Method:

O-MopTM Product
Line Assessment
Ronnie Forrest
Morgan Kapp
Dave Zhang

Overview
Methods Journey
Industry Overview
Corporate Values and Strategy
Brand Differentiation

O-Mop Product Line Introduction

Value Proposition
Strategic Decisions
Risk Assessment

Recommendation

Method: Household Products Industry Overview

$17 billion industry in the United States

Mature industry dynamics
Few powerful incumbents: SC Johnson, Proctor & Gamble,
Unilever, etc.
Steady cost pressures: raw material prices, commodity perception
Market leaders were able to invest in strategies to provide lowest
cost options to consumers

High barriers to entry

~40 brands peripheral brands competing in the market
Volume heavily consolidated with several incumbents that
leverage scale to drive down costs
Consumers commodity perception

Method: Corporate Values and Market

Strategy
Slogan: People Against Dirty
Dirty: toxic chemicals, non-recyclable materials, and animal
testing

Brand Differentiation
Integrate products and consumer household values
Health and safety
Aesthetics
Environmentally responsible
Premium offering to differentiate from existing commodity
brands available in the market
Superior packaging, presentation, colors, and sensory
aesthetics

Method: Product Values

Product values
Biodegradable
Contain no propellants, aerosols, phosphates, or chlorine bleach
Packaged in minimal and recyclable materials

Product formulation
Eye-catching designs
Lean outsourcing network of suppliers to remain nimble and
quick to market
Recognizable to establish brand loyalty

Convert environmental integration of products

from risks to opportunities

Method: Successes to this Point

Growth from $300k investment to $50M in revenues in
2006
125-product line of home solutions
Dishwashing liquids
Hand soaps
Body soaps

Significant penetration into key distribution channels

Drug stores, department stores, supermarkets, other retailers
Mainstream and environmentally responsible retail outlets

Ranked #7 on the top 500 growing and successful

firms by Inc. magazine in 2007

O-mop: New Product Line Decision

Value proposition

Ergonomic
Aesthetically pleasing
Biodegradable disposable cloths
Leverage PLA material

Source constraints
No U.S.-based manufacturers will agree to produce PLA non-woven cloths
due to technological concerns (90% of current products are sourced
domestically)
China source has agreed to produce the material
No source can guarantee non-GMO material

Considerations Should Method invest in the O-mop?

Distribution channel response to potential use of GMO materials
Consumer response to China source

O-Mop: Risk Assessment

Strengths
Supports their main mission Provide environmentally friendly alternative to nonbiodegradeable products
First to market on biodegradeable cleaning cloths
Technological familiarity

Weaknesses
Chinese supplier is unable to produce a quality product
Unable to effectively market this product consistent with core values
Sourced from China potential distribution complexity and increased price

Opportunities
Growth in the PLA cleaning cloth industry
High cost of entry for competitors (limited sources)

Threats
Public perception / consistency with core values: Materials sourced across the
globe carried a larger environmental impact due to shipping
Narrowing of distribution channels: GMO-free advocates and distribution channels
may shut Method off from the supply base due to the potential use of GMOs in PLA
More geo-political risk

O-Mop: Recommendations
Evaluate product market positioning
Product: convince management and stakeholders that the product aligns with
company vision is this product against dirty?
Price: Determine whether or not China-based source will result in a product
cost that can compete in the market
Placement: Understand distribution reaction to potential GMO in the products
Promotion: Clearly market the benefits of the O-mop over alternative solutions

Attempt to partner with domestic sources in parallel with

Chinese source to improve value proposition and mitigate
geo-political risk
Bottom line: environmental value over alternatives appears
to be present recommend introduction to market and
strong messaging / campaign to explain benefits to mitigate
non-GMO risks

Backup Slides

Current Situation
In 2006, Inc. magazine listed Method at #7 on the 500 fasted and
most successfully growing firms in the U.S.
$300,000 in startup capital
2007 45 employees and $50M in annual revenues; 125 products
Distribution was through drug stores, dept. stores, supermarkets,
and other retail outlets. (Target was a key channel 1400 stores in
47 states)
Live feedback from customers on their website tips for the future
Method created designer brands
Harmless to humans and the environment
Creative bottle and aroma designs
Created a premium brand to compete with cost-competitive non-green brands in the
market place

Market share how successful were they in doing this?

International sales expanding in discussions with new distribution
channels regularly

Assumptions / Missing Information

What assumptions and missing information can
be drawn from the case?
What % of corn is GMO? What are the risks with this?

Critical Issues Faced

New product line decision Cleaning cloths made
from PLA
List out the benefits of PLA

Issues
Source constraints domestically, with available sources in China
Raw material inputs to PLA could not be guaranteed GMO-free
some distribution channels / retailers were firmly against GMO
products

Should Method source the cleaning cloths from

PLA in China?

SWOT Analysis
Strengths
Supports their main mission Provide environmentally friendly alternative to nonbiodegradeable products
First to market on biodegradeable cleaning cloths
Technological familiarity

Weaknesses
Chinese supplier is unable to produce a quality product
Unable to effectively market this product consistent with core values
Sourced from China potential distribution complexity and increased price

Opportunities
Growth in the PLA cleaning cloth industry
High cost of entry for competitors (limited sources)

Threats
Public perception / consistency with core values: Materials sourced across the
globe carried a larger environmental impact due to shipping
Narrowing of distribution channels: GMO-free advocates and distribution channels
may shut Method off from the supply base due to the potential use of GMOs in PLA
More geo-political risk