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E.GOWTHAM(9UTA11)S.PARVADAVARDINI(9UTA19)
J.SANGEETHA(9UTA29)M.UDAYA KUMAR(9UTA37)
R.M. DHANANJAYAN(9UTA45)
ZENITH PET FOODS
ABOUT THE CASE
Zenith pet foods is a major distributor of dog foods for
show dog kennel in US
Its purpose was to review zenith entry in to household
dog food market in Boston, Massachusetts.
It sought the help of the marketing and advertising
consulting firm “Marketing Momentum Unlimited” for
the above purpose.
NATURE OF INDUSTRY Total dog food sales was $7.0 billion per year
US dog owners population 65 million.
Dog owners spend $20 billion annually as veterinarian fees
medication for dogs and dog toys, clothing, accessories
and furniture.
There are 50 dog food manufacturers and 350 dog food
brands sold in the US, which captures 83% of dog food
sales.
According to the 2009-2010 APPA National Pet Owners Survey, basic annual expenses for dog owners in dollars include:
Surgical Vet Visits $532 Food $229 Kennel Boarding $273 Routine Vet $225 Groomer/Grooming Aids $66 Vitamins $61 Food Treats $64 Toys $40
NATURE OF INDUSTRY Dog food manufacturers spend about 2% of their sales for advertising.
Annual advertising spending for established brands is $7 to $8 million for
nationwide media promotion.
Main competitors are:
NESTLE PURINA PET CARE
IAM (P&G)
HILLS PET NUTRITION(COLGATE PALMOLIVE)
MASTER FOODS USA (MARS INC.)
DEL MONTE FOODS
PRIVATE LABELS (10% OF SUPER MARKET DOG FOOD SALES )
ECONOMIC TRENDS:Growth in unique pet foods
Growth in pet services such as grooming, boarding, pet
photography, dog walking and pet sitting.
Growing interest in pet health care.
Continued steady increase in pet insurance, with at least two
new players arriving in the market.
More pet friendly environments.
Increased competition from large buyers.
ECONOMIC TRENDS
Large companies interact with small businesses behind the scene on monetary investments and market alliances.
Industry consolidation with large buyers buying
promising, small players.Increased online sophistication from new pet related
businesses in e-commerce, design and usability.More meaningful pet related blogs.Pet adoptions continue to grow.
Boston area has 1.2% of US population (since dog and human population are highly correlated).
SUPER MARKET SALES SEGMENTATION
The household dog food industry consists of four
categories of food. These categories and the percent of total
dog food sales of each are shown below:
Super market and grocery stores dispense 36% of all
dog foods sold in United States which represents $2.5
billion in sales at manufacturers price.
ZENITH PET FOODS Zenith pet foods is a major distributor of dog foods for show dog
kennel in US.
Show circuit was originally formulated by mink rancher for
improving the coats of his minks.
Kennel owners noticed that the dog’s coats were improved
dramatically, and business was born.
Zenith executives recognized packaging of show circuit would
definitely make a transition from Kennel market to household dog
food market.
ZENITH PET FOODS Packaged in 15 ounce plastic tub with 12 tubs per case
Cost of production, freight, packaging of meal was $6.37 per
case(total variable cost)
Super market would receive a gross margin of 22% of their selling
price for dog food.
GOALS:
To introduce & promote effectively the show circuit dog food in
Boston area.
Make public aware of the brand name through packaging
CASE ISSUE
Frozen foods
Advertising & Packaging strategy
Premium price
FROZEN FOODS Show circuit has two varieties Wet food and Semi moist dog
food. Both the food varieties should be frozen. Additional cost of
$30000 for super markets is included in the budget for freezer
space.
Even though Wet foods market is untapped by other competitors,
there is a threat in future that the fraction of market potential will
tremendously go down.
There is always a tendency that the dog owners will not look in to
the frozen section.
ADVERTISING STRATEGY
The communication budgeting approach used by
zenith pet foods is competitive parity.
The other competitors of zenith are well established, so
it is in appropriate to use this kind of approach.
The introductory advertising strategy is very low
which will not entertain more customers.
PREMIUM PRICE Price charged by zenith pet foods is quite high when
compared to their competitors
Organic dog food sales grow by 64% last year from
which only 0.9% are willing to pay premium price
Premium price is targeted to upper class people.
Niche market
TARGET MARKET:INCOME MARITAL STATUS AGE
>$25000 SINGLE AND MARRIED 21-54
AMERICAN VETERINARY MEDICAL ASSOCIATION SURVEY
MARKET POTENTIAL IN VARIOUS SEGMENTATION
75% OF PARENTS WITH SCHOOL GOING CHILDREN
71% OF PARENTS WITH OLDER CHILDREN
72% OF ROOMMATES HOUSEHOLDS
73% OF YOUNG CHILDLESS COUPLES
63% OF HOUSEHOLD WITH INCOME > $25000
30% OF OLDER SINGLES
41% OF RETIRED COUPLES
POSITIONING
It has a direct implication on pricing
Three companies capture 90% of the wet food market
Two companies capture 85% of semi moist food market
Here positioning becomes an issue because we assume the same
percentage also applies for the Boston market, therefore the
opportunity of show circuit is reduced.
Zenith has to maintain a high standard and high quality and
premium price to establish a unique place in the market.
MARKET POTENTIAL: DOG
FOOD CATEGO
RY
SALES DATA
% OF DOGS
EST DOG FOOD SALES
SUPER MARKET
%
SUPER MARKET
DOG FOOD
DRY 63% = $4.410 B
1.2% $52.92 M 36% $19,051,200
WET 17% = $1.190 B
1.2% $14.28 M 36% $5,140,000
SEMI MOIST
2% = $0.140 B
1.2% $1.68 M 36% $604,800
DOG TREATS
18% = $1.260 B
1.2% $15.12 M 36% $5,443,200
TOTALS $7.0 BILLION
1.2% $84.0 M 36% $30,240,000
MARKET SEGMENTATION Extreme dog lovers.
Dog owners concerned more with nutrition than
convenience and storage.
Dog owners who are unsatisfied with other dog foods.
As 75% of dog owners consider themselves as “mom
and dad” to their animal companions and who think
dog as a member of the family.
BREAK EVEN ANALYSIS - WET FOODS
Kal kan Pedigree = $.69/13.2 oz
1 ounce= $ 0.052
15 ounce = $ 0.78
Alpo = $.50/13.2 oz
1 ounce= $ 0.03815 ounce = $ 0.80
Zenith Pet foods = $6.37 /12 tubs
1 tub(15 ounce) = $ 0.53
Bill Jac = $ 2.29 for 2 pounds
(1 pound = 16 ounce)$2.29/32= $ 0.07215 ounce= $1.07
ACTION PLAN Zenith pet foods- wet foods cost of production, freight and
packaging of the meal $6.37 per case which represents total variable
cost.
Therefore one tub costs $0.53, we suggest zenith to recommend to
sell a tub for $0.80.
Compare to the wet dog foods the moist dog food category is likely
to be unprofitable for show circuit.
A lot depends on the quality of introductory promotion program and
the amount spend.
SHOW CIRCUIT CONTRIBUTION:
PREMIUM PRICED Wet Dog Food
PREMIUM PRICEDSemi- Moist Dog Food
CASE TUB CASE TUB
Price to Consumer
$ 9.60 $ 0.80 $ 10.80 $ 0.90
Price to Retailers(22% Gross
Margin)$7.488
$0.624 $8.424 $0.702
Broker Commission
(7% Commission)
($0.524) ($ 0.044) ($ 0.590) ($ 0.049)
Zenith Unit Revenue
$ 6.964 $ 0.58 $ 7.834 $ 0.653
Production + Freight +
Packaging cost
($ 6.37) ($0.531) ($ 6.37) ($0.531)
Contribution $0.594 $0.049 $1.464 $0.122
RECOMMENDATIONS
Create awareness of a new brand by motivating trials
through coupon redemption and emotional impact on TV.
Market coverage should extend to other mass merchandisers,
pet super stores, farm/feed stores, veterinarian and internet
retailers.
RECOMMENDATIONS
MEDIA SCHEDULING AND PLACEMENT:
The program planned seems to miss a sizeable
portion of target markets with day time TV scheduling.
So the advertisements impact should be measured from
time to time.
RECOMMENDATIONS
Trade program: a major issue here is whether the
proposed program will gain distribution.
The problem is - The broker must deal with frozen
food buyers and not pet food buyers, therefore
education is necessary.
RECOMMENDATIONSCoupon program: the consultants estimated that 1 in
10 coupons distributed would be redeemed with each
coupon valued at $0.10. On an average coupon
redemption will cost $0.01 per tub (or) $0.12 per case,
therefore the new contribution per case will be $0.12
less. This will increase the break even volume.
RECOMMENDATIONS Advertising spending level: Neither product pioneers a “new
category” frozen dog food therefore it would seem that show circuit is
under spending at $400,000 level for the introduction which further
places the market entry in danger.
The $600,000 spending level seems more appropriate. However, the
analysis of the marketing programs economics indicates this amount is
likely to be unprofitable.
RECOMMENDATIONS
They should provide dry foods and dog treats to compete
with the other competitors
The packaging quantity should be reduced and sold at
various quantity levels.
The best media to advertise about the product should be
found and the advertisement should have more emotional
impact on customers.
Trial packs should be introduced as introductory offers
SWOT ANALYSIS
STRENGTHIt is a highly nutritious and quality ingredient dog food
There is great potential to grow in this field.
Most pet owners want what is good for their pets, and
this includes pet food that is healthy for their dog.
Environmental trends.
Niche marketing.
WEAKNESSDog owners shopping for dog food in the supermarket
are not prone to look in the frozen section (awareness).
Competition in market.
Pricing
OPPORTUNITIESThe household dog food industry is growing and will
continue to grow
Potential to be the first to tap into frozen dog food
product in this region with possible expansion to other
regions.
Opportunity to invest in organic dog food which has
grown 64%
OPPORTUNITIESDistributing in grocery stores is ideal since it is the largest
channel for dog food .
The campaign will focus on national television reaching a
broad audience while still focusing on local media such as
newspapers.
The campaign will focus on the product being a premium-
priced, high-quality product highlighting the benefit of the
luxurious coat your pet will have.
THREATSIntroducing a new dog food in a new form.
Category of dog food.
Lack of appeal of frozen dog food.