MARKETING CHALLENGE The marketing challenge that Sarah Gremont is faced with is maximizing the listing productivity of the

garlic and herb division of Toppits Foods Ltd (Toppits), and increasing awareness of the product. This goal will be attainable by either: expanding the distribution channels, identifying a cheaper supplier, or altering the current promotional strategy. Although sales of the garlic and herb cubes (GHC) are increasing, relative profitability is staying stagnant. Gremont needs to identify a marketing plan that will increase overall profitability, or risk being de-listed by grocery stores.

CORPORATE CAPABILITIES & IMPLICATIONS Toppits Foods Ltd (Toppits) is an aged company dating back to 1899. It is a family run business that has expanded from fresh food offerings to the product in question; frozen garlic and herb cubes. Gremont has been working at Toppits for seven years, and has held various positions in the company, implying that she has a keen understanding of how Toppits operates. Having had sales of $25 million in 2005, Toppits is fairly profitable. It can also be inferred that Toppits is a small to medium sized company. As such, resources of the company are relatively limited. Toppits seems to have a large product variety (ranging from seafood to frozen spices), meaning that their operations and human resources would fit an organization that can operate many different branches within one company. Toppits marketing of the GHC has been rather unsuccessful as they have been unable to increase consumer awareness or profitability. Gremonts marketing plan must operate within a $200,000 budget, which has been allotted by Toppits. This means that the marketing of the GHC needs to be effective, and use its resources to reach a large crowd, even if it means using few variations of promotion mediums, at a higher cost.

INDUSTRY ANALYSIS & IMPLICATIONS The grocery industry, with which Toppits operates in, is not largely affected by current economic situations. People of all income levels, and of all ages (assuming adults 18+) must purchase their groceries, as food stuffs are one of the few necessities of life. Even if the economy slows down, people will still buy groceries. If the economy sees positive growth, and income levels rise, people will continue to purchase groceries, while diversifying their grocery lists potentially trying out new goods. Also, the grocery industry is not really seasonally sensitive.. As the population in Canada continues to grow, the grocery industry will grow with it. Although there is positive growth with in this segment, the grocery industry is becoming more competitive as consumers look for higher quality goods, which are environmentally friendly and are free of preservatives and the like. Entering the market at this time of increasing consumer awareness of health risks associated with chemical enhancers in food, products must be of the highest quality. Because the freshness, and natural ingredients of the GHC, being in the market now will work to our advantage. There are risks associated to our Israel supplier, as the current state of affairs is fairly unstable in Israel, as tensions between Lebanon, Palestine and Israel as rising. This could possibly affect shipment of goods.1

COMPETITIVE ANALYSIS & IMPLICATIONS Our direct competitors include: traditional herbs, Gourmet Canada, McCormicks Clubhouse Spices and Derlea Jars. Traditional herbs have been in the market place for many years, and enjoy a large percent of household penetration. They have a huge advantage over other competitors because they have become staple in everyday cooking, and consumers trust the
1

"2006 Lebanon War." Wikipedia, the free encyclopedia. 28 November 2008. Wikipedia. 1 Dec 2008 <http://en.wikipedia.org/wiki/2006_Lebanon_War>.

freshness of this product. The main issue they face is that their product rots within a few days of being purchased. Gourmet Canada has produced a tub like holder containing garlic and herb varieties, as well as dairy derivatives. They have limited their potential clientele as their product contains preservatives, so they cannot sell themselves as being all natural, and having dairy derivatives will cause people who are allergic to dairy products to stay clear of their product. McCormick has a large distribution network, and is a well-established brand; however, their products are of low quality. Derlea is a small, family owned business, with little production, and limited distribution network. Their products also contain preservatives. Indirect competitors are home grown herbs, which accounts for a very small segment of the market, and are difficult to maintain. Toppits has a competitive edge over its competitors as it boasts all-natural ingredients, no preservatives, and can last fresh for up to two years! These points should be Toppits main selling points, and should be heavily advertised. Also comparisons between the freshness of Toppits products versus its competitors should occur, to prove that what they are advertising is true. Toppits already has a good distribution network, but it needs to find a way to make GHC more visible, and stand a part from its competition. The competition might react by finding healthier supplies, and try to market themselves as being as healthy as Toppits products.

CUSTOMER ANALYSIS & IMPLICATIONS The potential clientele would be adults who are capable of cooking, and going grocery shopping. These consumers need a product that can help reduce the time spent in the kitchen, but which still has all the natural ingredients and flavour that they are looking for to spice up their meals. The product also has to be affordable so that people of almost all income brackets can afford to by the GHC. The market can be divided as such; people between the ages of 25-54 (who account

for 45% of the population) and students ages 18-25 (who account for 16% of the population). Both groups are looking for high quality goods that are affordable. Since the potential target market is so is large and because lifes tendency is to become more fast-paced, the number of consumers who would be looking for an alternative to crushing garlic is huge. People between the ages of 25-54 should be the target market, simply because of their sheer number, and their ability to add specialized products, such as the GHC to their shopping lists.

TARGET MARKET The chosen target market are Canadians between the ages of 25-54 who have limited time, and usually cook food at home. About 45% of the population is accounted for between the ages of 25-54. The target market will be predominantly women, although men should still be included. They tend to have little time and patience to stand in the kitchen chopping up onions, while crushing garlic, all while trying to handle their children, job, and life. They want a product that looks attractive, and is of the highest quality. Current social trends are moving towards healthier products that are all natural, and contain no preservatives. The target market also wants a product that is environmentally friendly. They would also tend to care about what they cook because they are using spices, which usually are only used to make bland food tasty and enticing. The large majority would not want to spend anymore on the GHC then they would have on traditional herbs so price is a definite influence on their purchases. This is the most suitable target market as they are the largest portion of the market, and tend to be the consumers who have developed a taste for food, a knack for cooking, and tend to have a family to feed.

PRODUCT

Toppits is offering an alternative to traditional garlic and herb varieties. The product is called garlic and herb cubes. They are frozen cubes of garlic and herbs that are placed in trays similar to ice trays. Each tray contains 20 cubes. The product is produced in Israel, where it is ensured that the produce used to create the garlic and herb cubes are of the highest quality. That is why it is crucial that Toppits sticks with the current Israeli producer instead of moving to an alternate supplier from China. The product helps to cut down the amount of time spent in the kitchen, as it allows the consumer to stop spending time chopping, dicing, cutting, and crushing garlic and herb alternative. Instead the consumer can just place the garlic and herb cubes in to the meals they are creating, saving time and strain. All the products are natural and fresh. None of their products contain preservatives or the like. Also the product stays fresh for up to two years. The target market will see the product as a great alternative to the traditional herbs that hold a large percent of the market. They will see the garlic and herb cubes as a quick and fresh alternative to spending time preparing traditional herbs for meals. Because this product is fresh and all natural, it truly stands apart from its competitors. All other competitors contain preservatives, and have a shorter life span. Because there is an increasing trend to be health-conscious, consumers will move away from products that contain preservatives, and more towards products that are fresh and natural, just like the garlic and herb cubes. Also the case that the GHC is held in is 100% recyclable2, meeting the new standards of environment-friendly products, as the consumer trends towards purchasing greener products. Lastly, garlic seems to have preventative affects on cancer3. In 2008, an estimated 166400 people with in the target market will be diagnosed with

"Garlic and Herb Cubes." Toppits. Toppits Foods Ltd. 30 Nov 2008 <http://www.toppits.com/garlic_herbs.html>. 3 "Health Benefits of Garlic." Toppits. Toppits Foods Ltd. 1 Dec 2008 <http://www.toppits.com/cubes_benefits.html>.

cancer4. Because of the high percentage of the target market that has, or will contract cancer, a product that can help prevent cancer will be regarded very positively by the target market. This means that the GHC are meeting the wants and needs of the consumer, because it is fresh, affordable and efficient.

PLACEMENT The current distribution of the garlic and herb cubes is from the producer to retailer (Toppits) through to distributors who sell the GHC to grocery stores. Another chain that is followed is from the producer to Toppits to warehouses. Currently grocery stores are Toppits main stream of distribution, as Toppits only distributes the GHC to one warehouse. Since traditional grocery stores are seeing growth of only one percent from 2005, Toppits needs to expand in to more warehouses. Warehouse stores annual growth in 2005 was 2 percent, but because it is a warehouse, products are sold in bulk, meaning that when consumers purchase the GHC, they will be buying a pack of 3 trays at a time instead of 1 tray. Also, there is a growing trend that the target market is making less and less trips to every distribution channel except warehouses, to buy their groceries. The statistics are inferring that there is a growing consumer movement towards purchasing goods at warehouses. By increasing Toppits distribution into warehouses, and keeping Toppits current grocery distribution, potential sales will grow (because the movement towards purchasing goods at warehouses, and because goods are bought in bulk) meaning overall profitability will increase.

PRICING
4

"General Cancer stats for 2008." Canadian Cancer Society. 17 August 2008. Canadian Cancer Society. 1 Dec 2008 <http://www.cancer.ca/Canada-wide/About%20cancer/Cancer%20statistics/Stats%20at%20a%20glance/General %20cancer%20stats.aspx?sc_lang=en>

The price to the end consumer of the grocery chain is $4.56. Please see exhibit 1 for an overview of pricing. Wholesale pricing through the warehouse chain has been adjusted to $3.00 per tray as opposed to $2.66 to increase Toppits profit margin. Although the warehouses are being charged more per tray, they will be earning a greater profit margin per tray as a result of the price increase. Also by increasing the price, the breakeven point is significantly lowered, allowing for a profit to be generated. Please see exhibit 2 for a sensitivity overview. These prices are placed right in the middle of Toppits competition, as McCormicks most similar product is priced at $5.795 and Derlea Jars most similar product is priced at $2.79 5. Also when purchasing the GHC, the target market will take in to account that they no longer need to buy traditional garlic and spices, which can be priced anywhere from $0.99 to $5.995, meaning that the GHC are a great deal. They are time-efficient are affordable. Also, by setting these price levels, the consumers perception of the GHC will be one of quality (because it is not cheap) and affordability (because it is not the most expensive of its kind).

PROMOTION It is Sara Gremonts challenge to increase consumer awareness of the GHC as it currently has very limited exposure. First, the GHC should no longer be placed in the specialty freezer, as its misplacement has reduced exposure of the GHC, because it is placed in inconvenient areas. Also, because the GHC are not placed amongst its competitors, consumers will be unaware of what the GHC offers, and how it is better than its competition. The GHC should then be placed in the grocery store or warehouse freezers, amongst its competition so that is easily accessible, which is what consumers are looking for. In store sampling should continue, as it increases consumer
5

Main Menu." GroceryGateway.com. Grocery Gateway. 30 Nov 2008 <http://www.grocerygateway.com/GGFrames.asp? GUID=912620424748967060340565&IT=1&N=0&Nrst=1&Mode=MainMenu>.

awareness of the GHCs natural and flavorful taste. Sampling on certain TV shows such as 30 minute meals, The Iron Chef and Emeril should be pursued. These shows boast famous TV personalities, who focus on quick and flavorful meals. The target market is amongst the largest audience of shows such as these, as they enjoy watching different ways to cook, and if the TV personalities are seen with the GHC, it will persuade consumers to purchase the product. Advertisements on television shows such as HGTV, and The Food Network will occur four days a week, for a period of 24 weeks. Also radio ads will occur three times a week for a period of 24 weeks. Average sales growth was about 30% during the advertisement period in the previous year, so it is clear that advertisements are amongst the most effective promotional methods. Please see exhibit 3 for a breakdown of costs related to promotions. Promotional coupons should be advertised in the grocery and warehouse stores flyer. Coupons will increase the target markets interest in the product as it promotes the product at a cheaper price. A new packaging will be created highlighting the GHCs all-natural ingredients, no preservatives, cancer preventative properties. Please see exhibit 4 for an example of the new packaging. These properties are key to increasing the GHCs popularity and awareness, as current social trends are moving towards products that are healthy and environment friendly. Lastly food festivals, freezer placement and website design will not be pursued in the budget as they are no longer relevant.

Exhibit 1- Price breakdown and breakeven for each distribution option Toppits Selling Price 2.66 $3.00 $2.39 VC $1.99 $1.99 $1.99 UC $0.67 $1.01 $0.40 RSP $4.65 $3.60 2.99 Profit Margin 25% 33.5% 16.7% Breakeven 719403 478264 1335216

Grocery Distribution (per tray) Warehouse Distribution (per tray) Walmart Distribution (per tray)

Exhibit 2: Warehouse price sensitivity and breakeven Toppits SP VC Toppits UC Warehouse SP $0.41 $0.67 $1.01 $2.88 $3.19 $3.60 Warehouse UC $0.48 $0.53 $0.60 Breakeven

$2.40 $2.66 $3.00

$1.99 $1.99 $1.99

1181916 721759 478264

Exhibit 3: Promotional cost breakdown Initiative Sampling (In-store and TV-show) Magazines Television advertisements Actual $68,080 $36,000 (310*4*24) + (180* 4*24) = $47,040 (290*3*24) = $20880 $20,000 $8000 Assumptions/ Explanations Left over budget to be spent on in store sampling and appearance on TV shows Same $ as previous year 4 ads per week for 24 weeks on HGTV and Food Network 3 ads per week for 24 weeks on CHUM FM Same $ as previous year Same $ as freezer placement, as products will be stored in grocery freezers instead of specialty freezers

Radio Packaging Shelf Placement

TOTAL

$200,000

Exhibit 4: New packaging

GARLIC & HERB CUBES

100% NATURAL NO PRESERVATIVES

PREVENTS CANCER

Toppits logo: http://www.toppits.com/secure/index_en.php Garlic image: http://static.howstuffworks.com/gif/how-to-plant-and-store-garlic-3.jpg Recycling image: http://keepgeorgiagreen.com/images/recycle_io3s.gif

EXECUTIVE SUMMARY Sara Gremont, vice-president of Brand Strategy and Business Development at Toppits Foods Ltd (Toppits) needs a marketing plan that will increase the profitability of Toppits garlic and herb cube business, while also increasing consumer awareness of the product. The garlic and herb cube business is run as a profit-centre for Toppits, and so it has to show increased profits over previous years. Also, Gremont faces having the product being de-listed by retailers if sales do not improve. The success of this product is contingent upon identifying a new marketing strategy that will increase the profitability of the herb and cube business, while also increasing consumer awareness of the product. Toppits should focus on consumers between the ages of 25-54. They are the largest group in Canada, representing approximately 45% of the population. Society is moving towards purchasing products that are healthier, greener, and more efficient, and this target market is no exception. They want a product that is competitively priced, and is of the highest quality. They will be willing to pay a small premium over other goods to have produce that is all natural. To achieve their goals of increasing profitability and consumer awareness of the garlic and herb cubes, while keeping within the target markets wants and needs, Toppits will need to follow these recommendations: o Expand distribution in to more warehouses, while keeping current grocery store distribution channels o Increase the wholesale price for the warehouse distribution o Place the garlic and herb cubes amongst its competitors within the grocery and warehouse stores freezers o Create a new package for the product o Pursue new more aggressive methods of promotion Expanding Toppits distribution in to warehouses is crucial, as more and more of the target market is moving towards purchasing the goods at warehouses. Warehouses are seeing a greater annual growth than groceries, and consumers spend more per trip to a warehouse, than to a grocery store (because goods are bought in bulk). Also because the warehouse distribution chain has less middle-men, Toppits will be able to increase their wholesale price, while still ensuring that the RSP is still affordable, and fits with the target markets spending ability. This also means that profitability per good sold increases. Toppits has been struggling with trying to find an effective way to promote the garlic and herb cubes. They must first ensure that their products are placed amongst the competition in the grocery and warehouse stores freezers, instead of in their specialty Toppits freezers. Secondly a design for the packaging needs to be implemented that will highlight the cubes all natural, no preservative, cancer preventative and recyclable qualities. It is these qualities that truly set the cubes apart from their competitors. They are also qualities that will influence the target market to purchase the cubes, as they are the qualities that are the most important to them. These new implementations will have to be promoted through aggressive promotions through different mediums such as TV, radio, coupons and in store sampling. These recommendations will help Toppits reach their goals as they ensure awareness of the product will reach the target market, loud and clear. This marketing strategy highlights the garlic and herb cubes advantage over its competitors in an effective manner, by giving the target market what it wants from quality produce goods. The increase in wholesale prices will ensure a profit, as will the expansion in to warehouses.

MARKETING MANAGEMENT REPORT BUSINESS 1220

TOPPITS FOODS LTD Irfan Hajee, Marketing Consultant

Irfan Hajee 250463143 Section: 008 Professor Watson Due: December 3, 2008