Reed Supermarket

SOM 498 - Spring 2012 2

Problem• Sale is decreasing• Threats from competitors are rising

Reasons• Wrong strategy

Reed Supermarket

SOM 498 - Spring 2012 3

Goal14% => 16% market share

Solution• Convenience• High quality product• Reinforce the brand image • Promotion/marketing strategy

SOM 498 - Spring 2012 4

• Supermarket• Limited Selection• Whole Food

Upper End => High Threat

• Warehouse Clubs• Supercenters• Dollars Stores

Lower End => Low Threat

Reed’s Competitors

SOM 498 - Spring 2012 5

High incomeconsumer base

PromoteHigh-end products

Brand awareness:

Quality product

Change customers’ perceptions

LowPerceived

Value

Improveproduct

selection

Limited product selection

Experience inprivate labelmerchandise

Strength Weakness

6SOM 498 - Spring 2012

2008 2009 2010

1.51.8 1.8

Quality Index

2008 2009 2010

-2.0

-2.5-2.1

Industry average

Price Satisfaction Index

Marketing Strategy16% of Market Share

SOM 498 - Spring 2012 7

Market Segmentation

Product Differentiation

Product Positioning

Brand Reinforcement

Market Segmentation

SOM 498 - Spring 2012 8

Primary focus:• High-end customers• Healthy concern consumers

Product Differentiation

SOM 498 - Spring 2012 9

High-end Products• Healthy• Organic• High Quality• Imported

Convenience• 25 Locations • Long hours• Full range of

products• One-Stop Shopping

Private labeling• Natural• Healthy Products

Dollar Special• Decrease Net

Operating Profits• Not consistent with

brand equity

Product Differentiation

SOM 498 - Spring 2012 10

High-end Products• Healthy• Organic• High Quality• Private Label

Convenience• 25 Locations • Long hours• Full range of

products• One-Stop Shopping

Increase Private labels• Natural

Products• Healthy

Products • Lower Prices

at a Lower cost

Prepare Foods• Increase variety of

Healthy Foods

= 2-4% Increase Store Traffic

Increase sales by 15%

Som 498 - Spring 2012 11

Introduction of Private Labeling Columbus Market

$1 Million Marketing Plan = Increase Sales by 15% (Estimations in Millions) Current Sales Sales Increase by 15%

Sales Decrease/Increase -31.43 99Total Sales 660 759

Sales Increase From Increase % Sales Increase by

Private Labels 10% 66.0

Prepared Foods 3% 19.8

Other Items 2% 13.2

Total Sales Increase 15% 99 16% SOM 498 - Spring 2012 11

SOM 498 - Spring 2012 12

SOM 498 - Spring 2012 13

Product Positioning

Maintain the current product position • High quality products• Organic & natural products• Imported products

Value-pricing strategies• Price the product based on customers’ perceived

value

Brand Reinforcement

Convenience

High-Quality Product

Customer Satisfaction

Products: • National brands • Private labels • Prepared food

Recommandations

SOM 498 - Spring 2012 15

Service offering:• Seasonal gifts• Food samples• Store events Short term

SOM 498 - Spring 2012 16

Website redesign: • Cooking receipts • Blogs/ forums• Customize healthy diet

Advertising: “Be Good to Yourself”• Health and sport magazines• Social media • Smartphone applications

Recommandations

Medium term

Membership programs:• Points shopping rewards • Gas reward cards • Birthday card/special occasion gifts for loyal members

Recommandations

SOM 498 - Spring 2012 17

Philanthropy• Community service

Long term

SOM 498 - Spring 2012 18

Conclusion• Revenue growth

• Differentiation strategy• Marketing campaign

• Branding as • High quality• Convenience• Customer Satisfaction/Choice

Thank You!

SOM 498 - Spring 2012 19

SOM 498 - Spring 2012 20

Threats

Competitors - low-end products

Walmart/ Target(one-stop shopping supercenter)

-introduced groceries-world’s largest retailer-leader of food retailing

Costco/BJ’s(wholesale warehouse)-most carry one brand-bulk-packed for large, middle class families -20% discounted price

Dollar General-biggest threat-mix of packaged items-mostly no refrigerated product

SOM 498 - Spring 2012 21

ThreatsMajor Competitors – High-end products

Trader Joe’s-Limited Inventory(private labeling)-highest Sales/ square foot-imported & specialty food

Delfina-conventional & Organic-above-average service-Bright, clean ambience

WholeFood-only 2 stores-Slowly expanding(Back burner)-High stable Sales

WholeFood-only 2 stores-Slowly expanding-High stable Sales

Som 498 - Spring 2012 22

Disadvantage to the “Dollar Special”($ Millions)

Dollar Special Price

(6% Increase)

Regular Price

2% Sales Increase

673.2 673.2

6% Sales 40.39 40.39

Net Profit Margin 13.46 13.46

Loss on Discounts -10.54 0

Net Sales 2.92 13.46

Sales increase by 15% = $54.45 Millions lost on Net SalesSOM 498 - Spring 2012 22

Som 498 - Spring 2012 23

Profits Increase($, Millions)

Estimated Sales

Total Sales 759

Operating Expenses -743.82

Profit Margin (2%) 15.18

Marketing Expense -1

Net Profits Increase 14.18

SOM 498 - Spring 2012 23

Adding Prepared Foods($, Millions)

Som 498 - Spring 2012 24

2010 Worst Case Scenario2011

Best Case Scenario2011

Estimated Sales:

660 673.2 686.4

Store Traffic Increase by:

- 2% 4%

Sales from prepared foods:

112.2 125.2 138.6

Profit Margin (30%)

- 37.56 41.58

SOM 498 - Spring 2012 24

Retrived From: http://www.ralcorp.com/pdf/Ralcorp_CAGNY_Presentation.pdfSOM 498 - Spring 2012 25

SOM 498 - Spring 2012 26

Ralcorp

SOM 498 - Spring 2012 27

2010 2011Date

http://gasbuddy.com/gb_retail_price_chart.aspx

Private Brand Foods Have Had ImpressiveLong-Term Growth Rates

SOM 498 - Spring 2012 28

Private-Brand Food Opportunity

SOM 498 - Spring 2012 29

Ralcorp Categories

Som 498 - Spring 2012 30

Financial Overview

Increase Market Share

http://www.reedsinc.com/ir/pdfs/12-711%20REEDS%20Dec%202011%20Investor%20Presentation.pdf

SOM 498 - Spring 2012 30

Som 498 - Spring 2012 31

2010 2011Date

Gas Price in Columbus, OH

http://gasbuddy.com/gb_retail_price_chart.aspx SOM 498 - Spring 2012 31

Columbus market

SOM 498 - Spring 2012 32

Columbus Comparing to Median

household income: $52,000

Population growth from 2000 to 2009: 11%

Unemployment rate in Dec 2010: 8.5%

Ohio 11.6% higher - -

Nation Slightly higher 2% higher 1.3% lower

Median income of a Reed shopper was 12% higher than the area household average

Total sales change 2005-2010

SOM 498 - Spring 2012 33

Quality Index

SOM 498 - Spring 2012 34

2008 2009 20105.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

8.3 8.4 8.4

6.86.6 6.6

5.2

5.7

ReedAverageDiscount Store

Year(s)

Qua

lity

Price Index

SOM 498 - Spring 2012 35

2008 2009 20100.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

4.2 4.3 4.5

6.26.8 6.6

7.7 7.9

ReedAverageDiscount store

Year

Pric

e

SOM 498 - Spring 2012 36

United States Organic Food Market Value & Value Forecast: $ billion, 2005-2014

http://www.sbdcnet.org/small-business-research-reports/retail-organic-food-industry-in-the-u-s

Customer Service Satisfaction Program

SOM 498 - Spring 2012 37

Annual satisfaction surveys distributed online and in-store, to measure:– Customer service– Customer expectations – Areas for improvement– What items they will like to see in stores

SOM 498 - Spring 2012 38

List of brand name food productsExample

Baked goods Cookies Chips Hot food brands

desserts

WarburtonsHovis [1]Nabisco [2]McVitie'sMother's PridePepperidge FarmWestminster Cracker Company [3]St. Amour CookiesKitsDanish

Burton's Maryland SpecialsCadbury SnackDouble TakeDominoDisney Pixar Milk Chocolate Crispy BarsJaffa Cake [5]Kit KatOreoBiscuitsWalkers Shortbread

CheeseletsCheesy Tool BagDiscosDoritosFrazzles (Walkers) [7]Good 'n' CrunchyGolden Wonder (Tayto Group)Horror BagsMcCoys CrispsSnackfood CompanyTayto Fusion

Chicago TownFindus Crispy PancakesPot Noodle [8] and derived like Pot RiceUnilever Crispy Chicken BitesBasil Brush Chicken Boom BoomsBatchelors

Ben & Jerry'sCalypso Icicles FreezepopsCremosaEskimo PieJuicy Drop PopLyons MaidMagnumPingviiniPehmisRocket