Pillsbury Cookie Challenge Marketing Plan Date 2017-09-27 Presented by: Tang, Si (Recorder) Carstensen, Micheal Knelsen, Brenda Pratheeharan, Dushyanthy Schmitz, Nicholas Ghorbani, Negin Executive Summary Ivan Guillen had worked as the marketing manager for RBG (refrigerated baked goods) at GMCC for two years and had witnessed stagnant growth and falling household penetration, which Guillen wanted to change. To find out the cause, Guillen conducted consumer insights that involved qualitative research (in-depth studies conducted at consumers’ home or with large groups of people) and quantitative research (measurement and analytic based to discover different variables, e.g. questionnaire). The result provided some striking differences which was previously thought to be almost the same. Significant differences were: prevalence of scratch baking in Canada (61% Canadian vs 49%), Canadian mothers’ view of having fun with kids, and Canadian kids’ view of a fun activity. As for baking method, RBG plays such an important role at GMCC. 75% of RBG profit came from cookie sales. Almost half (43%) of GMCC’s 2006 sale came from RBG category. Generally, when cookie sales performed well, other products in RBG tended to perform well. There are four alternatives that are discovered for Guillen: 1. Market existing customers to increase purchase frequency 2. Development a marketing campaign specifically for Canadian market 3. Introduce Canadian specific new flavours and products 4. Status quo We have recommended developing a Canadian specific marketing campaign (Alternative 2) to address the findings of consumer insight in order to offer a better baking experience to scratch baking users: a better way to have fun with kids and share time with family using less time and effort, which existing advertisement did not address based on Canadian climate and consumer preference. Meanwhile, Alternative 1 is used to address customer retention and migra ting existing nonfrequent users to brand champion, ensuring, first, GMCC does not loose existing customer base to outside competitors, and, second, paving another way of generating more profit. Should the alternatives don’t work as intended, we would foll ow Alternative 3 after studies with focus group, concept tests, evaluator’s tests, and creative testing done prior to launching a new product designed for Canadian market. C ompany Name Problem Statements Main problem: How to increase in product sales under the circumstance that the sales had been stagnant in the past two years, and increase hous ehold penetration? Other problem Current marketing plan, borrowed directly from its USA counterpart, did not seem to work. Company Objectives GMCC intended to achieve annual category growth of 5% to 7%. Historically, when cookies performed well, the entire category tended to perform well. Among the category of refrigerated baked goods (RBG), cookies was the most profitable. Therefore, GMCC wants to focus on the growth in cookie sales. Company Background General Mills in Minneapolis, MN, which had three operating segments: U.S. retail, International, and food service, owns General Mills Canada Corporation (GMCC) that operates completely autonomously from its parent company. GMCC had four business units: breakfast, baked goods, meals, and snacks, in which these units were divided to 12 categories. Each category had a dedicated marketing team (headed by managers like Ivan Guillen), and all the teams worked with cross -functional partners. Baked goods were further divided into “categories” such as RBG, pizza snacks, mixes and frozen breakfast foods. The category of RBG’s most profitable stock keeping unit (SKU) was cookies. It represented 62% of RBG’s total unit volume and 75% of RBG’s profit. GMCC held No. 1 or No. 2 in virtually all the categories it competed in. Its Pillsbury brand was widely accepted in Canada and had been in presence for more than 40 years. The Pillsbury Doughboy still played a key role in brand advertising. Situation Analysis Strengths Brand name recognition Cute Pillsbury Doughboy RBG products are easy to make Strong distribution channels Good product placement in stores 6th largest food manufacturer GMCC is a leader in the Canadian packaged foods 85% Market share in refrigerated baked goods category Pillsbury products are known for convenience and family appeal Weaknesses Focus on cookie performance US ads adapted to Canadian market rather than created for Canadian market Household penetration in Canada only 24% Lack of understanding of Canadian market Focus on TV ads instead of other forms of media 11/23/2017 Marketing Plan page 3 C ompany Name Volume growth at 1% in the past three years, nearly flat Cookie commercial “Kisses” campaign worked fine in the U.S. but not Canada Opportunities Focus on cookie performance US ads adapted to Canadian market rather than created for Canadian market Household penetration in Canada only 24% Lack of understanding of Canadian market Focus on TV ads instead of other forms of media Threats Focus on cookie performance US ads adapted to Canadian market rather than created for Canadian market Household penetration in Canada only 24% Lack of understanding of Canadian market Focus on TV ads instead of other forms of media Market Analysis According to Agriculture and Agr-Food Canada, “the bakery market in Canada, including frozen bakery and desserts, registered total value sales of C$8.6 billion and total volume sales of 1.2 million tonnes in 2011. The bakery category was the second-largest segment in the total packaged food market in Canada, representing 17.6% of value sales in 2011. However, the proportional sales of this category, relative to other sub-categories, experienced a slight decline in each year over the 2006-2011 period.” (International Markets Bureau, 2013). GMCC had been performing poorly between 2006 and 2011 when it saw its market share declined gradually from 3.5% to 2.8%. Top players in descending order in Canadian bakery market were George Weston, Kellogg Canada, Maple Leaf Foods, Kraft Foods, General Mills, and Saputo. Due to its highly fragmented nature in food categories, top 10 companies only represented 28% of new product launches while the rest 72% was shared by the rest 938 companies during the 2006 -2012 period (International Markets Bureau, 2013). Marketing 4P Product Price Place Promotion Chub $3 All major grocery retailer Buy 2 for less, family limit Ready-to-bake $5 All major grocery retailer Buy 2 for less, family limit Seasonal Sold for a premium All major grocery retailer Halloween, Easter, Valentine, Christmas Segmentation **Based on behavioural segmentation Segment # Name Qualifying dimensions Who? 11/23/2017 1 Users 2 Lapsed Users 3 Non-users Purchased refrigerated cookie dough in the past 12 months Purchased refrigerated cookie dough over 12 months ago Never purchased refrigerated cookie dough Marketing Plan page 4 C ompany Name What? When? Where? Refrigerated baked goods Often Grocery stores; food service operators easy and quick to make; tasty, create happy memories 24% Baking mixed Occasionally Grocery stores; food service operators easy and quick to make; tasty Beginning to focus on nutrition Purchase at random Natural organic baking Other Increasing in households with kids Family enjoyment Determining dimensions Benefits sought Convenience and taste, create memories with kids Convenience and east to clean Usage rate Often Seldom Easy to make at the spur of the moment and kept on hand when needed Never Why? Segment size Trends 16% Scratch Never Grocery stores; food service operators Users are heath conscious 61% Purchase their goods from raw, not ready made What is the targeted market? Scratch users are being targeted as MarketTools indicates that 56% of the entire Canadian market bakes from scratch and 33% do it every month. This is a highly valuable untapped market, instead of keeping focus on frequent users who were already use Pillsbury brand often. What is their current market? Target market is mothers in the 30-40s who lead an active and busy lifestyle. She is looking for time serving and convenient product that she can enjoy and crate happy memories with her family . What is their potential market? The potential market should include lapsed users and non-users whom don’t purchase frequently due to healthy concern for their family. RBG can come up with new product possible with organic ingredients. Competitive Analysis What is the status of their direct and indirect competitors? Manufacturer Product Promotion Market size General Mills Canada Big Delux oatmeal raisin cookies, Sugar Cookies, Chocolate Chip Cookie, Seasonal features and chub and ready to bake Use of Pillsbury dough boy 85% Nestle Tollhouse, Chocolate chip, Sugar cookie dough, Seasonal and ready to bake Discounts, Coupons Walmart/Others Great value chocolate chips Ready to bake, low cost Direct competitors Pillsbury RBG is controlling 85% of the Canadian market share in the refrigerated baked goods categories. Direct competitors are Nestle and Walmart. Nestle is active in both Canadian and US markets. Nestle 11/23/2017 Marketing Plan page 5 C ompany Name product is well known to families and considered to be good quality and pricing is similar to General mills and offer seasonal features. Furthermore, Walmart is operating throughout North America and it adopts low cost pricing strategy. Indirect competitors Scratch bakers and local bakeries would be considered as indirect competitors. According to the market research, there is 61% bake from scratch in Canada. Scratch bakers know what ingredients they are using for the product. They follow family baking experience and carries down recipes as family tradition. Local bakeries are mostly owned by local residents and they use natural ingredients and may no t be available in all areas. Positioning Local Bakeries Scratch Taste/Quality General Mills/RBG Nestle/Toll house Walmart/Great Value Price/Cost Financial Analysis The current refrigerated baked goods market (RBG) in Canada is $291.6 million per year. Pillsbury is the largest manufacturer and holds an 85% market share, which represents $247.86 million in sales. Th e main products driving this strong market share are their cookie SKUs. The cookie SKUs are responsible for 75% of the RBG profit for Pillsbury. If we assume that General Mills Canada Corporation (GMCC) enjoys the same 9% net profit margin on total sales a s their consolidated parent company, the total sales value of the cookie SKUs for Pillsbury would be approximately $193.4 million or 78% of the overall RBG sales for GMCC combined with their 62% of unit sales in this category (International Markets Bureau, 2013). Although Pillsbury is enjoying a large market share and achieving good net profits, the growth of the RBG market has been flat. The market penetration for the cookie SKUs in Canada is only 24%. Of the 24% of individuals that use RBG products 68% of them also bake from scratch and 37% also use baking mix. This low market penetration presents an opportunity for GMCC to reposition their cookie products in Canada to better compete with scratch users and baking mix users. Thi s repositioning requires the development and implementation of a tailor made Canadian marketing campaign. 11/23/2017 Marketing Plan page 6 C ompany Name This tailor made marketing campaign will include a new advertising spot, concept tests, evaluators, focus groups, product tests, and creative testing. The new advertising spot will be made for TV and also adapted for social media platforms. The exact total cost of this marketing campaign will range from $300,000 to $740,000 with the mid of the range being $550,000. A break even analysis was completed us ing three scenarios with estimated marketing costs of $300,000, $550,000, and $740,000. In order to calculate a breakeven point we have used an average retail sales price of $3.99 and assumed that the retail sales price includes markups of 40% by the retai lors and 30% by the distributors, as well as a cost of sales of 59.8%. This would result in a contribution margin of $1.54 per unit. In order to break even we would have to sell 240,416 units (low), 360,624 (mid), or 480,832 (high). If these new marketing efforts are successful in helping us to increase our market penetration resulting in achieving and maintaining 5% growth in sales for the cookie segment of the RBG category for this year and the following two years, we would see total sales increases of $2 03 million in year 1, $213.2 in year 2, and $223.9 million in year 3. The marketing expenses required to reposition our products in Canada and achieve a 5% growth rate in both cookie sales and RBG segment would result in a net return on investment ranging from 4940% to 2470% on the cookie SKUs (International Markets Bureau, 2013). Key Factors Key Opportunities Canadian market penetration Explore family-oriented baking Key Success Factors Re-package the product Advertise and promote the product to the target audience Awareness Key Uncertainties Competitive Reaction Consumer Acceptance Effectiveness of marketing message Product that suits local market Alternatives 1 – Market to Increase Frequency of Purchase The refrigerated cookie market already has loyal consumers that Pillsbury calls their Brand Champions. These consumers are familiar and comfortable with the product so there isn’t the challenge of trying to move a consumer in a new direction. If these consumers purchased more often, sales could increase the desired five to seven percent. Increasing the frequency of existing television ads will increase sales through repetition of the suggestion to buy. The advertising should be expanded to include internet banners and Fa cebook ads that demonstrate new preparation methods or recipes that include the refrigerated cookie dough, but create different things. New ideas and suggestions give existing customers a new reason to buy. Expanding the in store marketing and promotional material would remind existing customer to pick up the product while shopping, and coupons that offer savings for purchasing larger quantities could be available as a shelf talker. 11/23/2017 Marketing Plan page 7 C ompany Name Pros: Using existing ads is cost effective Customers are already familiar with the product New recipes using cookie dough may also bring back the lapsed users Cons: Does not expand the pool of consumers Brand awareness will not increase quickly Market may already at or near capacity, no room for growth 2 – Develop a Marketing Campaign for Canadians The cookies usage and attitude study revealed that Canadian customers are more different from the American customers than originally thought. Canadians scored higher on purchase drivers that relate to fun with kids and children’s wants than those in the US. A new marketing plan should be developed that focuses on these aspects of Canadian families. New television ads that show families having warm cookies together after skiing, skating or making snowmen in the winter, and at the cottage or as an activity to do with kids on summer vacation would make customers see cookies as a special part of Canadian culture. The packaging would be redesigned to depict scenes and activities with a Canadian flavor. Pros: Customers start to identify the brand as part of Canadian culture Promotes family values and the image of the brand Address the gap between US and Canadian consumers Cons: Additional research might be required to narrow target market Development of custom advertisements will be more expensive Advertising designed for one country is not as useable in other countries or markets Risk of loss of profits if investment in new ads and marketing materials are not successful 3 –New Flavors and Products The refrigerated cookie product line is limited to just three flavors, Chocolate Chip, Chocolate Chunk and Peanut Butter, plus the seasonal, gingerbread and sugar cookies. It’s not a lot of selection. The addition of Oatmeal or Oatmeal Raisin, White Chocolate Macadamia Nut, Chewy Chocolate Br ownie and Shortbread could be offered in chubs. Sugar cookie kits in a ready to bake package that have larger cookies for decorating, without the need to roll out the dough, and including icing and decorations could be offered in themes like Birthday Cake, Christmas Shapes, Valentine’s Day, and Mother’s Day would be fun activities for kids to bake, decorate and give as gifts. Pros: Expand selection to appeal to different tastes Decorating with the kids concept is in line with the purchase drivers in Canada Expand product offerings that use existing technology and processes is less expensive than all new products Kits and premium flavors may be sold at higher price points and increased profitability Larger selection may give consumers an incentive to buy more quantities at a time 11/23/2017 Marketing Plan page 8 C ompany Name Cons: Development of new recipes will be an additional expense Kits would require new packaging to be designed and produced at a cost Additional SKUs would require more inventory to be maintained 4 - Status Quo The refrigerated cookie product line is already 62% of the refrigerated baked goods category, and 75% of the category’s profit, which could be considered acceptable and not worth the risk of change. However, growth has been flat for the past few years, and household penetration has fallen to 24%. If this trend continues, growth will start to decline and revenues will be affected. With refrigerated cookies being the anchor and most profitable product line, even a slight decrease will have a negative impact on the whole category. Pros: Cost efficient Effortless to maintain current marketing plan No requirement for additional research or product development Cons: Falling market penetration will likely continue Revenues and profits will start to fall Brand awareness could decrease Recommendations Alternative 1 and 2 are recommended here. In Alternative 2, GMCC did implemented numerous Canadian-specific marketing initiatives, with all advertising were directly from GM, but none of it showed any positive result. Pillsbury doughboy image had received wide consumer acceptance in the past 40 years. The “kisses” commercial was indeed successful in that it appealed mothers and kids (which were their potential customers), but it focused on the product while not addressi ng customer’s potential concern: time saving. The “kisses” commercial even surpassed Milward-Brown measurement in “likely to buy”, “brand recognition”, and “relevance”. Based on the consumer difference (“fun thing to bake with the kids”, “kids like to make them”, “fun activity with kids”, and “kids like to eat them”), the new commercial will feature a time-starved mother busy preparing cookies after their kids finished their outdoor activities, starving and looking for fresh cookies to munch. The commercial ends with mother spending time with her children sitting at a warm place (couch or dinning table). Alternative 2, meanwhile, helps consolidate the consumer base in Alternative 1 which is intended to defend and grow GMCC’s existing customer base. Existing customers, upon recognizing new benefits, are more likely to use cookie dough in other occasions as the benefit of the product is “saving time and less effort”. We have not found any reasons to go ahead with status quo, for obvious reasons that the growth had been stagnant and falling household penetration rate. If we don’t do anything about it, Pillsbury Doughboy is viewed as famous and popular, but nobody buys the product. It is of Guillen’s and GMCC’s interest to change status quo. 11/23/2017 Marketing Plan page 9 C ompany Name We also do not recommend Alternative 3 of launching new product yet, when we haven’t evaluated the outcome of Alternative 1 and 2. In addition, launching new product consumes more time and money. Action Plan The idea should be discussed between managers to reach consensus as soon as possible Date Immediately 7 days from today 14 days from today 21 days from today 28 days from today 35 days from today 42 days from today 70 days from today 84 days from today 112 days from today Item Discuss with GMCC marketing manager Discuss with GMCC marketing manager Getting category managers on board Either invite MarketTool or develop survey measurement internally Survey employees Description Ian Guillen should meet with GMCC marketing manager to discuss the issue Ian Guillen should obtain GMCC’s marketing manager’s support and reach agreement on the current situation Draw diversity and expertise to develop ideas about new commercial Develop surveys and measuring matrix for GMCC-wide discussion Invite employees to complete survey and discuss the new commercial ideas. Leave a section where employees of GMCC can express freely about how the new commercial should be Apply for advertisement Discuss with marketing manager of GMCC to ensure funding will funding be available for making new commercial. GMCC is fully autonomous from its parent company and have the ability to develop new product, brand strategies, and consumer branding Make commercials Develop new commercials using existing resource or contact outside agency for making commercial GMCC internal evaluation Category managers and employees will submit ideas based on MarketTool measurement Consumer insight Invite Ipsos to conduct market research on behalf of GMCC by choosing selective Canadian audience for review Mass commercial broadcast Allow new commercial to go on air Contingency Should the sales remain stagnant, we choose to go with Alternative 3: launch new product with new flavours. Adding new flavours involving maple syrup products compliments GMCC’s existing products such as Oatmeal Crisp Maple Nut cereal. The act also corresponds to current market practises which saw 51.8% of frozen bakery products as new and 39.1% were new variety (International Markets Bureau, 2013). It was the competition’s requirement that launching new products and/or retiring old products were the common industry practises. However, prior to launching a new product, a thorough consumer insight must be conducted to confirm the demand, product design, and cons umer acceptance. 11/23/2017 Marketing Plan page 10 C ompany Name Appendix Exhibit 1 – Brief details about numbers Low High Target Growth TV Ad Cost Cookie Regular Price Cookie Sale Price 5% 200,000 2.99 1.99 Market Penetration 24% Total Sales US Sales International Food Service $ $ $ $ 11,600,000,000.00 8,004,000,000.00 1,856,000,000.00 1,740,000,000.00 Canada 566,000,000 Total Bakery Market 2006 Total RBG Sales 2006 % Canadian Bakery Market $ $ Total RBG sales at 85% $ 11/23/2017 7% 500,000 4.99 2.99 Marketing Plan 30% 7,332,100,000 291,600,000 4% 247,860,000 page 11 Exhibit 2 – GMCC cookie sales percentage and numbers Entity Fiscal Year Ended Net Sales Costs & Expenses Cost of Sales Selling, general, and administrative Interest, net Restructuring and other exit costs Divestitures (gain) Debt Repurchase Cost Total Costs and Expenses Earnings before Income Taxes & After Tax E Income Taxes After-tax Earnings from Joint Ventures Net Earnings Earnings per Share - Basic Earnings per Share - Diluted Dividends per Share $ $ $ $ $ General Mills Consolidated 28-May-06 11,640,000 6,966,000 2,678,000 399,000 30,000 100% $ 60% 23% 3% 0% $ $ $ $ Actual 2006 Results General Mills Canada 28-May-06 566,000,000 100% $ 338,724,742 130,218,900 19,401,546 1,458,763 60% 23% 3% 0% $ - 0% $ - 0% $ $ - 0% $ 87% $ 13% $ 5% $ 1% $ 9% $ - 0% 87% 13% 5% 1% 9% $ $ $ $ $ $ $ $ $ 10,073,000 1,567,000 541,000 64,000 1,090,000 3.05 2.90 1.34 489,803,952 76,196,048 26,306,357 3,112,027 53,001,718 RBG Sales 28-May-0 247,860,000 $ $ $ $ 148,332,711 57,024,835 8,496,232 638,81 $ $ $ $ $ 214,492,593 33,367,407 11,519,954 1,362,804 23,210,258 C ompany Name Exhibit 3 – Projected Income Statement for the year ending 2007-05-28 Assume 5% Increase Cookies Sales 28-May-07 Entity Fiscal Year Ended Net Sales Costs & Expenses Cost of Sales Selling, general, and administrative Interest, net Restructuring and other exit costs Divestitures (gain) Debt Repurchase Cost Total Costs and Expenses Earnings before Income Taxes & After Tax E Income Taxes After-tax Earnings from Joint Ventures Net Earnings Net increase in sales Net increase in profit 11/23/2017 Assume 5% Increase Cookie Sales 28-May-08 $ 203,089,755 100 % $ 121,539,796 60% $ 23% 3% $ $ 0% $ $ $ 46,724,602 6,961,582 $ 523,427 $ Assume 5% Increase Cookie Sales 28-May-09 213,244,242 100 % $ 223,906,455 100 % 127,616,786 60% $ 133,997,626 60% 23% 3% $ $ 0% $ 49,060,832 7,309,661 549,599 51,513,873 7,675,144 577,078 23% 3% 0% $ - $ 0% - $ 0% - 0% $ - $ 0% 87% $ $ 0% 87% $ 0% 87% $ 175,749,407 184,536,877 193,763,721 $ $ 27,340,348 9,439,137 13% 5% $ $ 28,707,365 9,911,094 13% 5% $ $ 30,142,733 10,406,649 13% 5% $ $ 1,116,645 18,278,078 1% 9% $ $ 1,172,477 19,191,982 1% 9% $ $ 1,231,101 20,151,581 1% 9% $ $ 9,670,941 870,385 Marketing Plan $ $ 10,154,488 913,904 page 13 $ $ 10,662,212 959,599 C ompany Name Exhibit 4 – Estimate of Advertising Expenses Advertising Expenses: Low Mid High Advertising Campaign $ 20 $ 350, 0,000.00 $ 000.00 500, 000.00 Concept Tests (One Per Province) $ 20,000.00 $ 3 $ 40,000.00 0,000.00 Evaluator $ 10 $ 100, 0,000.00 $ 000.00 100, 000.00 Focus Groups / Products Tests / Creative Testing $ 50,000.00 $ 7 $ 5,000.00 100, 000.00 Total $ 37 $ 555, 0,000.00 11/23/2017 Marketing Plan 000.00 page 14 $ 740, 000.00 Exhibit 5 – Break even analysis and ROI Current Cookie Sales based on Profit Margin Analysis Total RBG Sales $ 247,8 60,000 Total RBG Profit $ 23 ,210,258 Profits attributable to Cookies (75%) $ 17 ,407,693 RBG Profit Margin 9% Total Cookie Sales (Assuming same $ 193,4 margin) 18,814 Break even Analysis: Average RSP DSP (Assume 40% markup) MSP (Assume 30% markup) Cost of Sales (59.8%) Contribution Margin ($) 3.99 2.85 2.19 1.31 1.54 Low Mid Break-even (units) 240,416 360,624 Break-even (Dollars) 370,000.00 555,000 High 480,832 740,000 Return on Investment Total Cost of Marketing Campaign Sales (Estimated 5% Growth) 370,000 $ 89,755 203,0 555,000 740,000 $ 55 $ 755 203,089,7 203,089, Net Profit $ ,278,078 Return on Investment Year 1 18 4940% $ 8,078 18,27 3293% $ 8,078 18,27 2470% References References International Markets Bureau. (2013). Consumer Trends - Bakery Products in Canada. Ottawa: Her Majesty the Queen in Right of Canada. Retrieved from Agriculture and Agri-Food Canada: http://www.agr.gc.ca/eng/industry- markets-and-trade/foreign-market- information-byregion/canada/consumer-trends-bakery-products- in-canada/?id=1410083148462