Group 5: Giant Consumer Products, INC:The sales promotion Resource allocation decision Andrei Grechko Shane Johnston NakiaLape Kyle McDaniel Kevin Niehaus
How should Giant Consumer Products (GCP) structure a sales promotion so that it is a “win” for all parties involved? Primary Question for GCP
Who is Giant Consumer Products? What are GCP’s objectives? What environmental forces are at work? What’s going on in the Frozen Food production industry? What are FFD’s current constraints? What are the key metrics? Who is the target market? What are the strengths and weaknesses of FFD’s marketing strategy? What is their current market position? What are the current market trends? What is affecting GCP’s decision? How should FFD implement the selected alternative? Secondary Questions
Management Philosophy In general fairly conservative management practices and approach in every division/business unit
Organizational Culture • Pride. The most customer-centric management team in the frozen food industry. • Premium product quality, strong relationship and support from retailers • Helps company stay on top of consumer behavior trends • Promotes long-term thinking • Built on brand equity. Company is striving to take into account the preservation of GCP’s brand name and image in every decision that it makes
What are GCP’s objectives? Secondary Questions
Objectives • GCP Priorities in second half of 2008 • Generate much needed demand in the Frozen Foods Division (FFD) without undermining the long-term health of GCP's brands • Increase GCP's revenues to a point where they at least reach the low end of Wall Street's expectations
Secondary Questions What environmental forces are at work?
Economic conditions and trends • FFD had steady 2.8% growth rate between 2003 and 2008 in spite of larger economic downturn. • 50% of consumer dollars spent at restaurants (2007), likely to decrease as a result of economic conditions. • Sales promotions are a must in order to be seen as relevant to the consumer.
Cultural and Social Trends • Dual Career families (less time for meal preparation) • Increased awareness of ingredient quality (artificial ingredients, pesticides, hormones, food origin, and of course, caloric content.) • Higher focus on healthy living. • Return to family style dining.
Political and legal issues • If GCP were considering rolling out a specialty product nationally, they would need to be wary of the risk they assume when greater public awareness is gained. • Concern is growing as to the validity of organic certifications and consumer expectations will almost always exceed governmental expectations • Governmental mandates on healthy eating and living…obesity as cost factor
Secondary Questions What’s going on in the Frozen Food industry?
Industry Overview Frozen Food Production Industry NAICS code: 311412 GCP is one of 411 American players For 2009, Industry was approximately $16 Billion With an estimated profit of %32.38
Industry Profitability Product Mix: more product variety, the more their products will appeal to different markets Efficient Operations: The company model must be one of best practices Bulk Packaging: Products offered in bulk or bulk style packaging are easier to distribute to different channels Economies of Scale: The more channels a producers can distribute through the lower their over all costs
Major Competitors Daft The Schwan Food Company Argilink Foods Vegetable Company Arden International Food Company
Industry Overview Porter’s five forces: Threat of substitute products HIGH Rivalry among existing competitors Intense Bargaining power of buyers MID Bargaining power of suppliers HIGH Threat of new entrants LOW
Secondary Questions What are the FFD’s current constraints?
Constraints • Consumer Buying habits • Pressure from GCP and Wall Street • Possible implications from a sales promotion: • Cannibalization • Brand equity erosion • Forward buying • Stock piling • Brand switching
Secondary Questions What are the key metrics?
Secondary Questions Who is the Target Market?
Dinardo’s Target Market • Families • Conventional palate • Price conscious but will not accept sub-par quality
Natural Meals Target Market • Health conscious consumers • Sophisticated palate • Willing to pay premium pricing
The Sizes • 32 ounces – Families • 16 ounces* – Two people • 6-8 ounces – Single servings *Natural Meals brands are only offered in a 16 ounce size.
What are the Strengths and Weaknesses of the FFD’s marketing strategy? Secondary Questions
Potential Resource Strengths and Competitive Capabilities • Short-term marketing strategy objectives are well defined. • Strong brand image for the Dinardo’s brand. • Better quality product than competitors. • Efficiency gains for Natural Meals brand due to scale economies. • Natural brands has untapped growth potential in a developing market. • 43% of national market share (by revenues) for sub-category.
Potential Resource Weaknesses and Competitive Deficiencies • No clear long-term strategic direction for marketing. • Weak brand image and reputation for the Natural Meals brand. • Overall weak advertising and promotion. • Threat of cross-brand cannibalization • Shifting consumer habits.
What will affect GCP’s decision? Secondary Questions
Strategic Alternatives • Traditional sales promotion for Dinardo Brands (based on math) • Drop Dinardo’s single servings and offer a 6 & 8oz portion of Natural Meals brands • National sales promotion for Natural Foods
How should FFD implement the selected alternative? Secondary Questions
Recommendations • Traditional Marketing – Not a win for FFD
Recommendations • Dinardo “Other” Category – Severely underperforming • Sales Volume – down 8.6% • Gross Revenues – down 8.6% • Gross Margin down – down 9.6% • Marketing Margin – down 11.9% • Marketing Allocation – down 15.2%
Recommendations • Brand Awareness campaign – Natural Meals
Recommendations • Brand Awareness • Coupon Offering • Pay for Performance • In-store Product Placement • Repackaging for Natural Meals 32 oz portions • Brand Recognition/Brand Loyalty