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In-depth Analysis of E.D. Smith & Sons Ltd.
Commerce 3MC3: Applied Marketing Management
Professor: Marvin Ryder
Date: March 16, 2016
Core: 06
Group Number: 04
Member Names
Student Number
Contents
Appendices
Appendix A: Decision-Making Matrices ………………………………………………………………...
Introduction
E.D. Smith and Sons Limited (referred to as E.D. Smith) is primarily a spread and
sauce manufacturer and distributor in Canada. Their longest and largest market
presence is in the jam, and jelly market. Although this market has stayed relatively
stable in the past, the potential of a free trade agreement with the United States (U.S.)
and trade rumors about decreasing shelf space for all jams, jellies and marmalades has
made E.D. Smith’s management worry about its market position. We have identified the
need to implement a marketing plan that will ensure they maintain a 7.6 - 10% market
share and sell 163,000 - 170,000 cases (per year) regardless of the outcome of the free
trade agreement and trade rumors.
E.D. Smith will need to decide between an offensive or defensive tactic. With an
offensive tactic, the plan is to introduce alternative product lines that will draw new
customers and generate revenue for the business. This source of revenue can be seen
as an untapped market for E.D. Smith. With a defensive tactic, E.D. Smith should
solidify what it does best, making it difficult for new competitors from the U.S. to take
away E.D. Smith’s customers. In addition, the exit of Laura Secord from the jam, jelly
and marmalade market provides potential new customers to the E.D. Smith brand, an
opportunity that can be capitalized on with either the offensive or defensive approach.
Marketing Audit
The target market of E.D. Smith’s jams and jellies consists of Ontario residents
who buy groceries for personal use, such as mothers, children, university students.
These target consumers are interested in buying products with quality ingredients and
minimal artificial additives.
Marketing Mix
Product: E.D. Smith sells pure jam, jelly and lemon spread primarily. Pure jam, their
best seller, contains a minimum of 45% fruit and the remaining amount can contain
only sugar and natural preservatives; it can not contain additives, artificial colours or
chemicals. The jams are available in many flavours: Strawberry, Raspberry, Peach,
Apricot, Cherry, Damson Plum, Blueberry and Black Currant. E.D. Smith also offers a
sugar-free diet line of jams that uses sorbitol, a natural sweetener, instead of sugar. Diet
jams are available in Apricot, Blueberry, Raspberry and Strawberry/Rhubarb flavours.
The jelly flavours are grape, mint and apple. 75% of jam is sold under the E.D. Smith
brand in rounded jars while 25% uses private labelling for brands such as Top Valu,
Domino and President’s Choice. Collectively, the Strawberry and Raspberry jams and
Lemon spread account for 80% of total sales. Lemon spread is especially popular in the
Maritimes.
Price: E.D. Smith is a price taker in the market of jams; they do not influence the market
price of their product, but rather the prices are based in comparison to their competitors.
As a result, the company keeps its price on par with Kraft jams. Currently, they sell for
$2.19 per 250 mL container with an occasional on-sale price of $1.99.
Distribution: All shipping distribution is done by E.D. Smith. The company uses rail to
ship to Atlantic and Western Canada. They use a personal fleet of transport trailers for
deliveries in both Ontario and Quebec. The product is sold primarily in domestic grocery
stores with an emphasis of those in an 80 mile radius.
Promotion: E.D. Smith relies entirely on the strength of its well-established brand name
to sell jams and jelly. In 1974, there was a label design change to showcase the fruit in
the jams and a couponing campaign. However, in recent years, no money has been
spent on advertising jams and jellies.
Internal Analysis
Strengths: E.D. Smith was the first company in Canada to produce pure jam. This
provides E.D. Smith with branding advantage as customers are aware of the brand and
trust the product. E.D. Smith has now expanded enough to compete with multinational
companies. E.D. Smith is an adaptive company. E.D. Smith adapts to new trends and
changes in consumer needs by offering multiple product lines to meet their consumers’
needs, such as diet products, bulk pie fillings and vegetable juice. Multiple product lines
diversify the company’s risks. E.D. Smith also produces H.P.’s sauces for Canadian
consumers. All these product lines provide multiple sources of revenue for E.D. Smith,
and decreases the risk of investment. Alongside, it has modern and efficient
manufacturing capability; innovative technologies reduced operational costs and
streamlined the production process, resulting in maximized efficiency and a reduction in
costs. E.D. Smith is best known for its diet line of jams, which makes approximately
53% of E.D. Smith’s current market share. E.D Smith has made a market niche in the
diet line of jams, which decreases the company’s competition in the market, and
increases brand loyalty. E.D. Smith also handles it’s own shipping. This decreases
shipping costs, and dependability on other companies. Last, E.D. Smith’s management
engages employees by providing them with open door policy, and promoting employee
advancement. This focus results in good labour relations and ensures employees are
satisfied with the working conditions, which is beneficial in decreasing employee
turnover. E.D. Smith uses Canadian local produce, when possible, to remain
sustainable and decrease transportation costs.
Weaknesses: Eighty per cent of E.D. Smith’s pure jams and jellies’ sales are
concentrated in Ontario. Not being present in other markets affects its revenues; the
brand could reach other markets and increase its revenues by settling itself in the US
for example. E.D. Smith does not advertise its jam product lines. Potential customers
may not be aware of the characteristics of the brand, or not even know it.
Being engaged in private labelling for a quarter of its jam products distorts the
brand image, deteriorating customer loyalty.
It has stopped the sales of marmalade products, forcing some customers to
switch their habitual purchases to E.D. Smith products to a competitor’s products.
Overall, the strengths of E.D. Smith outweigh their weaknesses, suggesting that
the company is in strong standing in the market.
External Analysis
Opportunities: The Laura Secord name was recently sold to Nestle, who does not
seem to have any interest in continuing the jam line. If the Laura Secord brand leaves
the jam, jelly and marmalade market space there is 9.5% market share available to
acquire. As Laura Secord is the closest in quality to E.D. Smith there is the opportunity
to gain Laura Secord’s customers. This also reduces the amount of big competitors in
the less competitive marmalade sector. Also, private labels (counting for a quarter of
E.D. Smith’s jam products) are requesting a change in the jam container which looks
similar to the Kraft’s one; this provides an opportunity as Kraft consumers may decide to
buy the private label jam because of similar resemblance.
Threats: A major threat to the Canadian jam, jelly and marmalade market is the
approval of the Free Trade agreement with the United States. With the Free Trade
agreement in place it is expected that Smuckers, the number one producer of jam, jelly
and marmalade in the U.S., will enter the Canadian market. Due to their success in the
U.S. it can be expected that they will become among the top producers in Canada,
making E.D. Smith’s 7.6% market share vulnerable. Although the Free Trade
agreement would provide E.D. Smith the opportunity to easily enter the U.S.
marketplace, it is seen as a greater threat than opportunity.
E.D. Smith are currently price takers. This is a significant threat as the price of
their products are effectively determined by their major competitors, namely Kraft. This
threatens E.D. Smith’s revenues as they may be forced to charge a price that exceeds
their customer’s perceived value of their product.
Rumor, regardless of verifiability, can be detrimental to any business and in this
case may hurt the entire market for jams and jellies. The rumor is that the shelf space
for jam, jelly, and marmalade are about to decrease. If this is true, the biggest and often
sole, distribution method for many producers is shrinking. This increases competition,
which has a negative effect on price, as well as making the distribution of jam, jelly and
marmalade expensive, driving price up. The magnitude of the decrease in shelf space
will effectively determine price for the short term future. Coupled with this is the
possibility that distributors may choose to offer the cheapest product rather than a
variety in an effort to drive their sales. Even if the rumor is not true, should producers
act on this information the market may become a self-fulfilling prophecy. If everyone
cuts production then a shortage will occur. Furthermore, if E.D. Smith chooses to act on
this then their market share will be seriously hurt.
Finally, the threat posed to both E.D. Smith and their competitors is that of any
restriction that natural phenomena may inflict upon the supply of fruits and other
ingredients. Without a diverse product line and/or supply chain, E.D. Smith is exposed
to significant risk should a weather event negatively affect a given fruit the cost of
supplying that jam will react inversely.
It is clear that there are more threats facing E.D. Smith in the jam, jelly and
marmalade market than there are opportunities.
Alternative Strategies
Strategy #1: E.D. Smith could revitalizing the marmalade market by re-establishing the
Orange and Three Fruit marmalades. That strategy should not be too difficult to
implement as E.D. Smith could use its previous recipes from the product line that was
discontinued twenty years ago. Those marmalades could be positioned as an oldfashioned line, and thus, perhaps be sold at a premium price. Buying a new plant is not
conceivable for now; E.D Smith will have to find room in its existing manufacturing
facilities for the production of the new product line. Laura Secord is leaving this market;
this is an opportunity for E.D. Smith to take their marmalades’ market share and
increase its revenues as these two brands are perceived rather similar to their
customers in terms of taste and quality. E.D. Smith would only face two major
competitors (Kraft and Shiriff) in this new market. However, the demand for marmalade
product is declining of 8% per year, resulting in the shelf space for it to be reduced.
Since E.D. Smith currently does not advertise neither of its products, it loses the
opportunity to reach out to potential customer interested in purchasing marmalades.
Strategy #2: Moving forward E.D. Smith could take a defensive stance. Through
solidifying their market position they will be better equipped for the imminent influx of
competitors due to the free trade agreement. To do so, E.D. Smith must drop Black
Currant, Damson Plum, Cherry, and Peach jams. Additionally they should drop Apple
and Grape jellys. Strawberry, Raspberry and Lemon jams need to become the focus of
their operation as those flavours account for 80% of E.D. Smith’s sales. While Apricot,
Blueberry and Seedless Raspberry are outside the aforementioned percentage of sales,
there are few competitors for those flavours so continued production of these jams are
justifiable by the product specific market share they occupy. After their market position
has been solidified they can begin to see greater market share. Using capital relieved
from the cancellation of less profitable product lines, E.D. Smith can launch a branding
campaign to expand their market share. By establishing their product as multi faceted
they will be able to counteract the projected shrinkage of the jam market. Relaunching
their jam as a baking ingredient such as cake or pie filler can provide a boost to their
sales. No alterations to the core product line are necessary. The jams would simply
require an alternate packaging that specifies the product as a baking ingredient. By
maintaining the composition of the product, E.D. Smith saves on and Development
costs that may have been incurred in the launching of a brand new product.
Furthermore, conditional on the success of the rebranding, supplementary products
could be introduced. The addition of a measuring cup inside the cap of the cans that are
branded as baking ingredients can make our product more appealing to consumers.
The danger with this strategy is that by repackaging a portion of the cases,
cannibalization of jam might be experienced. Secondly, the under diversification of the
product line exposes the company to risk regarding any restrictions on the supply of raw
materials.
Strategy #3: E.D. Smith can develop a market niche for itself by focusing on unique
flavours of speciality jams and jellies. Developing market niche is these unique flavours
will repel Smuckers from entering into this niche. In addition, these markets would have
very minimal to no competitors, increasing the probability of being successful in the
market. This strategy has the potential of increasing E.D. Smith revenues permanently,
if successful. Unfortunately, in order for E.D. Smith to be successful, they have to sell
more than 4000 cases of each new flavour. It takes 4000 cases of a new flavour to
break-even, meaning a new flavour costs $68,000 roughly ($17.00 per case). Assuming
a higher selling price for specialty flavours, and the same cost as the regular flavours,
the profit margin on each jar would be higher so profit could be great once the breakeven point is reached. To successfully develop market niche, market research needs to
be conducted to gain insight on which new flavours consumers would prefer; E.D. Smith
likely does not have the resources to conduct this research. Even if consumer flavour
interest research was conducted, new recipes would need to developed for each new
flavour. Once produced, promotion of E.D. Smith’s new jam and jelly flavours would be
required to ensure that customers are aware of the availabilities. Overall, this strategy is
riskier than the rest; however, the return on revenue to this strategy is significant if
successful.
Recommended Strategy
Five criteria were used in the evaluation of the alternative strategies: the revenue
potential, being a low-risk strategy, the cost of the implementation, the time it takes to
implement the new strategy, and the increase in brand awareness that it would bring to
the company. The decision matrices in Appendix A shows the weight, score and
justification for each of the criteria used in evaluating the three alternatives. The second
alternative, focusing on the most profitable and least competitive jams, was chosen as
the best alternative for E.D. Smith. This alternative received the highest score in the
decision matrix and is the one that would make the E.D. Smith brand the strongest in
the long run. The company will become known for producing the core flavours of jam,
won’t be using money to produce flavours that don’t bring in as much revenue to the
company, and will be in a defensive position against Smuckers entering the market.
The third strategy was rejected mainly due to the costs involved. This strategy
would take a lot more money and time to implement: new recipes would need to be
formulated and testing would need to be done to ensure that the target market would
actually purchase the product. The break-even point on any new flavour introduced by
E.D. Smith is 4000 cases, which can be very difficult to reach for an odd, new flavour
that is not normal or familiar to consumers; this strategy is much riskier because
consumers may not adopt the new flavours. This strategy would also need more
promotion for the unique flavours which would end up increasing the break-even point.
The first alternative, revitalizing the marmalade flavours, was rejected because
the marmalade market has been declining steeply for the past years, and is assumed to
continue in the same manner. Within a few years, the marmalade market may be
virtually non-existent. Since E.D. Smith would be the new company in the marmalade
market, they would not have any customer loyalty in this segment, no contracts with
retailers for shelf-space so there would be many difficulties with this market.
Implementation Plan
To implement the plan of reducing our product line to the six flavours mentioned
above, by halting production of all the other flavours immediately. The time to transition
production facilities will be approximately three months. During this time, the facilities
and equipment that is being used to produce the flavours that are being discontinued
have to be prepared to start production of the five continuing flavours. Distribution will
also have to change, the suppliers from the produce that will no longer be needed must
be contacted and contracts terminated. E.D. Smith will need to find new suppliers of the
produce that will still be needed, strawberries, raspberries, lemon, blueberry, and
apricot, as the company will need to make more of those flavours and their current
suppliers can’t be expected to be able to increase the amount of produce that they are
selling to E.D. Smith right away.
After the production has been switched, the new marketing needs to be
addressed. It should take 9 months in total for the marketing mix to be converted to the
new strategy. The packaging will need to be changed on the product to show people
how to use the jam as a cake filling and in other things such as baked goods. The
promotion to bring awareness to the multiple uses and possibilities for this product will
need to start at this time. Television commercials or booths in grocery stores would be
useful in this situation. This promotion should start a week before the new packaging is
released to bring awareness to the uses of the jams before the rebranding of the
product line. This will ensure it sticks in people’s minds. The idea will be implanted into
their mind when they see a commercial or the booth in the grocery store. Then soon
after, when they purchase the product again, they will see the new label with
instructions for alternative uses and that will trigger the memory from before. They will
be more tempted to try the product in a different use. If we can get our customers to
start using the product as a pie filling or in their desserts, that increases the size of the
market and causes them to consume more of the same product, one of the ways to
increase revenue and profit.
Appendix A
Decision-making Matrices Used to Access the Three Alternative Strategies
Weight
#1 (discont.
+pie)
#2 (specialty)
#5
(marmalade)
Increase Revenues
2
1x2=2
Assuming new
revenues from
cake filling will
be greater than
lost revenues
from
discontinued
products
3x2=6
Assuming we
will generate
new revenue
from these
flavours as
they will be
places at a
premium price
as well
1x2=2
L.S leaving so
we can try to
get their old
customers.
This may be a
2 because of
the low
competition?
Risk-free
2
2x2=4
Defensive
tactic by
reducing the
lines we carry,
some risk in
the new
branding
1x2=2
Offensive
tactic, unknown
how customers
will respond
2x2=4
L.S leaving,
market share
up for grabs.
Marmalade
declining
market
Cost of implementing
this plan
1
2x1=2
1x1=1
Costs relieved
Huge costs from reducing
new recipe,
products will be new packaging,
spent on new
etc
branding
2x1=2
Costs with
reinstating the
product
manufacturing
costs, etc.
Short implementation
time
1
3x1=3
Discontinuing
will be
relatively fast,
re-branding a
bit longer
1x1=1
New product
entirely
2x1=2
Old product
coming back
Increase in Brand
Awareness
1
3x1=3
New market,
some money
on promo
1x1=1
1x1=1
14
11
11
TOTAL
NOTES:
Strengths:
1) First pure jam produced in Canada (if we want to position this as a strength
maybe restate it as a branding strength. I.e. people know and trust ED Smith,
been around a long time)
- known for ‘pure’ jams and jelly
- also known for its diet jam lines
2) new product lines - multiple product lines - diversified risks
- diet products, bulk pie fillings, vegetable juice
- in multiple industries (institutional products, olives, pickles, specialty
products, chili sauce relish)
3)modern, efficient manufacturing capability, able to adjust to new trends and and
changing markets
- computers aid in controlling operations
- streamlined production process
4) company handles its own shipping (why is this a strength?)
5) management: team spirit promoted, ensuring good labour relations -> innovation
- providing an open space (“open door policy”) for employees to voice their
opinions and concerns
- employee advancement encouraged: subsidized courses offered
- used local domestic [Canadian] produce as much as possible
- retail selling price very similar to that of competitors (not sure this is a strength, more so
a fact)
External Analysis
Opportunity: Switching the private labelling to square bottles
○ (as this is being put forth by private carriers it can be regarded as a threat
or an opportunity - what do y’all think. also it can be seen as an alternative
strategy maybe. kinda confused about this one)
■ I think it’s more of an alternative strategy than an opportunity
Strategies
#1
#1 - open an operation in BC or Alberta
#2 - Promotion
-flag down a chain to increase awareness
1. defensive posture- eliminate some of the varieties
a. keep strawberry, raspberry, lemon which account for almost 80% of sales
b. possible risk of under-diversification, possible risk of environmental
conditions devastating crops
c. keep flavours that have fewer competitors (apricot, blueberry)
d. Use relieved capital on promotion strategies
e. Rebranding in the past (label design - 1974) which halted their decline in
sales
Side note For Implementation i guess
Include supplementary product with the bottle (measuring cup in the cap)
2. focus on unique flavours of speciality jams and jellies
a. new flavour had to sell at least 4000 cases to break even
b. profit margin on each jar would be greater
c. $68000 for new case (what does this mean??)
d. cons- most likely need promotion to get market to embrace new product
line
e. Would need to develop new recipes
f. Would need to do more market research to see what flavours would be a
success (we do not have capital for this)
g. risky
3. Relaunch or reformulate the product
a. change packaging and branding or change the entire product (ex. formula
for making the jams)
4. launch jams/jellies into United States
a. within 80 mile radius of Winona to keep shipping costs low
b. pros- shipping costs low, niche, already well established so good
distribution channels
c. cons- heavier competition in US, unknown market, Buffalo sucks.
5. revitalize Orange and Three Fruit Marmalade
a. marmalade is a declining market
b. ends may not justify the means
c. opportunity Laura Secord is leaving
d.
e. To make the product would we need more capacity at our manufacturing
plants or do we have space? Would we need to cut other lines to make
room? Would we use the same types of jars?
f. marmalade is a declining market 8% PER YEAR DEMAND → ends may
not justify the means
g. Could be positioned as an old-fashioned line (premium)
h. opportunity Laura Secord is leaving - can take their market share of
marmalade (tastes tests ubducated that their flavour was equal to ed
smith) (same target market: consumers looking for better prodcuts with
better tasts), will only have 2 big competitors (Kraft and Shiriff)
i. Rumors shelf space is going to decrease for marmalade & jam/jellies so
this may cannibalize some of our shelf space
j. Introduced a new line in the past (diet - 1978) which halted their decline in
sales
6. offensive move- launch second line of E.D. Smith jam and jelly line
a. regular and premium/old-fashioned lines
i.
different price points, packages, labels, recipes, separate promotion
support
7. Buy Laura Secord’s Jam product line?
a. acquire market share
Implementation Plan
● Length of implementation - halt production immediately, lag time up to 3 months
to switch production, implementing newly branded cake fillings 9 months?
● Stop production of (obscure flavours black currant, damson plum, cherry)
● Use lines for production of focussed flavours
● ………..