[ ] 1-11 Long.ppt

MARKETING STRATEGY 468: General Mills -- Project Bowl Appétit!

Final Project Report

Team 11 (Section 201) Lillian Lilly Jorge Tessey Gabriel Michalup Hide TomitaAmrit Shergill Zoya Trofimenko

1. Our Goal2. Two Product Solutions & Descriptions3. Contextual Analysis: Industry, Category, Consumer

Trends, and Company 4. Competitive Analysis: Porter’s Five Forces, 5. Product and Brand Specific evaluations – Bowl Appetit,

Betty Crocker, Progresso6. Concept Testing7. Marketing Strategy & Competitive Positioning8. Revenue Projections9. Conclusion10. Bibliography & Appendices

Contents

Goal

Generate the maximum level of sustainable growth in single serve, shelf stable food products for General Mills.

+ =

Two Product Solutions

Progresso Chili & Chips Progresso Lunch-to-go!

Product 1: Progresso Chili & Chips

NEED/VALUE PROPOSITION

Men and other hearty eaters need a quick, healthy, easy-to-prepare meal, all in one package.

OFFERING

15oz. Progresso Bean Chili + Tortilla Chips (each part in self-contained bowl – snaps together as one package)Price: $2.89


STRATEGIC PLATFORM

Hearty and healthy meal kit

TARGET CONSUMER

By Demographics: Men (25 – 44 yrs)

By Usage (Moment-in-Time): Hungry in a hurry. Don’t want to waste time cooking or bother with cleaning up dirty dishes. Want hot & filling, but healthy.


Product 2: Progresso Lunch-to-Go

NEED/VALUE PROPOSITION

Busy women need a quick, healthy, easy-to-prepare lunch, all in one package.

OFFERING

12 oz. Progresso 99% Fat Free soup in a bowl +2 breadsticks + plastic spoon and napkin already in package Price: $2.49.


STRATEGIC PLATFORM

Portable and healthy meal kit

TARGET CONSUMER

By Demographics: Women (25 – 44 yrs)

By Usage (Moment-in-Time): In a hurry. Need to eat something filling yet healthy. No time or suitable place for washing dishes.


Ready-to-Eat Meal Industry

• Total market in 1999 - $14.5 B

• 40% of the US population carries a meal or snack from home at least once in a two week period.

• Four categories – canned ($ 3.2 B), dried ($ 1.8B), frozen($ 8.9B) and chilled ($ 0.7B)

• Fragmented market -- one third of total sales come from the top 24 players

Source: Euromonitor

Ready-to-Eat Distribution

• Category fragmented by product type (canned, dried, frozen) – ready-to-eat not grouped together in grocery store (see photo slide, next)

• No consistent product placement from store to store

• Result: Consumers confused, their favorites are hard to find

• General Mills can use distribution strength to place new products in most appropriate locations – Chili for Progresso Chili & Chips, and Soup for Progresso Lunch-to-go!

Ready-to-Eat Distribution

Bowl Appétit!

Ragu Express

Chef Boyardee

Hamburger Helper

Kraft Mac

Product Analysis Ready-to-Eat Meals

We analyzed five popular “meal solutions”: Kraft Mac ‘n’ Cheese, Stouffer’s Lean Cuisine, Uncle Ben’s Rice Bowl, Maruchan Instant Lunch, and Bowl Appetit. These products have a wide range of prices and serving sizes. We checked nutrition information on the packages Analyzed

– taste,– brand awareness – packaging and – promotion.


Nutrition Information: Item Fat Sodium Calories Price* Kraft Mac/Pasta Dry M&C (61g) 11% 24% 250 3.29/6 Maruchan Inst. Lunch Cheddar (64g) 25% 50% 340 0.33 Unc’s B Rice Bowl Teriyaki (340g) 5% 60% 380 3.49 Betty C. Pasta Alfredo (85g) 17% 37% 360 1.89 Lean Cuisine Beef & Broccoli (240g) 5% 29% 240 2.19

* Harris Teeter

Item Flavor Texture Kraft Mac/Pasta Dry M&C Very Good Soft, cheesy Maruchan Inst. Lunch Cheddar Not so hot Watery Unc’s Ben Rice Bowl Teriyaki Very Good/Worth Trying Soft, tender Betty C. Pasta Alfredo Worth Trying Hard, watery Lean Cuisine Beef & Broccoli Worth Trying Soft, tender


Packaging: Item Packaging Kraft Mac/Pasta Dry M&C Box/Colorful/Appealing Maruchan Inst. Lunch Cup/Cheap/Unappealing Unc’s Ben Rice Bowl Bowl/Colorful/Appealing Betty Crocker Bowl Appetit! Bowl/Colorful/Appealing Stouffers Lean Cuisine Box/Simple/Appealing


Promotion:

a) TV Advertisement Item Target Message Kraft Mac/Pasta Dry M&C Pre-teens/Teens Tasty, cheesy Maruchan Inst. Lunch N/A N/A Unc’s Ben Rice Bowl Singles/ Young adults Sexy, satisfying, exciting Betty Crocker Bowl Appetit! Working mothers Fast, simple, convenient Stouffer’s Lean Cuisine Working women Healthy alternative

b) Free-standing inserts Item Message Kraft Mac/Pasta Dry M&C N/A Maruchan Inst. Lunch N/A Unc’s Ben Rice Bowl Variety/ Innovative Betty Crocker Bowl Appetit! Easy/ convenient/ Tasty Stouffer’s Lean Cuisine Healthy/ Easy

Soup Industry

• Overall 4% decline in soup market forecast, but three segments are growing:– “Soups away from home” – Ready-to-serve soups (more likely to be

premium soups)– Menu items in restaurants.

• Biggest concerns are time, convenience, and ease of preparation

Chili Industry

• 85% of consumers surveyed in 1999 considered Chili as a meal.

• Sales revenue growth 25% over last 3 years

• New products introduced cater to adults, oriented around nutrition, eg chili ready meals (cans, dried in a pouch).

• Most popular type is “regular” chili with beans.

Consumer Trends

• Work + Family = Home Cooking

• Result? Higher Willingness to Pay for convenient and easy-to-prepare meals.

• More two-income and single-parent families – dual convenience & nutrition focus

• More whole meals purchased at stores rather than in restaurants(54.2% vs 45.8% of family budget).

• Microwaves almost universal (86% of households)

Our Consumer Survey

52 Respondents queried about ready-to-eat meals. Result?

• Women are more concerned about nutrition than men. 50% of Male respondents “didn’t care” vs 24% of women.

• However, nutrition is trumped by convenience in reason for purchase ready-to-eat meals.

• Top nutritional concerns are fat, calories, with sodium distant 3d.

More Survey Results

• Campbell’s soup is the product most frequently purchased by women in the last 6 months (55%)

• 50% of married respondents eat ready-to-eat food for lunch while 77% of singles eat it for dinner.

• General Mills brands associated with ready-to-eat: Hamburger Helper & Progresso

(Text of Survey - Appendix 1)

Consumer Survey Results

Most important nutritional factors?

Low Fat28%

Low Sodium11%Low Calorie

21%

Organic8%

None response4%

Don't care

28%


Choose to purchase because of:Average Mode Median Stdev

Taste 3.73 5 4 1.25Convenience 4.51 5 5 1.07

Price 3.10 4 3 1.17Nutrition 2.90 3 3 1.36No response 0.02 0 0 0.14

Scale 1 to 5, 1 is lowest


How often do you eat ready-to-serve per week?

0%

20%

40%

60%

0 <11

to 2

3 to

4 >5

No re

spon

se

Company

• General Mills recently acquired Pillsbury• Appropriate time to expand the Progresso and

Pillsbury lines• Take advantage of synergies between General

Mills and Pillsbury• Strong distribution and retailing relationships• New products should fit with combined firms’

capabilities and strengths

http://www.pillsbury.com/pressrelease.asp

http://www.pillsbury.com/pressrelease.asp

General Mills SWOT Analysis Strengths Weaknesses

Broadly positioned and appeal to a wide consumer base

Strategic joint ventures which create opportunities in new markets and deliver cost efficiency

Market leader in the important US breakfast cereals market

Pursues new product development aggressively and monitors consumer trends in order to develop line extensions and new brands

Within packaged food the company manages a fragmented product portfolio

Except for savory snacks and breakfast cereals, sales of other types of food remain heavily dependent on its domestic market

Company open to domestic industry fluctuations like supermarket price cutting

Cereals sales remain sluggish

Opportunities Threats Growth opportunities in new food

businesses such as frozen snacks, ready-to-serve soup and frozen dough

Cost savings through economies of scale in the supply chain, marketing and administration with Pillsbury acquisition

Expanded international presence in packaged food and strengthening capabilities for the development of new products

Greater segmentation into health-orientated food

Lack of dynamism in the US cereals market requires the company to allocate increasing resources for promotional and development activity

High competition

Porter’s Five Forces- Ready-to-Eat Industry• Buyer Power:

– General Mills distributes the majority of its products directly, through its own sales organization, to retailers, co-operatives and wholesalers.

– Targets alternative distribution channels, particularly convenience stores, vending and non-grocery outlets as well as foodservice outlets.

– Due to its size and huge range of offerings, the company is able to command strong representation through these channels.

• Supplier Power: – Power is low; brand manufacturers are in a good position to

negotiate with suppliers since ingredients are commodities.

Porter’s Five Forces- Ready-to-Eat Industry• Threat of Entrants:

– Market is so segmented than new entrants can always come in to target niche segments.

– However, its does require a moderate to heavy investment in production and distribution facilities.

• Threat of Substitutes: – Many substitutes including soups, delis, home food, frozen foods,

power bars, pizzas, noodles, canned, chilled and frozen meals.

• Competitive Rivalry: – High rivalry; many major players like Kraft, ConAgra, Hormel,

Campbell’s Soups, Nestle,Maruchan and private labels offer products that are close substitutes for the Progresso range.

Competitive Rivalry: high

Substitute Threats:high

Buyer Power: low

Supplier Power: low

Entry Barriers: high

Porter’s Five Forces- Ready-to-Eat Industry

Bowl Appétit! Marketing Mix

Product:

• Variety: Bowl Appétit! comes in 10 different flavors of pasta, rice and potatoes

• Quality: Low quality of ingredients. No nutritional value. High calories.

• Packaging: Medium size plastic bowl covered by an appealing carton box. A thin plastic film protects the content.

• Sizes: Single-serve portions that range from 57g to 88g


Price:

• Bowl Appétit! rice, pasta and potato bowls are priced $1.89 at local grocery stores. There is no price difference among the 10 varieties despite the fact that they contain different ingredients.

Place

• Bowl Appétit! products are located in the packaged dinner aisle, and are widely available in grocery stores, retail stores, clubs, and mass merchandisers


Promotion

Advertising: The target audience is working women and the message is that Bowl Apettit! is a fast, convenient and easy to prepare meal.

Web Site: Customers can sign up to receive an email newsletter from Betty Crocker with information about their products and recipes as well as other useful information such as dinner planners.

Bowl Appétit SWOT Analysis

Strengths Weaknesses Fast initial market penetration in

first year Comes in a bowl as opposed to

Easy Mac Strong Brand loyalty amongst

women Leverages General Mills

distribution and marketing power

Preparation problems Tasted bad Not particularly nutritious High percentage of customers over

55 (aging population)

Opportunities Threats Growth opportunities in new food

businesses such as frozen snacks, ready-to-serve soup and frozen dough

Greater segmentation into health-orientated food

Competition from the frozen food category

Increase in the popularity of ethnic food

Bowl Appetit

Market share ($):• Fast penetration /Among all major products, Bowl Appétit!

Pasta ranks 7th, Rice ranks 12th, and Potato ranks 40th.

(Nielsen Data)

Rank Brand Sale ($)Market Share

1 MARUCHAN INSTANT LUNCH/INSTANT MEAL DRY 97,832,626 15.71%2 UNCLE BEN'S RICE BOWL/ORIENT 1 FOOD FROZ 63,614,617 10.22%3 KRAFT EASY MAC/PASTA DRY DINNER 51,900,424 8.34%4 CLASSICO IT'S PASTA ANYTIME/SHLF STAB RE 34,713,860 5.58%5 HEALTHY CHOICE SOLOS/PIZZA FROZEN 33,267,491 5.34%6 UNCLE BEN'S RICE BOWL/POULT 1 FOOD FROZE 4.93%7 BETTY CROCKER BOWL APPETIT!/PASTA DRY DI 27,326,797 4.39%

12 BETTY CROCKER BOWL APPETIT!/RICE MIX 18,469,240 2.97%

40 BETTY CROCKER BOWL APPETIT! -M/POTATO MA 828,071 0.13%

Bowl Appetit

(Nielsen Data)

Major Brand Sales ($) for 52 weeks ending 8/11/01

0100000020000003000000400000050000006000000700000080000009000000

10000000 Maruchan InstantLunch

Bowl Appeti (Pasta)

Bowl Appeti (Rice)

Bowl Appeti (Potato)

Uncle Ben's RiceBowl

Kraft Easy Mac

Bowl Appetit

Pasta• Ranks 3rd in this

category. • Easy Mac and

Classico are major competitors (Nielsen Data)

Pasta sales for 52 weeks ending 8/11/01

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

1 2 3 4 5 6 7 8 9 10 11 12 13

Kraft Easy Mac

Classico It's PastaAnytime

Bowl Appetit

Uncle Ben's PastaBowl

Chef Boyardee(Spaghetti)

Rank Best selling past brands Sale ($)Market Share

Pct change vs Prev

1 KRAFT EASY MAC 51,900,424 8.34% 23.08

2 CLASSICO IT'S PASTA ANYTIME 34,713,860 5.58% 258.27

3 BOWL APPETIT! 27,326,797 4.39% 2,506.45

4 UNCLE BEN'S PASTA BOWL 18,683,838 3.00% -

5 CHEF BOYARDEE 12,907,071 2.07% 1.48

(Nielsen Data)

Bowl Appetit

Rice

• Ranks 4th in this category.

• A total of Uncle Ben’s rice products sells about six times as much as Bowl Appétit!does. (Nielsen Data)

Rank Best selling rice brands Sale ($)Market Share

Pct change vs Prev

1 UNCLE BEN'S RICE BOWL/ORIENT 63,614,617 10.22% 6.76

2 UNCLE BEN'S RICE BOWL/POULT 30,702,803 4.93% (10.37)

3 UNCLE BEN'S RICE BOWL/MEAT 20,010,637 3.21% (2.32)

4 BOWL APPETIT 18,469,240 2.97% 2,220.41

5 UNCLE BEN'S RICE BOWL/REM 1,071,946 0.17% (48.52)

Rice sales ($) for 52 weeks ending 8/11/01

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

1 3 5 7 9 11

13

Uncle Ben's(Orient)

Uncle Ben's (Poult)

Uncle Ben's (Meat)

Bow l Appetit

(Nielsen Data)

Consumer Profile

Bowl Appétit!• Age: Female Head over 55 is the biggest segment (30%). FH

between 45-54 is the second (28%) .

• Family Size: 69% of consumers has the size between 2-4.

• Gender: No Female Head counts 6% (Uncle Ben’s:10%).

• Life Style: Middle Aged Childless couples (21%) and Empty Nesters (23%).

• Repeat purchase rate is not yet impressive (Pasta: 28.6% / Rice: 19.2%) compared with other brands (Easy Mac: 43.7%)

(Panel Data)

Age & Gender

10% 14% 11% 17%8% 8% 7%

25%30% 30%

27%

23% 21% 19%

28%25% 26% 27%

27% 27%24%

30%26% 26% 23%

31% 35%40%

6% 5% 7% 7% 10% 10% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FH - No Female Head

FH - 55+

FH - 45-54

FH - 35-44

FH - Under 35

(Panel Data)

Consumer Profile

(Panel Data)

Life Style

2% 1% 1% 1% 2% 2% 1%4% 3% 3% 2% 4% 3% 3%4% 7% 4% 12% 3% 2% 3%

16%

29%25%

27%

13% 12% 13%

10%

11%14%

9%

9%8% 7%

9%

5% 7%5%

11%13% 10%

21%

15% 17% 16%

20%19%

16%

23%20% 21% 18%

24%24%

29%

12% 9% 8% 8%14% 17% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Older Singles

Empty Nesters

Middle Aged Childless Couples

Middle Aged Singles

Established Families

Maturing Families

New Families

Childless Younger Couples

Young Singles

Consumer Profile

Limitations of the Betty Crocker Brand

There is an increase in demand for healthy food, and Betty Crocker is not associated with healthy food. We would like to use a brand that can support a healthy product.

Betty Crocker has no experience with neither soup nor chili products, making it harder to use this brand for launching these types of food products.

Limitations of Bowl Appétit! Products

• Dried value meals have seen a decrease in sales. The most popular Betty Crocker products are dried and thus have a risk in future. Therefore we need another brand focused on the growth category.

• Evidence: Over the last year there is negative growth tendency with BA even though they launched the potato flavor.

• Primary consumer of Betty Crocker products are white women over 55 years old. We would like to go beyond this niche market by using a brand that is not solely related to older women, but also other target segments.

• Evidence: BA is very seasonal – not purchased as much in summer or Xmas – confirms older “cook” woman as key customer.

Bowl Appétit! vs. Progresso Consumer Profiles

(Panel Data & 98 MRI data)

AgeBOWL

APPETIT! Progresso

FH - Under 35 10% 31.0%FH - 35-44 25% 27.8%FH - 45-54 28% 24.3%FH - 55+ 30% 16.9%

Family SizeBOWL

APPETIT! Progresso 1 Mem 23% 11.9% 2 Mem 35% 36.3% 3+ Mem 42% 51.8%

EmploymentBOWL

APPETIT! ProgressoFull Time 48% 49.1%Part Time 16% 12.9%Not Employed 30% 38.0%

Our Preference: Progresso

• Progresso appeals to a younger consumer – Female head of Household (FH) under 35 Progresso (31%) vs. Bowl Appétit! (10%).

• Progresso appeals to families (especially with kids) - Progresso (39%) vs. Bowl Appétit! (30%).

• Progresso associated with quality soups and beans, favored brand name for chili in concept test.

Progresso’s Market-Based Assets

• Reputational: Enjoys customer loyalty and brand awareness, perceived as having innovative new flavors

• Relational: Strong relationships with retailers allows wide distribution and nationwide coverage

• Knowledge: Extensive knowledge about customer profiles, suppliers and channels

Progresso Brand

Personality: Excitement – daring, spirited, imaginative, up to-date

Description:• High-quality Progresso soups, sauces, beans, bread

crumbs, tomato products, olive oils and vinegars• Tradition of creating fine Italian and Italian-influenced

foods and bean and tomato based recipes like Chili • Convenient: Ready-to-serve NOT condensed • Big chunks, seasoned, hearty, fresh-from-the-garden• Flavorful

Progresso’s Brand Report Card

A- The brand excels at delivering the benefits customers truly desire. A The brand stays relevant. B- The pricing strategy is based on consumers’ perceptions of value. A- The brand is properly positioned. A The brand is consistent. A The brand portfolio and hierarchy make sense.

A The brand makes use of and coordinates a full repertoire of marketing activities to build equity.

B- The brand’s managers understand what the brand means to consumers.

A- The brand is given proper support, and that support is sustained over the long run.

B The company monitors sources of brand equity.

Progresso’s Strengths and Weaknesses

Strengths Weaknesses Consumer base is large, popular

among younger women between 25-34

Strong Brand Leverages General Mills

distribution and marketing power Perceived as healthy

Not perceived as convenient and eaten out of the home

Potential compartmentalization with Italian identification

Competition for New Products

SOUPS:

• Campbell Soups, Knorr soups (Unilever), Healthy Choice, Advantage/10 Soups (light soups from ConAgra).

• Campbell’s Soup Co ranked as the number one manufacturer overall in 1999, with a market value share of 54.8%.

CHILIS:

• Hormel, Armour Star Chili, Wolf & Stagg.

• Hormel is the leader with 39.1% of the market share

Concept Testing

• We tested 19 consumers – 9 males and 1 female for the chili product

concept– 9 females for the soup product concept

• See attached Appendix 2 for test questions

Concept Testing - Chili

Key Results:• The Progresso Brand preferred, followed by Hormel• Surprising result –initial product concept was Old El Paso

branded but consumers strongly preferred Progresso• 70% of those surveyed would try the product• Most said it appealed to single men and kids• Consumers overwhelmingly described it as “complete”,

“convenient” and “appealing” • Equally associated with dinner and lunch• 70% willing to pay between $2.49 and $2.89• Majority preferred name “Chili & Chips”

Concept Testing - Soup

Key Results:• Progresso and Campbell’s close in recognition/ preference• Soup with breadstick, all in one package, would appeal to

busy women• The product was described as quick, convenient, high

quality• Concern about sodium, fat, and presence of meat• Consumers associated it primarily with lunch at work, with

dinner at home as second use• 80% of them were willing to pay up to $2.49 • Majority preferred “Lunch to go” name over “Complete”

Marketing Strategy

a) Leverage Market-Based Assets:

• Progresso Brand Equity: Enjoys customer loyalty and brand awareness, perceived as having innovative new flavors

• General Mills’ Knowledge: Extensive knowledge about customer profiles, suppliers and channels

Marketing Strategy

b) Distribution:

• Traditional retailers such as grocery stores/supermarkets are our target consumers’ preferred channel. General Mills commands a strong representation here.

• Continuous Replenishment Strategy to assure presence at POS and avoid stock-outs; enhancing customer satisfaction.

Distribution – Chili Aisle

Placement for our product

Distribution – Soup Aisle

Placement for our product

Progresso Marketing Strategy

c) Pricing Strategy:

Price High Medium Low

High Bear Country Progresso Kits

Medium Uncle’s Ben Campbell’s Kraft Mc Pasta Qu

alit

y

Low Bowl Appétit! Maruchan

• High-value strategy: High-quality product at an average price. We consider that our target customers are price sensitive since they can easily compare the quality and price of substitutes.


d) Promotion Strategy - Chili:• Objective: To make our target consumers aware of

our new offerings.• Message: Healthy, Hearty, Flavorful & Quick. • Vehicle: Television and Newspaper.

- Television: In the short term, we will use heavy advertising for sports events.

- Newspapers: We will use free-standing inserts in newspapers and issue coupons to induce buying by female shoppers.


d) Promotion Strategy - Soup:• Objective: To make our target consumers aware of

our new offerings.• Message: Healthy, Nutritious, Convenient &

Disposable. • Vehicle: Television and Newspaper.

- Television: In the short term, we will use heavy advertising in TV.

- Newspapers: We will use free-standing inserts in newspapers and issue coupons to induce trial.

Main Competitive Landscape

Brand Label

Fast Food Leftovers

Ready-to-eat

Cooking Restaurants

Not eating

Chili: Competitive Landscape

Chili Other Chili Leftovers Ready-to-eat Convenience High Low High High Price Medium Medium Low Medium Quality Medium - low Medium High Medium - low Taste Low Low Medium - high Low Different High High Low Medium Time to cook Low High Low Low Cleaning Low High Medium Low

Soup: Competitive Landscape

Our Soup Other Soups Leftovers Ready-to-eat Convenience High Medium High High Price Medium Medium Low Medium Quality Medium Medium High Medium - low Taste High Low Medium - high Low Different High High Low Medium Time to cook Low High Low Low Cleaning Nil High Medium Low

Competitive Positioning

THE STRATEGIC GAMEBOARD

2 Resegment the

Market to Create a Niche

1 Do More and Better of the

Same

3 Create and Pursue a Unique

Advantage 4

Exploit Unique Advantage

Industry Wide

Selective

Same Game Across-the-Board

New Game

Scope of Competition (Where)

Mode of Competition (How)


Product 1: Progresso Chili & Chips. Using this framework we realize that the Chili product has a

unique advantage over its competitors because it is entering a market where no company is offering chili with chips ready-to-eat. This product is focusing on a selective niche market (see consumer analysis) but in a new competitors game. With this product General Mills will offer changes in the market by introducing a totally new ready-to-go chili accompanied with some chips, making the customer having a complete meal. Also, this will target health conscious & busy consumers that we don’t specifically target.


Product 2 : Progresso Lunch–to-Go Using this framework we see that the soup makes no attempt to

change the industry structure by a new radically different way of doing business. This product is focusing on a selective niche

market (see consumer analysis) but in the same competitors game. With this product General Mills will offer changes in the market by introducing a totally new packaging accompanied

with breadsticks, offering the customer a complete meal.Also, this will appeal to new customers that are health conscious

and require a low calorie but complete “ready to eat” and “to-go” meal.

Competitive Response

Competitive Advantage Lower cost Differentiation

Broad Target

1. Cost Leadership 2. Differentiation

Com

petit

ive

Scop

e

Narrow Target

3A. Cost Focus 3B. Differentiation

Focus

As General Mills targets this selective market, the competitors (like Campbell’s) may avoid intense action like price-cutting because Campbell’s will be hurt more as a leader in the field.

Porter’s Generic Strategic Framework

Revenue Model & Forecasts

See Appendix 3 for Revenue Model

Revenue Forecasts

• Two markets -- Chili and Soup – with different behavior and data

• Principles behind forecast assumptions– Use historical data where available– Extrapolate conservatively– Assumptions (e.g. in price changes,

cannibalization rates) chosen such that revenue outcome is most conservative – actual results may be higher in each case

Our Revenue Model

• New Model created for this analysis• Improves on traditional pricing model• is more conservative, • adjusts for • brand differences in growth rates• Cannibalization rates

Chili Revenue Model

Chili Revenue Model Growth Assumptions

1. Yearly Sales Growth – 20%, based on historical data extrapolated for three years

2. Price Growth – 10% year one, based on expectation that competitors will respond sharply to our new premium entrant, then 5% each year thereafter as competition fine tunes its response, 5% also applies to our new product

Chili Revenue Model Market Share Assumptions

1. No new customers in overall Chili market, all our customers are taken from competitors

2. Proportion of Market Share lost by competitors – based on product attributes, and on price differential between their product and ours, adjusted by “Consumer Price Sensitivity Factor”

Consumer Price Sensitivity Factor (CPSF)

• Lack of data prevented precise consumer price elasticity calculation

• Consumer Price Sensitivity Factor is a proxy for elasticity – captures concern over price difference between our product and competitors

• Base level is 1 – above 1 is more price sensitive, below 1 is less price sensitive

• CPSF for Chili is .85 – Chili consumers consider other attributes to be more important than price

Chili Revenue Model Assumptions

Yearly sales growth (revenues)

Market Growth 20.0%

First year Price growth 10.0%

Competitors Price 5.0%

Sources of Our Product's Market Share

From New Customers entering Chili market 0.0%

From Competitors (as % of their Sales Revenues): Will be adjusted for CPSF

From Armour Star 2.50%

From Dennisons 0.50%

From Hormel 10.00%

From Libby's 1.50%

From Nalley's 1.00%

From Stagg 1.00%

From Wolf Brand 5.00%

From Other 0.50%

Consumer Price Sensitivity Factor (CPSF) 0.85

Growth rate of Competitors Sales Volume are extrapolated from historical data

Price of Our Product $2.89

Chili Revenue Forecast

Revenues/Market Share

0.00%

2.50%

5.00%

7.50%

10.00%

12.50%

15.00%

17.50%

20.00%

2002 2003 2004

Years

Mar

ket S

hare

$-

$5.00

$10.00

$15.00

$20.00

$25.00

Rev

enue

s

Total New Product Revenues Total New Product Market Share

Revenues are in US$ Million

Taking Market Share from Competitors

2002 2003 2004From Armour Star 0.15 0.36 0.64

From Dennisons 0.02 0.06 0.10 From Hormel 3.39 8.87 17.39 From Libby's 0.06 0.15 0.26

From Nalley's 0.05 0.13 0.24 From Stagg 0.04 0.11 0.21 From Wolf Brand 0.38 0.95 1.81 From Other 0.02 0.02 (0.00) Total 4.12 10.64 20.65

Where my customers come from (US$ million Revenues)

Source of Customers by percent

2002 2003 2004From Armour Star 3.7% 3.4% 3.1%

From Dennisons 0.6% 0.5% 0.5%From Hormel 82.4% 83.4% 84.2%From Libby's 1.5% 1.4% 1.3%

From Nalley's 1.2% 1.2% 1.2%From Stagg 1.1% 1.0% 1.0%From Wolf Brand 9.1% 8.9% 8.8%From Other 0.4% 0.2% 0.0%Total 100.0% 100.0% 100.0%

Where my customers come from (in % of revenues)

Market Share before & after entry

1998 1999 2000 2001 2002 2003 2004Our Product 0.0% 0.0% 0.0% 0.0% 5.0% 10.8% 17.5%Armour Star 11.0% 10.6% 10.2% 9.8% 9.3% 8.7% 8.2%Dennisons 8.7% 8.5% 8.3% 8.1% 7.9% 7.7% 7.5%Hormel 36.8% 39.1% 41.6% 44.2% 42.9% 41.0% 38.4%Libby's 6.8% 6.5% 6.3% 6.0% 5.7% 5.3% 5.0%Nalley's 6.4% 6.6% 6.8% 7.0% 7.1% 7.3% 7.4%Stagg 7.0% 6.9% 7.1% 7.3% 7.4% 7.6% 7.8%Wolf Brand 8.8% 8.6% 8.8% 9.1% 8.9% 8.7% 8.4%Others 14.6% 13.2% 11.0% 8.5% 5.8% 2.9% -0.2%Total Market Share 100% 100% 100% 100% 100% 100% 100%

Market Share including new product

Note: New Product introduced in 2001, takes 5% share in 2002

Sensitivity Analysis

Sensitivity Analysis on Product Price

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Sensitivity Analysis on CPSF

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Sensitivity Analysis on Hormel's %Switch

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Hormel's % Switch

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Sensitvity Analysis on Market Growth

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Sensitivity Analysis Results

Significant Assumptions in descending order:

• CPSF

• Product price

• Market Growth

• Not significant: degree of switching from Hormel

Soup Revenue Model

Soup Revenue Model Growth Assumptions

1. Yearly Sales Growth –based on historical data for each brand, extrapolated for three years

2. Price Growth – 2.2% annually, across all competitors and including new product

Soup Revenue Model Market Share Assumptions

1. Overall growth rate of Soup market is 0.1%; distribution of that growth is uneven, favoring convenience packaging and premium Soups.

2. Proportion of Market Share lost by competitors is based on product attributes, and on price differential between their product and ours, adjusted by “Consumer Price Sensitivity Factor”

3. Cannibalization rate is calculated as in #2 above, assumed no reverse effect (increase in canned sales) by consumers introduced to Progresso via the new product

Consumer Price Sensitivity Factor (CPSF)

• Lack of data prevented precise consumer price elasticity calculation

• Consumer Price Sensitivity Factor is a proxy for elasticity – captures concern over price difference between our product and competitors

• Base level is 1 – above 1 is more price sensitive, below 1 is less price sensitive

• CPSF for Soup is 1.5 – Soup consumers consider price to be one of the more important attributes

Soup Revenue Model AssumptionsYearly sales growth rates (revenue)

Canned 0.8%

Dried -2.0%

Chilled 17.8%

Annual increase in Soup Prices 2.2% Source: Euromonitor

Sources of Our Product's Market Share

From New Customers entering soup market 0.1%

From Competitors (as % of their Sales Revenues): Will be adjusted for CPSF

From Campbell's 1.25%

From Healthy Choice 2.0%

From Swanson's Broth 1.5%

From Maruchan 0.0%

From Lipton 1.0%

From Progresso (cannibalization) 3.5%

From Others 1.5%

Consumer Price Sensitivity Factor (CPSF) 1.50

Growth rate of Competitors Sales Volume are extrapolated from historical data

Soup Revenue Forecast

Revenues are in US$ Million

Revenues/Market Share

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1.00%

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2002 2003 2004

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Total New Market Share

Taking Market Share from Competitors

2002 2003 2004

From New Soup Consumers 4.63$ 5.81$ 7.30$ From Campbell's 10.07$ 12.22$ 14.42$ From Healthy Choice 7.38$ 8.48$ 9.63$ From Swanson's Broth 0.90$ 0.97$ 1.03$

From Maruchan -$ -$ -$ From Lipton 0.54$ 0.64$ 0.74$ From Progresso (cannibalization) 17.76$ 20.72$ 23.79$ From Others 5.09$ 5.62$ 6.12$ Total 46.37$ 54.46$ 63.04$

Where my customers come from (US$ million Revenues)

Source of Customers (by percent)

2002 2003 2004From New Soup Consumers 9.98% 10.67% 11.59%From Campbell's 21.71% 22.43% 22.87%From Healthy Choice 15.92% 15.58% 15.28%From Swanson's Broth 1.95% 1.78% 1.64%

From Maruchan 0.00% 0.00% 0.00%From Lipton 1.17% 1.18% 1.17%From Progresso (cannibalization) 38.31% 38.04% 37.74%

From Others 10.97% 10.32% 9.71%Total 100% 100% 100%

Where my customers come from (in % of revenues)

Market Share before & after entry

1998 1999 2000 2001 2002 2003 2004

Campbell's 48.5% 48.8% 49.1% 49.4% 49.4% 49.7% 49.9%Healthy Choice 6.1% 6.2% 6.3% 6.4% 6.3% 6.4% 6.5%Swanson's Broth 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Maruchan 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%Lipton 4.9% 4.8% 4.7% 4.6% 4.5% 4.4% 4.3%Progresso (canned only) 12.9% 13.1% 13.3% 13.5% 13.2% 13.4% 13.5%Progresso (New product only) 0.0% 0.0% 0.0% 0.0% 1.3% 1.5% 1.7%

Others 19.9% 19.4% 18.9% 18.4% 17.7% 17.2% 16.6%Total Market Share 100% 100% 100% 100% 100% 100% 100%

Market Share (including new product from 2001)

Progresso Expected Market Share

Years

Progresso Soup Combined Market Share

11.50%

12.00%

12.50%

13.00%

13.50%

14.00%

14.50%

15.00%

15.50%

1998 1999 2000 2001 2002 2003 2004

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Sensitivity Analysis on Product Price

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Sensitivity Analysis on CPSF

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Sensitivity Analysis on Campbells % Taken

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Campbells % Steal

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Sensitivity Analysis on Cannibalization %

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Sensitivity Analysis Results

Significant Assumptions in descending order:

• Price (highly significant up to $2.59, less significant above that price)

• CPSF

• Degree of switching from Campbell’s

• Degree of Cannibalization from Progresso canned

Conclusion

• Synergies created by GM and Pillsbury • Progresso high brand equity fits target

markets -- young, quality conscious and growing

• Products fill unserved market needs – healthy, quick hot food in a kit

• Make optimal use of GM production and distribution networks

Bibliography

• Sloan, Elizabeth. “Soups On” Food Technology, October 2000, Vol. 54, No. 10. p26.

• EuroMonitor

• S&P Market Insight

• General Mills website and Annual Report

• Nielsen Data / Panel Data

• Hormel, Campbell & ConAgra website

• U.S. Department of Commerce

• Marketing Management, Kotler, Philip.

• MRI Data 1998

• U.S. Government Census 2000

Appendices

1. Survey Questionnaire

2. Concept Development Questionnaire

3. Revenue Model

4. Product mock-ups

Documents

[ ] 1-11 Long.ppt