RiceTecs Marketing Current Situations - Case Study Example

RiceTec's Marketing Analysis: Past and Present June 22, 2006 [Insert [Insert [Insert RiceTec's current president is Robin Andrews. Since his 1994 involvement, the board of directors has been please with the increase in distribution and profitability, however, debates in the use of specialty blends as retailer labels and co-branding has left Andrews with the option to continue using this avenue of distribution or to move away from the sub ordinance to private brand labels. In April o f1994, RiceTEc introduced a new product line, RiceSelect. This is supported with redesigned package and expanded product line. Supermarkets using Texmati in their private brand programs had expressed interest in increasing their rice lines by using the RiceSelect branding. Other grocers inquired about using Texmati in their private blend program. This product has been marketed with promising results, but has also contributed to an increase in overhead and the final market price. The product line is at five million annual retail sales, and this is below that of dominant brands, however, this is also a result of a thirty percent increase in sales, the growth is also due to an influx of immigrants and growing popularity of ethnic foods. Andrews and market team are in process of setting the marketing and distribution strategy for new aromatic rice that developed called Kamati, and would be a different in appearance and have superior taste, good US market potential, and international sales potential is even better, especially in Middle East and UK where consumption of basmati rice was high. There are several factors which influence the development of a marketing strategy for Rice Select. The first is the company brand and product lines that are currently on the market and in half of the national grocery stores. This is the baseline for marketing research and is used to establish what has or has not worked to further the business goals. As new product lines are integrated with the company brand, RiceSelect will want to envision marketing and distribution strategies that encompass the product goals. The competitive market analysis assists the business in understanding what other company's levels of engagement are. Marketing strategy also looks at the methods of exchange amongst various entities as well as the projected or perceived values of those exchanges, and the manner in which advertising and promotional strategies have affected commercial exchanges. The main brand is Texmati rice under the Master Choice label, which was traditionally sold in Texas markets. Texmati brand of rice was developed and marketed as aromatic and flavorful basmati rice, and local Texas marketing began in 1978, where sales were mostly bulk to natural health food stores. Volume, however, remained low until marketing efforts concentrated in Texas with the eventual goal to direct retailer sales. Movement into the national markets took off in 1991, when Texmati was added to a Loblaw, a leading Canadian grocery retailer, that controlled almost forty percent of Canadian grocery rice sales. Their licensed President's Choice branding was distributed to Northeastern US retailers. Supplying Texmati to the President' Choice brand allowed for more visibility of Texmati on a national scale. In 1991, Jasmati, jasmine aromatic specialty rice, was added to the Tesmati product line. This rice was ideal for oriental cooking and rated very high in taste tests, which led to the addition of Jasmati as an accompaniment to the Texmati Master Choice labels. RiceTec had developed a new umbrella brand, RiceSelect, product line by 1994 designed to convey high quality and attract attention on the store shelf. This is expected to bring different tastes to consumers as aromatic rice. The product line expanded to include Italian specialty rice blends and basmati rice. These new products needed to receive facing on the grocer's shelf, which increases shelf space for RiceSelect products and billboard marketing. New marketing tools were directed at including special displays as well as trial-sized packaging. Texmati's previous profitability in the Texan market allows for a national expansion opportunity through distributor and retail labels. The addition of the Canadian market and the increased distributor network influenced RiceTec's introduction of RiceSelect product line as specialty aromatic blends. Texmati brand reception and the new RiceSelect product line has been well received by distributors, retail chains and consumers. The new packaging was designed to convey both brand name and quality product, and to differentiate RiceTec from private brand competitors. The entrance of the RiceSelect strategy onto the market was in conjunction with the expansion of the product line. This allowed for marketing to develop new displays as well as specialized advertisements upon enterance to the market. Buy one get one frees were used along with trial sized packaging and special price strategies to introduce the new line of RiceSelect. The primary task in the introduction of RiceSelect was to improve the movement of packages through retail and distribution chains, doubling this would effectively double the revenue of RiceTec. A 1993 review found that the product line has satisfactory efforts for a regional brand, the company's perception by national consumers must be improved for RiceTec to compete effectively in the rice industry. National advertising was not a financially viable option, and so sales would primarily be affected by packaging, placement and pricing strategies, leading to the final packaging and low pricing of RiceSelect. The competitors for RiceSelect are traditional large food companies, such as Uncle Ben's rice which controls 182 million, and Minute Rice, which controls 109 million of the national rice market, which in 1993 was a 980 million dollar per year market. Leading mixed rice blends included Rice-a-Roni and Near East, as well as the lower price segment rice that is marketed as an alternative to the large brands, but these competed mainly on a regional basis. Small rice companies are a concern in marketing strategy as they are the primary competitors in the aromatic and specialty blend segments, and traditional rice imports, however these are regionally based. Advertising for the rice market is about 4.5% of the industry costs. Marketing research further notes that brand-building activities are at high levels in the premium, convenience and mixture segmentations. Co-branding with A&P's Master Choice was used, if cautiously, as a manner to nationally distribut Texmati in national grocer chains. This allowed RiceTec to build brand equity and visibility by sharing the label with Master Choice, and allowed A & P to use the aromatic specialty blends. The concern with this arrangement was that Texmati is small compared to the nationally known A & P. RiceTec had twenty products sold through four main channels. Direct sales to supermarkets and wholesalers through brokers stocked the store shelves with the RiceTec brands in Texas. A broker's compensation was three to five percent; this was paid directly by the RiceTec company. This method allowed for a strong establishment of the Texmati brand in Texas, with a 3% share of the dried rice market. Distributors in 1993 accounted for forty percent of RiceTec revenue. In this manner, distributors stocked store shelves and was used for Canada and US grocers. This allowed for RiceTec to gain visibility in markets where it did not have funds or trade power. The distributor method raised costs because both the distributor and store took a large amount of the margins, leaving RiceTec with only 45 percent margin. This also doubled the retail price of the aromatic rice blends, which resulted in movement being between national brand rice (Uncle Ben's) and other specialty rice. Distribution had reached 80% or more in some areas of the country. Increasing the coverage in these areas would increase the movement of RiceTec products. Of the twenty products being distributed, an average of only one per week per store was sold. The August 1994 Board of Directors meeting showed that the new product distribution was encouraging, though slightly behind plan with increases in both distribution and direct retail avenues, RiceTec's share of the national market was reaching 1.5%. Trade response to new packaging was positive, and distributors as well as direct sales in Houston had remained steady during the changes. While the influence of national grocer's brands, such as the Canadian example above, increased RiceTec's revenue and visibility, there are serious concerns in regards to RiceTec's brand being sold under a retailer's label. Howard Marguleas, believed that Texmati brand equity was undermined by the retailer's brand name associations. The expansion of private brand participation should not be, according to Marguleas, through retailer labeling. This method essentially devalues RiceSelect as a consumer brand, and the does not allow RiceTec to grow as a viable, stand alone company. Other board members noted that, while using a national retailer's brand labeling allows for some inexpensive exposure of RiceSelect as well as adds funds, the use of Texmati as a co-branded name should be reevaluated and not allow Texmatie and Jasmati to become a generic name. This would cause some loss of the brand equity and cause the Texmati name to become well known, but, in turn Texmati would lose focus and marketability as a national brand name. RiceTec's 1993 market research showed that Texmati was well received and associated with aroma as well as taste, with a strong loyalty base in Texas, with 43% consumer brand awareness. Texas customers were from predominantly above average incomes, characterized as those who have the time to cook as well as being more interested in gourmet foods and being higher in age. The three main focuses of customer's who preferred Texmati to other brands was a good taste, this is followed by the rice textures, but price was the largest reasons customer's did not sustain brand loyalty. The raise in price was due to increase in fixed costs and the initiation of a new marketing strategy, as well as market research and package design expenses associated with the launch of RiceSelect. RiceTec's positioning and brand strategy as of August, 1994 included reducing the influence of retailer labeling, as well as marketing efforts directed towards the removal of private brand labeling and co-branding. This would increase RiceTec's brand equity while releasing it as stand alone aromatic specialty rice. This strategy benefits RiceTec, but also causes some consideration for the cost of openly removing RiceSelect from retailer labeling. RiceTec would then have to depend solely on internal marketing and distribution strategies. For this strategy to be adequately integrated post-1994, the company must set specific objectives in market management. This would include sales volume in relation to marketing dollars. The objective goal is to create a national consumer market of RiceSelect as a stand alone brand name, however, this must also be consistent with RiceTec's business strategies and resources, as well as be continuously monitored as the product is marketed. Because the Texmati name was increasing recognition, the strategy to move away from retail labels would, hopefully, increase brand equity by volume, however this also creates some issues in price and distribution strategies. That is proven because Texas research shows that sustained loyalty has been lost due to pricing strategy, and pricing has increased because of the entrance of RiceSelect into the market. This overall marketing strategy was appealing to customers; however the price strategy was not consistently viable for consumers. While it remains that there was a necessity to increase the price strategy, introducing RiceSelect at intervals as opposed to a massive twenty product line with new packaging and the new aromatic flavors would have lessened some of the strain in cost, thus lowering the price for the target markets. The conclusion in that case would have been an increase in the product and marketability of the price structure simultaneously, instead of RiceTec's apparent need to juggle between strategies. Robin Andrews should certainly continue to listen to the advice of the board of directors, many of whom have extensive business backgrounds. In regards to private branding, however, Andrews must make a choice. The choice to continue using retail labeling as an easy and affordable route to increased revenue, or to create more brand equity by moving away from co-branding and towards RiceSelect brand equity and stand alone viability. Either route will increase revenue, but the concern becomes if retail labeling is furthering RiceTec's long term goals as a business' And, if so, how long can the private brand labels carry RiceTec's revenue and sustainability' Andrews must look at these aspects before making his choice. It is believed by the board of directors and this research paper that RiceTec has outgrown the need for private label and co-branding. These avenues of retailing will not sustain RiceTec's brand equity in the long term, and do not allow for RiceTec to have a marked increase over long term. The use of co-branding and retail labeling was necessary when RiceTec needed a short term method of gaining national and Canadian recognition, but as the company has grown and developed, the retail labels will only serve to hinder future options. This opinion does not change if RiceTec is acquired by a massive retailer, because that will not serve RiceTec's brand equity, it will only serve the retailers label's brand equity. Furthermore, the acquisition of RiceTec by a major national label will eventually 'box' RiceTec's revenue as a dependent of that retailer, not as an independent and nationally recognized brand name. However, as CEO of a large, cash-rich packaged goods company, it would significantly benefit a retail label to acquire RiceTec, especially the RiceSelect product line. This is because the aromatic specialty blends are generally controlled by regional manufacturers, and in that specific market there exist very little competition. Competition in the industry is limited to plain rice, fast cook rice, and mixed rice, not to specialty and aromatic rice. This creates a 'hole' for the national retail label to fulfill. Reference PLEASE ADD YOUR CASE STUDY CITATION. THANK YOU. Read More