GIANT CONSUMER PRODUCTS, INC:

THE SALES PROMOTION RESOURCE ALLOCATION DECISION

Group 5:Andrei Grechko

Shane Johnston

Nakia Lape

Kyle McDaniel

Kevin Niehaus

Primary Question for GCP

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

Secondary Questions

I. Who is Giant Consumer Products?II. What are GCP’s objectives? III. What environmental forces are at work?IV. What’s going on in the Frozen Food production industry?V. What are FFD’s current constraints?VI. What are the key metrics?VII. Who is the target market?VIII. What are the strengths and weaknesses of FFD’s marketing

strategy?IX. What is their current market position?X. What are the current market trends?XI. What is affecting GCP’s decision?XII. How should FFD implement the selected alternative?

Giant Consumer Products Company Overview

Organizational StructureAllan Capps

CEO

Byron Flatt

VP, Sales

Mary Davidson

FFD General Manager

Mike Sanchez

FFD Director of Marketing

Organizational Structure

Ultimately

Need to make sure division’s objectives always align with overall strategic goals of the company

Negative

Difficult to get quick answers

Structure might be too rigid and not flexible enough

Difficult to work across divisions to achieve organizational goals

Positive

Each business unit have defined and measurable goals

Promotes Accountability

Management Philosophy

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

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

Secondary Questions

What are GCP’s objectives?

Objectives

GCP Priorities in second half of 2008Generate 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

Most Important Objectives

•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

Sales Promotion

•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

Marketing Strategy

Secondary QuestionsWhat 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 QuestionsWhat’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 OverviewPorter’s five forces:

Rivalry among existing competitors

Intense

Threat of substitute products

HIGH

Bargaining powerof buyers

MID

Threat of new entrants

LOW

Bargaining power of suppliers

HIGH

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

Downward pressure on prices Brand value will be key!

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?

Key Metrics for FFD

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.

Secondary Questions

What are the Strengths and Weaknesses of the FFD’s

marketing strategy?

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.

Secondary Questions

What will affect GCP’s decision?

Sep '0

6

Oct

'06

Nov '0

6

Dec '0

6

Jan

'07

Feb '0

7

Mar

'07

Apr '0

7

May

'07

Jun

'07

Jul '0

7

Aug '0

70

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Promo

Promo

PromoPromo

Promo

Sales Promotions and VolumesSept 2006 - Aug 2007

Dinardo's 32Dinardo's 16Dinardo's OtherNatural Meals

Aug '07

Sep '07

Oct '07

Nov '07

Dec '07

Jan '08

Feb '08

Mar '08

Apr '08

May '08

Jun '08

Jul '08

Aug '08

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000Promo

Promo

Promo

Promo

Sales Promotions and VolumesAug 2007 - Aug 2008

Dinardo's 32Dinardo's 16Dinardo's OtherNatural Meals

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

Secondary QuestionsHow 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 $ (1,197,278.37)

Total Effect of D16 Promotion $ 2,775,636.96 Total Brand Impact from Promotion on Marketing Margin

Total Effect of D32 Promotion $ 2,576,012.75

Total Effect of D16 Promotion $ (879,443.14)

ROMI 71% -20%

Recommendations

Dinardo “Other” Category – Severely underperformingSales 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

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 $ 6,718,892

Variable Cost change from promotion $ 2,085,173

Promotion Cost change from promotion $ 4,125,425

Marketing Margin Change from promotion $

508,294

ROMI 165%

Recommendations Brand Awareness

Coupon OfferingPay for PerformanceIn-store Product Placement Repackaging for Natural

Meals 32 oz portionsBrand Recognition/Brand

Loyalty

Questions?