Report on Lipton Ice Tea

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Report on Lipton Ice Tea
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Assignment

CONTENTS

Introduction................................................................................ 3 Demand Equation...................................................................... 4 Justification for the Chosen Variables................................... 4 Regression Analysis................................................................... 9 Explanation of results.............................................................. 9 Comments on Regression Analysis........................................ 11 Elasticity....................................................................................... 12 PED............................................................................................. 12 YED............................................................................................. 12 XED............................................................................................. 13 Competitive Structure of the Market....................................... 14 Strategic Decisions....................................................................... 14 Recommendations ....................................................................... 15 References...................................................................................... 16 Appendix........................................................................................ 17

INTRODUCTION

The company “A&P Enterprises Ltd.” was established in 1959. Since then it became one of the biggest beverage producing, importing and distributing companies in Cyprus. The company is operating in the importing and retailing sector of the market. “A&P Enterprises Ltd.” is operating with a big product range including such worldwide known names as Pepsi and 7up. In June 1996, our company entered into a franchise agreement with Unilever International Market Development Company for the production and marketing of Lipton Ice Tea products in the domestic market. Since then Ice Tea became one of the key products of the company. The product is distributed and sold in almost every supermarket, restaurant, café, hotel, etc., all over Cyprus. “A&P Enterprises Ltd.” is the only legal representative of Ice Tea Lipton in Cyprus. Ice Tea Lipton is differentiated in terms of flavor, shape and size of the package. Flavor: The Ice Tea is introduced in the Cypriot market in five flavors: peach, lemon, red, mango and forest fruit Shape, size, packaging: 330 ml cans, plastic bottle 0,5 lt and 1,5 lt. Market Structure: The Company is operating in an oligopoly, having four main competitors: • Kean Ice Tea – cheaper, local

• Pokka Ice Tea – cheaper, local
• Nestea Ice Tea – biggest competitor
• Snapple Ice Tea – big variety, not big market share, but possible future danger

DEMAND EQUATION

Q = f (P + I + Ad + Pc + Pop + T)

Where:
Q = Quantity Demanded of Ice Tea Lipton
P = Price of Ice Tea Lipton
I = Income of the consumes
Ad = Advertisement
Pc = Price of competing good
Pop = Consuming population size
T = Temperature

Justification of the chosen variables:
P = Price is one of the key factors in determining the demand of such product as Ice Tea. An important reason, which makes Ice Tea Lipton be one of the most consumed soft drinks in Cyprus, is its available price, so major changes in price will have major changes in demand. From the Table 1 (p.10), we clearly see the tight correlation between changes in price and changes in quantity demanded. As an example, we can look at the years 2008-2009:

|2008 |10085 |2,15 |
|Q2 |20552 |1,75 |
|Q3 |25025 |1,65 |
|Q4 |11508 |2,3 |
|2009 |12041 |2,3 |
|Q2 |22506 |2,25 |
|Q3 |30012 |1,75 |
|Q4...
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