Giant Consumer Products: The Sales Promotion Resource Allocation Decision
A. Situation Analysis:
1. Context: In early September’08 Giant consumer Products, Inc. (GCP) realized that Frozen food division, which had been growing at 2.8% (compounded annual growth) rate since 2003 to 2007 and accounted for almost 33% of GCP’s overall business volume, is not doing well now. The sales as well revenue volume is around 3.9% behind the target. Most specifically marketing margin (key parameter for GCP business) was also under plan by 4.1%. GCP had been doing well in wall-street but performance of past couple of quarters has increased the worries of GCP i.e. whether GCP will able to maintain its profitable growth.
GCP is expecting FFD to deliver the sufficient growth to match up with the annual targets. VP of GCP suggested CEO of GCP for the sales promotion of the FFD; however the CEO has some of his apprehensions against the sales promotions. Nonetheless he agreed to allocate some funding if FFD team comes up with a solution generating funds without affecting long term health of the GCP’s brand.
2. Consumers: The emergence of dual career families resulted in unavailability of sufficient time to cook food. Hence interest and love towards such frozen food is increasing1. Type of meal 2. Brand 3. Variety.
A new consumer segment for healthier frozen food (Organic food) has also grown in recent past. This segment doesn’t like any kind of artificial ingredient in the food.
3. Company: FFD of GCP has the most customer centric management team and hence they had consistently delivered on the promise of convenient, good tasting food (Italian frozen dinner’s sector) at a reasonable price. GCP has two brands:
I. DinardoTM: Key contributor to the net revenue. Use of quality ingredient and seasonings made this product better than its competitors. Packaging is done such a manner that consumer can directly use the inner packaging for heating food in microwave. This product was introduced in different sizes i.e. 32-ounce, 16-ounce & 6 and 8-ounce as need aroused in the market.
II. The Natural MealsTM: It was highly successful regional brand and now well reputed as Organic, low fat & preservative less food. Packaging was same as Dinardo’s but imagery is changed to appeal health conscious people. Segment of both the products ( Dinardo, The Natural) is mutually exclusive, hence less chance of cannibalization. GCP predicted that this brand will grow the business at 5 – 10 times the current rate, with low expenditure. This product was super premium product hence retailers were getting good margin.
4. Competitors: The major outsider competitor is Daft in “Italian frozen dinner’s sector”. Daft is already having a steady 25% market share and it is understanding the shifting consumer’s habits and hence planning to offer an own developed new organic food during 4th quarter of 2008. If this test results favorably, it will launch the product in Jan’09 with...