Brannigan Foods soup division general manager Bert Clark was in charge of bringing their company out their recent decline. The company had seen steady decline in division sales, market share, and profitability over the last three years. He was in charge of moving their division’s growth back up to 3-4% per year and his team had come up with four different plans for doing this. It was Bert’s responsibility to review the benefits and costs of each plan and choose the most effective way to grow the company. Outside Concepts
Brannigan Foods soup division happens to be one of the most profitable and successful divisions of the company. An overall analysis of the company through a BCG matrix shows that their soup division is their cash cow. This is where they make the vast majority (40%) of their sales. Because of this, it is very important to them to keep sales in profits as high as possible for as long as possible. An industry such as the canned soup and RTE (Ready to Eat) soup industry sees very little, if any, innovation in it. Because there is little relative R&D, it is important for companies in this kind of industry to milk their cash cow for as much as possible and as long as they can. It is also important to note that their RTE product category accounts for 71% of total revenues with other divisions such as: dry soups, healthier soups, and fast & simple meals.
In regards to their brand awareness and company value, Brannigan Foods is behind the pack in relation to competitors with aspects and divisions such as health trends, diet advances, product convenience, flavors (eastern, foreign), and popular products outside of their major seasonal sales. From the perspective of their retail distribution network, they are not innovative enough for the market, and therefore not profitable. Consumers are looking for innovations in the RTE sector along with new flavors, something Brannigan is not offering properly. If we look at Brannigan’s value chain, we can see that the retailers are the most important and strategic channel. The issue is that there is a disconnect between the two because retailers are offering shelf space to new innovative small companies that is eroding Brannigan’s shelf space.
Brannigan has been focusing on generating brand awareness when they may want to focus on their relationship with the retailers to cut down on costs. If we analyze Brannigan’s marketing mix, it is possible to find their defects and locate where they need improvement. The first thing to consider is a new positioning statement that properly expresses their current position in the market and what they would like to offer consumers (new and old): “For consumers who enjoy an inexpensive, quick, tasty, and easy to cook meal; Brannigan’s Soup offers a variety of flavored soups that ensure high quality, convenience and superior health.
Our rich history and in-depth knowledge of the industry allows us to provide exactly what the consumer wants at the most competitive prices”. If we consider the market and analyze an Ansoff matrix for Brannigan’s current situation, it is possible to improve their position even more. Brannigan needs to enter the new (healthy) market with a new product. They currently do not have any “healthy” products, so they either need to construct one or acquire one. The Ansoff matrix shows that Brannigan will need to use a diversification strategy if they want to succeed. Since the healthy soup division is relatively new, Brannigan can still introduce their healthy products as “new” innovations.
Brannigan is the market leader with the most share in the industry Majority of products are similar to the majority of American diet (RTE, etc.) High brand awareness
Sales have decreased over the last 3 years
Lack of consistent communication within several departments of the company Recently failed in targeting new markets as well as competitors Unable to keep up with current diet trends
Acquire firms with new products
Strong relation with distributors through history and volume Can create new products (eastern taste, etc.)
Possible 3-4% growth
Brannigan is losing shelf space
Innovative new products from competitors have eroded sales
Faults in segmentation, targeting, and positioning
Competitors are meeting consumer needs that Brannigan is not
Brannigan Foods has seen steady decline over the last three years Perceived as not very innovative (not providing the new flavors consumers want) Not in line with healthy food craze
Baby Boomers are largest and most loyal segment
Distribution is a big concern
Sluggish economy drives consumers to eat more soup (at home) Soup is considered a seasonal product
Competitors: General Mills, Unilever, Private Labels, Other
New product success rate (7%) is in line with general food industry Quantitative Data
Soup division is cash cow (40% of sales)
RTE products account for 71% of revenue
3% reduction of shelf space every year
62.9% of total sales are in supermarkets
$6.4 billion sales for total soup consumption market (2.8% decline from 2010) Households average 1.4 cans a week
High Income customers eat 40% of deli soups
Consumers perceive Brannigan to be behind in: health trends, diet claims, convenience, flavors and innovation Results/Analysis
From the emails received from Bert’s reports, it seems as if the best option comes from Claire Mackey, Director of Finance and Planning. She points out the major hole that is currently facing Brannigan, their lack of products in the new flavor categories. Since it is not their core competency, they should probably not try and create their own products to compete in this market. The best idea here would be to acquire a company that is currently doing well in this area, and then those brands will be able to take advantage of the distribution compliments that Brannigan has to offer. Claire offers a couple different products along with their financials, and the best option between these would be the Red Dragon Foods.
This option not only gives them the company with the highest in sales, but it also allows them to keep their brand name. This may or may not be a good idea since they are expanding into an area in which they are not successful; however they at least they have the option. Red Dragon Foods also has the highest expected earnings at $4.2MM that comes along with its $36million is sales. This means that this company may cost the most, but it is most in line with the area of the market that Brannigan is lacking. Brannigan has built an American homegrown view of their brand that typically does not compliment with foreign styles of soups. This type of acquisition provides a perfect opportunity for Brannigan to increase their brand portfolio through a successful company while still keeping the option open to use their brand name. The last opportunity provided by Red Dragon Foods is the incorporation of the brand within their advertising and promotional techniques; comes with a savings of 55%.
From a financial standpoint, the acquisition of Red Dragon Foods would not affect the profit of the company greatly because interest rates are low. Speculating from the financials of Red Dragon Foods, it can be inferred that the addition will add the higher end of percentage (3.5%) to sales within five years. One of the issues with this purchase is the possibility of cannibalization; however estimates are only at 0.3% which is not terrible. Although Claire’s last acquisition project was a failure (Annabelle’s Food), this type of expansion is a bit different. Her initial expansion project was an idea to expand their brand through a purchase that was too similar to their initial product; there would obviously be issues with cannibalization. The key issue here is to put in the investment for marketing to make sure the brands are separate and cannibalization is minimized. This may lead to a higher cost in shelf space, so the difference in these two aspects will have to be weighed.
The other plans include investing in the core, invest in the organic growth from internally developed new products, or invest in growing sectors. Investing in growing sectors may not bring the volume of change or sales needed; and also profits would have to be revised which was a huge concern, giving up profit was virtually impossible given the views of the board. Investing in internal growth and products would actually come at a larger cost from the analysis done. The main issue with internally investing would come with cannibalization. Brannigan estimated a 90% chance of cannibalization. Not only would sales eat into each other, but they would also be competing for shelf space. The benefits that came with this option were also a projection based on estimates with high variability.
It would be difficult to make estimate on profit margins when there is not a clear indication of how much money was directly involved in R&D for each product. Another issue with this option is the not-so-flashy history. Their data showed that of 10 previous products in a similar project, nine failed in less than two years and did not recoup their investment. In terms of investing in the core, management really liked this idea. However this idea involved cutting prices which was not a great idea. This was a short term solution and not one that would help the company become stable and survive in the long term. Preferred Action Plan
The best action plan would be to follow Claire Mackey’s strategy. This way they could enter the markets they are currently not available or striving in with somewhat of a guarantee. With the Red Dragon plan in particular, they have the option of suing their brand name or sticking with the current name. In total, it seems that none of the ideas is a guarantee, but this idea will at least guarantee equal to little growth, but with the possibility for high growth.