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Group 5: Andrei Grechko Shane Johnston Nakia Lape Kyle McDaniel

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Presentation on theme: "Group 5: Andrei Grechko Shane Johnston Nakia Lape Kyle McDaniel"— Presentation transcript:

1 Giant Consumer Products, INC: The sales promotion Resource allocation decision
Group 5: Andrei Grechko Shane Johnston Nakia Lape Kyle McDaniel Kevin Niehaus

2 Primary Question for GCP
How should Giant Consumer Products (GCP) structure a sales promotion so that it is a “win” for all parties involved?

3 Secondary Questions 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?

4 Giant Consumer Products Company Overview

5 Organizational Structure
Allan Capps CEO Byron Flatt VP, Sales Mary Davidson FFD General Manager Mike Sanchez FFD Director of Marketing

6 Organizational Structure
Positive Each business unit have defined and measurable goals Promotes Accountability Negative Difficult to get quick answers Structure might be too rigid and not flexible enough Difficult to work across divisions to achieve organizational goals Ultimately Need to make sure division’s objectives always align with overall strategic goals of the company Divisional Structure

7 Management Philosophy
In general fairly conservative management practices and approach in every division/business unit Positive: Standardized practices promote efficiency and result in economies of scale Careful decision-making process Negative: Slows down the decision making process if the decisions are to be made quickly Might be difficult to accept change

8 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

9 Secondary Questions What are GCP’s objectives?

10 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

11 Most Important Objectives
Sales Promotion Can a sales promotion help GCP meet its organizational goals? Which product should be selected for promotion? Determine impact on key metrics and long-term health of brands Marketing Strategy Develop the details of a marketing strategy that results in a win-win for the company, retailers, and ultimately consumers. The strategy has to be consistent with the overall goals of the company and ensure preservation of brand image

12 Secondary Questions What environmental forces are at work?

13 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.

14 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.

15 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

16 Secondary Questions What’s going on in the Frozen Food industry?

17 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

18 Industry Profitability
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 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

19 Major Competitors Daft The Schwan Food Company
Argilink Foods Vegetable Company Arden International Food Company

20 Industry Overview Porter’s five forces: Threat of substitute products
HIGH Bargaining power of suppliers HIGH Rivalry among existing competitors Intense Bargaining power of buyers MID Threat of new entrants LOW 20

21 Porter’s Five Forces Factor Analysis Impact
Threat of substitute products Consumers have multiple substitute products (Many brands, styles/types of food) Consumers have a wide Varity of options to choose from Bargaining power of suppliers Higher quality ingredients lead to high quality product for consumers Supplies are able to bargain more , because producers want the best quality Bargaining power of buyers Frozen meal purchases are frequent, consumers tend to be loyal to products unless similar products offer price promotion Loyalty in target market will be easy to build Competitive rivalry Over 400 domestic manufacturers and increased competition from foreign competition. Also, introduction and competition for similar target market Downward pressure on prices Threat of new entrants Well established players Brand value will be key! 21

22 Secondary Questions What are the FFD’s current constraints?

23 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

24 Secondary Questions What are the key metrics?

25 Key Metrics for FFD

26 Who is the Target Market?
Secondary Questions Who is the Target Market?

27 Dinardo’s Target Market
Families Conventional palate Price conscious but will not accept sub-par quality

28 Natural Meals Target Market
Health conscious consumers Sophisticated palate Willing to pay premium pricing

29 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.

30 What are the Strengths and Weaknesses of the FFD’s marketing strategy?
Secondary Questions What are the Strengths and Weaknesses of the FFD’s marketing strategy?

31 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.

32 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.

33 Secondary Questions What will affect GCP’s decision?



36 Strategic Alternatives
Traditional sales promotion for Dinardo Brands (based on math) National sales promotion for Natural Foods Drop Dinardo’s single servings and offer a new 32 ounce family size to Natural Meals brands

37 How should FFD implement the selected alternative?
Secondary Questions How should FFD implement the selected alternative?

38 Recommendations Continue traditional marketing of Dinardo 16 or 32oz
Discontinue Dinardo “Other” items Brand Awareness campaign for Natural Meals

39 Recommendations Traditional Marketing – Not a win for FFD
Total Brand Impact from Promotion on Top-line Revenue Total Effect of D32 Promotion $ (1,197,278.37) Total Effect of D16 Promotion $ ,775,636.96 Total Brand Impact from Promotion on Marketing Margin $ ,576,012.75 $ (879,443.14) ROMI -33% 64%

40 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%

41 Recommendations Brand Awareness campaign – Natural Meals
Average Monthly Incremental Volume for Natural Meals 705,252 Average % Store Promoting for Natural 7.61 Average Monthly Incremental Volume /Promo Point 92,674 Incremental Volume from 25% Promo Points 2,316,859 Revenue change from promotion $ ,718,892 Variable Cost change from promotion $ ,085,173 Promotion Cost change from promotion $ ,125,425 Marketing Margin Change from promotion $ ,294 ROMI 165%

42 Recommendations Brand Awareness Coupon Offering Pay for Performance
In-store Product Placement Repackaging for Natural Meals 32 oz portions Brand Recognition/Brand Loyalty

43 Questions?

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