Case 31:

Wal-Mart and Vlasic

Pickles

Cesista, Eliza Marie G.

Ranque, Lorraine Rose H.
Solomon, Jhairon Treb F.
Tapawan, Rachelle T.
Tutor, Francel O.
 I. Time Context
In 1997 the focus on the one gallon jar of Vlasic pickles came into play when Wal-
Mart manager came up with the idea to offer the one gallon jar of Vlasic pickles usually
sold in the Food Service section as Memorial Day item at the promotion of $2.97, instead
of everyday low price of $3.47.
In 1998, Vlasic’s gallon jar of pickles went into every Wal-Mart stores, at $2.97, a
price low that Vlasic and Wal-Mart would yield only one or two cents per jar.

II. Viewpoint
Major deals and programs had to be approved by the president of sales, Maurice
Lane. Both Steven Young, vice president of grocery sales, and Patrick Hunn, team leader
for the Wal- Mart account, report to the president of Sales. Patrick Hunn, team leader of
Wal-Mart Sales, for Vlasic Foods International made a record- breaking deal that resulted
in selling more pickles that Vlasic had ever sold to any account. The deal made by Vlasic
with Wal- Mart is to offer a gallon jar of Vlasic pickles at $2.97 that started in one of the
Wal-Mart store as a little promotion in a relatively trafficked part of the store but
blossomed into a major deal.

III. Central Problems

Patrick Hunn thought that the promotion of a gallon of pickles at its low price of
$2.97 will blossomed into a major deal that will benefit both Vlasic and Walmart.
However, some marketing, logistics, and financial factors were not considered before
making this deal and sources at Vlasic reported that profit was down 25%–50%. Others
blamed the Wal-Mart deal for this decline and insisted that the promotion had
cannibalized the non-Wal-Mart business.

IV. Statement of Objective

 Must Objective (Short-term)
 To eliminate the 25%-50% decrease in profit
 To stabilize the deal with Wal-Mart and meet the demand of the consumers
 To improve the supply and production of pickles

 Want Objective (Long-term)

 To settle the debt of $500 million and be financially stable
 To increase company’s market share
 To build volume for Vlasic brands and products
 To continually be the number one national pickle brand in America
V. Areas of Consideration
 Strengths
 Long heritage of being number one pickle brand in America
 Perceive as premium brand by consumers
 Secured agreement with Wal-Mart to continue buy grocery sized pickles, relishes,
peppers with each order of gallon jar.

 Weaknesses
 Financially weak with a debt of $500 million
 Inefficient procurement and production capacity/rate due to volume increase
 Agreement with Wal-Mart lacks limitations and needs provision for changes

 Opportunities
 Bundling high margin grocery sized pickles, relishes, and peppers with each order
of the gallon jar
 Access to the Retail Link database of Wal-Mart
 Strong relationship with Wal-Mart

 Threats
 Declining profit and cash shortage
 Very high bargaining power of Wal-Mart
 Non-Wal-Mart businesses are being cannibalized by on-going promotion
 Raw material supply shortage and compromised flow of the supply chain

VI. Alternative Courses of Action

1. Introduction of new promotional product and slowly phasing out the existing
one
Advantage:
Patrick Hunn should negotiate another good deal with Wal-Mart and Young on
the other hand should slow down production. While doing this, Vlasic should prepare
their next promotional product launch - a quarter (32 oz.) of the existing one-gallon
jar (128 oz.) of pickles at $0.99. This is expected to be another successful promotion
knowing Vlasic as number one pickle brand in America. Besides addressing the issue
of declining profitability, it will also answer the wastage problem when a household
consumed just a quarter of a jar of pickle and throw away the remaining when it got
moldy.
 Disadvantage:
The new promotional product may or may not be successful in bringing back the
profits of Vlasic because promotional pricing tends to produce cash flow but not
profit.

2. Bundle the one-gallon jar of pickles with slow moving but high contribution
margin items
Advantage:
Bundling a selection of other Vlasic grocery items will address the declining
profit and cash shortage of the company. Its benefits will outweigh the negative effect
of the existing promotion.
Disadvantage:
This promotional campaign will moderate the sale of a gallon jar pickle.

3. Investment in new technology to reduce the cost of production

Advantage:
With cost reduction strategy, Vlasic Foods International can maximize its profit.
Disadvantage:
Vlasic lacks cash to invest. To make this happen, Vlasic needs to sell some
business units / production line because the company cannot accrue more debt. Also,
Vlasic Foods International may end up creating an inferior product because of cost-
cutting measure.

4. Adoption of efficient distribution and logistics management system to ensure the

constant flow of the goods
Advantage:
To meet customer demands through the planning, control and implementation of
the effective movement and storage of related information, goods and services from
origin to destination.
Disadvantage:
Poor logistics planning gradually increases expenses, and issues may arise from
the implementation of ineffective logistics software.

5. Implement supply chain innovations to produce their pickles more efficiently

Advantage:
Shortages of pickles in case of larger production than normal will be eliminated
since supply chain will be improved and it will help produce the pickle supplies more
efficiently.
 Disadvantage:
The incorporation of sustainability throughout the supply chain involves constant
innovation, company leadership that is an indefinite process and, transaction cost for
the innovation may result to an increase of the expenses to company.

VII. Decision
VIII. Detailed Action Plan