Improving Sales, Marketability, and Profitability of the Brannigan Company - Case Study Example

Problem Statement Bert Clark, the vice-president of Brannigan Food Soup’s Division faces the most challenging task of his lifetime to decide upon the four different alternatives which his team members have proposed to be implemented to ensure the decline of industry growth as well as improve sales, marketability and profitability of the company. Analysis of the Situation Company: Brannigan has been operating in the industry for over 100 years and is characterized with a soup division which has been experiencing a decline in its profitability and sales and needs to create a new marketing strategy to ensure growth of the company. However, it is important to note that as per Boston Consulting Group Matrix report the soup division of the company is experiencing a “Cash Cow” position as the same delivers 40% of the company’s total sales. The most profitable product category in this division is the Ready to Eat Soups (RTE) which accounts to near 71% of the total revenue. Other brand segment in this division includes Dry Soups, Healthier Soups and The Fast and Simple Meals. The BCG Matrix highlights that investing in potential growth lines will provide an opportunity to ensure that they work as cash cows and will generate maximum revenues from it. The ready to serve products will further help in the direction as the demand for ready food products is rising and will thereby provide an opportunity through which the business will be able to maximize profits. This will provide an opportunity where the new method and product matches with the traditional products and will create a niche market through which more and more products will be demanded and will ensure that the cash cows provide better returns. It is to be further noted that the conclusion of deciding upon the best alternative for Bert Clark has to also look at the Annabelle Company which was acquired by it five years ago and the strategy adopted was to strongly invest in Dry Soups, Healthier Soups and Fast Meals. Alternatives and their Evaluation 1. Invest in growing sectors The Director of Simple Meal Units, Srikant Tipha, proposes to emphasize more on simple meals, heart healthy soups and dry soups by increasing investment on advertisement by 18% to generate more sales Pros: This strategy focuses its impact on products and its brands targeting the most growing segment of the industry thus ensuring a higher probability of success as the recent trend of consumers show a shift towards more healthy lifestyles and easy to prepare meals due to time constraints in their busy scheduled life and further the same works perfect with Srikant’s division. However, it is important to analyze the personal motives behind the same when analyzing any alternative. It will also provide an opportunity to tap a new and niche market through which revenues will grow. Lastly, the mechanism will also help to ensure that a new product which will be accepted over a longer period of time will be identified and will present an opportunity to be successful over the years. Cons: The strategy although focuses on the Star products but leaves behind the Cash Cow (Ready to Eat Soups). This shall further involve promoting the star products at the finance of cash cow which shall lose profitability and sales and lead to a situation where subsidy cannot continue. In addition to the same, company’s previous experience with Annabelle’s acquisition was slowly gaining acceleration and did not meet the forecasted growth rates. Further this would not allow the earnings of the company to increase. 2. Acquire product lines to complement the core growing sectors Claire Mackey, the Director of Finance and Planning, proposes to acquire new small companies to enter the healthier and convenient segments with new flavors to add more product lines to the existing product portfolio of Brannigan’s food category. Here it is of prime importance to understand the current market environment as these products may be growing the market share in a short term phase but their long term growth is uncertain. Pros: Investment in R&D in such acquisitions seems to be null hence the acquisitions seems more feasible as the same shall ensure an important reduction in cannibalization effects. Cons: The past acquisition of the company already had not met the expected forecast and hence may be looked down by the stakeholders, further acquisition may sometime lead to synergies between companies which are not stable enough and may lead to miscues in the lines of production. In addition to the examining the profitability calculation, the same would lead to decline in profits of the company by around 7%. 3. Invest in Organic growth from internally developed new products. Anna Chong, The Chief Innovation Officer, proposes to invest in R&D, advertising and promoting the new product entries. She emphasize on skimming the cash cow phase and subsidizing the investment on star products. Further her ideas seem more realistic like new flavors, new packaging and new usages of soups. Pros: Realistic ideas with low investment as no need to acquire new small business which avoids the risks of miscues in production lines. Further the new innovation targets different segments of soup division specially focusing on the growing segments which includes healthy meals and active lifestyles. One important innovation in this category is to add new products for Ready to Eat category which sounds profitable for the company. Cons: Few of the innovative products actually succeed and are added to the product portfolio in the long run while remaining may incur losses or not even reach the break-even point. It is also difficult to calculate and assign the actual cost of the products that are developed internally. Furthermore, adding new products with diminishing shelf space is a bigger challenge since the same would require a reduction in the shelf space of Ready to Eat Soups. 4. Invest in core The Director of Marketing and Sales, Bob Pugh, concentrates on a strategy to increase the marketing expenditure by $20MM so as to increase brand awareness and restore its previous numbers. He also proposes a price cut of 5% on Ready to Eat Soups and proposes a $22MM investment in capital to enhance the existing manufacturing plants efficiency and cut production costs. Pros: The risk of introducing new products in the market is curtailed by 100% since the same focus on core products, primarily the Ready to Eat Soups which is the most profitable unit in the current condition. Cons: Price reduction may hard the premium brand image of Brannigan which has already made a presence in the market. Further total investment shall add up to $42 million which is a heavy investment and attracts a larger risk. Recommendations Based on the case analyze, I would recommend that the best fit alternatives are a combination or mix of third and fourth alternative. However, it is to be noted that the same may not alone generate a stable and steady growth in the long term perspective due to possible fluctuations in the market trend. Furthermore option four does look profitable however qualitative analysis for long term such as brand heath, equity and perceptions are not addressed in a comprehensive manner which shall hinder the growth of the company in the dynamic and constantly fragmented market. Clarke’s first challenge or whether new benefits should be added to their current lines makes sense as the same involves lower risks in terms of adding new products to the existing product portfolio. However, adding new benefits shall always have a market acceptance risks and innovations shall be considered by consumer analysis. One important innovation in this category is to add new products for Ready to Eat category which sounds profitable for the company. Hence the advice from Anna Chong to invest in organic products that are internally developed sounds more feasible. However, adding new products with diminishing shelf space is a bigger challenge since the same would require a reduction in the shelf space of Ready to Eat Soups. The value proposition for Clarke will be thereby to have both traditional and new product which will provide them new and better markets to tap. This will improve the overall process of carrying out activities and will ensure that the business is able to earn more and more profits through their cash cows. An acquisition does not make sense since the company already in the past had acquired Annabelle whose results did not meet the expected growth and a new acquisition shall involve huge drainage of capital investment and miscues in the production lines. In addition to the same on an analysis of the profitability the same shall lead to decline in profits by near 7%. Further diversifying the existing product lines involve market risks however the same is much low in comparison to new acquisition. Developing the products internally seems to be a more feasible option as the same shall involve skimming the cash cow and subsidizing the star products. The organization also have to procure a strategy where they look at reducing the prices at the lowest level and look at extensive advertising so that more and more people can be attracted. This will thereby help to create an influential environment through which better resources can be used and the overall framework through which better revenues will be earned will be highlighted. This will bring a complete change and ensure that better penetration in the market takes place. The company should focus on Ready to Eat Soups and develop marketing strategies for it accordingly to ensure higher growth and profitability. Further more spending on R&D shall involve creation of products with low sodium content which shall be effective in targeting the health and convenience trend. It is important to invest in RTE to make its market stronger and be able to keep financing the “Question mark” products which shall become stars and cash cows in the near future. On a whole a holistic view is to be applied for long term success and need to understand the importance of “Cash Cow” division of the RTE as viable by 4th alternative. However we need to understand that the market requires the company to invest in R&D due to changing trends and needs of consumers and market demands as viable by alternative three. Hence, a mix of alternative three and four shall ensure long term success of the company and ensure that the company is able to change the trend of entire industry and emerge as market leaders. Furthermore it shall ensure stretching the life cycle of RTE soups and boost growth in the early stages of its product life cycle. Read More