Bert Clark is faced with a very serious problem and has enlisted the help of several counterparts of Brannigan Foods’s Soup Division. The soup industry has been declining for several years, and directly affecting the Brannigan division for the last three. Bert has to determine, of the four plans he received, which is the best in order to move growth back to 3-4%.
The Environment: Major consumer trends affecting the industry are the concern for health and obesity. The inclining age of the most brand-loyal segment of soup consumers, the baby boomers, are seeking diets with low sodium. It’s crucial to maintain this large market segment, luckily the Heart Healthy line is positioned well with the baby boomers. Conversely, younger consumers (millennials) are needed to ensure vitality in the long run. One of the most critical aspiring trends among consumers are that of professionals and working mothers seeking fast, simple meals. The acquisition of Annabelle’s Foods helps this segment with growing sales of 12% per year. Another trend is the tastes of consumers. New flavors such as Mexican and Asian soups are gaining way in the division. An opportunity to procure these flavors is to acquire a new product line; Roarin’ Cajun Foods would secure the Mexican style soup and Red Dragon would lock down Asian tastes. If not acquired, these brands pose a threat to us in addition to Brothers Gourmet and others in the soup market.
The Industry: Brannigan is in the soup industry and has major competitors in Panera Bread and Harry’s Fresh Foods. These two competitors have soups that are refrigerated and/or frozen and are associated with being healthy. Essentially meaning they are a fast, quick, unprocessed, healthy meal. Refrigerated and frozen soups are becoming very popular, with growth of 15.5% and 70.4% respectively. Even though they are growing, they only account for 3.2% of the soup industry’s total sales. General Mills proves to be a major contender as well, owning 24% of the market share, 15.5% less than us. Though they own a fair chunk of the market, they do not hold up against Brannigan’s RTE soups, with a 15% and 12% share in wet and condensed RTE soups, respectively.
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Private labels are also posing a threat and are growing approximately 5%, all the while decreasing our shelf space by 3% ever year. They have less market share than General Mills, but have a greater sales volume in RTE soups than General Mills. 18% and 22% for wet and condensed, appropriately. Retailers have moderately high bargaining power. They are making more room on their shelves for their own labels, and are reluctant to give us more shelf space in return. They are quite keen on instructing us to displace a soup that isn’t doing well when wanting to put a new flavor on the shelf. End users also have strong buying power because they wish for cheaper, healthier, simpler soup options.
The Organization:
Strengths
Brannigan owns the largest chunk of the market with its RTE soups that account for 78% of the division’s sales and 86% of its profits. RTE soups are still considered a staple in US
Weaknesses
Brannigan’s mature products are in slow decline, 1-2% per year in dollars and 2-3% in volume. Advertising and appealing to a younger generation—social influencers have shifted to cultural values of health and efficiency (fast and healthy soups fulfill these.) Behind competitors in health trends, diet claims, flavors, and seasonal products. 30%-higher price premium has eroded our brand value.
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Opportunities
A 90% chance of gaining shelf space if acquiring a brand, while reducing cannibalization by 70%. Innovate by introducing a new flavor, Gazpacho and/or Teriyaki Beef—the dry mix will make retailers happy with less shelf space and a potential increase of 180% in sales. Threats
Private labels are becoming more popular, as stated above.
Pre-made deli soups, like that of Panera and Harry’s offer, threaten packaged soup.
The Marketing Strategy: Retailers and advertising seem to be our main current marketing strategy focus. With being the market share leader, retailers know the Brannigan brand well because the strong brand awareness among consumers. $189 million was spent in advertising and promotion in 2011, or 10.6% of net income. However, in order to keep profits stable, price has continued to inflate over the past few years to help soften the blow of reduced sales. Baby boomers have been our target market for so long, but in order to maintain longevity of the company, more markets need to be pursued. This may mean new channels.
Course of Action: Bert has four alternatives to choose from to take to his manager, John Wilson; 1. Invest in the growing sectors, 2. Acquire product lines to complement the core in growing sectors, 3. Invest in organic growth from internally developed new products, or 4. Invest in the core. Each plan has great potential, but combining the strongest parts of a few of the plans will make the marketing strategy the strongest.
Acquiring a new line will give Brannigan a new flavor as well as additional shelf space, and potentially a new market segment. However, an acquisition can be costly. I believe that investing internally to develop a soup to meet the needs of consumers is a better option. Although Dragon foods has an impressive $4.2 million EBITDA, I believe Brannigan can create a soup with a superior taste and match the needs of customers better. With promoting this new line of soup, we can hopefully attract the segment which seeks out this flavor and increase the longevity of the company.
Also, the sales growth in the Annabelle’s line has been great. Although this line only accounted for 2.4% of sales in 2012, the growth it has made is showing great potential and promotion and should be continued. When demand for this line continuously increases, bringing the manufacturing plant up to the current century will be imperative for efficiency purposes.
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Continuing to meet the needs of the baby boomers is also vital. This segment has been the most brand loyal consumer and has helped us get where we are today. Continuing to offer products like the heart-healthy, low-sodium soup will cater to their needs and keep them in our family.
Keeping these segments happy will keep us at the top of our consumers mind as well as in their consideration set for future purchases. Although we have tried new flavors in the past, and it has been costly, we need to listen to the customers when we innovate. From what I hear, the consumer trend has a desire for Mexican and Asian flavors as well as quick, simple, healthy meals. Last is the option to invest in the core. Our core is the lifeline of our company, and the RTE soups are what dominate the soup industry. The idea here is to reach a younger generation with the core. Using social media to promote the product using simple, quick recipe ideas and couponing are strong incentives for a younger generation to pick up a can of RTE soup to use as a cooking ingredient.
