Exam code: 7132
Read the case study in the Insert (opens in a new tab).
Sanjay has a marketing objective of achieving a 15% market share within 3 years.
Analyse the factors that influenced Sanjay’s decision to set his marketing objective at a 15% market share.
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A product’s price rises by 20% and its sales volume falls by 10%. All of its competitors leave their prices unchanged. The product’s market share, as measured by sales volume, remains the same.
Which of these statements is false?
The market size, measured by volume, remains unchanged.
The product’s market share, measured by value, increases.
The product’s price elasticity of demand is inelastic.
The product’s sales value rises.
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The UK tea market
Tea drinking in the UK is declining as younger customers choose alternatives such as coffee. Extrapolation of the annual sales suggests that coffee will outsell tea in the UK by 2025.
Within the overall tea market traditional black tea still dominates sales. However, a ‘health tea’ niche made up of fruit, herbal and green teas is growing. This niche has benefitted from its association with wellbeing.
Appendix A Annual sales volume of black tea and coffee (million kg), UK (actual sales 2012–2020; estimated sales 2021–2025)
Appendix B UK tea brands 2019
Rank | Brand | Annual Sales (£m) | % change | Type of tea in range |
1 | Twinings | 108 | +3.8 | Black and health tea |
2 | PG Tips | 99 | −7.2 | Mainly black, with small new health tea range |
3 | Taylors (including Yorkshire Tea) | 98 | +5.0 | Black and health tea |
4 | Tetley | 90 | +0.4 | Mainly black but some health tea |
5 | Pukka | 23 | +15.4 | Organic and ethical black and health teas |
Other tea brands | 144 |
Appendix C Price elasticity of demand data
Type of tea | Price elasticity of demand |
Black tea | −1.2 |
Health teas | −0.5 |
Appendix D Selected data from recent market research survey
How often do you drink black tea? (% of respondents) | |||
Overall | Age 18–24 | Age over 65 | |
Several times a day | 42 | 25 | 56 |
Once a day | 15 | 16 | 16 |
2–3 times per week | 10 | 14 | 5 |
Occasionally | 12 | 17 | 7 |
Never | 21 | 28 | 16 |
Do you drink health tea? (% of respondents) | |
Yes | |
Female | 32 |
Male | 19 |
How important is it that the tea you buy is ethically sourced, eg fair trade? (% of respondents) | |
Important | 62 |
Not very important | 26 |
Not at all important | 12 |
Using Appendix B, calculate the combined market share of the top four tea brands in 2019.
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In 2007, a business had sales of £10 million in a market with a size of £125 million.
In 2017 the business’s sales were £12.6 million and its market share was 6%.
Calculate the percentage growth in the size of the market between 2007 and 2017.
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The rise of the discount food retailers
For many years four companies have dominated food retailing sales in the UK: Asda, Morrisons, Sainsbury’s and Tesco. However, these ‘big four’ retailers have faced growing competition from discount retailers such as Aldi and Lidl.
Figure 1: Total UK food retail sales
Figure 2: UK food retail sales of discount food retailers
Figure 3: A comparison of the ‘big four’ model with the discounter model
The typical discounter model | ‘big four’ model | |
Product range in stores | Relatively small | Large |
Brands | Large proportion of own label products traditionally targeting low to medium income earners | Large proportion of well-known brands traditionally targeting high to medium income earners |
Sales of food compared to non-food items (eg clothing and health and beauty products) | 80%:20% | 60%:40% |
Administration costs and overheads as percentage of turnover | 15% | 20% |
Typical profit margin | 3% | 2% |
Figure 4: Market map of the UK food retail sector
Figure 5: Extract from consumer survey:
“What benefit is most important in determining where you shop?”
Benefit | % of replies |
I can rely on what I need being in stock | 16 |
It has a good range of non-food products | 17 |
It has well trained, helpful staff readily available | 18 |
The stores are well designed and maintained | 14 |
Figure 6: Company and Human Resource Data
Aldi Stores Ltd (discount retailer) 2014 | Tesco (one of the ‘big four’) 2014 | |
Turnover | £6 893 million | £ 54 443 million |
Profit for the year | £250 million | £162 million |
Average salary per employee | £21 272 | £14 452 |
Total employee costs | £507 million | £6 968 million |
Number of employees | 23 858 | 482 152 |
Calculate the market share of the discount retailers in the UK food retail market in 2015.
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