Distribution Channels: We do not know how strong Golden Valley’s distribution channels are however, they appear to be weak. A strong distribution channel is essential to survive in a market as competitive as this one.
Supermarket Sales: It is very difficult for a new product to enter the food market. Supermarkets are highly competitive and very difficult to penetrate. Golden Valley tried selling its product in supermarkets and failed. They have since achieved strong sales in the microwave popcorn market but have not re-established their products in the supermarkets.
Packaging: The packaging of microwave foods is difficult. Often the package affects the cooking of the food as well as the taste. The food containers must be able to withstand the heat of the microwave without catching fire or becoming too hot. In the past consumers have been burned by containers that overheated when placed in a microwave oven. Microwave containers have also been known to break or explode while cooking causing the contents to spill.
Joint venture with ConAgra: Microwave french fries represent a $60 million market. Because of this GVMF saw a great sales potential and entered into a joint venture with ConAgra. However, two other companies take most of the market share for this product. Although french fries are largely a restaurant item, GVMF plans to package them as single servings. GVMF ‘s packaging for popcorn was superior over other popcorn packages, it is not known if the same will hold true for the packaging of french fries.
GVMF is counting on being able to manufacture french fries that will be golden brown after microwave cooking. No tests have been preformed to prove or disprove their intentions. Also GVMF has not stated what markets they intent to target with this product and how they plan to distribute it.
The venture with ConAgra is vague, and does not state which company is responsible for which parts of the research and development, production, distribution, market analysis. Do each of these companies have the necessary qualities and strong points to make this joint venture a good move for each company?
Financials: There is no financial information available concerning product profit. I will assume that the microwave popcorn is producing the majority of the company’s profits and that the company is in good financial health.
Consumers: Although U.S. consumers are spending $55 million in the fast food market, they were spending very little on food designed for the microwave oven. Most of the microwave oven food sales come from snacks and occasion foods. Supermarkets are disappointed in microwave food sales and are reluctant to use shelf and freezer space for new unproven products.
Market Segmentation: GVMF hasn’t done any market segmentation research. It is unknown if any or all of GVMF’s products are reaching the different consumer groups that would purchase their products.
International Sales: Although there has been some research completed on the use of microwaves in foreign countries and the consumption of popcorn, GVMF has made no plans to enter these markets.
Product Line: GVMF microwave popcorn has been very successful however, they only market one kind.
Low Sales: GMVF’s breakfast line is not a big seller.
Marketing Plan: Golden Valley does not have a marketing plan. A formal marketing plan brings employees together to form a cohesive work environment in which all employees work to achieve common goals.
Economies of Scale: Economies of scale have been difficult to reach in the production of microwaveable foods. Past experience has shown that the quality of the product diminishes as the production increases.
Advertising and Sales Force: GVMF does not employ a sales force and has no advertising campaign.
S.W.O.T.
Strengths:
Packaging: GVMF has an innovating package for microwave popcorn that allows more popcorn to be popped than its competitors.
Brand Recognition: GVMF Act II popcorn is a recognized brand.
Research and Development: GVMF has a strong research and development team of experienced employees.
Weaknesses:
Distributions Channels: GVMF has weak distribution channels.
GVMF has no direct contact with its customers: Therefore, they are unsure if all their customers wants and needs are being met. Golden Valley’s sales of popcorn through vending machines and mass merchandisers has been successful, but they have not done any studies to ensure that their products are being sold in enough areas and channels. The microwave breakfast foods has not done that well but they haven’t done any market research to discover why.
The marketing department: There is no mention of the marketing department and the roll they play in the overall strategic planning of the company. GVMF has not made total customer satisfaction a major goal and encouraged all employees to achieve this goal.
Company mission: There is no company mission statement. What is GVMF ‘s business? Do they see themselves as only a producer of microwavable foods, or are they open to new technologies that may in the future make microwave ovens an appliance of the past?
Marketing Segmenting: GVMF has not developed any products geared to diverse market segments even though the are aware of the consumers tastes in different markets of the world.
Opportunities:
Foreign markets: GVMF may enter foreign markets and sell their products globally.
New Market Segments: GVMF discover and compete in new market segments.
Increase product line: GVMF can add to existing product line or enhance existing products.
Delete product lines: GVMF can delete any products that are loosing money or not producing enough revenue to justify their continuance.
Threats:
Changes in buyer’s need or tastes: Changes in customers needs or tastes can have an adverse affect on GVMF sales.
New Market entrants: Any new company entering in the microwave food sales market can steal some or all of GVMF’s market share.
Substitute Products: New products that customers perceive as better than GVMF products can have an adverse affect on GVMF sales.
THE FOUR Ps OF MARKETING:
Price: The food industry is very difficult to compete in. Consumers can easily replace a product with another if one is not available or if it is priced too high.
Promotion: Consumers have a wide variety of food products to choose from. In order to entice consumers to buy a product a company must make consumers aware of the product and its benefits.
Place: GVMF products must be available to consumers at the time the consumer is ready to buy. Consumers purchase microwaveable meals and snacks for convenience. For example, an employee is hungry and goes to the company vending machine to purchase a snack. If the snack he intended to purchase is not available he will purchase a substitute product. The employee does not have time or the desire to locate another vending machine.
Product: Microwave products must be of good quality and meet the expectations of the consumers. The microwave food industry has a history of not achieving repeat sales due to consumers’ disappointment in the product.
COMPETITIVE FORCES:
Rivalry among existing firms: There are strong rivals in both the snack food market and the frozen dinner market. GVMF produces food products for use in microwave ovens but all snacks and frozen dinners compete against GVMF. In addition, fast food restaurants and places that deliver are also competing for the same customers.
Threat of New Entrants: Any company that is in the food processing business can enter the microwave snack and or dinner market. In addition, and new fast food restaurants can take market share from existing markets.
Threat of Substitute Products: The snack food industry is highly competitive with 500 new products being introduced each year. If consumers find anyone of these new products more satisfying than the snacks they currently buy they will switch. The forces that drive a consumer to purchase snack can also change. For example, newly released medical studies can have an affect on the snack product they buy.
Bargaining power of the supplier: A change in the available of the supplies needed to produce, package, and ship GVMF’s products can have an adverse affect on the company.
Bargaining power of the buyers: In the case of snack and convenience foods, the consumer has a great deal of bargaining power. There are plenty of snack products to choose from, or they may simply decide not to purchase any snack foods. Also there are plenty of quick and easy breakfast foods to choose from.
Recommendations:
GVMF must make total customer satisfaction a company wide goal. They need to conduct extensive market studies to ensure that their customers’ needs and wants are being met. They also need to research competitors and potential competitors. The marketing department must play a larger role in determining the future goals and objectives of this company.
Although the popcorn market is mature, Microwavable popcorn is still in a growth market with the potential to take market share away from conventional popcorn markets and increase their market share. Popcorn is considered a healthy snack food and capitalizing on this notion can increase GVMF’s popcorn sales. GVMF’s has a strong competitive advantage over their competitors and they need to make this advantage known to consumers. They need to start an advertising campaign showing consumers the benefits of eating their microwavable popcorn and how completely their popcorn pops in the microwave,. They also need to distribute their product through supermarket chains.
GVMF needs to extend their product line and begin marketing their popcorn in foreign countries. Market studies have already been completed in several foreign markets. GVMF knows how many households have microwaves and how each group prefers their popcorn. There is only one other major competitor for the microwave popcorn market in foreign markets and GVMF has a strong competitive advantage over them. Attached is a sales forecast showing the expected revenues that could be generated by producing and marketing the type of popcorn preferred in each market. The sales forecast assumes that the microwave popcorn has a growth potential of 15% over the next three years. Since Microwave ovens are the fastest growing appliance in Europe it was also assumes that 50% of the households in the respective countries own microwave ovens.
The breakfast line of GVMF needs to be marketed to children and consumers over the age of 55. Both of these groups are the leading purchasers of microwavable meals. GVMF should advertise their breakfast line as a good way to start the day and show the importance of starting the day off with a good breakfast. Since these meals are so easy to prepare, children can cook them.
Both ConAgra and Golden Valley need to work on their joint venture. Golden Valley needs to be sure that the french fries will be golden brown and not soggy. I think they should do a market test before they start selling to the general public. They also need to make sure that the quality of the french fries don’t decrease with an increase in their production.
ConAgra and Golden Valley need to have an interactive relationship to ensure that they enhancing each company. If ConAgra has a strong distribution channel Golden Valley should take advantage of it and see they can use the same channels.
Golden Valley should focus on increasing market share by enhancing its product line and entering new market segments. But they must also continue to develop and introduce new microwavable products to the market. A strong sales force is needed to achieve these goals.
