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Reed Supermarket
SOM 498 - Spring 2012 2
Problem• Sale is decreasing• Threats from competitors are rising
Reasons• Wrong strategy
Reed Supermarket
SOM 498 - Spring 2012 3
Goal14% => 16% market share
Solution• Convenience• High quality product• Reinforce the brand image • Promotion/marketing strategy
SOM 498 - Spring 2012 4
• Supermarket• Limited Selection• Whole Food
Upper End => High Threat
• Warehouse Clubs• Supercenters• Dollars Stores
Lower End => Low Threat
Reed’s Competitors
SOM 498 - Spring 2012 5
High incomeconsumer base
PromoteHigh-end products
Brand awareness:
Quality product
Change customers’ perceptions
LowPerceived
Value
Improveproduct
selection
Limited product selection
Experience inprivate labelmerchandise
Strength Weakness
6SOM 498 - Spring 2012
2008 2009 2010
1.51.8 1.8
Quality Index
2008 2009 2010
-2.0
-2.5-2.1
Industry average
Price Satisfaction Index
Marketing Strategy16% of Market Share
SOM 498 - Spring 2012 7
Market Segmentation
Product Differentiation
Product Positioning
Brand Reinforcement
Market Segmentation
SOM 498 - Spring 2012 8
Primary focus:• High-end customers• Healthy concern consumers
Product Differentiation
SOM 498 - Spring 2012 9
High-end Products• Healthy• Organic• High Quality• Imported
Convenience• 25 Locations • Long hours• Full range of
products• One-Stop Shopping
Private labeling• Natural• Healthy Products
Dollar Special• Decrease Net
Operating Profits• Not consistent with
brand equity
Product Differentiation
SOM 498 - Spring 2012 10
High-end Products• Healthy• Organic• High Quality• Private Label
Convenience• 25 Locations • Long hours• Full range of
products• One-Stop Shopping
Increase Private labels• Natural
Products• Healthy
Products • Lower Prices
at a Lower cost
Prepare Foods• Increase variety of
Healthy Foods
= 2-4% Increase Store Traffic
Increase sales by 15%
Som 498 - Spring 2012 11
Introduction of Private Labeling Columbus Market
$1 Million Marketing Plan = Increase Sales by 15% (Estimations in Millions) Current Sales Sales Increase by 15%
Sales Decrease/Increase -31.43 99Total Sales 660 759
Sales Increase From Increase % Sales Increase by
Private Labels 10% 66.0
Prepared Foods 3% 19.8
Other Items 2% 13.2
Total Sales Increase 15% 99 16% SOM 498 - Spring 2012 11
SOM 498 - Spring 2012 12
SOM 498 - Spring 2012 13
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
Brand Reinforcement
Convenience
High-Quality Product
Customer Satisfaction
Products: • National brands • Private labels • Prepared food
Recommandations
SOM 498 - Spring 2012 15
Service offering:• Seasonal gifts• Food samples• Store events Short term
SOM 498 - Spring 2012 16
Website redesign: • Cooking receipts • Blogs/ forums• Customize healthy diet
Advertising: “Be Good to Yourself”• Health and sport magazines• Social media • Smartphone applications
Recommandations
Medium term
Membership programs:• Points shopping rewards • Gas reward cards • Birthday card/special occasion gifts for loyal members
Recommandations
SOM 498 - Spring 2012 17
Philanthropy• Community service
Long term
SOM 498 - Spring 2012 18
Conclusion• Revenue growth
• Differentiation strategy• Marketing campaign
• Branding as • High quality• Convenience• Customer Satisfaction/Choice
Thank You!
SOM 498 - Spring 2012 19
SOM 498 - Spring 2012 20
Threats
Competitors - low-end products
Walmart/ Target(one-stop shopping supercenter)
-introduced groceries-world’s largest retailer-leader of food retailing
Costco/BJ’s(wholesale warehouse)-most carry one brand-bulk-packed for large, middle class families -20% discounted price
Dollar General-biggest threat-mix of packaged items-mostly no refrigerated product
SOM 498 - Spring 2012 21
ThreatsMajor Competitors – High-end products
Trader Joe’s-Limited Inventory(private labeling)-highest Sales/ square foot-imported & specialty food
Delfina-conventional & Organic-above-average service-Bright, clean ambience
WholeFood-only 2 stores-Slowly expanding(Back burner)-High stable Sales
WholeFood-only 2 stores-Slowly expanding-High stable Sales
Som 498 - Spring 2012 22
Disadvantage to the “Dollar Special”($ Millions)
Dollar Special Price
(6% Increase)
Regular Price
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 0
Net Sales 2.92 13.46
Sales increase by 15% = $54.45 Millions lost on Net SalesSOM 498 - Spring 2012 22
Som 498 - Spring 2012 23
Profits Increase($, Millions)
Estimated Sales
Total Sales 759
Operating Expenses -743.82
Profit Margin (2%) 15.18
Marketing Expense -1
Net Profits Increase 14.18
SOM 498 - Spring 2012 23
Adding Prepared Foods($, Millions)
Som 498 - Spring 2012 24
2010 Worst Case Scenario2011
Best Case Scenario2011
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
SOM 498 - Spring 2012 24
Retrived From: http://www.ralcorp.com/pdf/Ralcorp_CAGNY_Presentation.pdfSOM 498 - Spring 2012 25
SOM 498 - Spring 2012 26
Ralcorp
SOM 498 - Spring 2012 27
2010 2011Date
http://gasbuddy.com/gb_retail_price_chart.aspx
Private Brand Foods Have Had ImpressiveLong-Term Growth Rates
SOM 498 - Spring 2012 28
Private-Brand Food Opportunity
SOM 498 - Spring 2012 29
Ralcorp Categories
Som 498 - Spring 2012 30
Financial Overview
Increase Market Share
http://www.reedsinc.com/ir/pdfs/12-711%20REEDS%20Dec%202011%20Investor%20Presentation.pdf
SOM 498 - Spring 2012 30
Som 498 - Spring 2012 31
2010 2011Date
Gas Price in Columbus, OH
http://gasbuddy.com/gb_retail_price_chart.aspx SOM 498 - Spring 2012 31
Columbus market
SOM 498 - Spring 2012 32
Columbus Comparing to Median
household income: $52,000
Population growth from 2000 to 2009: 11%
Unemployment 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
Total sales change 2005-2010
SOM 498 - Spring 2012 33
Quality Index
SOM 498 - Spring 2012 34
2008 2009 20105.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
8.3 8.4 8.4
6.86.6 6.6
5.2
5.7
ReedAverageDiscount Store
Year(s)
Qua
lity
Price Index
SOM 498 - Spring 2012 35
2008 2009 20100.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
4.2 4.3 4.5
6.26.8 6.6
7.7 7.9
ReedAverageDiscount store
Year
Pric
e
SOM 498 - Spring 2012 36
United States Organic Food Market Value & Value Forecast: $ billion, 2005-2014
http://www.sbdcnet.org/small-business-research-reports/retail-organic-food-industry-in-the-u-s
Customer Service Satisfaction Program
SOM 498 - Spring 2012 37
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
SOM 498 - Spring 2012 38
List of brand name food productsExample
Baked goods Cookies Chips Hot food brands
desserts
WarburtonsHovis [1]Nabisco [2]McVitie'sMother's PridePepperidge FarmWestminster Cracker Company [3]St. Amour CookiesKitsDanish
Burton's Maryland SpecialsCadbury SnackDouble TakeDominoDisney Pixar Milk Chocolate Crispy BarsJaffa Cake [5]Kit KatOreoBiscuitsWalkers Shortbread
CheeseletsCheesy Tool BagDiscosDoritosFrazzles (Walkers) [7]Good 'n' CrunchyGolden Wonder (Tayto Group)Horror BagsMcCoys CrispsSnackfood CompanyTayto Fusion
Chicago TownFindus Crispy PancakesPot Noodle [8] and derived like Pot RiceUnilever Crispy Chicken BitesBasil Brush Chicken Boom BoomsBatchelors
Ben & Jerry'sCalypso Icicles FreezepopsCremosaEskimo PieJuicy Drop PopLyons MaidMagnumPingviiniPehmisRocket
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