Brannigan Foods Case Analysis

  

BRANNIGAN FOODS:

STRATEGIC MARKETING PLAN

Mitchell Lunde

University of Maryland University College

MRKT 495

21/10/2013

Table of Contents

Executive Summary

Company/Product Analysis

Problem Statement and Underlying Symptoms

Bert Clark faces many challenges as vice-president and general manager of Brannigan Foods’ Soup
Division, but nothing could have prepared him for what he recently read. A critical analysis of the
entire soup industry indicated the situation as dismal and with no end in sight. Because of the
increased health concerns amongst American consumers and the perception of most soups as being
high in sodium and full of preservatives, many consumers have either stopped buying soup entirely,
or have moved to fresher, healthier soups. Not only is the report slightly negative, but the
company’s own market share, sales, and profitability has been slipping for the past three
consecutive years indicating only one thing: new strategies had to be implemented in order to
subside the downward spiral.

The people he depended most on in his division had all provided their own careful analysis and
recommendations, but despite their efforts, there was no comprehensive solution amongst any of
the recommendations. There was however one point which Clark felt was his division’s most
pressing need: in order for the company to grow, it had to target products to a younger audience
despite the fact older segments consumed a majority of condensed and ready to eat (RTE) soups. In
order to acquire this group however, the correct marketing strategies had to be assessed and
implemented, and fast.

Marketing objectives for Brannigan include the following:

* Increase profits by 3 percent every year for the next 5 years

* Develop 2 new products internally over the next 5 years

* Increase shelf space by 1 percent over the next 5 years

* Increase R&D budget from $14 million to $19million

Supporting Evidence

Taken from the report, health concerns were clearest amongst those who were part of the baby
boomer generation, or those born between 1946 and 1964 (Quelch & Kindley, 2013). Members of
this group have enjoyed long lives and the first wave are entering retirement. They are aware of
their health needs and know there are many healthy soup options available. Despite the increased
longevity in this developed and diverse segment, it is in Brannigan’s best long- term interests to find
a way to target younger segments. The product’s perceived health benefits is of little concern to
young consumers. Instead, this group is more concerned about price and convenience. Increasing
R&D spending would help fuel new product development and help Brannigan respond to changes in
consumer preferences more quickly. To increase profits however, the company had a couple of
options which might backfire if consumers responded negatively. One was to continue increasing the
price of certain lines of soup for the following years. Another was to increase the A&P budget by $20
million. This option of course would eat into earnings if sales did not increase.

Current Target Market

With over 90 percent of all respondents in DeGennaro’s report saying that soup is a good thing to
have in the pantry (Quelch & Kindley, 2013), Brannigan is in an excellent position to not only
continue to target its core segment, but also capture other attractive consumer segments that have
evaded the company thus far. Currently, senior citizens are the largest consumers of soup and
happen to be the most brand loyal, according to the report. This segment represented over 40
percent of the adult population totaling almost 80 million people according to report by Rajesh Iyer
and Timothy Reisenwitz (2010). Many are entering retirement age and this presents a problem for
Brannigan as it must also target younger generations of people with new products which are
designed to fit their needs.

Attractive Consumer Segment

Young professional mothers who often had little time to prepare a home cooked meal usually looked
for products which provided quick solutions to their dilemma; soup would serve as an excellent
solution. Another cohort group who was also a member of the household, millenials, consumed 2.1
cans of soup per week with 48 percent eating dry soup and 78 percent eating wet soup (Quelch &
Kindley, 2013). This market segment also considered soup as a snack with consumption remaining
steady year round rather than seasonal (2013).

Current Product Positioning Strategy

With a wide array of products that catered to multiple consumer needs, they have been able to
maintain a leading position in the market of shelf-stable soups (Quelch & Kindley, 2013), but
consumer tastes were constantly changing, and in order for the company to maintain its competitive
advantage, it had to continue to offer new products. The company had been able to maintain profits
from falling as much as sales due to annual price increases. Its condensed and ready-to-eat soups
provided 78 percent of the division’s sales along with 86 percent of its profits (Quelch & Kindley,
2013).The recently acquired Annabelle’s Fast n Simple soup-in-a-pouch was slightly higher priced
compared to most competitors, but the product was positioned as a gourmet product intended to
capture younger market segments with its exciting array of flavors and better quality ingredients.
The other product introduced with little traction several years ago, Brannigan’s “Heart Healthy” low-
sodium line, had now become a rewarding product for the company, bringing in $320 million in sales
for the year 2011 (Quelch & Kindley, 2013).

Exhibit 1 Brannigan’s Product Value Proposition

More for more

More

Price

Benefits

Fast & Simple Meal-in-a-pouch | | Heart Healthy |

| Brannigan core Soups (wet & condensed) | Ready-to-eat soups |

Less

| | Less for least

Environmental Analysis

Internal Strengths and Weaknesses

According to Julian DeGennaro’s summary report based on the “State of the Soup Industry,” those
who are part of the baby boomer generation are considered the most brand loyal out of all other
market segments. This is a plus for Brannigan Foods as this group of consumers represents a large
portion of the American adult population. Not only is this group brand loyal, but they are also heavy
consumers of soup who maintain a good stock in the pantry year round.

Brannigan’s maintains 40 percent of the $6.4 billion soup market, with a 16 percent lead in front of
its closest competitor, General Mills, followed by an astounding 33 percent ahead of Unilever.
Another strength for the company is that Clark’s division was responsible for more than half of the
U.S. division’s total profits (Quelch & Kindley, 2013). These strengths served as an advantage over
competitors, but there were internal weaknesses which were a cause for concern.

For the past three years, not only had the soup industry been in decline, but the division’s
profitability, sales and market share had fallen as well (Quelch & Kindley, 2013). Clark estimated net
sales as declining $60 million annually for the next two consecutive years. Soup consumption in
Brannigan’s primary product line (RTE, wet and condensed wet soup) was in decline.

External Opportunities and Threats

As canned soup continues to remain a staple in the American diet, Brannigan’s should continue to
with this tradition by offering fast, simple meals, ready to be served within minutes for an entire
family. Although soup is fast and easy, it is most often high in sodium and loaded with preservatives,
with important consumer segments demanding healthier options to the already popular soups. Not
only are they craving healthy soups, but also more dry-mix soups and pre-made deli soups with
exotic flavors. Other opportunities presented by Clark’s four leaders included the following:

* Increase the advertising and promotion budget

* Offer promotional deals for hot new flavors (Quelch & Kindley, 2013)

* Acquire smaller competitors who offer healthier, more popular flavors

* Increase PP&E investments

* Introducing new products

A shift in consumer tastes is the greatest external threat the company faces. Although the company
offers healthier soup options, sales indicated that these consumers were purchasing other products.
Another concern for the company is the possibility of newly acquired brands cannibalizing sales of
core Brannigan products. Retailers were also developing private-label brands of soup which not only
took away valuable shelf space, but also chipped away at sales.

Industry Analysis

Brannigan Foods is under constant pressure from many external forces within the industry. Some
forces are stronger and more demanding than others, but all must be dealt with in some way in
order to remain competitive. Utilizing Michael Porter’s Five Forces Analysis, the following
information provides an analysis of all the threats currently faced by Brannigan Foods.

1. Rivalry and threat of new entrants

The soup market is dominated by many competing brands, some are large and well known while
others are small. There is also the threat of retailers’ private label soups becoming an increasing
competitive force. According to Census Bureau data, the concentration ratio, CR, for the 4 largest
food retailers is relatively high indicating that this industry is highly concentrated with very few
constituting a large portion of the market. The three largest competitors to Brannigan includes
General Mills, Inc., Unilever, and H.J. Heinz Company, according to business analysis company
Hoovers, Inc. (Hoovers.com, 2013). Brannigan Foods maintains roughly a 40 percent share of the
market, and is a highly developed brand. New entrants to the market is unlikely due to the high costs
of production is low margins due to how highly competitive the industry is as a whole.

2. Threat of Substitutes

A consumer can switch brands relatively easily and at little to no cost. Although Brannigan has tried
to stay ahead of competitors by introducing new lines of products, so have its competitors.
Consumer tastes are driven by culture and age, so not all soups will encompass all segments, making
the threat of consumers substituting Brannigan products for a competitors highly likely. Brannigan
has incrementally increased prices, but is now facing consumer pushback (Quelch & Kindley, 2013).

3. Buyer Power

There are many consumers and customers of soup, making their power less of a threat than that of
rivals. Soup is enjoyed by many market segments with 90 percent indicating that it’s a good item to
stock up on (Quelch & Kindley, 2013). No individual segment has significant power over any member
of the soup industry.

4. Supplier Power

Although Brannigan faces increased competition from other branded products, it is the growing
resilience with private label brands being offered by retailers that pose a significant threat. Although
soup is a commodity product, retailers remain reluctant to offer more shelf space to Brannigan, or
any other competitor for that matter. Instead, retailers have pushed their own private label
products. Despite this, retailers don’t maintain as strong an influence as they might do in other
industries.

Financial Analysis

Soup consumption in the U.S. has been on the decline for the past three years, as indicated in the
summary report by DeGennaro (Quelch & Kindley, 2013). This slump in sales has affected every
business within the industry, including Brannigan Foods. Sales for Brannigan in 2011 totaled $3
billion. Net profit margins for the year were 10 percent, and is estimated to decline for the next
consecutive two years, according to Clark’s forecast (2013). Despite his rather pessimistic
observation of his division, the four people he relied on remained optimistic and stated so in their
accompanying correspondence.

Management Considerations

Clark relied on the advice of his four senior colleagues in order to help him determine what actions
would bring the best possible growth to the division. The following table lists each member’s best
solutions to the division’s growth challenge.

Table 1 Colleague Proposals

There was nearly unanimous agreement on the need to increase advertising and promotional
spending on new products, but Clark had serious reservations due to not only the summary report,
but his own sales forecast. If sales weren’t anticipated to increase, why cut into those lower margins
with more advertising? Still though, he understood there was a need to remind consumers on
products that had reached a mature category stage and to adequately promote new products that
targeted younger, slightly more affluent consumers.

Comprehensive Summary of market situation

Declining sales within the industry as a whole and a slump in Brannigan’s soup division sales has
created problems for Clark and his colleagues. The goal was clear, but the strategies to achieve
growth were numerous, as indicated in the correspondence between Clark and his senior colleagues.
The company has invested heavily into products which fit best with consumer sentiment, but the
economy remains stagnant as more people prefer eating at home rather than going out, which is a
plus for Brannigan Foods.

Recommendations

Alternative Strategic Solution 1

To provide to younger consumer segments who demand exotic yet competitively priced products,
Brannigan should increase A&P spending on the Fast & Simple and Heart Healthy premium soup
lines.

Advantages and disadvantages

Not only are these lines star performers representing high growth capabilities, but these premium
soups are well in line with current consumer tastes and with the product accurately targeted to
younger consumers, it is in line with the company’s long-term growth strategy. However, even if
these recipes are well received by a test market, the recipes might not be popular enough to
become a staple item for the company and ultimately become just another short life-cycle product
which fails.

Alternative Strategic Solution 2

To increase sales volume from the largest customer segment, 50+group, a price decrease of 10 cents
per can from Brannigan’s core RTE wet soups shall be distributed over a 5 year period and made
possible by investing $22 million in refurbishing older manufacturing plants.

Advantages and Disadvantages

One advantage of implementing this strategy would be that the price decrease would be visible by
customers immediately. The economy is likely to rebound, as indicated by multiple government
reports. Retailers would be more cautious about taking away shelf space from a product which
brings them revenue as well. The price decrease might even bring in other untargeted market
segments such as low-income families and students who are more concerned about price rather
than health details. Another possibility is that this strategy might alleviate cannibalization from
occurring on a larger scale when new products are produced and promoted to different segments.
Core customers remain satisfied and new groups are free to try products target to them.

One disadvantage of implementing a price cut strategy would be that the company inadvertently
repositions the its core RTE soups into a lower value position. Consumers who relate price to quality
would prefer competitors soups that are slightly higher priced over Brannigans. Not all consumers in
the senior segment are concerned with price, therefore this strategy relies mostly on the hope that
consumers will buy more soup because of the price decrease. If the investment $22 million
investment does not produce the expected efficiencies , then the company might end up losing more
money than it brings in.

Alternative Strategic Solution 3

Targeting young, professional mothers who are equally concerned about the health benefits of soup
as they are with convenience; increase spending on R&D for 2012 from $14 million to $19 million in
order to bring two new recipes from the Ready-to-eat soup line to full production.

Advantages and Disadvantages

Introducing new recipes to this market segment from the new line of soup will further propel the
brand ‘s perceived image as a consumer oriented that remains loyal to core consumers but is also
willing to offer new products to new segments. RTE soups are consistent with the consumer’s
preference for fast and simple meals. Being able to introduce new products will help take away the
sting of not being able to introduce new products first, despite the large share of the market.
However, to create two winning recipes, the company likely has to go through with producing
multiple duds which might have tested well on a small scale, but end up failing when introduced on a
full scale.

Recommended Alternative

In order to achieve the marketing objective for 3 percent annual growth, the optimal strategy would
be to increase advertising and promotions on Brannigan’s rising star soup categories which includes
the Fast & Simple and Heart Healthy soup lines.

Rationale for recommended Solution

With the division’s desire to reach younger consumes, most preferably, teens and young working
professionals, Brannigan will achieve the greatest success if they properly advertise and promote
these two new categories of soup. This

Additional details regarding challenges of implementing recommendation in marketing

Plan:

* Required changes to the target market or positioning strategy

* Required changes to the marketing mix to implement the recommended

* Solution. Discuss changes to product, price, place and promotion that may

be needed. If no changes to any particular marketing mix element needed,

* Discuss why no change needed.

* How management considerations, if any, can be minimized

* How to address any operational issues, if any, to implement recommended

* solution

References

Top Competitors for Cambell Soup Company. (2013). Retrieved from

http://www.hoovers.com/company
information/cs/competition.Campbell_Soup_Company.4540740b62f38c61.html