What effects the changing competitive environment on Brannigan foods? How does this impact the investment decision?
The soup industry faced a decline of 2.8% in sales in all categories from 2011 to 2010.
Initially, senior citizens (60+) were the heavy consumers of the soups and were loyal to the brand. However, as the needs of the ready to eat products and healthy products arised, there was an increase in the customer base especially in “convenience” categories for the working moms.
The larger cost of these products and high price premium, concerned its retailers, as they were also bringing in products with short life cycles that failed to meet their expectations.
Data as shared by Ching showed that they had launched ten new products, out of which nine of them lasted for less than two years. So, the introduction of new products should be based on market research. They had a success rate of only 7% in the food industry.
They also wanted to enter the refrigerated and frozen foods market. Although there was an increase in their sales, but it was not substantial to their investments. Refrigerated and frozen foods were branded by names like Panera Bread and Harry Fresh foods. But, due to retailer’s unwillingness to provide additional space, the sales decreased.
They came up with flavours being region specific. Being the category leader in soups and unable to provide different flavours to the customers as per the trend, resulted in slow decline of sales.
86% of the consumers liked to consume soups in cold weather. This also made people to have a perception of soups as a seasonal product with less innovation.
Impact on Investment Decision:
This had a direct impact on the investment decision.
Investing in advertising and promotion of the new products should be considered for the long term and continued for the mature or core products.
Based on the consumer responses on their new products, they should invest in R;D of the product.
As the customer base expands, the company should follow trends and demands and invest accordingly.
Retailers concern on cost and pricing should be taken into consideration to increase their shelf space and market reach.