MKTG 422 - «Giant Consumer Products» Case Analysis

By Jeremie Dalin

MKTG 422: Giant Consumer Products Case Analysis

Talha Harcar

The Pennsylvania State University

July 15th, 2017

By Jeremie Dalin

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MKTG 422 - «Giant Consumer Products» Case Analysis
By Jeremie Dalin

The following case analysis will present the firm’s SWOT analysis, followed by an analysis
of the firm’s data in order to recommend a promotional solution that will enable GCP (Giant
Consumer Products) to increase its performance without impacting its brands negatively.

Finally, the author will conclude with the brand to promote and a promotion structure that the firm
should implement in order to increase volume, gross margin and marketing margin.

SWOT Analysis

Strengths: Weaknesses:

High customer-centric management team
High national market share (45%) in “Italian
frozen dinner and entree offerings”.
Dinardo’s generates $425M per annum in
revenues
Decreased sales volume (3.9% behind plan),
marketing margin (4% behind plan), Gross
revenue (3.6% behind plan)
Promotion-centric customers stockpiling given
high frequency of promotions / discounts in
some product categories.

Natural Meals accounts for 25% of GCP’s FFD Natural Meals only available in one size
revenues ($150M per annum)

Dinardo’s use of high-quality ingredients and

seasonings is a source of competitive advantage.

Opportunities: Threats:

Potential growth with Natural Meals brand Competitor developed “Healthy Option” in order
estimated at 5/10 times current rate, with to compete directly with GCP’s Natural Meals
materially lower delivered costs. brand.

High yearly growth for Natural Meals (15% / Customers buying less and in a different product
annum) mix.

Restaurant capturing target audience of

supermarkets.

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Strengths:

One of Giant Consumer Products’ strength lies in its management team, described as
“having the most customer-centric management team in the frozen foods industry” this allowed the
company to successfully anticipate trends, promote and consistently deliver high quality products to
their target audience.

In addition, the firm’s large market share of the «Italian Frozen dinner and entree», this provides
the company a large source of revenue within this subcategory of FFD. In addition, GCP’s
Dinardo’s brand generates a large portion of the firm’s revenues, with approximately $425 million
per year, making it the firm’s most profitable brand, second to Natural Meals, which generates 25%
of FFD revenues (approx. $150 million).

Dinardo’s strength lies in the firm’s used of high-quality ingredients and seasonings, which makes
the brand’s meals “taste better” (Bharadwaj, N., & Delurgio, P. D., 2009) when compared to
competitors, given it a significant competitive advantage.

Weaknesses:

The firm endured a decrease in sales volume, marketing margin and gross revenue in comparison to
their plan. This means that the company’s overall revenue generation was under-performing.

One explanation could be that consumers are increasingly becoming promotion-centric and the
frequent usage of promotions to generate additional sables by manufacturers has created a customer
that is always expecting promotions and highly motivated by them to purchase a product. They are
loyal to the promotions and no longer to the product(s) they purchase, therefore revenues decrease
when manufacturers do not run promotions.

One of the firm’s weaknesses in regard to its individual brands is that it’s Natural Meals does not
offer different sizes other than its 16 oz version, therefore this could limit the growth that the brand
experiences because consumers are not finding a suitable product for their needs (ie. family).

Opportunities:

Natural Meals offers the company a high yearly growth of approximately 15% which given the
right advertising and promotion strategy could significantly increase the firm’s gross revenues, it’s
marketing margin and sales volume. Additional consideration needs to be taken into consideration
before implementing an advertising strategy to promote the brand.

Natural Meals’ growth potential has been projected between five and ten times its current rate,
offering Giant Consumer Products an extremely profitable revenue generation opportunity, given
that all the strategic decisions are implemented, and funds allocated. The firm could gain immensely
from promoting the brand further (ie. national promotion).

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MKTG 422 - «Giant Consumer Products» Case Analysis
By Jeremie Dalin

Threats:

The most threatening element for Giant Consumer Products is the development of “Healthy Option”
by competitor Daft. This product would directly compete with GCP’s Natural Meals product line
and if the firm’s product trials would be positive, Daft would introduce its product nationwide.
Therefore, it is important for GCP to secure first mover’s advantage by developing and increasing
promotional strategies for Natural Meals.

Another threat for GCP is the increasing number of promotion-centric consumers who rely solely
on promotions to make their purchases. Due to the frequent use of promotions by manufacturers to
temporarily increase their sales, these consumers have become reliant on promotions to make their
purchases and sometimes indulge in “stockpiling” the purchase of large quantities of discounted
items for future use.

Identification of brand to promote based on financial performance

Based on the financial data made available within the case, it is assumed that the brand which will
generate the highest return on marketing investment (ROMI) should be promoted, as “anything less
than 0 is not deemed profitable” (Bharadwaj, N., & Delurgio, P. D., 2009) and therefore would be
detrimental to the firm’s ability to generate revenues and positive marketing margin.

Therefore, according to calculations summed up in Table 1 “Financial Impact” of promotion efforts,

we can determine that neither the promotion of Dinardo’s 32 oz or it’s 16 oz counterpart will
achieve an acceptable ROMI. However, Natural Meals proves to be a highly valuable candidate as
it achieves 12% return on marketing investment, a value that is highly sought after.

We will take a look at several tables based on historical data discussing the aspects of promoting a
brand item(s), within-brand cannibalization due to promotion and finally the promotion impact of
Natural Meals compared to the firm’s 2008 plan to make our case.

Dinardo’s products promotion impact of promoted item

Based on table 2 “Promotion impact on the promoted item” we can see that the marketing margin
change for Dinardo’s 32 oz product is the highest, this is largely associated with the fact that the
brand’s 32 oz offering rakes in more sales when the item is not on promotion and has a lower
overall promotion cost compared to the 16 oz version. In addition, the 32 oz has a positive
marketing margin of $718’986 compared to the brand’s 16 oz version’s negative marketing margin
of $-526’946.

This makes Dinardo’s 32 oz promotion a more successful feat that it’s 16 oz counterpart and should
be favored if it were to be promoted once again.

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Within-brand cannibalization

When promoting a brand’s items, the firm needs to ensure that within-brand cannibalization occurs
at a minimal level or preferably doesn’t occur at all. This is because one item’s promotion will
suddenly attract the target audience of another similar, closely related product that is not on
promotion and if this other closely related product is from the same company, then the result is
within-brand cannibalization. As we can see in the data from table 3 below, there are significant
effects of within brand-cannibalization due to promotions implemented by the firm on Dinardo’s
products but most specifically the 16 oz version.

It is therefore imperative to ensure that promotions are carefully crafted and implemented in order
to reduce the losses resulting from the cannibalization effect.

Promotion impact of Natural Meals

It is important for the firm to acknowledge the positive impact that promoting Natural Meals will
have regarding the volume, revenue and marketing change from promotion as seen in table 4 below.
This brand has a lot of potential to grow even further, as predicted by the firm, at a rate of “five to
ten times the current rate” (Bharadwaj, N., & Delurgio, P. D., 2009). Currently, it accounts for
approximately 25% of the firm’s division revenues making it a popular product choice amongst its
target customer base. In order to further increase revenues of GCP’s FFD, it is important for the
firm to promote an item that will generate a significant amount of additional revenue.

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Brand promotion recommendation

Based on all the available data, it is recommended for Giant Consumer Products to solely promote
its Natural Meals brand due to several different reasons.

The first is the lack of cross-brand cannibalization, essentially Dinardo’s and Natural Meals have
different target customers, “Dinardo’s customers would not be enticed to purchase Natural Meals”
therefore the impact on cross-brand cannibalization is negligible.

The second, Natural Meals is a product that is geared towards health-conscious consumers by
providing low fat products that are free from unnecessary additions and preservatives (Bharadwaj,
N., & Delurgio, P. D., 2009), the product is currently being targeted by the competing firm “Daft”
with an alternative called “Healthy Option” which directly compete with GCP’s Natural Meals
brand.

Therefore, in order to continue to benefit from first mover advantage, increase the target audience
of the brand and generate additional revenue, it is necessary for the firm to conduct a strong and
aggressive marketing and promotion campaign in order to gain the largest market share.

The promotion of the Natural Meals brand will provide Giant Consumer Products with a volume
increase of 1.4%, gross revenue increase of 1.7% and a marketing margin increase of 0.3%
compared to plan as see in table 5 below.

In addition to these results, Natural Meals is the only brand that has achieved a positive ROMI
(Return on marketing investment) of 12% as demonstrated in table 1 above which is imperative for
a brand to be profitable. Therefore, the firm’s only path to profitability is the promotion of its
Natural Meals brand, this will enable the company to decrease its current negative results and best
achieve the results stipulated by the top management of the company.

Conclusion

GCP’s has a powerful frozen food division which offers a variety of products under its Dinardo’s
and Natural Meals brands.

In recent years, the firm has experienced a decrease in sales volume and gross revenue. After
extensive analysis of the two preceding years of data, a solid recommendation can be made to the
firm in order to increase its volume, gross revenue and marketing margin.

In order to effectively reduce the current negative results, the firms most optimal course of action is
to undertake the promotion of its Natural Meals brand which will allow the firm to benefit from a

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MKTG 422 - «Giant Consumer Products» Case Analysis
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positive return on investment of approximately 12%, gain market share in the health conscious
subcategory of the industry which will allow the firm to exponentially grow its market rate, forging
it a position that will be hard to take from the firm by competitors.

Finally, in order to fully gain from the promotion of Natural Meals products, the firm will stick to
the established pay-for-performance structure, which will motivate, encourage and ensure that the
supermarkets increase their efforts and sales in order to gain from the promotion.

Reference:

Bharadwaj, N., & Delurgio, P. D. (2009, June 15). Giant Consumer Products - The Sales Promotion
Resource Allocation Decision [PDF]. Brighton, MA: Harvard Business Review.