Oscar Mayer Foods

Case Study Report

Company Name

Oscar Mayer

Nature of Operations

Processed red meat products

Problems in the case

- Change in consumer lifestyle and eating habits. People prefer those food items which are convenient to prepare and are healthy with less fat content. Thus, Oscar Mayer's red meat products are seeing softening in sales trends.

- Threat from substitute products. Most consumers have shifted their preference from red meat products to white meat and seafood.

- Failure of the new convenient product line of Oscar Mayer, "Stuff 'n Burgers"

- LR facing competition from copycat brands

- Declining sales for Oscar Mayer

Alternatives available

- Adding new benefits to the current OM/OR products

- Strengthening/diversifying your lines via another acquisition

- Internally developing new products that tap the new needs

- Bringing a new advertising campaign for OM/LR brands

Analysis of Alternatives

Now, looking at the case we can see that McGraw's objective for the next 3 years was to promise the board an annual growth of 4% per year on volume and 15% percent on operating income but an alarming market research report is threatening the company and his objectives in the long run.

The new research report shows changes in meat consumption where consumption in red meat has reduced since last 5 years while white meat consumption has increased. This has hit OM's profits and is likely to threaten the company in the coming years. This combined with other problems had put McGraw in a dilemma. But when he sat down with the letters, reports and memos he began to plan and organize the data that was given to him to formulate a divisional strategy. He has already taken the initial steps of strategy decision making by gathering information about the external environment, analyzing internal strengths and weaknesses, formulating goals, strategies and supporting programs, and now he's at the organizing and implementation step.

Currently, McGraw has 4 options:

1. To back Louis Rich and launch new products with a expensive advertising campaign

Louis Rich has shown promise and is doing well in white meat market. Louis Rich is balancing the scorecards of the division with increased growth and the consumer shift to white meat is favoring LR even more. There is a flip side to this option that is the huge advertising budget. Also, there is a risk in introducing the new products (turkey bacon) into the market, because of taste issues. As seen from the industry trend, the market for white meat is already growing by 15%.

Current Year Prior Year From Exhibit 2: Current Year Last Year

All lunch meat: White 324 285 Louis Rich Brand:

All hot dogs: White 198 166 Pound volume 272 244

522 451 % change from last year 10.90%

White meat (Industry standards) 15.74%

The industry sale of white meat for the current year is 15% higher than the previous year whereas the LR brand has only grown by 10.9%. Louis Rich brand, although growing, it has not been able to completely utilize its potential to reach the industry standards. There is definitely a potential for growth as the eating trends have now more focus on nutritious products.

2. Go aggressive - buyout and acquire smaller companies of interest

This would seem like an ideal option of buying out smaller companies. They can eliminate competition and capture an already existing market share directly. Turkey Time Ltd. seems like the ideal option as it has a similar line to LR and readymade products. It is located in the west coast allowing them to penetrate a new market. Turkey Time also has a new plant with excess capacity which would further our growth. The biggest problem in this strategy is that the huge investment is required purchasing and setting up the business. Also, the debt cost would be hanging on the business for the years to come. The other options like Chicken Rite Inc. and Crabbies, Inc. would not be feasible mainly because of too much diversification into new unknown products. As of now, it is best to stay with your know-how products.

3. Developing a 4th major category of products to already existing ones

Introducing a 4th category product may seem to be the thought of the day as this has been recommended by the consultancy as well. The company should bring in products dealing with latest consumer trends so that they can continue to establish themselves in the market. By doing this the company can address consumer trend with "Zapetites" and "Lunchables" and employ the Porter's Differentiation strategy where a business concentrates on achieving superior performance through unique product valued by the large part of the market. As the company is a quality leader it can innovate and bring unique products. However, the research and development of these two products is still in its early stages and would be launched in the later part of next year. The investment cost for these products is too