaged in product creation, and provenance.
One major advantages of customisation is that it allows companies to move away from a purely
price-led competition that destroys margins and favours volume-driven multinational competitors
that outsource production31
. According to the authors of the report manufacturers that adopt a
“made-to-order” approach have an unprecedented edge in today’s market. One clear advantage is
not having to stock finished goods, but also establishing better alignment between customer needs
29
Some examples from BDC report On youbars.com and elementbars.com, customers can choose the
ingredients of their nutritional bars. On brewtopia.com.au, customers can create their own beverage with a
custom label. On uk.mymuesli.com, customers can create their perfect cereal mix with an assortment of
ingredients. On chocomize.com and createmychocolate.com, customers can create their own chocolate bars.
On mybeans.com, customers can create their own coffee mix.
30
Business Development Bank of Canada
http://www.bdc.ca/Resources%20Manager/study_2013/consumer_trends_BDC_report.pdf
31
Ibid
33. 33 | P a g e
and the firms supply. The same report notes the importance of striking a balance between
increased product personalisation and counterproductive variety. Smart and innovative
customisation approaches develop products that deliver on the expectations of consumers, but do
not overload them with choices. Unfocused customisation can create an unsustainable logistical
burden that increases production complexity and decreases profitability. SMEs can avoid this by
keeping high-volume variants of a product in stock, while offering structured customisation to meet
other needs and capture full client share.
4. Research analysis
Building on the research methods and literature review above I have set out below how this forms
my analysis, and ultimately recommendations, of the choices that Treleavens could take in
developing its business in this latest stage of its business lifecycle.
4.1 Soft systems methodology
From the SSM approach to the workshop, and the workshop itself, I established a consistent view
that, although the company had a mantra of selling luxury, handmade Cornish ice cream using only
the finest ingredients32
the management of the business were not convinced this mantra reflected
reality. Indeed words like con, misleading, premium? and luxury? (appendix 10) were used during
the stage of the process where the business problem was being expressed.
I have a lot of sympathy with Denning’s view, referred to above. A firm such as Treleavens must
aim to add value to customers through innovation and finding new ways of delighting them as he
describes it. Experimentation, customisation and innovation should be integral to everything the
firm does. However, I am sure Denning wouldn’t argue against having at least part of one eye on
the competition.
For Treleavens what is needed is a clear, agreed and evidence based strategy to enable them to
achieve and sustain a competitive advantage within the ice cream market. In my opinion shared
value concepts should also be at the heart of this, which I discuss later on.
Developing the SSM during and after the workshop, I have produced the following conceptual
model for one of the systems identified. Due to time limitations, and the word limit of this report, I
have not been able to do this for all systems identified in the inquiry stage, but would recommend
the management team does develop this further.
32
Treleavens’ company website http://www.treleavens.co.uk/about-us/
34. 34 | P a g e
From the approach outlined in my research methods I was able to draw out the following themes,
having produced a Rich Picture - although in our case we chose to use Post It notes, rather than
drawing a rich picture (appendix 10)
Key themes
1. Lack of consistency with what we say we are, and what we believe we are.
2. At what rate do we want to grow, and how big are we going to be?
3. How do we sell our product, through which distribution channels and to whom?
4. What does success look like? Should we be focusing on the competition (5 Forces), or
creating new markets (Blue Ocean Strategy)33
?
From these themes, in discussion with the team, we came up with the following Systems
1. System to develop a clearer narrative about the belief, values and purpose of the
company
2. System to understand future production costs
3. System to match production with demand for quality ice cream
4. System to distribute nationally
5. System to explore synergies with Harbour Brewing Company34
, specifically potential
routes to market
6. System to distribute capital investment to deliver the company’s aims
From the list of Systems I developed a Root Definition, tested against the Customer Actors / Agents,
Transformation Process, Worldview, Owners, Environment (CATWOE) model, which essentially
aims to understand the impact of a new system on a range of stakeholders, and then produced a
conceptual model and agenda for debate. This stage of the methodology aims to describe what
ought to happen in the new business situation. By explicitly acknowledging these perspectives, the
user of the methodology has to consider the impact of any proposed change on the people,
processes and environment that they apply to.
33
Burke, A, van Stel, A, Thurik, R Blue Ocean vs. Five Forces (May 2010) http://hbr.org/2010/05/blue-ocean-
vs-five-forces/ar/1 Harvard Business Review [accessed 9 September 2014]
34
Harbour Brewing Company is also a subsidiary of Camel Back Ltd.
35. 35 | P a g e
The Root Definition is a structured description of a system in form of a clear statement of activities
which take place, or may take place in the system being studied. For the purposes of this report I
have developed one Root Definition which ultimately led to an agenda for debate. The system
chosen is highlighted above, and was chosen as, I believe, from the discussion stage of the
methodology this is the biggest initial challenge the business has, and I recommend Treleavens
uses this initial work to further develop its business strategy.
1. A system to establish a clearer brand persona35
(the immediate aim), by means of collective
agreement (the how to do it) on the company’s values, beliefs and purpose, in order to produce a
product that employees are proud to be associated with, ultimately leading to higher sales (the long
term aim).
Checking this against the CATWOE method and refining leads to;
C – CUSTOMERS or CLIENTS: Who are the beneficiaries or victims of this particular system? Who
would benefit or suffer from its operations?
A – ACTORS or AGENTS: Who are responsible for implementing this system? Who would carry out
the activities which make this system work?
T – TRANSFORMATION PROCESS: What transformation does this system bring about? What are
the inputs and what transformation do they go through to become the outputs?
W – WORLDVIEW: What particular worldview justifies the existence of this system? What point of
view makes this system meaningful?
O – OWNERS: Who has the authority to abolish this system or change its measures of
performance?
E – ENVIRONMENT: Which external constraints does this system take as a given?
1. A system to work with staff and customers to establish a clear brand persona36
, through debate,
customer input and independent advice. To ultimately agree, collectively, the company’s values,
beliefs and purpose, in order to produce a product that employees are proud to be associated with.
To lead increased sales and profit to invest back into the company, staff and community. To
empower staff to promote the new persona, and to change the working environment to reflect the
new persona. To give staff the skills needed to sell the product with a confident and consistent
narrative.
35
From interview with Juliette Smith, appendix 15
36
Ibid.
36. 36 | P a g e
By highlighting the verbs actions can be established;
1. A system to work with staff and customers to establish a clear brand persona37
, through debate,
customer input and independent advice, to ultimately agree collectively the company’s values,
beliefs and purpose, in order to produce a product that employees are proud to be associated with.
To lead to increased sales and profit to invest back into the company, staff and community. To
empower staff to promote the new persona, and to change the working environment to reflect the
new persona. To give staff the skills needed to sell the product with a confident and consistent
narrative.
From the conceptual model this can now be presented to the business for it to develop this into
actions;
Item in Conceptual Model Present in the ‘real world’ Debate?
Work with staff Staff knowledge and opinion exist, but
they should be involved in the
development of the brand persona.
Y
Seek independent advice Internal conversations at this stage,
some independent advice might be
needed.
Y
Agree collectively Each member of the team has a view
shaped by their own experiences,
beliefs and values.
Y
Give staff skills to sell Skills exist but could be improved. Y
Empower staff to promote Unclear what level of empowerment
staff feel.
Y
Produce a product The production of the product exists,
but some debate needed on product
development.
Y
Change the environment Existing production site exists. But
whether it is fit for purpose, both in
terms of functionality and brand
consistency, needs to be discussed.
Y
I believe the business should develop the other systems in a similar way, and should they agree
have offered to support this process once the management has had chance to consider the findings
of this report.
37
From interview with Juliette Smith, appendix 15
37. 37 | P a g e
4.2 Market opportunities and threats
One of the challenges I faced in writing this report is getting reliable data on what is potentially one
of Treleavens biggest market opportunities; restaurants, beach cafes and leisure destinations. I
attempted to understand the size of the market, particularly the local market, by analysing
government’s Valuation Office Agency (VOA) data. However, as mentioned there are a number of
assumptions that I have had to make and thus it is only for guidance, but does give an indication of
the potential size of the local catering and leisure market and a starting point for building up a
customer database.
The rationale for focussing on this segment of the market is threefold. Firstly, Treleavens has some
existing capability, including in relation to the production process and understanding customer
needs, and well established networks and reputation in this market. Almost all of its sales come
from restaurants, cafes and ice cream parlours or other outlets where they sell scooping ice cream.
A resourced based view or operational strategy perspective would suggest the firm is thus better
placed to build on this capability. My second observation relates to the option to sell a mid priced
product, through supermarkets as a distribution channel. My view is Treleavens should strive to add
value through quality rather than pursue a strategy based on price. In my interview with Sainsbury’s
ice cream buyer Matt Smith he told me he wasn’t sure there is room for a new product similar to
Kelly’s and its own brand products. He also noted that R&R has ‘grown the brand [Kelly’s]
massively since taking over’, investing heavily in promotions. Finally, given the competitive nature
of the supermarket industry at the moment, the fact 46% of ice cream sales are on promotion38
and
what both these factors mean for prices, I do not believe Treleavens should pursue a price driven
strategy. Gemma Addison, Frozen and Chilled Buyer at EH Booth & Co. Ltd also made reference to
the elastic nature of price in the ice cream category, and that there was a strong correlation with
promotions and sales volumes.
I also noted through my observations at the factory that staff opinion of Daisy’s is not as high as
Treleavens despite the knowledge that they are very similar products, which will have an impact on
how it is being pitched to prospective customers. Further, from looking at the sales volumes it is
evident that Daisy’s sales have increased, in volume terms, by 58%, whilst overall volumes
increased by 3.6%39
. It seems to me that Daisy’s may be taking sales from Treleavens, especially
where existing customers are aware of their similarities in terms of product inputs and production
process. Given this is a much lower margin product could in the longer terms have a harmful impact
of the Treleavens’ brand.
38
From Kantor, referenced in The Dairymen (The Grocer, September 2014)
39
From company figures
38. 38 | P a g e
Further evidence of the competitive nature of the industry is included in the Five Forces analysis
below.
4.2.1 Porter’s Five Force Analysis
Despite my reservations about the usefulness of Porter’s approach to strategy development, it is a
worthwhile tool to understand the structure of an industry from the perspective of an incumbent, as
is Treleavens. It is therefore worth reflecting on, given the brief to consider expansion through, for
example, supermarkets. Porter argues there are five forces that operate in an industry, and
together they determine the potential profitability of that industry (Bowman, 1998).
Figure 8 Illustration of Porters Five Force model and ratings, from detailed analysis in appendix 9
Applying Bowman’s (2008) additional element to the Five Forces by rating the strength of each
force we are able to get a sense of the competitiveness of the industry. Using a simple 1 = weak
force and 5 = strong force schema I have drawn the attributed scores to each of the forces above,
shown in brackets in figure 8.
Degree of
rivalry
(3)
Barriers to
entry
(3)
Threat of
substitutes
(1)
Supplier
power
(3)
Power of
buyers
(3)
39. 39 | P a g e
From my analysis, although it is a competitive market, there are a number of factors, such as a
relatively low threat of substitutes and, on a larger sale production side, relatively high barriers to
entry, particularly risk adjusted to take account of how much profit can be generated from a small
ice cream producer. Indeed, according to analyst Plimsoll, a sign of the intense competition within
the UK industry, is that 25 companies of the 142 they monitor continue to sell at a loss for the 2nd
year running. These serial loss makers, as Plimsoll describes them, are adding to the congestion in
the market, often undercutting the rest of the market and driving down profit margins across the
board.40
4.2.2 Marketing matrix / 7 Ps
This analytical tool, the detail of which is in appendix 9 allowed me to consider Treleavens’ business
through the lens of a marketer and allows it to consider questions such as; what product it should
produce? At what price? How will it communicate its offer, and through which channels? My
interviews with Jennifer Lewis, Julia Collins and Juliette Smith were particularly helpful in building
the 7 Ps models, the analysis that it generated and my recommendations.
My view is that the product is well regarded by customers, awarding bodies such as The Great
Taste Awards and is generally seen as premium and high quality. There is certainly flavour
innovation, which is positive and potentially value creative with trends in areas like customisation. It
also has the potential to be a point of difference between Treleavens and larger multinational
companies. The price is higher than its most local competitor, which is something that might need
to be addressed whilst not sacrificing quality. Indeed the biggest concern about the product was
from management, not consumers or other staff. The biggest areas for improvement identified in
the 7P model are Place, Promotion and Physical Evidence. Process to some extent too. Although
in terms of servicing existing customers the production process is satisfactory, some of the other
processes like customer service and distribution are areas that need to be reviewed.
4.2.3 Positioning the brand
From my interviews with marketing experts I support the view that the business needs to review how
its brand is positioned. Julia Collins, who is currently advising Riverford Dairy on its brand
positioning, observed in my interview with her (appendix 13) that the company didn’t really have a
narrative when she was invited to provide Riverford Dairy with marketing advice. She explained that
although staff knew what they did they didn’t realise that what they were doing was something good
and something worth shouting about. So, she took the things that they do that are exceptional, and
40
Plimsoll Ice Cream Manufacturers and Suppliers report
http://www.plimsoll.co.uk/marketreports.aspx?market=ice_cream_manufacturers_suppliers
40. 40 | P a g e
not advocated by all other organic producers, and then packaged them up into a compelling story.
The result is that the employees realise they work somewhere really good, they are proud to be
doing what they’re doing, especially now they are selling to places like Selfridges. She went on to
describe the buzz that has been created as a consequence, and customers love the business, and
its ethics. For Riverford much of the change was about the process. For example a lot of what they
do is traditional in terms of methods so things take longer, and the physical evidence is beautiful
Dorset countryside with a strong commitment from management to preserving the natural
environment. Evidence of this is the programme in place to preserve hedgerows, birds in
hedgerows, bats in the diary. This message is then translated into the packaging, website and
other communications channels.
Juliette Smith added some thoughts on the need to position the brand by describing how
differentiation comes from the persona you build for a brand - so that when people purchase they
are buying into a way of life, a reason to believe and an attitude or outlook on life. In doing so they
are able to form an emotional connection with the brand. She cites Red Bull as a good example of
this point. The drink itself is very similar to other energy drinks, as ice cream is given it is an easily
imitated commodity product. But Red Bull has been hugely successful in building real brand
personality. They are famous for aligning themselves with sports and high octane events that
embody what they want the brand to stand for. People who buy it believe that the brand attributes
somehow apply to them – they feel good being a part of the Red Bull way of life.
Building a brand with a strong sense of personality also allows a company to create content that’s
not specifically about the product. Juliette went on to explain that doing so allows the firm to make
more noise and make noise in spaces that are normally off limits. It is worth Treleavens thinking
about how it could leverage customers using this philosophy, for example sponsoring relevant
events, putting on its own events to showcase its product but more implicitly than an advert, website
or promotion. An example that is closer to home in terms of product is Ben and Jerry’s and their
Free Cone Day, which they’ve been doing since 1979.41
Jennifer Lewis talked about the brand being what a company stands for, again reinforcing the
argument that it is a manifestation of the company’s essence or its reason for being. Turning
specifically to premium, which from my research is an attribute strongly associated with Treleavens,
Jennifer explained that what helps define a brand as ‘premium’ is in the mind of the consumer. They
look for distinct features that allow them to compare the product to their own personal
41
Ben and Jerry’s website http://www.benjerry.com/scoop-shops/free-cone-day [accessed 21 September
2014]
41. 41 | P a g e
characteristics or aspirations. Two comparable products might appear the same, but one is
considered ‘premium’ because of the principles the Company that made it portrays.
Treleavens undoubtedly has a story to tell, and I have described the values I, and others, associate
with it previously. One of its issues is the place it produces ice cream from. I would therefore
suggest it takes the opportunity afforded it by a break in its lease to find a location that is more
suited to those values.
4.2.4 Keeping up with the digital revolution
I also ran an exercise to understand who is using the Treleavens’ website, which will help the
company to review and renew it so that it becomes more of a shop window for the business.
It gives a perspective of what the now looks like, rather than where the opportunity is necessarily.
Although it is interesting to note that the highest proportion of traffic comes from London, which is
certainly some evidence to support the recommendation to establish a presence in the capital given
many of the London consumers’ affinity to the West Country.
Key findings:
Traffic Overview
Traffic from January 2014 to July 2014 is the same as January 2013 to July 2013 - sessions
were actually down by 1.16%.
For an overview, I looked at January 13 to December 2013. There were very low levels of traffic
- only 5013 sessions last year.
Slightly seasonal activity around he summer, and a spike on 21 February, which correlates to an
article that appeared in the Guardian42
, evidence of how public relations can drive website traffic
75% are new visitors (25% returning).
The majority spend navigate between 0-10% of the site, which is a low engagement and further
reinforces the point that message needs to be clearer.
43% bounce rate, or the number of users who leave website immediately. This is about average.
Of the organic search terms, most are brand searches, which means people who are already
aware of the product – which in my opinion means there is a need to increase search visibility,
via search engine optimisation (SEO) for example.
42
Henley, J. Cornwall: Britain’s New Foodie Capital The Guardian (20 February 2013)
http://www.theguardian.com/lifeandstyle/2013/feb/20/cornwall-britains-new-foodie-capital [accessed August 31
2014]
42. 42 | P a g e
Of those that aren’t brand searches “Cornwall/Cornish ice cream” or “luxury ice cream” are the
next best organic searches – although these figures are very low.
UK searches account for 88% of traffic, and 95% from England. The top 5 cities breaking down
as follows:
- London (22%)
- Plymouth (4%)
- Bournemouth (4%)
- Truro (4%)
- Bristol (3%)
Operating system
53% traffic from Windows
34% from iOS/Mac
By device
67% Desktop
18% Mobile phone
15% Tablet
There’s a strong desktop presence, so although most websites are nowadays built with mobile
functionality as the focus, it is now relatively easy and cheap to build a straight forward dynamic
site.
User flow / page engagement
57% of total traffic lands on the home page.
The subsequent 1st interaction is ‘flavours’ (14%), which reinforces the interest in product type
and the impact of the key message about 90 flavours on the home page.
It is important that the pages seeing most traffic are optimised for correct search terms.
Given the amount of traffic to the site, and the fact the business is still very much business and not
consumer facing, I would recommend investment but not more than a few thousand pounds, using
the Kaushik model of web analytics 2 as guidance.
More important though is to clearly redefine the company’s purpose, which can then be reflected in
all communications channels including the website and social media platforms.
43. 43 | P a g e
4.2.5 Moving towards a more sustainable business
As mentioned earlier I believe that the business should consider the concept of shared values as it
looks at this next stage of its business lifecycle. It might not be Unilever but that doesn’t mean it
shouldn’t recognise its role in addressing societal needs, not just conventional economic needs. I
strongly support the notion that markets are defined by, and have a symbiotic relationship with, both
the economy and the society within which they operate.
Kramer in the Harvard Business Review (2011) talks about shared value as the antidote to
corporate businesses continuing to view value creation too narrowly, as a way of optimising short-
term financial performance in a bubble. In my view Kramer’s argument is fairly consistent with
Denning’s, referred to above, that whilst managers are fixated on maximising shareholder value,
they miss the most important customer needs and ignore the broader environmental influences - by
which I don’t simply mean energy consumption and waste production - that determine their long
term success. Some organisations are becoming increasingly conscious that profit is a result, not
the goal. This is something Habib Lesevic impressed upon Cass Business School Executive MBA
students in his New Venture Creation module, and resonates strongly with me. It is an area
investors are becoming more aware of, with a shift from a negative to a positive orientation, and
alongside this a more sophisticated appreciation of enterprise risk (Chouinard, 2011). Clearly
Treleavens is not yet the size or type of business that is being challenged by investors,
government’s or other actors on these issues. Nonetheless, I am of the opinion that given trends in
this area and the principles of the company, having positive societal, economic and environmental
impact as the foundation of its wider value proposition should be developed further.
4.3 Customer orientation
It was clear from my conversations with employees of the business, and statements I recorded, that
customer service is seen as a key element of the businesses offer, and indeed a point of difference
between it and some of its competitors. One example of this was how orders are processed, giving
customers the flexibility of ordering via a voicemail system, which is often difficult to decipher and
therefore leads to some incorrect orders. To test this further I undertook a MARKTOR exercise with
the staff at the business and then crossed referenced to the feedback from my customer survey.
The detail of the MARKTOR feedback is at appendix 7 and the customer survey results can be
found at appendix 6.
The normal marking scheme for the Narver and Slater (1990) MARKTOR method is to add up the
score for each section and overall, remembering to reverse score some questions. For a section, 8-
16 is poor, 17-40 is average and 41-56 is good. Overall, 24-48 is poor, 49-120 is good and 121-168
44. 44 | P a g e
is good. However, I adapted this in recognition of Treleavens being a small business. I thus
reduced the 24 questions to 18, as some were not relevant, especially those relating to exports.
These were exclusively in the inter-functional co-ordination section of the survey. So my adapted
scheme changed to reflect this, from my understanding of the process all questions were equally
weighted, so it follows the following marking rationale;
- Customer and competitor orientation 8-16 is poor, 17-40 is average and 41-56 is good.
- Inter-functional competition 1-4 is poor, 5 - 10 is average and 11 – 14 is good.
- Overall 7 - 36 is poor, 37 – 90 is average and 91 – 126 is good
All Treleavens’ staff filled in this questionnaire, including management, production, distribution and
accounts. Each of them has a sales and therefore customer facing function to some extent or other.
The conclusions are set out below;
Customer
Orientation
Competitor
Orientation
Inter-
functional
competition
Overall
A 46 (good) 41 (good) 13 (good) 100 (good)
B 51 (good) 37 (average) 10 (average) 98 (good)
C 45 (good) 26 (average) 10 (average) 81 (average)
D 32 (average) 25 (average) 12 (good) 69 (average)
E 31 (average) 28 (average) 8 (average) 67 (average)
F 25 (average) 23 (average) 8 (average) 65 (average)
G 29 (average) 27 (average) 6 (average) 62 (average)
Although there are a range of views, from this analysis it is clear that the majority of staff think they
are only averagely oriented towards the customer, yet they recognise being so as of key importance
to the business and a potential point of difference.
Overlaying the evidence from the customer survey I found that customers are more satisfied with
Treleavens customer service than its competition (appendix 6), and, when asked ‘Rank in order the
most important factors to you when purchasing ice cream? Where 1 is the most Important’ none of
the respondents ranked it below a 3.
From my literature review it is clear customer service is important, particularly for a smaller business
where the personal touch is easier to deliver, and can be a competitive advantage in relation to
