deloitte case competition

Group 10

Friday, September 12, 2014

Kenny Hamilton, Adriel Lubarsky, Alex Piasecki, Sarah Spurr, Kelcie Wildeman

Bringing Simple Mills from the Natural Market to the Mainstream Market

Appendix Group 10Simple Mills2

How Simple Mills can increase their average store revenue by 2018?

Rebrand Simple Mills to appeal to a younger

demographic

Expand Simple Mills product line to include

childhood favorites and become a family staple

Implement a new promotional effort

through worthy cause marketing

Implementing this new marketing strategy will provide a 38% ROI at the end of 2018

Simple Mills’ target market is growing, but they need to implement a new marketing strategy in order to expand

Background Strategy Implementation Group 10Simple Mills3

2011

2012

2013

2014

(for

e)

2015

(for

e)

2016

(for

e)

2017

(for

e)

2018

(for

e)0

5000

10000

15000

20000

25000

Simple Mills Market SizeTotal Market Size

Ma

rke

t S

ize

($

mm

)Simple Mills target market is growing and an increasing number of consumers are purchasing gluten-free products

Gluten-free Foods and Beverage & Simple Mills’ Market Size is Growing

Projected market size for gluten free baked products, cookies, snacks, and desserts in 2018!

$6.2B

53%

31%

Of consumers avoiding gluten are trying to lose weight

Of gluten-avoiders do so because they believe these foods are

healthier. They chose gluten-free as a lifestyle option

Consumers in this market are buying gluten-free products for more than just intolerance issues

45%

Of those who do not currently eat gluten-free foods saying they are interested in trying

them

Source: (1) DataMonitor Report “Consumer and Innovation Trends in Bread and Bakery” (2) , Foodmanufacturing.com “Consumer Trends Gluten-Free Market


Gluten-free now has a more mainstream customer base, Simple Mills needs to rebrand to appeal to this group

Consumers are turning to gluten-free products for medical and non-medical reasons (weight loss, digestive health and healthy lifestyle)

Develop products that offer additional secondary benefits to the consumer to widen appeal

Promote gluten-free products as part of a healthy lifestyle regimen to enter the mainstream

Appeal to a wider customer base (not just the gluten intolerant) to bring products mainstream

Source: (1) DataMonitor Report “Consumer and Innovation Trends in Bread and Bakery”

Market Trend

Rebrand Simple Mills to appeal to a younger demographic

Expand Simple Mills product line to include childhood favorites to become a family staple

Implement a new promotional effort through worthy cause marketing

Strategy

Simple Mills offers products that not only satisfies the gluten-free demand, but offers other health benefits as well








1 2 3

Strategy:


Source: (1) Packaging Digest “The Undeniable Influence of Kids” (2) Institute of Educational Services “Children as Consumers: Advertising and Marketing”

(3) Kushman, Rick “The Barefoot Spirit”

We can increase sales through a rebranded Simple Mills look that appeals to children and households alike!

Simply Youthful

Simply: Keep the original mass appeal

• Continue to appeal to your original customer

• Strengthen focus on high-quality, natural ingredients

• Experts at Packaging Digest recommend clean graphics and use of white space on packaging1

‒ Stands out from the chaos of a grocery aisle

Break

fast

Cer

eal

Snack

Foo

ds

Candy

Clothin

g

Sham

poo

House

hold

clean

er0

0.5

1

1.5

2

2.5

3

3.5

4

0%

20%

40%

60%

80%

100%

Fre

quen

cy o

f R

eque

sts

(4 =

oft

en,

1 =

nev

er)

Per

cent

age

of M

othe

r’s Y

ield

ing

Children have the most influence over mothers with food related decisions

2 to 14 year olds have influence over $1.2 trillion per year in household purchasing2

Kids influence 80% of household purchases1

Youthful: Attract the children’s market

• Attention-grabbing product features are key to attracting children’s interest in commercial activity2

‒ Implement brighter colors, convenience packaging, and high print quality for kids.

• Merging business and values is a dynamic and youthful way to reach customers3

‒ Initiate worthy cause marketing to build brand recognition and loyalty through experiences!








1 2 3

Strategy:


Introducing new product lines allows Simple Mills to become a family staple at the dining room table!

Waffle Mix

• $4.4 Billion in frozen pizza sales grocery in 2013

• 34% of pizza shoppers willing to pay more for gourmet ingredients

• 85% of Americans enjoywaffles/pancakes for breakfast.

• Children influence breakfast food decisions in 97% of American families.

Pizza Dough Mix

Source: (1) The Barefoot Spirit by Michael Houlihan & Bonnie Harvey (2) Bulldog Reporter: Branding the Barefoot Way

*based on an average of 16 products sold per month for 14 month period in current sales data

$4.62 per bag

$1034.88 per store

$51,700 for 50 stores$258,500 for 250 stores$5,170,000 for 5000 stores

ProfitsProducts








1 2 3

Strategy:


Implement a new, youthful promotional effort through worthy cause marketing

Benefits of worthy cause

marketing

Positive brand

associations

Taste tests for large customer

base

Free exposure to variety

of consumers

Opportunity to receive direct

market research

Ethos brand

association

Worthy Cause Marketing involves reaching the consumer in a memorable way, through partnerships with socially impactful, meaningful causes.

Autism Events

• AmeriCarna (North Carolina car show

benefiting Autism)

• 11th Annual Walk & 5k Run for Autism

(Schenectady, NY, near Wegmans)

• San Diego Chop Talk (Event about healthy

eating for Autism)

• Best Buddies: Sponsorship at conferences

around the country

Of consumers in the U.S said they would be willing to reward companies that give back to society by paying more for their goods and services

44%

Source: (1) The Barefoot Spirit by Michael Houlihan & Bonnie Harvey (2) Nielsen 2013 Consumers Who Care Study

Worthy Cause Marketing

Effectiveness


Worthy cause marketing is simple and was effective as the sole type of promotion for Barefoot Wines

Year 1

Year 3

Year 5

Year 7

Year 9

Year 1

1

Year 1

3

Year 1

5

Year 1

7

Year 1

90

4

8

12

16

20

24

0

100

200

300

400

500

600

Sales (USD) Sales (# of Cases)

Sa

les

(M

illio

ns

US

D)

Sa

les

(1

00

0s

of

ca

se

s)

Barefoot Wine saw increasing sales over the course of 19 years using only worthy cause marketing

Source: (1) The Barefoot Spirit by Michael Houlihan & Bonnie Harvey (2) Bulldog Reporter: Branding the Barefoot Way

How to harness the power of worthy cause marketing to build your own brand

12

3

546

Find a worthy cause that resonates with you or your product.

Start small and stay loyal.

Shine a light on your partners' causes.

Keep your retailers in the loop (and in your advertising!).

Identify nonprofits that champion your cause.

Donate products in exchange for recognition

and brand visibility.

Started worthy cause marketing


Simple Mills should implement these three brand strategy changes over the next four years

Year 1 2 3 4 5

9/1/2014 2015 2016 2017 2018

Rebranding

• Research most effective branding

• Work with design team

• Packaging production

Expanding Product Line

• Research and develop new products

• Product launch

Engaging in New W.C. Marketing

• Identify retail partners

• Host events

• Alternative promotions

Store Expansion 500 1200 2500 5000 5000

Source: Team Analysis



Source: Team Analysis


Risks inherent to both the strategy of targeting children, as well as with the health food industry at large

Over-emphasis on children as target market can lower broader brand uptake

Sticking to the Simply Youthful mission ensures that the product is exciting for children, approachable by adults and a family-targeted solution

Risk Mitigation

This strategy may not be effective enough for wide spread brand

Creating brand loyalty through consistent quality and worthy cause marketing will keep engagement high

The emphasis of health foods, especially gluten, may just be a fad

Creating brand loyalty through consistent quality and worthy cause marketing will keep engagement notwithstanding trends

The high costs of health foods- and even higher cost of Simple Mills- can turn people off from the category, and the brand

Promotion emphasizing high quality and superior taste, which is a proven positive based on Amazon customer reviews

Targeting Children

Health Food Industry


So, how can Simple Mills increase their average store revenue by 2018?

Rebrand Simple Mills to appeal to a younger

demographic

Expand Simple Mills product line to include childhood favorites to

become a family staple

Implement a new promotional effort

through worthy cause marketing


Simple Mills’ target market is growing, but they need to implement a new marketing strategy in order to expand


Thank you for your time! Happy baking!

Market Information1. Information on Consumers in Gluten Free Market2. Market Size Forecast3. Popularity of Gluten-Free Products4. Innovative Trend in the Breads5. Opportunities in Baking Trends

Gluten-Free Foods6. Why Do We Eat Gluten-Free Foods?7. Frequency of Children’s Attempts to Influence Purchasing Decisions8. Children’s Influence on PurchasesNew Product Profitability

Simple Mills Information9. Additional Product Ideas for Future Launch10. Current Store Locations 11. Current Store Carrier Demographic12. Effectiveness of Marketing Channels13. Grocer Expansion Plan14. Simple Mills Product Information15. New Packaging Cost Analysis

Real-Life Supplements15. Barefoot Wine Sales16. Barefoot Wines Strategy17. Simple Mills in the Chapel Hill Whole Foods18. Justification for Waffle/Pizza Mix Profitability19. Financial Analysis

If you would like any more information concerning the topics above, we’d be happy to share it with you!


Consumers in this market are buying gluten-free products for more than just intolerance issues

72%

28%

Eating gluten-free for reasons other than intol-

erance

Could potentially be gluten intolerant

Not diagnosed but sure of gluten intolerance

In the process of testing for gluten intolerance

36%

17%

11%

9%

Diagnosed with celiac disease

Not diagnosed with celiac disease


Market Size ForecastSimple Mills Market

Total Market Size

2011 2205 7,6552012 2588 8,9852013 (est) 3037 10,5442014 (fore) 3421 11,8802015 (fore) 3782 13,1332016 (fore) 4189 14,5442017 (fore) 5097 17,6972018 (fore) 6202 21,533

Simple Mills Market Size

2011 2012 2013 2014 2015 2016 2017 2018Breads 19.5 20.5 23.9 23.9 23.9 23.9 23.9 23.9Desserts 9.3 8.3 7.5 7.5 7.5 7.5 7.5 7.5Total Percentage 0.288 0.288 0.314 0.314 0.314 0.314 0.314 0.314

2017 – 2018 ForecastFood intolerances: gluten-free and free-from food sales in the U.S. 2006-2020Gluten-free and free-from food retail sales in the United States from 2006 to 2020 (in billion U.S. dollars)2006 0.90 2011* 3.80 2015* 10.50 2020* 23.90

Min

tel R

ep

ort

Assumes maintain market share (growth in desserts is more likely)

*Inflation adjusted


The popularity of gluten-free is rising

An increasing number of non-celiacs will turn to gluten-free products due to their perceived health benefits (no bloating, aids weight loss, better for you)

Source: DataMonitor Report: Consumer and Innovation Trends in Bread and Bakery 2014


Gluten Free is an innovative trend in the Breads and Baking market



Opportunities that come with Bakery trends



Reasons for Eating Gluten-Free Foods


Statistics about children’s influence on purchasing decisions

According to the 2008 YTV Kids and Tweens Report, kids influence:• Breakfast choices (97% of the time) and lunch choices (95% of the

time).• Where to go for casual family meals (98% of the time) (with 34% of

kids always having a say on the choice of casual restaurant).• Clothing purchases (95% of the time).• Software purchases (76% of the time) and computer purchases (60%

of the time).• Family entertainment choices (98% of the time) and family trips and

excursions (94% of the time). [1]

http://mediasmarts.ca/marketing-consumerism/how-marketers-target-kids


Frequency of Children’s Attempts to Influence Purchases and % of Mothers’ “Usually” Yielding

Frequency of Requests

Percentage of yielding

Breakfast Cereal 1.59 87%

Snack Foods 1.8 63%

Candy 1.93 42%

Clothing 2.52 37%

Shampoo 3.28 16%

Household cleaner 3.76 2%

1= often 4 = never


Justification for Waffle and Pizza Dough Profitability Revenue Sale Price (per

bag)$8.99

less Expenses Total Cost (per bag)

($4.57)

200 grams almond flour ($3.66)

½ tsp baking soda ($0.25)

1 tsp cinnamon ($0.16)

2 tbsp coconut flour ($0.34)

½ tsp nutmeg ($0.14)

½ tsp celtic sea salt ($0.02)

= Profit $4.42*Prices based on net weight cost of items online for retail pricing (or, if available, wholesale pricing)*Prices based on current 266g package size

1 2 3 4 5 6 7 8 9 10 11 12 13 140

4

8

12

16

20

68 9

11 1214

17 18 18 19 18 19 18 18

Average Store Sales: (Units Sold / SKU / Store / Month) • Average monthly sale across 14

month period is 15.92 units (16).

• Store counts (50/250/5000) represent limited release, current capacity, and 4 year store goal counts

$4.62 per bag

$1034.88 per store*

$51,700 for 50 stores$258,500 for 250 stores$5,170,000 for 5000 stores


Additional Simple Mills product additions to consider introducing to families and kids in the market

Cinnamon Roll Mix

Biscuit Dough Mix

Dinner Roll Mix

Whole Wheat Bread Mix

Pita Bread Dough Mix

Tortilla Mix


Barefoot Wine Sales

Operating Year

Year Sales (cases) Approx. Sales (USD)

1 1986 18,000 648,000

3 1988 60,000 2,160,000

5 1990 80,000 2,880,000

7 1992 95,000 3,420,000

9 1994 120,000 4,320,000

11 1996 160,000 5,760,000

13 1998 200,000 7,200,000

15 2000 235,000 8,460,000

17 2002 350,000 12,600,000

19 2004 570,000 20,520,000

20 2005 Bought by EJ Gallo wines


• More colorful packaging• Interesting, simple logo

• All brands are the same general colors (dark/white)

• Complicated, non “eye-catching” logo/design

Barefoot Wines strategy: Comparing and contrasting in-store presentations in CVS Pharmacy on Franklin Street


Chapel Hill Whole Foods: Example of current perception from customer POV of Simple Mills in-store


Current store location at Year 0


Current store carrier demographic at Year 0

Chain Number of stores

Price Point for Simple Mills mixes

Average Units sold / SKU / month / store

Earth Fare 32 $ 8.99 28

Independent 38 $ 8.99 10

Jimbo's 5 $ 9.49 10

Natural Grocers 28 $ 7.99 14

New Seasons 13 $ 9.99 10

Wegmans 75 $ 7.99 10

Whole Foods 84 $ 8.99 30

Grand Total 275 $ 8.67* 18.6*


Effectiveness of Marketing channels for Simple Mills

PRINT ADVERTISING

Immediate ROI: <3%

CONSUMER EVENTS & TRADESHOWS

Immediate ROI: 7%

PUBLIC RELATIONS

Immediate ROI: >1000%

SOCIAL MEDIA & ONLINE ADS

Immediate ROI: 30%

32

Long-term Value: Uncertain


Grocer expansion plan 2014 2015 2016 2017-2018

NA

TU

RA

LM

AIN

ST

RE

AM

PR

EM

IUM

500 1,200 2,500 5,000

Sept 2014: 275 stores


Nutrition facts, pricing, and value prop. of Simple Mills compared to competitors in the gluten-free market

Flour GI* 1 90 90Sweetener GI* 36 65 65

Calories 130 140 100Cholesterol 0g 0g 0gTotal Carb 18g 33g 24gSugars 6g 17g 7gProtein 4g 1g 1gVitamin A 140% 0% 0%Vitamin E 40% 0% 0%

Simple Mills Competitor A Competitor B

Competitor Nutrition Facts Comparison

Table Sugar Tapioca Flour Potato Flour Rice Flour Corn Flour

Guar gum Sodium acid

pyrophosphate Monocalcium

phosphate

Soy Dairy Corn Rice

All Simple Mills products only contain:

Low Glycemic Index

Flours

Completely Natural

IngredientsAllergy Friendly Ingredients

Almond Flour Almonds Coconut Nectar Arrowroot

Powder

Almost all gluten free baked goods contain:

High Glycemic Index Flours

Preservatives and Unnatural Ingredients

Other Allergens

Competitor Pricing Comparison

Simple MillsPrice:$8.99/9.4ozPrice/Ounce: $.95Retail Locations: Whole Foods, Natural Grocers, Amazon, and more

Competitor APrice:$5.99/8ozPrice/Ounce: $.75Retail Locations: Memphis Whole Foods, Amazon

Competitor BPrice :$5.99/14ozPrice/Ounce: $. 43Retail Locations: Unknown

Almond FlourPrice :$11.99/8ozPrice/Ounce: $1.50Retail Locations: Whole Foods (top 5 bestselling product)


New Kid-Friendly Packaging Cost Analysis is explained through the following metrics:

61 million kids in USA under 14 years old* % stores carrying Simple Mills (# of SM stores/37,459)= # of kids within reach of stores carrying Simple Mills(# of kids within reach of SM stores)/(2.01 kids per home)= # homes with kids under 14 in reach of stores carrying Simple Mills* [(56% women buy gluten free)(13% moms of kids under 14)]= # of moms of kids under 14 years old who buy gluten free and are in reach of our stores*80% yield rate of mom’s whose household purchases are influenced by their kids= # of moms influenced by kids in reach of our stores*90% to account for brand loyalty to competitors= # of moms who are not loyal to competitive brands and might be influences to buy SM*40% of kids who will be drawn to Simple Mills= # of new sales


Financial Analysis

deloitte case competition

Documents

gluten free products

gluten free baked products

glutenfree diets

weight of gluten

simple mills products

gluten intolerant

termed glutenavoiders

target market