- Political/Legal/Regulatory:
- The Federal Food, Drug, and Cosmetic Act (FFDCA) requires that pet foods, like human foods, be safe to eat, produced under sanitary conditions, contain no harmful substances, and be truthfully labeled. In addition, canned pet foods must be processed in conformance with the low acid canned food regulations to ensure the pet food is free of viable microorganisms (see Title 21 Code of Federal Regulations (CFR), Part 113).
- Many ingredients such as meat, poultry and grains are considered safe and do not require pre-market approval.
- Sales of dog food totaled about $10 billion in 2009.
- Dog population has been growing at a rate of 1.2% every year in the United States.
- The dog population in the U.S. was 65 million in 2009.
- The U.S. owned dog population of 65 million, spurred on by the owner’s desire for companionship or need for protection, is growing steadily and is expected to continue growing.
- Internal Analysis:
- Strategic Alternatives:
- No-Go: Do not introduce the Show Circuit Brand as a frozen dog food product in the Supermarkets. Do not enter the retail dog food market. Stick with kennels and show dog markets.
Pros:
- Continued success as a specialty provider. Well known/ experienced market.
- Continue with high profits and low production and distribution costs.
- No product introduction costs. No risk of failed product introduction.
Cons:
- Opportunity cost of losing out on new markets.
- Limited revenue growth in existing markets.
- Huge capital costs with no guarantee on the return of investments.
- Execute in-depth market research: Although the current marketing plan has a well specified market assessment and advertising plan, there is no mention of what approach to take with respect to production and distribution. Currently, there is no money allocated to market research.
Pros:
- Higher chances of success for launching the product if the market research results are positive.
- An opportunity to analyze the concerns and interest of the prospective customers and defining target segment.
- Better idea about pricing and positioning the product: packaging and branding of product as consumer goods.
Cons:
- This will take time and be sunk cost if the research results are very negative.
- Opportunity cost of losing out on new markets and being a brand leader.
- Instead of placing it in Supermarkets in the freezer section along with people food, pay to have a freezer put in the pet food section and sell out of the pet food department. Pros:
- This will help in making it easier for the customer to finding the dog food.
- Customers are not likely to look for dog food in the freezer section of a grocery store.
Cons:
- Will likely lose the guilt factor in the promotion campaign.
- Hard to market the “should your dog eat as good as you” without having it positioned next to people food.
- May not get complete buy in from stores because some may feel their space is better utilized by pursuing other brands.
- Logistical issues in branding and distributing the freezers and on going cost to maintain that can mount to high operating cost.
- Expand to international market for show-dog and kennels.
Pros:
- Experience in the show-dog market. Possibility of obtaining high sales volume.
Cons:
- High capital requirements, high risk of failure.
- Need for new distribution channels.
- No experience in international markets, its rules and regulations.
- Strategic Recommendation:
Our strategic recommendation includes a combination of our first two alternatives. We recommend that First in Show Pet Foods, Inc. do not enter introduce the Show Circuit brand as a frozen dog food in the retail dog food market. Instead they conduct in-depth market research to gain valuable consumer insight.
We have come to this conclusion because currently there is no relevant market research and no budget has been allocated to market research. The fact is that frozen dog food is a whole new concept to the consumer market. This concept is unknown and completely new to the consumer market. Therefore, there is a need to educate the consumer market about the product category and it calls for research to identify the need for such a product.
- Implementation:
We think that First in Show Pet Food, Inc. should invest in market research. The market research will take forms of personal interviews, focus groups, surveys, observation of customer purchasing behaviors.
Currently, the company is planning to spend $500,000-$700,000 in advertising and promotion just in the Boston Market Area which is equivalent to $42 million - $59 million for a national budget. Also, as research indicated the cost of introducing a new product could be anywhere from $10 million (Alpo Lite – Alpo) to $34 million(Beneful – Purina). Instead of spending on new product introduction and advertising and promotion, the company should just allocate this budget of approx. $80 million to market research.
After an in-depth analysis of the market, we recommend that the company runs market testing in the Boston, Massachusetts metropolitan area in some selected independent pet stores (Because Boston has the highest percentage(1.2) of dog population in the U.S.).
