First in Show Pet Foods, Inc.

Case Analysis
Submitted To: Dr. Thomas B. Clift Prepared By: Tong Li Student Number: 200906154 Date: 2011/10/12

Introduction
First in Show Pet Foods is a major producer of dog food for show-dog kennels in the U.S. Show Circuit, major product of the company, would dramatically improve the dog`s coat. It is a completely balanced frozen dog food, which is of the finest quality and has been used and recommended by professional show-dog owners for years. First in Show now faces the decision of whether to make the transition from the kennel market to the retail dog foods market in the Boston area.

Case Problems, Issues

The major problem for First in Show Pet Foods is whether to make the transition from the kennel market to the retail dog food market. Several issues need to be resolved regarding this problem. First, whether the market itself is completely defined and segmented. Second, what positioning strategy should the company use to target the retail dog foods market and what distribution channel should be capitalized? Third, the selling price is undetermined and whether the company could achieve 15% profit in its introductory year.

Objectives
The objective of this report is to solve the problem identified above by defining the issues; in addition, to provide a recommendation for the First in Show dog foods, Inc.

Analysis
Market situation Exhibit 1: Market Matrix Market Matrix Dry (Boston Area) Supermarket & $28.08M grocery stores Mass merchandisers Total 23.4% $49.92M 41.6% $78 M 65% $6.48M 5.4% $11.52M 9.6% $18M 15% $8.64M 7.2% $15.36M 12.8% $24M 20% $43.2M 36% $76.8M 64% $120M Canned Treats Total

As shown in the table above, the dog foods are distributed through two major channels, supermarket and mass merchandiser, in Boston area; each account for 36% and 64% of the total market share separately. Because the introductory program target the supermarket as its distribution channel due to the need for refrigeration, the efforts of this report will be focused on the supermarket & grocery stores channel. Under the channel, the market is divided into three major categories. Dry dog foods account for 23.4% of the total market share. In this category, five major competitors hold 68% of the market. The second category, canned dog foods, account for 5.4% of the total market share with four major competitor; they capitalize on 88% of the market. For the treats category, there are three major competitors. They control 73% of the market,

which account for 7.2% of the total market.

There are five major competitors in the market through the major three forms of dog foods in 2008. They are Nestle, Iams, Hill`s Pet Nutrition, MasterFoods USA, and Del Monte Foods, Inc. They account for 75 percent of U.S. dog food sales in 2008. As we look through each category, it`s obvious to find that Nestle has two brand names in each of the category. Thus, Nestle is our major competitor in compare with other national brands.

SWOT analysis Strengths Premium high quality dog food. Specialized frozen dog food. Weaknesses New product name in the market. Expensive price. Difficulties of product distribution and placement due to the frozen requirement.

Exclusively been sold to show-dog kennels.

The product has the benefit of improving dog`s coat.

Being the first organic food that will be marketed in Boston areas.

Opportunities The growing population

Threats of Competitor of 50 dog food

dog-ownership.

manufactures and 350 dog food

The growing popularity of organic dog food.

brands in U.S. 5 major companies accounted for 75% market share. Nestle is the leading U.S. dog food advertiser. Distributions acceptance to provide freezer space in their store.

The estimation of Boston area is 1.2 percent of the U.S. population and the average expenses of dog food.

There is no complete frozen dog food being introduced in Boston areas.

Marketing Mix 1. Product Show Circuit is a unique dog food which is originally for show dogs. It is formulated to improve dog`s coat. Show Circuit is packaged in a 15-ounce plastic tube with 12 tubes per case.

2. Price Exhibit 2: Competitor`s Price Price per oz 0.066 0.07 0.09 0.057 Retail price 8.49 8.99 11.59 1.25 Form Dry Dry Dry Canned Packaging 8 lbs 8 lbs 8 lbs 22 oz Brand Dog Chow Mealtime Iams Alpo Cuts Prime

0.125 0.254 0.154 0.549 0.677

0.69 0.89 3.69 5.49 3.70

Canned Canned Treats Treats Treats

5.5 oz 3.5 oz 24 oz 10 oz 5.6 oz

Mighty Dog Cesar Select Mike Bone Beggin`s Strips Pup-Peroni

Exhibit 3: Trade Margin Marketing channel Unit cost of goods Unit selling price sold Manufacturer Distributor Retailer 7.87 9.26 9.96 9.26 9.96 12.77 15% 7% 22% Gross margin

In order to achieve 15% gross margin, the selling price of Show Circuit to consumer is determined to be $12.77 per case. In term of unit price, it is $0.851 per oz. Thus, it is reasonable to position Show Circuit at the super premium dog food when compare with competitors.

3. Promotion The promotion objectives for company are: Create awareness of the new brand Obtain distribution through supermarket outlets Motivate trial through coupon redemption

Motivate trial through emotional impact of television

4. Placement Because the Show Circuit is priced at $0.851, which is higher than other brand, the exclusive target market will be the super premium dog foods market. Thus, the ideal distribution channel for the Show Circuit is the supermarket which dispenses 36% of all dog food sold in the U.S. and complies with the idea of the brand, which is to treat your dog as a family member.

Alternatives
Based on the analysis, there are three alternatives for the First in Show Pet Foods. 1. Introduce the program with a budget of $500,000. 2. Introduce the program with a budget of $700,000. 3. Do not run the program ant stick with kennels and show dog markets.

Analysis of Alternatives
1. Introduce the program with a budget of $500,000. Exhibit 4: Break-even analysis of the introductory grogram Program budget Slotting fee Total expense Unit variable cost 500,000 30,000 530,000 7.87 700,000 30,000 730,000 7.87

Unit revenue Gross margin Break even quantity Selling price to consumer Break even sales volume

9.26 1.39 381,295 12.77 4,859,137

9.26 1.39 525180 12.77 6,706,649

If the company take the introductory program with a budget of $500,000, First in Show has to sell 381,295 cases of Show Circuit to achieve the break-even. At the 15% of gross margin per unit, the break-even sales volume for the company is $4,859,137. That is to say, the company has to grab the 11.2% of the total market through the supermarket channel in Boston area. Pros Capitalize the retail dog food market which has a huge growth potential. It is easier to achieve break-even than the $700,000 program. Build brand awareness in retail market.

Cons The company may not attract enough awareness with lower budget. Risk of failure.

2. Introduce the program with a budget of $700,000. If the company runs the program at the budget of $700,000, the company has to achieve the sales volume of $6,706,649, which represents 15.5% of the market share

in Boston area, to reach bread-even. Pros Grab the huge potential market as a growth opportunity. Create more public awareness in the market than $500,000 program.

Cons Incur Higher Risk of failure. Company has to perform better to achieve break-even. It is harder to go back if the program fails.

3. Do not run the program ant stick with kennels and show dog markets. Pros Continued success as a well known brand. Continue with high profits and low production and distribution costs. No cost associate with product introduction. No risk of failure.

Cons Opportunity cost of losing a new market. Growth opportunity is limited in existing market.

Recommendation
Based on my comparison among the alternatives, I recommend First in Show Pet Foods to run the introductory program with a budget of $500,000. There are several

reasons associate with my recommendation. Firstly, opportunity for growth is great in the retail dog foods market. If the company runs the program, it will have the opportunity to be the first to tap the vast market. Secondly, in terms of competition, Show Circuit is completely a new brand that differs from the competitors in the existing market which could be used as a competitive advantage against its competitor. Also, the guilt concept that applied to the Show Circuit customer would attract more potential customer who treat dog as a family member and stand outside of the existing market. Thirdly, the budget of $500,000 will make it easier for First in Show Pet Foods to achieve break-even in its introductory year and lower the risk to the company.

In order to succeed in the introductory program, the First in Show Pet Foods should make a clear definition for its market segment which is the high end dog raisers who would spend more on their dogs than those who buy Dry, Canned, and Treats. In addition, Show Circuit should be positioned as super-premium dog food in frozen state and only target toward the high-end segment because of the inherent high quality of the brand.