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Shorewood Soups Issues Case Study

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Updated: Jun 3rd, 2019

Abstract

The report identifies and analyses the problem facing Shorewood Soups as it seeks to increase revenues from $100 million to $200 million, following a business-to-consumer strategy. It analyses the opportunities available and the threats facing the company. The report also offers a marketing mix strategy that includes the promotion of a refrigerated fresh soup product with gluten-free attributes.

The paper then supports the recommendations with the resource-based view theory analysis. The following case study discussions assume that the business environment affecting Shorewood Soups remained the same as explained in the case study. It also assumes that there will be interdepartmental support for the project at the time of execution.

Problem Question

The company needs a consumer-packaged goods strategy that will allow it to increase its revenues significantly. The current strategy has supported the growth of the business by only concentrating on the Business-to-Business (B2B) approaches using the bulk foodservice and buck retain option.

While maintaining this option for the current business revenues, the company must also find room for Business to Consumer (B2C) options as a way of filling the $100-million-dollar revenue gap that it envisaged to earn in the next five years.

The business must find a way to introduce a packaged or packaged products to the market with its gluten-free brand, ensuring that it maintains current efficiency levels of the business and shore up profit margins to ensure that the five-year target for the overall growth of the business remains achievable.

It implies that the marketing and sales team has to do a good job to ensure that the first and second-year performances of the business are supportive of a trend towards the achievement of the main objective. This requirement highlights several factors that help to explain the problem that the company is facing.

First, the company has almost exhausted its ability to improve the revenues for the current businesses. There is no structure and operating model that will take on the new retail branch of the business (De Assunção 2008). The sales team and the marketing team have been successful at doing another type of business, and there is uncertainty whether the success will replicate to the proposed move of Shorewood Soups (Anselmsson & Johansson 2007).

Thus, the minor problems that the company has include lack of brand personality, lack of existing structure to support the proposed CPG segment, and the development of an appropriate strategy that will support the new growth plan without introducing irrevocable problems for the existing business framework and success of Shorewood Soups.

As the company moves resources from its other operations and acquires new resources, it must be able to sustain growth momentum in the environment rather than pause and wait for the peak of revenue for the five-year point mark when the final evaluation would be due.

Analysis of environment of Shorewood Soups

According to the Porter’s five forces for competitive advantage, there are five critical forces that a business must look at when it is analysing its external environment.

In Shorewood Soup’s case, the entry into the CPG market makes it a new entrant. Based on this understanding, its biggest concern is threats of substitutes, threats of other new entrants, threats of the existing rivalry within the market segment, and the bargaining power relations with buyers and suppliers. The table below helps to perform the analysis for Shorewood Soups.

Table 1: Porter’s Five Forces Analysis for Shorewood Soups’ new business plan

Force Effect
Bargaining power of buyers Buyers are not organized in the consumer packaged goods segment. Therefore, they have limited power
Bargaining power of sellers The company makes its soup, but suppliers are not organized for other operations requirements; they are many. Therefore, there is no major power held
Threat of new entrants New entrants pose a big threat because they will be eyeing the same market segment. However, no notable new entrants have been identified.
Threat of existing rivalry The existing rivalry is very high; this threat will remain high
Threat of substitutes There are no notable substitutes of soup. There are also limited options for gluten-free products.

Based on the analysis summarized in the table above, the external environment for Shorewood Soups is supporting the business’ new foray into the CPG market. Nevertheless, the threats and opportunities available are critical for influencing the successful strategy that the company has in place (Forlani, Mullins & Walker 2002).

The analysis only considers the new business segment. Notably, there is a projected double increase in the refrigerated fresh soup market segment, which accounts for less than 3% of all retail soup sales. New entrants may be eyeing the market (Gulati & Oldroyd 2005). In the consumer retail segment, the threshold for new entry continues to decrease. A 3% market share with projected 50% growth will appear lucrative.

Another important factor for this indication is that it is a consumer trend, rather than a producer trend; the demand is increasing. Another significant demand trend has been on ready-to-serve broth, whose demand has doubled from 2004 to 2009 to make it constitute 12% of all retail soup sales.

These two market segments are the most lucrative based on Shorewood Soups’ strategy, and that is why they form the biggest environmental variables for the company (Hansen, McDonald & Mitchell 2013). The next section explains how these and associated factors influence the opportunities and threats to the company.

Main marketing opportunities/threats

A SWOT analysis framework will be useful in reviewing the marketing opportunities and threats facing Shorewood Soups, The SWOT analysis is a marketing theory that helps marketers to form a final objective of their project (Hauser, Tellis & Griffin 2006). It highlights the strengths and weaknesses of a business, which also show its internal environment.

It compares them to the opportunities and threats of the business, which make its external environment. The SWOT relies on the right questions being asked, and that is why it is often case specific. In this paper, the SWOT analysis is used to find out the external environment conditions for Shorewood Soups, concerning its intention to launch CPGs (Herbet-Maccaro & Ottley 2012).

Table 2: SWOT analysis for Shorewood Soup

Strengths
– Good product awareness/ brand reputation (30%)
– Gluten-free branding
– A strong marketing team
Weaknesses
– No internal structures for serving CPG market segment
– Untested marketing strategy proposals
Opportunities
– Refrigerated fresh soup segment & ready to serve broth
– Convenient packaging to adapt to trends in increased convenience + healthy options
– Gluten-free branding for CPG
Threats
– Market entry and an increase in product segmentation by dominant players (increased rivalry) such as Campbell

As the SWOT analysis has shown above, there are significant opportunities and threats affecting the prospects of Shorewood Soups. First, the company has to consider launching its new consumer packaged goods product in the two categories earlier highlighted as the most lucrative (Williams, Kannan & Azarm 2011; Şeref, Carrillo & Yenipazarli 2015). They are growing segments of the market, driven by demand.

Major segments of Shorewood Soups & Discussion on types of research of the segments that would be needed to develop a marketing strategy

The company has to consider the level of patience that the consumers have with a new product. This will affect their willingness to try out the new product and stay loyal throughout its testing process in the market. It must also research to find out whether the targeted consumers are replacement buyers, or they are first time buyers.

Other factors to consider in this case include the effect on product reputation that the new product quality and pricing will have on the company’s overall market and its specific market segments. The intention here is to achieve a comfortable level of certainty that allows the management to go ahead with the plan without risking jeopardizing its operations and any of the factors that are highlighted as areas for further research (Pedram & Balachander 2015).

Once the company goes ahead with its announcement of a new product for the consumer market, it will be signalling a change of strategy to consumers and its employees. The company may consider the interaction of the product and its target groups of consumers. It might go ahead with preannouncement to confirm these expectations and have them influence the major product and distribution, as well as marketing decisions.

Besides, it will seek to estimate the right packaging look and size for its most popular product in the segment. It implies that first, there must be a decision made concerning the number of different brands to launch, and whether those brands will have a specific name or tag that associates or disassociates them with the rest of the company’s products (Su & Rao 2010).

Another issue worth looking at is the generational differences among consumers. Based on the preliminary strategy information presented in the case, the company will be targeting people who are in their late twenties and early thirties for its gluten-free consumer brand. Also, it might have to look at whether there are similarities and differences that are worth noting within the targeted years because they influence the effectiveness of a particular direct marketing strategy that it embraces.

So far, the company is considering the use of consumer advertising, point-of-sale and merchandising materials, public relations and partnerships, website enhancements, demos, tastings and events, grassroots promotion, direct mail campaign, and social media. It must use the options according to their cost implication and their ability to achieve the expected sales outcomes (Yannopoulos, Auh & Menguc 2012).

While considering its financial position and projections as a factor for evaluating choices, the company needs to also research on the short-term or long-term nature of the respective marketing strategies (Van Tonder & Mulder 2015).

Lastly, the company needs research on resources that allow it to specialize and achieve competencies that ensure its products are superior to the companies across different consumer scales. Consumer tastes and preferences will need to be established alongside the information presented in reviewing the competency of the firm (Hansen, McDonald & Mitchell 2013).

SMART objectives of the organization

The concept of SMART objectives uses the mnemonic acronym to imply that objectives need to be specific, measurable, assignable/actionable, realistic, and time-related. The objective of Shorewood Soups is to increase its revenue from $100 million to $200 million in five years from the year 2009 to the year 2014 (Ke, Shen & Li 2013).

In addition, the objective will be realized through strategies implemented by the marketing division of the company. The division has been allocated funds for the project, and it will report to the executive on its progress on the project. The achievement of the objectives will be measured by the attainment of revenue growth, which conforms to a projection on reaching the target when the specified period ends (Herpen, Nierop & Sloot 2012).

The objective has to be realistic for it to conform to the SMART criteria. In this case, the company has allocated funds and allowed the marketing division to bring new staff and resources to help (Jonas & Roosen 2008). In addition, this division is the most spirited in the organization and its leadership will not change during the implementation phase of the project. Based on these facts, the projected increase in earnings is realistic.

Besides, the product’s ingredients will affect the typical selling package for a consumer packaged goods segment for soups, as there is a substantial public health concern for gluten intolerance. Finally, the market share that Shorewood Soups takes out of the $5 billion allergen-free foods market value of 2008 can also measure the achievement of the goals.

Explanation of proposed marketing mix strategy

There are four factors worth breaking down in covering the marketing mix. They collectively form the marketing strategies. According to the 7Ps of marketing theory, which extends the 4Ps of marketing, a firm has to look at people, processes and physical evidence factors, in addition to product, place, price, and promotion (Liao, Chen & Tseng 2009). The proposed product is a refrigerated fresh soup brand by Shorewood Soups.

It will be distributed in supermarkets and other conventional stores that target shoppers seeking healthy alternatives to their food (Ke, Shen & Li 2013). The product will be priced within the range of competing products that have a quality attribute, with the price difference being within the range of $1.

The promotion strategy will be multifaceted. It will include five direct marketing options that will be influenced by the reception that the marketing team has with focus groups on its main consumer segments. These segments are the ones that have a substantial population of people seeking gluten-free substitutes as their food (Kulmala, Mesiranta & Tuominen 2013).

The people in charge of the new products will be the marketing team structured to influence operations at the company level and efforts of marketing in the field. Kevin O’Leary will head the team that is in charge of the new marketing strategy. He will coordinate efforts with operations and other divisions of the company to ensure that all aspects of the strategy are well funded and supported. He will manage conflicts among staffs in the implementation team (Lingelbach, Patino & Pitta 2012; Lowe & Alpert 2010).

The processes involved in marketing will include announcements, product design, and promotion of the product during launch and after launch, collaboration with retailers and setting up of competitive strategies for ensuring that the product is visible and dominant in the target consumer groups (Lowe & Alpert 2010).

The products vary in the quality and functionality in comparison to the existing market conditions. These features will be the physical conditions for the product, including its gluten-free ingredients. In addition, the promotional strategies used will include aspects of tasting and merchandising to ensure that consumers are interacting with the physical product (Van Den Bulte 2000; Ngobo 2011).

Justification of proposed marketing mix strategy for Shorewood Soups in overcoming the identified problem

According to the above marketing mix strategy, there are several elements that will be considered for it to succeed. The case study provides information showing the relevance of the proposed options when used as part of the marketing mix (Tatikonda & Montoya-Weiss 2001). First, the most lucrative products are ready-to-serve broth and refrigerated fresh soup. In the first case, the biggest company in the market, Campbell, is serving the segment.

It uses an established brand name based on its licensing agreement with Wolfgang Puck Worldwide Inc. (Herbet-Maccaro & Ottley 2012). This leaves the best option as the fresh refrigerated soup, given that the other options considered in the case are including non-desirable ingredients and, therefore, are less healthy.

They are also less lucrative concerning market growth, given the existing market rivalry in the industry (Tan & Cadeaux 2012). The best strategy is one that includes a product that is in a rapidly growing market. That way, new entrants like Shorewood Soups can capture their share of the market without having to displace the incumbents.

The pricing was arrived at from the consideration that consumers would be sensitive to price. They would welcome a healthy alternative, but only when it is within their grocery shopping allowances. In this regard, it would be able to compete from a price point of view, as well as a quality and functionality aspect.

The place for sale conforms to the popular way of distributing consumer-packaged goods. The case study notes that there are consumers looking for convenient and healthy alternatives (Herbet-Maccaro & Ottley 2012). Such consumers will shop at healthy food stores and food segments in supermarkets. The rival products are also sold at these places (Panigrahi, Ede, & Calcich 2003).

The options presented for promotion are also valid because the “gluten-free” brand is a growing niche product. It has loyal consumer groups that can serve as brand ambassadors and help the company to achieve its objective and still have lower promotion costs. Thus, targeting the groups in a direct manner in social media and testing exhibitions at supermarkets will be excellent strategies (Luo 2010; Olson et al. 2001).

Evidence and theory to show the proposed strategy will work

This paper used various theories of marketing to analyse the opportunities and threats of the business, as well as the elements of the marketing mix. According to the resource-based view theory of competitiveness, a firm can only compete in the long-term when it manages to sustain competitive capabilities that fulfil the value, rarity, inimitable, and non-substitutable elements. An understanding of the theory’s VRIN framework helps to analyse the proposed strategy critically.

The proposed product is valuable and will, therefore, elicit demand from consumers. The marketing team behind the product is well experienced in doing things the hard way. The company culture is valuable to Shorewood Soups at the time of launching the new product (Herbet-Maccaro & Ottley 2012). The rareness in the strategy proposed also helps it to contribute to the competitive capabilities of the firm.

The proposal is to use new forms of marketing in combination with existing forms, such as giving out free samples. These resources are also available in the competition, but they cannot be ignored. Otherwise, the strategy would not work. In addition, there is the gluten-free brand that the company will be using. This branding will help to grow the brand’s personality of the Shorewood product (Swink & Song 2007).

Competing firms may opt to introduce new gluten-free products, but they will not have the same advantage as Shorewood Soups. The company makes its soup and has great control over the quality (Su & Rao 2010; Othman & Rahman 2014). It can promise consumers the best quality that its competitors will not match easily.

The actual product comes in a refrigerated form, which is an acceptable way of storing fresh produce (Schön 2010). The product feature will help the company to sustain its other operations strategies, such as making bulk deliveries to retailers as though they were its clients (Teimoury & Fathi 2013).

The new marketing mix will fit into the existing structure well to create a unique blend that is non-substitutable in the short run. Companies seeking to copy the strategy must first achieve the other attributes of competition enjoyed by Shorewood, which will take them several years (Reffelt, Schmitt & Meye 2013; Şeref, Carrillo & Yenipazarli 2015).

Discussion of implications envisaged for the implementation of the proposed strategy

The company’s marketing division will adopt a new structure when implementing the strategy. There will be a need for an independent team that has access to other departments and works according to the objectives of the project. The team will have less stringent rules to allow it to experiment with various options within the objectives and project deliverable parameters (Amini & Li 2015).

As the team interacts with the project features, it will gain more knowledge about the task and be able to make informed decisions. The decision-making elements and tradition of the firm will need to change to accommodate this new approach (Calantone, Dröge & Vickery 2002). Overall, the company will be making new processes and using change implantation strategies for its internal operations, in addition to the marketing strategies that have been explored in this report (Reffelt, Schmitt & Meye 2013).

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