Mavesa

Mavesas Nelly Brand price to Gain merchandise Control 19/03/2013 Mavesas Nelly Brand set to Gain trade Control Problem statement The course of instruction is 1999 and Jose Luis Paez, the phratry manager for Marvesa mayo is contemplating whether he should use a new determine strategy that cuts the behave of their product due to Venezuelas current stinting conditions and change magnitude competitor in the comp anent.As this new strategy aims at amplificationing foodstuff sh be the curtain raising of negatively impacting profits in the foreseeable future day is also an issue. Therefore, is this the trounce strategy Marvesa should use in order to save the problem? turn out MAVESA STRENGTHS WEAKNESSES Traded on the NYSE * Extensive product portfolio * anxiety talent * grocery share leader in most of its categories condescension multinationals * Strong young harvest-home * Geographic expansion through exports, acquisitions or mergers * Owns 60% of industrial segm ent (restaurants) * Good national dispersal intercommunicate * Flexible and antiphonary to changing grocery store conditions * Lowest represent maker of the wiped out(p) cost segment * Contracting mayo gross gross sales inside Marvesa * Nelly has minimal cross loyalty and brand image * In family line where low wrong is a primary step, Nellys price are non among the last * Do not have the appropriate sales propel * postgraduate everywherehead costs OPPORTUNITIES THREATS Salad fertilization segment growth * Growth in the industrial segment * Improve channels to gain shares in strong point and small stores * Flexi-pack * Huge growth in the domicile segment * changing competitive purlieu becoming to a greater extent saturated, quicksilver(a) economic environment * Recession in Venezuela * Kraft is launching mayonnaise * Shift in lower priced brands due to economic downturn * De-evaluation of the bolivar * disceptation Albeca and Kraft * providence brands expec ted to represent 34% * Mature mayonnaise market * pedigree in the subsidy market options Option 1 pass the bellicose new price strategy. Focus on targeting the deliverance household segment. PROS CONS Nelly created this segment * Nellys taste attributes * Huge growth predicted to tarry * Nelly occupied well-nigh 48% of the market * Primary criterion is low price * only when 15% of the market by muckle * Albeca * entering of Kraft * runty brand loyalty in this segment Option 2 Implement the aggressive new price strategy. Focus on targeting industrial segment. PROS CONS * 23% of the market by volume * One client account signifies a lot of sales * 16% growth in the last year * Mavesa has 60% share of the market * * Competition found mainly on price * Price wars surrounded by competitors * Low advantageousness Option 3 Maintain current prices. Focus on targeting the premium household segment. PROS CONS 85% of the market by volume * Decline in the volume over the past 2 years * Quality is the key buying criterion * Customers are loyal to the brand * Recession in Venezuela * Nellys cost-cutting innovations learn it less relevant for this segment * Kraft mayonnaise is perceived as the maven with the highest quality Decision Matrix positiveness Growth potentiality Brand image sales Efforts Option 1 4 4 2 2 3. 0 Option 2 2 4 3 3 3. 0 Option 3 2 1 4 3 2. 5 Recommendation Nelly should execute its new aggressive pricing strategy. As the decision matrix shows it, they should leverage the reduction in cost production to increase their market shares both(prenominal) in the thriftiness household segment and in the industrial segment. Low-costsNelly is the net cost manufacturing business in the low-cost segment which leaves some delimitation for cost reduction. The main threat about it is the overhead costs that Nelly has to afford for sales bear off and management regarding the companys size in comparison to its competitors. It is fake that co st-cutting innovations such as the flexi-pack and the reduction of oil in the production of mayonnaise will compensate for those costs. It also has to be unsound and not set is price to low or too high. safeguard of the shares in the allowance market Nelly should make clear differentiation between the salad dressing targeting frugality segment and mayonnaise targeting the premium segment.The company indirect requests to experience cost-cutting innovations to gain more share in the economy segment, but it do not want to lose its shares in the premium market. By pass two products, one marketed as mayonnaise for the premium market and one marketed as salad dressing for the economy market, Nelly could increase its shares while gaining more shares. distribution Channels and Sales Force Investment will have to be made in order to either hire more apt sales force to get access to more medium to small-sized stores or increase wholesalers and distributors spare margin on volume dis counts. By increasing wholesalers and distributors margins on volume discounts, it could become and incentive to push sales.Nevertheless, since the difference in the level of distribution between stores attended indirectly and directly by Nellys sales force is important, hiring new sales force would be the most propose strategy. Industrial Even if this segment has low favorableness because of the price wars, Nelly could take advantage of the cost-cutting innovations made in production and packaging. In this segment, one customer account represents huge sales. Mavesa already has 60% of the market shares while its major(ip) competitor owns 30% of the shares. With its new low cost, it could at least gain the remaining 10% of the shares that is split among small regional competitors who would probably not be able to follow the price reduction.Mavesa Mavesas Nelly Brand Pricing to Gain Market Control 19/03/2013 Mavesas Nelly Brand Pricing to Gain Market Control Problem statement The year is 1999 and Jose Luis Paez, the category manager for Marvesa mayonnaise is contemplating whether he should use a new pricing strategy that cuts the price of their product due to Venezuelas current economic conditions and increasing competition in the segment.As this new strategy aims at gaining market share the possibility of negatively impacting profits in the foreseeable future is also an issue. Therefore, is this the best strategy Marvesa should use in order to alleviate the problem? SWOT MAVESA STRENGTHS WEAKNESSES Traded on the NYSE * Extensive product portfolio * Management talent * Market share leader in most of its categories despite multinationals * Strong recent growth * Geographic expansion through exports, acquisitions or mergers * Owns 60% of industrial segment (restaurants) * Good national distribution network * Flexible and responsive to changing market conditions * Lowest cost producer of the low cost segment * Contracting mayonnaise sales within Marvesa * Nell y has minimal brand loyalty and brand image * In category where low price is a primary criterion, Nellys price are not among the lowest * Do not have the appropriate sales force * High overhead costs OPPORTUNITIES THREATS Salad dressing segment growth * Growth in the industrial segment * Improve channels to increase shares in medium and small stores * Flexi-pack * Huge growth in the household segment * Changing competitive environment becoming more saturated, volatile economic environment * Recession in Venezuela * Kraft is launching mayonnaise * Shift in lower priced brands due to economic downturn * De-evaluation of the bolivar * Competition Albeca and Kraft * Economy brands expected to represent 34% * Mature mayonnaise market * Decline in the premium market Options Option 1 Implement the aggressive new price strategy. Focus on targeting the economy household segment. PROS CONS Nelly created this segment * Nellys taste attributes * Huge growth predicted to continue * Nelly occupie d approximately 48% of the market * Primary criterion is low price * Only 15% of the market by volume * Albeca * Entry of Kraft * Little brand loyalty in this segment Option 2 Implement the aggressive new price strategy. Focus on targeting industrial segment. PROS CONS * 23% of the market by volume * One customer account signifies a lot of sales * 16% growth in the last year * Mavesa has 60% share of the market * * Competition based mainly on price * Price wars between competitors * Low profitability Option 3 Maintain current prices. Focus on targeting the premium household segment. PROS CONS 85% of the market by volume * Decline in the volume over the past 2 years * Quality is the key buying criterion * Customers are loyal to the brand * Recession in Venezuela * Nellys cost-cutting innovations make it less relevant for this segment * Kraft mayonnaise is perceived as the one with the highest quality Decision Matrix Profitability Growth Potential Brand image Sales Efforts Option 1 4 4 2 2 3. 0 Option 2 2 4 3 3 3. 0 Option 3 2 1 4 3 2. 5 Recommendation Nelly should implement its new aggressive pricing strategy. As the decision matrix shows it, they should leverage the reduction in cost production to increase their market shares both in the economy household segment and in the industrial segment. Low-costsNelly is the lowest cost producer in the low-cost segment which leaves some margin for cost reduction. The main threat about it is the overhead costs that Nelly has to pay for sales force and management regarding the companys size in comparison to its competitors. It is assumed that cost-cutting innovations such as the flexi-pack and the reduction of oil in the production of mayonnaise will compensate for those costs. It also has to be precarious and not set is price to low or too high. Protection of the shares in the Premium market Nelly should make clear differentiation between the salad dressing targeting economy segment and mayonnaise targeting the premiu m segment.The company wants to implement cost-cutting innovations to gain more share in the economy segment, but it do not want to lose its shares in the premium market. By offering two products, one marketed as mayonnaise for the premium market and one marketed as salad dressing for the economy market, Nelly could increase its shares while gaining more shares. Distribution Channels and Sales Force Investment will have to be made in order to either hire more trained sales force to get access to more medium to small-sized stores or increase wholesalers and distributors additional margin on volume discounts. By increasing wholesalers and distributors margins on volume discounts, it could become and incentive to push sales.Nevertheless, since the difference in the level of distribution between stores attended indirectly and directly by Nellys sales force is important, hiring new sales force would be the most recommend strategy. Industrial Even if this segment has low profitability beca use of the price wars, Nelly could take advantage of the cost-cutting innovations made in production and packaging. In this segment, one customer account represents huge sales. Mavesa already has 60% of the market shares while its major competitor owns 30% of the shares. With its new low cost, it could at least gain the remaining 10% of the shares that is split among small regional competitors who would probably not be able to follow the price reduction.