MMPD: SBR3 – Group 4 (Amit, Priyanka, Rubi, Olivia)
Question 1: How profitable is the current SKU in the product line for both Heinz and the retailer?
- Consider profitability of both regular and promotional prices on a dollar and % basis
The above calculation is done by taking regular price as well as promo prices into consideration; the price of each product was spread on per ounce basis and was multiplied by the number of units sold.
Based on this observation, the 50-ounce was seen as the most profitable for regular price model and the 36-ounce was seen as most profitable for promo price model.
Question 2: What we would need to do in terms of trade dealing to make customer purchases of larger sizes make sense for retailers and make sense for Heinz? (Start by 46-oz size).
According to the sales figure in 2016, the 50-ounce bottles dominate Heinz tomato ketchup sales at 44% of total sales. However, the 50-ounce bottles will take up a lot of place on the shelf for the retailers, and in case of stock-outs the consumer will be left disappointed. So what kind of trade dealings can we consider to make purchase of larger sizes sensible for both Heinz and the retailer?
Recommended trade dealings:
• Heinz can work with retailers to educate them how the smaller sizes of ketchup, particularly the 24-ounce Red Rocket, eroded profitability for all parties involved. This is especially because profitability on a per-customer basis was higher with the larger bottles. Heinz can emphasize on the mutual benefit of offering larger sizes. The 24-ounce Red Rocket can be phased out, despite its overwhelming popularity, and gradually be replaced by the larger bottles that yielded greater per-customer profitability and category growth for both retailers and Heinz.
• Heinz can offer trade dealings in a form of distributor incentives, such as price discounts, quarterly rebates, and co-op advertising fees, to cash collection history.
• To tackle issue on limited space on supermarket shelves, we can recommend Heinz to optimize unused space by launching a series of standalone, dedicated Heinz shelves. This will create more space exclusively for Heinz that really stand out in the crowd.
For hypermarkets like Wal-Mart and Club, the standalone shelves may take form as gondola or supermarket islands. The gondola may take shape as a giant Heinz bottle, with a shelf capacity of up to 200 units of 46-oz sized Heinz ketchup.
For smaller retails such as supermarket or convenience stores, the gondola presence should be more compact such as this:
Question 3: Are there other sizes we should consider promoting? Are there SKUs we should consider adding or removing from the current ketchup product line?
Heinz Ketchup is the current market leader in the category. However, there were faced with problems associated with maximising retail shelf space for their SKUs and the means to sell larger pack sizes to end customers in order to optimise revenues and profits. Further, the requirement of...