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Reed Supermarket

Problem

Sale is decreasing
Threats from competitors are rising

Reasons

Wrong strategy

SOM 498 - Spring 2012

Reed Supermarket
Goal
14% => 16% market share

Solution

Convenience
High quality product
Reinforce the brand image
Promotion/marketing strategy

SOM 498 - Spring 2012

Reeds Competitors
Upper End => High
Threat

Supermarket
Limited Selection
Whole Food

Lower End => Low


Threat
Warehouse Clubs
Supercenters
Dollars Stores
SOM 498 - Spring 2012

Strengt Weakness

Experience
h in
private
label
merchandis
e

Limited
product
selection

High
income
consumer
base
Brand
awareness:
Quality
product

Improve
product
selection

Promote
High-end
products

Low
Perceived
Value

SOM 498 - Spring 2012

Change
customers
perceptions

Price Satisfaction
Index

Quality Index
1.8

1.8

1.5

2008

2009

2010

Indust
ry
avera
ge

2008

2009

-2.0

-2.1
-2.5

SOM 498 - Spring 2012

2010

Marketing Strategy
16% of Market Share

Market
Segmentation
Product
Differentiation
Product
Positioning
Brand
Reinforcement
SOM 498 - Spring 2012

Market Segmentation
Primary focus:
High-end customers
Healthy concern consumers

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Product Differentiation

High-end
Products
Healthy
Organic
High Quality
Imported

Convenience
25 Locations
Long hours
Full range of
products
One-Stop
Shopping

SOM 498 - Spring 2012

Private
labeling

Dollar
Special

Natural
Healthy
Products

Decrease Net
Operating
Profits
Not consistent
with brand
equity

Product Differentiation

High-end
Products

Convenienc
e

Healthy
Organic
High Quality
Private Label

25 Locations
Long hours
Full range of
products
One-Stop
Shopping

Increase sales

Increase
Private
labels

Prepare
Foods
Increase
variety of
Healthy Foods

Natural
Products
Healthy
Products

= 2-4%
Increase
Store Traffic

Lower
Prices
by
15%at a
Lower cost

SOM 498 - Spring 2012

10

Introduction of Private Labeling


Columbus Market
$1 Million Marketing Plan = Increase Sales
by 15%in
(Estimations
Current Sales
Sales Increase by
Millions)

15%

Sales
Decrease/Increase

-31.43

99

Total
Sales
Sales
Increase
From
Private Labels
Prepared Foods
Other Items
Total Sales
Increase

660 %
Increase

Sales 759
Increase
by
66.0
19.8
13.2
16
99
%11
11

10%
3%
2%
15%
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Product Positioning
Maintain the current product
position
High quality products
Organic & natural products
Imported products

Value-pricing strategies
Price the product based on customers
perceived value
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Brand Reinforcement
Convenience
High-Quality Product
Customer Satisfaction

Recommandations
Products:

National brands
Private labels
Prepared food

Service offering:
Seasonal gifts
Food samples
Store events

SOM 498 - Spring 2012

Short term
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Recommandations
Advertising:

Be Good to

Yourself
Health and sport magazines
Social media
Smartphone applications

Website redesign:

Cooking receipts
Blogs/ forums
Customize healthy diet
SOM 498 - Spring 2012

Medium term
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Recommandations
Membership programs:

Points shopping rewards


Gas reward cards
Birthday card/special occasion gifts for loyal
members

Philanthropy

Community service

Long term
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Conclusion
Revenue growth
Differentiation strategy
Marketing campaign
Branding as
High quality
Convenience
Customer Satisfaction/Choice

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Thank You!

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Threats
Competitors - low-end products
Walmart/
Target
(one-stop shopping
supercenter)

-introduced

groceries
-worlds largest
retailer
-leader of food
retailing

Costco/BJs
(wholesale
warehouse)
-most carry one
brand
-bulk-packed for
large, middle class
families
-20% discounted
price

SOM 498 - Spring 2012

Dollar
General
-biggest threat
-mix of packaged
items
-mostly no
refrigerated
product

20

Threats

Major Competitors High-end


products
Trader Joes
-Limited
Inventory
(private
labeling)
-highest Sales/
square foot
-imported &
specialty food

Delfina

-conventional

&

Organic
-above-average
service
-Bright, clean
ambience

SOM 498 - Spring 2012

WholeFood
WholeFood
-only 2
2 stores
stores
-only
-Slowly
-Slowly
expanding
expanding
(Back stable
burner)
-High
Sales
-High stable
Sales

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Disadvantage to the Dollar


Special
Special
($Dollar
Millions)

Regular Price

Price
(6% Increase)

2% Sales
Increase

673.2

673.2

6% Sales

40.39

40.39

Net Profit Margin

13.46

13.46

Loss on Discounts

-10.54

2.92

13.46

Net Sales

Sales increase by 15% = $54.45 Millions lost on Net Sales


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2012 2012

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22

Profits Increase
($, Millions)
Estimated Sales
Total Sales

759

Operating Expenses

-743.82

Profit Margin (2%)

15.18

Marketing Expense

-1

Net Profits Increase

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2012 2012

14.18

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23

Adding Prepared
Foods
2010

($, Millions)

Worst Case
Scenario
2011

Best Case
Scenario
2011

Estimated
Sales:

660

673.2

686.4

Store Traffic
Increase by:

2%

4%

Sales from
prepared
foods:

112.2

125.2

138.6

Profit Margin
(30%)

37.56

41.58

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Retrived From: http://www.ralcorp.com/pdf/Ralcorp_CAGNY_Presentation.pdf

Ralcorp

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Private Brand Foods Have Had Impressive


Long-Term Growth Rates

Date
2010
http://gasbuddy.com/gb_retail_price_chart.aspx
SOM 498 - Spring 2012

2011
27

Private-Brand Food Opportunit

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Ralcorp Categories

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Financial Overview

Increase Market Share

http://www.reedsinc.com/ir/pdfs/12-711%20REEDS%20Dec%202011%20Investor%20Presentation.pdf

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30

Gas Price in Columbus, OH

Date
2010
http://gasbuddy.com/gb_retail_price_chart.aspx
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2012 2012

2011
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Columbus market
Columbus
Comparing to

Median
household
income:
$52,000

Population
growth from
2000 to
2009: 11%

Unemployme
nt rate in Dec
2010: 8.5%

Ohio

11.6% higher

Nation

Slightly
higher

2% higher

1.3% lower

Median income of a Reed shopper was


12% higher than the area household
average
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Total sales change 20052010

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Quality Index
9.0
8.5

8.4

8.3

8.4

8.0
7.5

Quality

7.0

6.8

6.6

Reed
Average
Discount Store

6.6

6.5
6.0
5.5
5.0

5.7
5.2
2008.0

2009.0

2010.0

Year(s)
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Price Index
9.0
7.9

7.7

8.0

6.8

7.0

6.6

6.2

6.0

Price

5.0

4.2

4.3

4.5

2008.0

2009.0

2010.0

Reed
Average
Discount store

4.0
3.0
2.0
1.0
0.0

Year
SOM 498 - Spring 2012

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United States Organic Food Market


Value
& Value Forecast: $ billion, 2005-2014

http://www.sbdcnet.org/small-business-research-reports/retail-organic-food-industry-inthe-u-s

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Customer Service
Satisfaction Program

Annual satisfaction surveys distributed


online and in-store, to measure:
Customer service
Customer expectations
Areas for improvement
What items they will like to see in stores

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List of brand name food products


Example

Baked
goods

Cookies

Warburtons
Hovis [1]
Nabisco [2]
McVitie's
Mother's Pri
de
Pepperidge
Farm
Westminster
Cracker Co
mpany [3]
St. Amour C
ookies
Kits
Danish

Burton's Ma
ryland Spec
ials
Cadbury Sn
ack
Double Tak
e
Domino
Disney Pixa
r Milk Choc
olate Crisp
y
Bars
Jaffa
Cake [

Chips

Cheeselets
Cheesy Tool
Bag
Discos
Doritos
Frazzles (
Walkers) [7]
Good 'n' Cru
nchy
Golden Wond
er (
Tayto Group)
Horror Bags
5]
Kit Kat
McCoys Cris
Oreo
ps
Snackfood
Biscuits
Walkers Sh Company
Tayto Fusion
ortbread
SOM 498 - Spring 2012

Hot food
brands

desserts

Chicago T
own
Findus Cri
spy Pancak
es
Pot Noodle
[8] and der
ived like
Pot Rice
Unilever
Crispy Chi
cken Bites
Basil Bru
sh Chicke
n Boom Bo
oms
Batchelors

Ben & Jerry's


Calypso Icicl
es Freezepops
Cremosa
Eskimo Pie
Juicy Drop Po
p
Lyons Maid
Magnum
Pingviini
Pehmis
Rocket

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