McGraw intends to retain Oscar Mayer’s (OM) reputation within Kraft Foods as the fastest growing profit maker, and hopefully achieve a +4% volume growth and +15% profit growth for the coming year. His division has two business lines: the traditional OM meat-based products line and the recently acquired/fast growing Louis Rich (LR) turkey-based products line. He has to tailor his strategy which would balance the interests of both lines and yet, achieve his targets.
Strengths: OM products enjoyed customer confidence for nearly 100 years, and contribute a massive 82% or $110 MM of the total profits. Acquisition of LR and investment in its line of white meat products has proven to be a strategically wise decision, as shown by the strong volume growth of its products.
Weaknesses: There is a significant shift in consumer preference towards less fat/salt food products, i.e., the LR line, while OM line has been giving the maximum profits; its prices are out of tune with the market. Investment costs for acquisitions and/or A&P to buttress LR business will further depress OM business and depress short-term profits; competition from unbranded products will add to the pressure on pricing and bottom line. LR products are susceptible to copying.
In terms of convenience, taste, price and customer satisfaction factors, there is a greater negative bias on OM products. OM’s frozen product ‘stuff n burger’ has not been an outstanding success.
Opportunities: LR product line business is showing promise of further growth, albeit at the expense of OM product line. LR can add further range to its existing products through in-house R&D efforts that are already underway. Or, it can acquire one or more mid-size firms dealing in white meat products to complement present facilities and products.
Threats: Consumers are shifting to healthier and more convenient foods, directly impacting OM range. LR range of products is easy to copy and competition from branded as well