Group 5:

Andrei Grechko Shane Johnston Nakia Lape Kyle McDaniel Kevin Niehaus

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

I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII.

Who is Giant Consumer Products? What are GCPs objectives? What environmental forces are at work? Whats going on in the Frozen Food production industry? What are FFDs current constraints? What are the key metrics? Who is the target market? What are the strengths and weaknesses of FFDs marketing strategy? What is their current market position? What are the current market trends? What is affecting GCPs decision? How should FFD implement the selected alternative?

Giant Consumer Products Company Overview

Organizational Structure
Allan Capps CEO

Byron Flatt VP, Sales

Mary Davidson FFD General Manager

Mike Sanchez FFD Director of Marketing

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 divisions objectives always align with overall strategic goals of the company

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

Organizational Culture

Pride. The most customer-centric management team in the frozen food industry.
y Premium product quality, strong relationship and support from retailers y Helps company stay on top of consumer behavior trends y Promotes long-term thinking

Built on brand equity. Company is striving to take into account the preservation of GCPs brand name and image in every decision that it makes

What are GCPs objectives?

Objectives

GCP Priorities in second half of 2008

y Generate much needed demand in the

Frozen Foods Division (FFD) without undermining the long-term health of GCP's brands
y Increase GCP's revenues to a point where

they at least reach the low end of Wall Street's expectations

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

What environmental forces are at work?

Economic conditions and trends

y FFD had steady 2.8% growth rate between

2003 and 2008 in spite of larger economic downturn.

y 50% of consumer dollars spent at

restaurants (2007), likely to decrease as a result of economic conditions. y Sales promotions are a must in order to be seen as relevant to the consumer.

Cultural and Social Trends

y Dual Career families (less time for meal

preparation)
y Increased awareness of ingredient quality

(artificial ingredients, pesticides, hormones, food origin, and of course, caloric content.) y Higher focus on healthy living. y Return to family style dining.

Political and legal issues

y 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. y Concern is growing as to the validity of organic certifications and consumer expectations will almost always exceed governmental expectations y Governmental mandates on healthy eating and livingobesity as cost factor

Whats 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
Porters 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

Porters 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 Over 400 domestic manufacturers and increased competition from foreign competition. Also, introduction and competition for similar target market Well established players Downward pressure on prices

Loyalty in target market will be easy to build

Competitive rivalry

Downward pressure on prices

Threat of new entrants

Brand value will be key!

What are the FFDs 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

What are the key metrics?

Key Metrics for FFD

Who is the Target Market?

Dinardos Target Market

Families Conventional palate Price conscious but will not accept subpar 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 FFDs marketing strategy?

Potential Resource Strengths and Competitive Capabilities

Short-term marketing strategy objectives are well defined. Strong brand image for the Dinardos 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 GCPs decision?

Sales Promotions and Volumes Sept 2006 - Aug 2007

12,000,000 Promo 10,000,000 Promo 8,000,000 Promo 6,000,000 4,000,000 2,000,000 0 Sep '06 Nov '06 Jan '07 Mar '07 May '07 Jul '07 Promo Promo Dinardo's 32 Dinardo's 16 Dinardo's Other Natural Meals

Sales Promotions and Volumes Aug 2007 - Aug 2008

12,000,000 Promo Promo 10,000,000

8,000,000

Promo Dinardo's 32

6,000,000 Promo

Dinardo's 16 Dinardo's Other Natural Meals

4,000,000

2,000,000

0 Aug '07 Oct '07 Dec '07 Feb '08 Apr '08 Jun '08 Aug '08

Strategic Alternatives

Traditional sales promotion for Dinardo Brands (based on math) Drop Dinardos 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?

Recommendations

Traditional Marketing Not a win for FFD

Total Brand Impact from Promotion on Top-line Revenue Total Effect of D32 Promotion Total Effect of D16 Promotion Total Brand Impact from Promotion on Marketing Margin Total Effect of D32 Promotion Total Effect of D16 Promotion ROMI 71% $ 2,576,012.75 $ (879,443.14) -20% $ (1,197,278.37) $ 2,775,636.96

Recommendations

Dinardo Other Category Severely underperforming

y Sales Volume down 8.6% y Gross Revenues down 8.6% y Gross Margin down down 9.6% y Marketing Margin down 11.9% y Marketing Allocation down 15.2%

Recommendations

Brand Awareness campaign Natural Meals

705,252 7.61 92,674 2,316,859 $ $ $ 6,718,892 2,085,173 4,125,425 $ 508,294 165%

Average Monthly Incremental Volume for Natural Meals Average % Store Promoting for Natural Average Monthly Incremental Volume /Promo Point Incremental Volume from 25% Promo Points Revenue change from promotion Variable Cost change from promotion Promotion Cost change from promotion Marketing Margin Change from promotion ROMI

Recommendations

Brand Awareness
y Coupon Offering y Pay for Performance y In-store Product Placement y Repackaging for Natural

Meals 32 oz portions y Brand Recognition/Brand Loyalty

Questions?