som 498: strategic management
DESCRIPTION
-Act in the role as consultant for Reed Supermarket-Demonstrate the ability to offer creative solutions based on the case scenario and to justify these solutions with rigorous analysis.-TRANSCRIPT
Reed Supermarket
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Problem• Sale is decreasing
• Threats from competitors are rising
Reasons• Wrong strategy
Reed Supermarket
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Goal14% => 16% market share
Solution• Convenience
• High quality products
• Reinforce the brand image
• Promotion/marketing strategy
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• Supermarket
• Limited Selection
• Whole Food
Upper End => High Threat
• Warehouse Clubs
• Supercenters
• Dollars Stores
Lower End => Low Threat
Reed’s Competitors
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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
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1.51.8 1.8
2008 2009 2010
Quality Index
-2.0
-2.5
-2.1
2008 2009 2010
Industry average
Price Satisfaction
Index
Marketing Strategy16% of Market Share
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Market Segmentation
Product Differentiation
Product Positioning
Brand Reinforcement
Market Segmentation
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Primary focus:
• High-end customers
• Healthy concern consumers
Product Differentiation
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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
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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%
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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 99
Total 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
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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
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Service offering:
• Seasonal gifts• Food samples• Store events
Short term
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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
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Philanthropy• Community service
Long term
Conclusion
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• Revenue growth
• Differentiation strategy
• Marketing campaign
• Branding as
• High quality
• Convenience
• Customer Satisfaction/Choice
Thank You!
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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
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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
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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% = $54.45 Millions lost on Net SalesSOM 498 - Spring 2012 22
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Profits Increase($, Millions)
Estimated Sales
Total Sales 759
Operating Expenses -743.82
Profit Margin (2%) 15.18
Marketing Expense -1
Net Profits Increase 14.18
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Adding Prepared Foods($, Millions)
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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
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Ralcorp
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2010 2011
Date
http://gasbuddy.com/gb_retail_price_chart.aspx
Private Brand Foods Have Had Impressive
Long-Term Growth Rates
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Private-Brand Food Opportunity
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Ralcorp Categories
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Financial Overview
Increase Market Share
http://www.reedsinc.com/ir/pdfs/12-711%20REEDS%20Dec%202011%20Investor%20Presentation.pdf
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2010 2011
Date
Gas Price in Columbus, OH
http://gasbuddy.com/gb_retail_price_chart.aspx SOM 498 - Spring 2012 30
Columbus market
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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
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Quality Index
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8.38.4 8.4
6.86.6 6.6
5.2
5.7
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
2008 2009 2010
Qu
alit
y
Year(s)
Reed
Average
Discount Store
Price Index
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4.2 4.3 4.5
6.2
6.8 6.6
7.7 7.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2008 2009 2010
Pri
ce
Year
Reed
Average
Discount store
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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
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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
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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