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Oscar Mayer

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SMM ­­ Group 2 – Alex, Jaya, Rachel, Richard Oscar Myer Case Background
Oscar Mayer is a leading manufacturer of processed meats in the American market because of its brand equity, successful history and effective product diversification within the meat market. It is focused on placing quality first and price second and its major goal is to boost convenience products in the processed meat market. Currently, the OM sales are declining, but the losses have been offset by a recent acquisition of Louis Rich (LR) a #1 turkey based line (#1), which is a cheaper and less fat meat more in tune with customer demand. The SWOT analysis given below presents a snapshot of the company’s internal and external background. Weaknesses Strengths  High prices of OM products compared to  Powerful brand reputation with retailers competitors and consumers  Focused on product and competition, and  Technology skills in R&D not on “customer satisfaction”  Unmatched sales force  No products on chicken market  History as “get it done” organization  Batting average for new products: 1 in 10  Strong business and distribution system  Strong acquisition of a #1 turkey based line – cheaper and less fat “total division scorecard” – favorable Threats Opportunities  The processed meat undergoing  The need for products offering greater fundamental changes that will affect convenience growth in 3‐5 years.  The growing emphasis on nutrition  Red meat products (bologna, hot dogs,  “boost convenience” for working moms bacon) are too high in fat content, which is market going against the current market trend of  “white meat” market “health food”  “High investment” cost for second brand (LR)  entry of copy cat brands

Problem Definition
McGraw’s vision: +4% growth per year on volume; 15% on operating income In the last 5 years the needs of the customer has changed. This change has lead to a decrease in the sales of red meat consumption and an increase in white meat consumption. Because of the decrease of sales of red meat, the competitors have decreased their price, which also leads to a decrease in Oscar Mayer’s sales of red meat. Also, a new trend is to move to healthier products and convenient meals, which is not currently a focus on OM.

Analyzing possible solutions
The solutions proposed by the managers are stated in order of most viable to least viable: Eric’s (VP of OM Brand) recommendation       10% price cut on top 3 OM brands in each category to stay competitive Increase A&P budget by 25MM for fair brand support Promotional program Low fat and salt line of OM products – invest in R&D Check capacity utilization Goal: “Reinvigorating OM Brand growth”

Rob’s (Louis Rich category manager) recommendation    Boost brand awareness of LR – “Switch to Rich” campaign New string of products (not sure of success rate of turkey based bacon, etc.) Increase advertising and promotion budget by 22 million (long term growth; short term hit)

Jane’s (Finance and planning director) recommendation   Acquisitions suggested: Chicken Rite, Turkey Time, Crabbies 15‐25 MM to acquire per piece

Jim’s (new product in charge) recommendation   Invest in 4th major category (lunch meat, hot dogs, bacon) Zappetities o Needs more staff o Will use learning from previous experience o 6‐8 months to complete Lunchables o Solving Mom’s problems of “painful to pack, boring to eat, zero appreciation for effort” o “important problem – superior solution model” o “own carried lunches”



Analysis The above e strategies fo ocus mostly o on their own department, and do not p present an ove erall strategy y. This would lea ad to conflict between the departments s and within d departments as well. Comparin ng to the BCG matrix, OM i is currently th he cash cow a and LR is the q question mar rk. Therefore, , the position o of OM and LR should be lev veraged with additional in nvestments.

The possible solutions are as illustra ated by the m matrix. We have developed d a combined d and diversifi ied as presented in the next section. strategy, a

Recom mmended problem solution
Our overa all recommen nded solution is somewhat t in line with M Mike’s recom mmendations:  Adding new be enefits to current OM/LR p products

 

Strengthening and diversifying company lines via another acquisition Internally developing new products that tap new needs

Specifically, the following activities will be targeted OM ‐ ‐ ‐ 10% price cut on top 3 OM brands in each category: To stay competitive and maintain our market share Increase A&P budget by 12.5 MM for OM fair brand support: To maintain our position in the market Low fat and salt line of OM products – invest in R&D: Diversification of OM to attract the new market

LR ‐ ‐ Boost brand awareness of LR – “Switch to Rich” campaign : Strengthening the new product line Increase advertising and promotion budget of LR by 22 million (long term growth; short term hit): To stay ahead of copy cats

Acquisitions ‐ Chicken Rite for 20 MM: To capture white meat market with an existing product, no R&D costs

Conclusion
Because of the changes in the market place, there was a need for a new strategy to compete and stay ahead and reimprove OM’s product value, and change focus to the customer. To tackle the above problems, a new strategy was formulated which diversified the market to include white meat and high nutrition products. Prices of red meat products will be lowered to tackle competition. A new acquisition of Chicken Rite will also contribute to the diversification strategy. The above steps will help be a positive step towards meeting McGraw’s vision of 4% volume increase and 15% operating income increase.

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