Market Share and Competitor Analysis of Sonoco

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  1. 1. Market Share and Competitor Analysis SABIHA AFRIN
  2. 2. Company Background Founded in Hartsville, South Carolina, on May 10, 1899 Diversified provider of consumer packaging, industrial products, protective solutions, display and other packaging services Products sold in 85 countries Aims to be the global leader in providing Innovative Packaging Solutions (IPS) Promises to bring more to packaging than just the package
  3. 3. Market Definition Paper : Most-used material in packaging Plastic: A much newer packaging material than paper, metal, or glass Metal: Lost some share of packaging to plastics Glass: This also lost some share of packaging to plastics Flexible: An innovative packaging solution Potential Substitute Packaging Value Added Packaging: Innovating packaging solutions (IPS) True Blue(TM) line of sustainable packaging solutions Sonoco Recycling SONOCO
  4. 4. Packaging Market Definition 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 0 1 2 3 4 5 6 Unsustainable Sustainable Paper Plastic Metal Glass Flexible
  5. 5. Growth Potential and Sonoco Packaging is a Mature Market (Hopkins, 2009) Specific trends and drivers for the growth of this market includes world economy, technology, government regulation, consumer behavior, etc. (Hopkins,2009) Global packaging market to reach $975 billion by 2018 (Smitters Pira) Global packaging sales are projected to rise by 3% in real terms to $797 billion in 2013 Sonoco streamlined the organization to focus on global growth. Introduced Innovative Packaging Solutions (IPS) and Sonoco Recycling to embrace sustainability in business and environment.
  6. 6. Sonoco Crown Industry Ratio Performance Gap with Competitor Performance Gap with the Industry Comments Key figure Annual Sales (in millions) 2.9 8.6 -7.69 -5.7 10.59 Better than the industry. Worse than competitor. Profit Margins Gross Profit Margin 18.18 15.14 24.52 3.04 -6.34 Worse off than the industry. Better off than competitor. Pre-tax Profit Margin 6.81 6.19 3.85 0.62 2.96 Better off than both the industry and the competitor. Net Profit Margin 4.88 4.68 4.26 0.2 0.62 Better off than both the industry and the competitor. Investment Returns Return on Equity 14.51 515.85 15.99 -501.34 -1.48 Investment is not paying off as well as the industry or the competitor. Return on Assets 5.91 4.74 3.91 1.17 2 Assets are being used more effectively than the industry and the competitor. Management Efficiency Receivables Turnover 0.005 0.007 -0.002 Not collecting receivables as well as the competitor. Inventory Turnover 9.67 6.03 3.64 Moving industry more frequently than the competitor. Effective Tax Rate 0.44 0.46 -0.02 Better tax management practices than the competitor. Revenue per Employee 12.03 19.86 16.26 -7.83 -4.23 Not staffed properly or as efficient as the industry and the competitor. Financial Condition Current Ratio 1.58 1.3 1.57 0.28 0.01 Better than the industry and the competitor. Debt-to-Equity 0.55 19.26 1.42 -18.71 -0.87 Worse off than the industry and the competitor. Interest Coverage 7.07 3.29 4.02 3.78 3.05 Possibly has more debt than the industry and the competitor, however, has the ability to pay obligations. Growth Rates 5-year Revenue growth 3.3 0.83 15.93 2.47 -12.63 Growth is not as good compared to the industry, but better than the competitor.
  7. 7. Competitor Ratio Analysis Annual Sales: Depending on the size, Sonoco's sales revenue is better than the industry, however not as good as the competitor. Gross Profit Margin: Sonoco is spending less to produce goods than its competitor, however it is still not up to the mark with the industry. Net Profit Margin: Sonoco's Net Profit Margin is comparable to the industry as well as its competitor. However, Sonoco has a better grasp over its expenses and has a more effective tax strategies than the industry and its competitor. Return on Equity: Sonoco's investment is not paying off as well as the industry or the competitor.
  8. 8. Ratio Analysis Return on Assets: Sonoco's assets are being used more effectively than the industry and the competitor. Effective Tax Rate: Sonoco has a better tax management practices than the competitor. Current Ratio: Sonoco has more short-term cash than short-term debt. It is not where is should be, but it is still better than the industry and the competitor. 5-year Revenue growth: Sonoco's growth is not as good compared to the industry, but it is better than the competitor.
  9. 9. Ratio Analysis and Recommendations Investment returns: Sonoco is able to utilize its assets effectively, however it is not meeting the investment returns that it should. Financial: As seen in the analysis, Sonoco has a higher current ratio and a lower debt-to-equity ratio than its competitor. Depending on various factors, it can be indicative that Sonocos competitor is funding more projects to expand its business. Management Efficiency: Sonocos management is more efficient than the industry and the competitor in most aspects. However, Sonoco should look into better staffs to increase efficiency up to the industry standards to remain competitive.
  10. 10. Sonoco: Competitive Advantage Differentiation Advantage: Valuable customer relationship Latest barrier technology (IPS) Consumer-friendly opening system Highly Profitable loyal customer base 360-degree Customized Solutions Multiple packaging solutions Premium quality packaging Sustainable Advantage: Long-term profitability and viability Building positive brand images Active Member of Sustainable Packaging Coalition Rainforest Alliances Smart Wood Chain-of-Custody certification Harvested wood products from well-managed forests In-house Sustainability Council Implementing Sonoco Recycling
  11. 11. Key Aspects Sustainability: Cost and Profitability Maximizing efficiencies in production Conserving recourses and reducing sources High-cost to maintain Controlling costs by reusing and renewing raw materials Long-term profitability Cost saving scope for the investors Sonoco: Promoting Sustainability Sustainable advantage: Competitive distinction in the marketplace Ensuring positive economic growth and profitability Re-envisioning Sonoco: 45.2% total return in 2013 Educating and persuading customers about sustainability
  12. 12. Key Aspects Sonoco: Innovation, and Globalization Introduced IPS (Innovative packaging solutions) to adopt latest technology Operates in 85 countries 41 industrial manufacturing facilities and 6 paper mills in Europe International sales and income growth in 2013 Innovation, and Globalization: Changing supply chains Customers shifting their manufacturing facilities Overseas Competition High-cost to invest in latest technology High-cost of operation and management
  13. 13. Conclusion Overall, Sonoco is doing better than the industry, but not as good as the competitors. The management should take necessary steps in order to hold the market share. Promoting sustainable advantages can be profitable for the company. Creating performance targets and management incentives can be he helpful for the company. To remain competitive, it is essential for Sonoco to focus on maximizing productivity of its business.