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General Mills Project

General Mills Project. “Routes to Growth” Team – 11 (Section 202) Abhas Bhalla (#533) Henri Bourgeois Angel Gavieiro-Besteiro Andrey Krukov Carlos Montalv á n John Stoner. Agenda. New Product Strategies New Product Concepts Revenue Estimation Back-up Analysis. Agenda.

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General Mills Project

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  1. General Mills Project “Routes to Growth” Team – 11 (Section 202) Abhas Bhalla (#533) Henri Bourgeois Angel Gavieiro-Besteiro Andrey Krukov Carlos Montalván John Stoner

  2. Agenda • New Product Strategies • New Product Concepts • Revenue Estimation • Back-up Analysis

  3. Agenda • New Product Strategies • Current Landscape and Strategic Positioning • Strategy A: “Home-made” Pasta Deluxe! • Strategy B: “Away-from-home” Bowl Appetit Quick! • Customers, Industry & Environment • New Product Concepts • Revenue Estimation • Back-up Analysis

  4. Pasta Deluxe! “Away-from-home” Market New Product Strategies Current Landscape andStrategic Positioning • Compete at the high-quality end: “home-made” Pasta Deluxe! Quality (+) Vacuum Food Frozen Food Bowl Appetit Quick! Microwave Multipacks Microwave Cups Offer extra convenience : “away-from-home” Bowl Appetit Quick! (-) (+) Convenience Instant Meals (-) “Home” Market

  5. New Product Strategies Current Landscape andStrategic Positioning(cont.) • “Home-made” Pasta Deluxe! • Goal: leader of high-quality vacuum food market • Target: high-premium customers at home • Strategy: positioning vs. frozen food • “Away-from-home” Bowl Appetit Quick! • Goal: leader of away-from-home dry food market • Target: convenient customers at work/school • Strategy: positioning through distribution

  6. New Product Strategies Strategy A “Home-made” Pasta Deluxe! SWOT Analysis

  7. Strategy A “Home-made” Pasta Deluxe!(cont.) Opportunity Evaluation Matrix • Competitive analysis: • Many competitors across range of meals offered, prices, levels of quality • Only one competitor provides shelf-stable, vacuum-packed pasta meals • Buyer Requirements: • Need for quick, satisfying meal made with high-quality ingredients • Shelf-stable storage for convenience

  8. Strategy A “Home-made” Pasta Deluxe!(cont.) • Market Demand /Supplier Sources: • Consumer demand for convenience, quality foods, and healthy meals • No supplier shortages • Pasta and sauce to be supplied in-house

  9. Strategy A “Home-made” Pasta Deluxe!(cont.) • Social, Political, Economic, Technological Forces: • Time pressures limit choices for meals, limit preparation time • Shelf-stable pasta and sauces seen as healthier than dry pasta and sauces • Microwave ovens are widely accessible to consumers • Technology for vacuum-packed pasta and sauce is available and may be adopted

  10. Strategy A “Home-made” Pasta Deluxe!(cont.) • Organizational Capabilities: • Betty Crocker brand has image of “home-cooked goodness” • Strengths in distribution and marketing power

  11. Strategy B “Away-from-home” Bowl Appetit Quick!

  12. New Product Strategies Customers, Industry & Environment Customers what? Needs: eat & hurry how? Big trends: • Quality: “Home cooked” • Healthy: “Better for you” Niches in growth: • Diet, Kids, Ethnic… At home: • Frozen (freezer & microwave) • Dry/Vacuum (microwave) • Instant (hot water) Away from home: • Self-brought • Cafeteria/Vending Machines • Outside work Source: team analysis, S&P Industry Survey, U.S. Census

  13. New Product Strategies Customers, Industry & Environment(cont.) • Industry Trends • Less time for preparing food (50% of U.S. population spends an average of 15 min. doing so) • More meal time “away-from-home” (home/away: 1950, 73% vs 27% / 2000, 54% vs 46%) • More women at work (U.S.: 46.5% of labor force) • 40% of U.S. workers eat at their desk or on the go • Growing concern about nutrition and quality • Baby boomers (30% of U.S. population) more affluent, willing to pay for quality Source: S&P Industry Surveys: Foods & Nonalcoholic Beverages (June 7th, 2001); Healthy Choice Market Survey

  14. New Product Strategies Customers, Industry & Environment(cont.) • Demographics • Empty nesters, middle-aged childless couples and maturing families are the larger consumers, the first two mainly of frozen food and the last of dry food • Small families (1, 2 members) use more frozen than dry food, the opposite to large families • While frozen food is consumed largely by families without kids younger than 18, dry food is evenly consumed by the two groups • Affluent and comfortably living families and high income families (+$50,000) are the bulk of demand Source: Nielssen Household Panel Data

  15. Agenda • New Product Strategies • New Product Concepts • Concept Definition • Segmentation & Prioritization • Selling Proposition • Relevant Competitors • Capabilities & 4Ps • Revenue Estimation • Back-up Analysis

  16. New Product Concepts “Home-made” Pasta Deluxe!(1) Concept Definition • Pasta Deluxe! • Shelf-stable, pre-cooked, vacuum-packed pasta with a packet of pre-made sauce • Five types of pasta and five varieties of sauce, matched to provide ten separate SKUs. • Package: self-contained tray, used for cooking and serving • Cartoon-cover with sophisticated photo of the prepared pasta meal • Visible sauce packet with old fashion label (flavor & recipe) • The space where the sauce packet is located serves as a heat-resistant handle

  17. New Product Concepts “Home-made” Pasta Deluxe!(1) Concept Definition(cont.) • Preparation • The customer mixes pasta and sauce in the tray (key: as if the customer had cooked the pasta herself) • Ready to heat in the microwave; no clean-up • Branding • Recommended: Betty Crocker for both pasta and sauce (umbrella branding) • Alternative 1: Develop or acquire a different brand for the sauce (internal co-branding) • Alternative 2: Partner with an outside reputable sauce brand (external co-branding)

  18. New Product Concepts “Home-made” Pasta Deluxe!(2) Segmentation & Prioritization Market Shares Frozen has the lead vs. Dry & Instant together Frozen: families of 1, 2 members (as well 3-4) Dry & Instant: 3-4 and +5 members families

  19. New Product Concepts “Home-made” Pasta Deluxe!(2) Segmentation & Prioritization(cont.) Market Sizes Higher interest of 3-4 member families in terms of #consumers 2 members and +5 members are still very relevant 1 member less important

  20. New Product Concepts “Home-made” Pasta Deluxe!(2) Segmentation & Prioritization(cont.) Growth Trends (10 year rates) High growth: 1, 2 members families Moderate growth: +5 m. families Low growth: 3-4 member families

  21. 1st Priority: 1, 2 m. families (share, growth) 1st Priority 2nd Priority 2nd Priority: 3-4 m. families (size, share) New Product Concepts “Home-made” Pasta Deluxe!(2) Segmentation & Prioritization(cont.) Main category: quality ~ frozen f.

  22. New Product Concepts “Home-made” Pasta Deluxe!(3) Selling Proposition • Premium pasta and sauce from Betty Crocker for a quick, fresh-tasting meal • Pasta and sauce in flavor-saving vacuum-sealed packets are convenient to store and easy to prepare • Ten combinations of pasta and sauce give you a lot of variety in your meals • Retail price about $3.00 • No need to refrigerate • Preparation and clean-up are quick and simple

  23. New Product Concepts “Home-made” Pasta Deluxe!(4) Relevant Competitors Relevant competitors in the category offer dry and frozen food with above-average quality Price $ Uncle Ben 8% 3 Healthy Choice 8% Pasta Any Time 2% Stouffers 71% 2 Bowl Appetit 4% 1 Goods have different prices and quality Chef Boyardee 7% - - + + Quality Quality Dry food Frozen food Source: Nielsen scanner data

  24. New Product Concepts “Home-made” Pasta Deluxe!(4) Relevant Competitors(cont.) Pasta Deluxe! will take over the high-price high-quality segment Price $ Uncle Ben 5% Pasta Deluxe! 20% 3 Healthy Choice 6% Pasta Any Time 2% Stouffers 58% 2 Competitors will lose 20% market share to Pasta Deluxe! Bowl Appetit 3% 1 Chef Boyardee 6% - - + + Quality Quality Imitation and retaliation are expected Dry food Frozen food

  25. New Product Concepts “Home-made” Pasta Deluxe!(4) Relevant Competitors(cont.) We foresee four scenarios regarding Pasta Deluxe! market share by the end of year one Market share 20 Price $ Introduction of me-too products Uncle Ben 15% Scenario D Pasta Deluxe! 20% 3 Healthy Choice 11% 15 Scenario C Aggressive advertising campaigns Pasta Any Time 4% 11.50% Stouffers 41% 2 10 Bowl Appetit 2% Scenario B Based on assigned probabilities, we expect Pasta Deluxe! to capture 11.50% of the real market Competitors cut prices 1 Chef Boyardee 7% 5 Scenario A - - + + Quality Quality Year 1 Time Dry food Frozen food Evolution of Pasta Deluxe! market share incorporating competitors likely reaction

  26. New Product Concepts “Home-made” Pasta Deluxe!(5) Capabilities & 4Ps • Product • Ten combinations of pasta and sauce • Packaged in ready-for-microwave tray with heat-resistant handle • Preparation and clean-up are simple: Cooks in the microwave oven and no pan or plate to wash • Place • Sell in grocery stores • Use existing distribution network

  27. New Product Concepts “Home-made” Pasta Deluxe!(5) Capabilities & 4Ps • Price: Retail range: ~$3.00 (existing competitor It’s Pasta Anytime is priced at $2.71) • Promotion: • Ad Campaign: two different ads & targets: • Directed to middle-age couples (2 and 3-4 m. family sizes) • Directed to active, sophisticated individuals (1 m. families) • Websites: Link from Betty Crocker website to the Pasta Deluxe! website • Coupons: • On-package: usual Betty Crocker coupons • Initial trial: 50 cents off one package

  28. New Product Concepts “Away-from-home” Bowl Appetit Quick! (1) Concept Definition • Bowl Appetit Quick! • New improved Bowl Appetit! which does not need a microwave, just add hot water and it’s ready. • Package: suitable for vending machines, fork included, no paper package, just a bowl with a colorful top. • Varieties: 10 available flavors. • Specially designed vending machine with hot water faucet.

  29. New Product Concepts “Away-from-home” Bowl Appetit Quick! (1) Concept Definition(cont.) • Branding • Leveraging Betty Crocker and Bowl Appetit! brand names • Adding “Quick” on the packaging to distinguish from existing Bowl Appetit! product and to emphasize improved convenience

  30. New Product Concepts “Away-from-home” Bowl Appetit Quick! (2) Segmentation & Prioritization SEGMENT Office Workers: Gourmet Pasta Buyers: Empty Nesters: Coupon Driven 3-Member Family: PRIMARY DRIVER Convenience. Quick, hot & complete meal. Quality. Sophisticated taste and appeal. Nutritious, wholesome Some convenience. Value. Promotions. HI RETAIL TRANSIENTS – ONE TIME COUPON/ PROMO DRIVEN BUYERS COUPON DRIVEN 3 MEMBER FAMILY OFFICE WORKERS DURING PEAK HRS (LUNCH) EMPTY NESTERS/ SINGLE ADULTS OFFICE WORKERS WHEN SNACKING Time Pressure FAMILIES WITH 5+ MEMBERS PRICE SENSITIVE SMALL FAMILIES GOURMET PASTA BUYERS LO LO MED HI Repeat Purchase Potential/Frequency

  31. 1st Priority 2nd Priority New Product Concepts “Away-from-home” Bowl Appetit Quick!(2) Segmentation & Prioritization (cont.) 100 M Market Sizes Working professionals show the largest opportunity Small families and empty nesters would be second tier market niches 50 M 0 Working Professionals Small families Empty Nesters High-income shoppers Remaining market

  32. 1st Priority New Product Concepts “Away-from-home” Bowl Appetit Quick! (2) Segmentation & Prioritization (cont.) Growth Trends vs. Income High-income shoppers as the highest growth segment Working professionals with moderate growth but highest future income potential 10 High-income shoppers Historical Growth Rate (CAGR 96-99) 5 Small families Working Professionals. 0 Empty nesters 0 5 10 Future Potential (Total disposable income %)

  33. New Product Concepts “Away-from-home” Bowl Appetit Quick! (3) Selling Proposition • Get a complete hot meal at your workplace with New Bowl Appetit Quick! • Easy to prepare: just add hot water. • 10 different flavors: 4 pastas, 3 rice, 3 potatoes. • Available in vending machines at your office. • Priced just $2.00

  34. New Product Concepts “Away-from-home” Bowl Appetit Quick!(4) Relevant Competitors Cafeteria food Vending machine snacks (e.g. Powerbars) Lunch options out of the office (e.g Subway) Current players in the dry foods segment (e.g Kraft Mac ‘n Cheese) Frozen food/canned soups currently available in vending machines

  35. New Product Concepts “Away-from-home” Bowl Appetit Quick! (5) Capabilities & 4Ps • Product • Convenient and easy-to-prepare • Suitable for vending machines • Place • Vending machines in the offices • Cafeterias in the offices

  36. New Product Concepts “Away-from-home” Bowl Appetit Quick! (5) Capabilities & 4Ps (cont.) • Price • Premium pricing of $2.00 • Potential decrease in the future if competitors move in • Promotion • Vending machine • In house magazines/office newsletters • Vending machine community • Add “now available at your office” to TV commercial

  37. Agenda • New Product Strategies • New Product Concepts • Revenue Estimation • Assumptions • Sales & Revenue Projections • Sensitivity Analysis • Back-up Analysis

  38. Revenue Estimation “Home-made” Pasta Deluxe!(1) Assumptions • Market Potential (835 million servings) • U.S. population, by 4 groups of family size (1, 2, 3-4 and +5 members), adjusted by microwave availability (85%) • Annual average usage rate (3.56 servings per consumer) • Reachable Market (256 million servings) • Dry + Instant + Frozen: 30.6% of Market Potential • Quality Market (175 million servings) • Market Share (~Frozen): from 82% to 59%, depending on family size. Usage rate: 3.09 servings per consumer

  39. Revenue Estimation “Home-made” Pasta Deluxe!(1) Assumptions (cont.) • Sales & Revenues • Family size groups and quality category combined growths: from 6.67% to 5.82%, depending on group • Pasta Deluxe! market share (depending on competition): • Penetration horizon: 1 year • Penetration reduction factor: 50%

  40. Revenue Estimation “Home-made” Pasta Deluxe!(2) Sales and Revenues Projections Expected Revenues around $60 million per year (after 1 year penetration) Expected #Buyers above 6 million after year 2

  41. Revenue Estimation “Home-made” Pasta Deluxe!(3) Sensitivity Analysis • Frozen Food growth vs. Annual Usage Rate: • Every additional 1% growth means around $23 million • Every additional 0.5 usage rate means $6 to $2 million Total 3-year Accumulated Revenues (millions) Annual Usage Rate Quality (~Frozen) growth

  42. Revenue Estimation “Away-from-home” Bowl Appetit Quick!(1) Assumptions • Market Potential (nb of reachable working people) • U.S. population adjusted for working in offices people • Initial availability: 10,000 machines -> reach 15% • Yearly increase of 40% of the availability • Usage: 3 different subcategories (data from survey)

  43. Revenue Estimation “Away-from-home” Bowl Appetit Quick!(1) Assumptions (cont.) • Sales forecast • For each category, use a Bass model to forecast adoption of vending machines • Coefficient of innovation: 0.2 (by analogy) • Coefficient of imitation: 0.6 (by analogy) • Reaction of competition: 2 impacts • Price decrease: increased competition implies 10% price drop each year • Loss of market share: 100% year 1 (1st mover adv., then drop 20% each year) • Sensitivity analysis

  44. Revenue Estimation “Away-from-home” Bowl Appetit Quick!(2) Sales and Revenues Projections Expected Revenues: $58 millions (3 years) Peak sales: $25 million 3 sales opportunities: Lunch: $71 million Snack: $9 million Dinner: $25 million

  45. Revenue Estimation “Away-from-home” Bowl Appetit Quick!(3) Sensitivity Analysis Major variable: availability of machines Price war needed if market share endangered

  46. Agenda • New Product Strategies • New Product Concepts • Revenue Estimation • Back-up Analysis • Customer Analysis • Competitor Analysis • Company Analysis • Revenue Projections • Bowl Appetit!'s Customer - Demographic Analysis • Focus Groups (US / Int'l) - Behavior Analysis • Focus Group (At Work) - Behavior Analysis • Category Competitors - Demographic Analysis • Competitors Pricing & Placing Analysis • Vending Machine Distribution Analysis • General Mills Brand Portfolio Analysis • Pasta Deluxe! - Revenue Projections • Bowl Appetit Quick! - Revenue Projections

  47. Back-up Analysis Customer Analysis(1) Bowl Appetit!’s Customer - Demographic Analysis Analysis by family type • The product is mainly placed among: • Empty nesters • Middle aged childless couples • Maturing families • Common patterns: • No children • Maturity Especially relevant for Bowl Appetit!

  48. Back-up Analysis Customer Analysis(1) Bowl Appetit!’s Customer - Demographic Analysis Analysis by family kids • Regarding the presence of children in our consumer’s families: • 70% either do not have children or they are older than 18 years Especially relevant for Bowl Appetit!

  49. Back-up Analysis Customer Analysis(1) Bowl Appetit!’s Customer - Demographic Analysis Analysis by family size • Not surprisingly: • Singles and couples (presumably without children) sum up 55% of our consumers • Significant presence in the 3-4 member family segment Especially relevant for Bowl Appetit!

  50. Back-up Analysis Customer Analysis(1) Bowl Appetit!’s Customer - Demographic Analysis Analysis by family size growth • Regarding the dynamics of these family groups: • Families of 1 and 2 members are on the rise, aside from exceeding 25 million each • Families of 3 and 4 keep a slight growth trend • +5 families show full stagnation Especially relevant for Bowl Appetit!

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