The product manufactured by the company is orange juice. Traditionally, the company manufactures orange juice using oranges cultivated in Florida and supplied by Florida’s farmers. However, series of poor crops forced the company to start importing oranges from Brazil and other countries. In such a way, the company changed suppliers to ensure the stable supply of oranges to keep the production process stable.
Today, the company considers the introduction of the new product, Tropicana Juice Premium, which uses Florida’s oranges solely. In such a way, the company attempts to enhance the public image of its product and to regain the confidence of customers in safety and usefulness of its products for their health. Customers will perceive the new product as being safer and probably healthier but the company cannot fully replace Brazilian oranges to meet the current demand of the orange juice. Florida’s oranges are not enough to provide sufficient amount of oranges to maintain the production lines of the company busy.
Taking into consideration the large share of imported oranges, the company could have considered the possibility of decrease the price of its products. At this point, it is important to place emphasis on the fact that the price of oranges in Brazil and Latin America are basically lower compared to the US due to the lower costs of the labour force and other factors. Even if the company adds transportation costs, buying oranges in Brazil is cheaper than buying oranges in Florida. Hence, the company could have decreased the price of its products but Tropicana Juice has not decreased the price so far.
The main reason for the maintenance of the price of Tropicana Juice products unchanged is the economic recession and certain decline in the consumption of orange juice. The economic recession is the main cause of the drop of consumption since customers prefer saving costs and buy cheaper products. The decrease of the consumption naturally forces the company to look for options to minimize its financial losses and to increase revenues to maintain the high productivity and to enhance its marketing position.
In order to regain possible financial losses, the company has decreased the volume of juice cartons and preserved the price unchanged. In fact, this step was quite controversial since the decrease of the carton meant the rise of the price, even though a carton of Tropicana Juice’s price has not changed. In fact, the decrease of the carton size is just another way of increasing the price of the product. The rise of the price, direct or indirect, as is the case of Tropicana Juice, is a regular step undertaken by companies, who want to preserve their revenues high, regardless of the crisis in the economy.
Moreover, the introduction of Tropicana Juice Premium will increase the price of the new product. In this regard, several factors provoke the rise of the price. First, the new product is manufactured of oranges cultivated in Florida, which are more expensive than Brazilian oranges, for instance. Hence, the costs of production of Tropicana Juice Premium are higher compared to the conventional orange juice manufactured by Tropicana Juice. Second, the new product is positioned as the product of the upper segment of the market. Hence, the company has to set the higher price to cover costs and to meet the average upper segment price level.
Tropicana Juice has an extensive distribution network. As a rule, the company uses large retailers, such as Target or Wal-Mart, to distribute its products. At the same time, the company uses its own shipping to deliver its products directly to customers. The company has refrigerators that deliver Tropicana Juice to customers directly. However, today, the use of such shipping becomes costly for the company, while the use of large retailers allows the company to maintain its sale rates high with relatively low costs on shipping. On the other hand, the direct shipping to customers improves the public image of the company and increases the customer loyalty to the brand. The latter is very important today, because the customer loyalty can help the company to maintain its competitive position in the market.
The introduction of the new product is unlikely to change the distribution chain of the company since Tropicana Juice relies heavily on large retailers, who are capable to maintain the high level of sale rates and large volumes of products being sold in the market. On the other hand, the company can use intensively its shipping to deliver the new product to customers. Taking into consideration the positioning of the new product and its belongingness to the upper segment, the company can include the transportation costs into the price of Tropicana Juice Premium, which is higher compared to the conventional orange juice supplied by the company.
In addition, the company considers the further international market expansion that requires the expansion of the distribution network of the company internationally. At the moment, the company operates in North and Latin America, Europe and Asia. As the company keeps growing, the further expansion of the distribution network becomes essential. Basically, the new product may be sold successfully in international markets as well but the company should be aware of the fact that the new product is likely to be popular in the markets, where customers have the high level of health concerns. For instance, the new product may attract customers’ attention in European market, while it may be not very popular in Latin America, where the price is often more important than quality or health concerns.