BRANNIGAN

FOODS
Strategic Marketing Planning

Section D Group 10
Arijit Nayak (15P189)
Chandrima Dhar (15P194)
Mihir Upasani (15P212)
Nidhin George Thomas (15P215)
Sambit Dash (15P225)
Shivi Sharma (15P230)
Vivek Agarwal (15P240)
Contents
Introduction:................................................................................................................ 2
Context:....................................................................................................................... 2
Problem Statement...................................................................................................... 4
Options proposed to Clark:.......................................................................................... 5
I. Invest in growing sectors....................................................................................5
II. Acquire product lines to complement the core in growing sectors.....................7
III. Invest in organic growth from internally developed new products...................11
IV. Invest in the core.............................................................................................. 14
Recommendations: -.................................................................................................. 17
Conclusion: -.............................................................................................................. 18
Introduction:
Bert Clark, vice-president and general manager of Brannigan Foods’ Soup
Division is evaluating options for future investment avenues, provided by four
of his key managers based on their views of an analyst’s report on the Soup
industry. Soup industry was mature and Brannigan’s sales and profits had
been declining. There was also an ongoing shift in the consumer trends in
soup consumption, in light of health and obesity concerns, and preference for
simple and convenient meals. Clark was especially concerned about engaging
younger consumers. He asked for and got recommendations about future
plans from his four most trusted subordinates. Here, we analyze the
recommendations and propose a solution of our own for the future direction
of the company.

Context:
The Soup Division is responsible for 50% of the profits of the company and
40% of the sales. The most profitable product category this division has is the
Ready to Eat Soups (RTE), which accounts for 64% of the total revenues
($1942 Million) and 71% of its profits ($ 210 million). These products are in
mature stage and are in slow decline.
201 201 Growt
0 1 h
Ready to serve wet 225 202 -
soup 7 0 10.5%
189 182
Condensed wet soup 3 1 -3.8%
136 139
Dry Soup 6 7 2.3%
Ready to serve broth 862 915 6.1%
Refrigerated soups 142 164 15.5%
Frozen Soups 27 46 70.4%
Deli Soups 110 140 27.3%
665 650
Total 7 3 -2.3%
Table 1: Total market sales of all soup categories (in $ millions)
The Soup Division has other product and brand segments such as Dry Soups,
Healthier Soups and the Fast & Simple Meals. Five years ago, a soup company
named Anabelle Foods was acquired to broaden the range of products offered
by introducing the Fast & Simple meal category, and the strategy that has
been followed during the past few years has been to strongly invest in Dry
Soups, Healthier Soups and the mentioned Fast & Simple meals.

Customer Segmentation: Baby boomers (born 1946 – 1964) are the largest
and most loyal brand segment. They are leaning towards eating healthy
soups (low sodium, fiber enriched). Another category is that of working
mothers, who prefer fast, simple meals. Brannigan is also actively trying to
engage younger consumers.

Consumer behavior: On an average, 1.4 cans of soup per household are

consumed per week. Consumers aged 18-24 average 2.1 cans per week. 48%
of consumers eat dry soup and 78% eat wet soup. 38% of all consumers eat
soup as a snack. Millennials (age 15-30) are most likely to do so. 55% of
consumers say that someone in their household eats soup all year round, but
86% of consumers are most likely to eat soup when it is cold outside. This
shows soup is still perceived as a seasonal food. 78% consumers see soup as
a healthy or low calorie option food. 61% of consumers take low sodium in to
account when purchasing soup. This shows the increasing trend towards
eating healthy foods. (Exhibit 1)

Customer perception of Brannigan: Customers perceive Brannigan to be

behind competitors in the following (Exhibit 1):
 Health trends
 Diet claims
 Convenience offerings
 Flavors – especially popular regional ones
 Seasonal products outside of cold weather
Retailer perception of Brannigan: Retailers perceive Brannigan to be the
category leader in soups. But, it is seen as less profitable than competitors
and not innovative. (Exhibit 1)

Distribution channels: Retailers and supermarkets provide adequate channels

to reach the consumers. However, the relationship is becoming strained as
Brannigan needs more shelf-space for its various new products and retailers
are unwilling to increase the shelf space for Brannigan, as they don’t want
one company to monopolize all their shelf space. They want to maximize their
profits by making shelf space available to profitable private label products.
Retailers are also becoming intolerant of the cost of bringing in new products
with short life cycles that fail to meet their sales and profit expectations.
Stocking fees, returns and other charges for each new product brought it in
were a constant factor for Brannigan.

Competitors: The size of the US Soup market is $ 6.4 Billion. Brannigan is the
market leader, having an overall market share pf 39.8%. Its major
competitors are General Mills and Unilever. It also faces stiff competition from
private label products and deli soups. 35% of consumers buy soup from
supermarket deli sections as they believe they are fresher and healthier and
provide a fast and simple meal (Exhibit 1). New small competitors are
entering the market with more convenient, healthier soups and new flavors
which are becoming popular among customers, like the Mexican and Asian
flavors.

Problem Statement

Clark needs to determine the most profitable way to deploy the company’s
resources, so as to stem the declining sales and profits of the division. He
needs to determine which of the alternatives suggested by his subordinates
should be implemented in order to reverse the steady industry decline (long-
term) and increase profits by 3% per year (short term). The decision factors
chosen by Clark are:

1. Volume vs profit
2. Short term vs Long term
3. Brand equity vs Brand constraint
4. Category trend vs performance
5. Health
6. Convenience
7. Risk of options
8. Opportunities and resource limits
9. What we do well
10. Competition

Options proposed to Clark:

I. Invest in growing sectors

Srikant Tipha is the category manager for Simple Meals, Heart Healthy Soups,
and Dry Soups. According to Tipha, Brannigan should keep investing
increasingly in the growth categories of dry soups and healthier soups as
they’re very promising. He proposes an increase in the advertising and
promotional expenditure of dry soups in general and the Fast & Simple soup
and Heart Healthy soup lines, and new dry mix flavors (Gazpacho, Teriyaki
Beef) in particular. This strategy focuses a lot on ‘star’ products (BCG product
matrix) and a long term growth vision. While these categories are indeed
gaining popularity, they are not nearly as big as the canned soups category.
And being very popular, these categories witnessed high competition that led
to a larger hit to the profit margins than the core products.

As we have calculated above, the soup market is declining by around 2.3%

per year (Table 1). Sales of the proposed lines have been growing at 12% per
year. As shown in the following calculations, the sales would have to grow by
21.5% to meet his target sales of $ 2954 million.
2013 Growt
2012 2013 Growth Tipha h
Traditional ready to eat soups
-
10.5
Ready to serve wet soups 998 893 -10.5% 893 %
Condensed Wet soups 917 882 -3.8% 882 -3.8%
Broths 414 439 6.1% 439 6.0%
New products, acquisitions last
10 years
21.5
Low Sodium RTE "Heart Healthy" 321 360 12.0% 390 %
21.5
Annabelle's Fast n Simple 71 80 12.0% 86 %
Dry soups and mixes 53 54 2.3% 55 3.8%
Other, including private label 199 209 5.0% 209 5.0%
Total 2973 2913 -1.9% 2954 -0.6%
Table 2: Growth projections according to predictions of Mr. Tipha (in $ millions)

This growth seems unreasonable to expect in a declining market scenario,

even with increased promotion expenses of $ 18 million. Also, the short-term
objective of achieving profit growth of 3% would not be achieved even if sales
projections are met, as shown below.
201 2012 201 2013
Year 1 E 3 Tipha
Net sales of Brannigan's Foods 733 823
worldwide 0 7979 0 8230
303 291
Net Sales of US Soup Division 4 2973 3 2954
Less:
166 160
Cost of goods sold 9 1635 2 1625
Marketing, R&D, Selling Expenses 425 416 408 426
Other expenses 625 627 600 606
Net Earning 315 295 303 297
Broken out of Marketing and
selling expenses
Advertising and Promotion 189 178 170 188
Table 3: Earning projections as per Mr. Tipha’s recommendations (in $ millions)

The analysis as per the decision criteria proposed by Clark is as follows:

Volume vs profit: The sales of the new product lines are $ 445 million at
present (Table 2). The category is growing by 12% per year. Increased
promotion expenditure may mean higher growth, though likely not at the
projected level of 21.5%. But, the profit target of 3% will not be achieved by
this strategy.

Short term vs Long term: This strategy is focused on the long term growth.
Short term target is not being achieved.

Brand equity vs Brand constraint: Brannigan is perceived by consumers as

being behind competitors on health and diet trends and convenience
offerings. This strategy may remedy that.

Category trend vs performance: There is a clear trend towards healthy and

convenient soups which this strategy addresses. The category has been
growing at 12% annually which shows good performance in a declining
market.

Health: Heart Healthy soups is gaining market share.

Convenience: Fast and Simple soup is on the right track.

Risk of options: Increased promotional spending may not translate in to

growth as projected.

Opportunities and resource limits: An increase of $ 18 million in promotional

expenditure leads to decrease in profits. It took 5 years for the acquired line
to break even, instead of the initial projection of two years.

What we do well: The product category is new to Brannigan and not a

traditional strength.

Competition: There is high competition in this category as consumer trends

are leaning towards it. In order to keep up with competition and protect its
market share, Brannigan will have to focus on this line of products sooner or
later.

Mr. Tipha’s recommendations appear to be overly optimistic. Short term

target of 3% growth in profit will not be met if this alternative is implemented.
However, the proposed focus on healthy and fast and simple category is in
line with market trends. The company cannot ignore these product lines for
achieving long term growth and maintaining its position as market leader in
the future.

II. Acquire product lines to complement the core in

growing sectors

Claire Mackey is the Director of Finance and Planning at Brannigan and

favored the acquisition of product lines in order to obtain a foothold in the
new flavors and healthier soups categories quicker. According to her an
acquisition would have a favorable impact on gross margins via
manufacturing and operating synergies and advertising and promotion
expenses could be reduced from expected numbers by using the Brannigan
brand name. The difficult acquisition of Annabelle’s Foods notwithstanding,
cannibalization was a concern and using the Brannigan brand name instead
of retaining the acquired brand names would antagonize the retailers who
were wary of large vendors gaining shelf space. The pros and cons of the
strategy are listed below.
Pros:
1. It will enable easy entry to the recently evolved popular flavour and
healthier categories (Asian flavours).
2. The products are priced higher and have higher margin, so will be more
profitable.
3. The acquisitions are estimated to add to sales to the tune of 1.5 to 3.5%
within 5 years.
 4. Acquisition pricing at 6-7 EBITDA is reasonable.
5. If the integration is hiccup-free, significant manufacturing and operating
synergies can be expected which is expected to add 10% to gross profit
margins within two years.
Cons:
1. Annabelle’s acquisition did not meet expectations. The projected break-
even period of two years turned in to five years. The management of
the company is likely to view another acquisition proposal with
apprehension.
2. Issue of branding and marketing investment is complex. Brannigan can
either choose to sell the newly acquired products under its own brand
name or continue to sell them under the brand name of the earlier
company. Both choices offer their own benefits and challenges. If the
products are sold under the Brannigan brand name, cost of promotion
would be 15% of sales; whereas if the acquired company’s brand was
continued the cost of promotion would be 30% of sales. Cannibalisation
was also a critical consideration. As retailers are unwilling to provide
more shelf space to Brannigan, if the products are sold under the
Brannigan brand name some non-performing Brannigan products would
have to be removed from the shelves. The cannibalisation is expected
to be 8.5% of total sales (Clark estimates cannibalisation to be 0.6% of
total sales if the acquired company’s brand was maintained, double
that predicted by Ms. Mackey. He also estimates that maintaining the
acquired company’s brand would allow Brannigan to keep 90% of the
acquired company’s shelf space and thus reduce cannibalisation by
70%). In both the cases, there will be significant increase in promotion
expenses and some cannibalisation is to be expected.
3. A capital expenditure of about $ 29 million (7 x EBITDA of $ 4.2 million)
would be required for the acquisition. While most of this expenditure
would be reflected in the balance sheet and not the income statement,
interest and depreciation/amortization expenses will be added to it and
thus affect profits.
The estimated income statement, for either of the two tactics, for the next
five years (2011-2015) is given below.
201 201 201 201 201
Year 1 2 3 4 5
Net sales of Brannigan's Foods 733 797 823
worldwide 0 9 0
303 297 294 289 283
Net Sales of US Soup Division 4 3 9 0 2
Less:
166 163 162 159 155
Cost of goods sold 9 5 2 0 8
Marketing, R&D, Selling Expenses 425 416 413 405 397
Other expenses 625 627 600 588 576
Cannibalization -- -- 25 25 24
Interest -- -- 1 1 1
Net Earning 315 295 288 282 276
Broken out of Marketing and
selling expenses
Advertising and Promotion 189 178 175 171 168
Table 4: Maintaining Brannigan Brand Name (in $ millions)

201 201 201 201 201

Year 1 2 3 4 5
Net sales of Brannigan's Foods 733 797 823
worldwide 0 9 0
303 297 294 289 283
Net Sales of US Soup Division 4 3 9 0 2
Less:
166 163 162 159 155
Cost of goods sold 9 5 2 0 8
Marketing, R&D, Selling Expenses 425 416 419 410 402
Other expenses 625 627 600 588 576
Cannibalization 18 17 17
1 1 1
Net Earning 315 295 290 284 278
Broken out of Marketing and
selling expenses
Advertising and Promotion 189 178 181 177 174
Table 5: Maintaining acquired company brand name (in $ millions)

As can be seen from the above tables, net profit is decreasing steadily over
the next five years in both scenarios, against Clark’s estimated increase in
gross profit margin by 10%. Even though the Cost of Goods Sold is reducing
due to increased gross profit margin, increased marketing, cannibalization
and interest expenses reduce the net profit margin over the next five years.
So, the short term target of 3% growth in net profit would not be met.

The analysis as per the decision criteria proposed by Clark is as follows:

Volume vs profit: The sales of the new product lines are $ 36 million, and ay
add 1.5 to 3.5% to sales within 5 years. So, the projected volume of sales is
low. The acquisition targets have an EBITDA of about $4.2 million, but as
shown in Table 4 and 5, net profit growth target of 3% per year will not be
met by this strategy.

Short term vs Long term: This strategy is focused on the long term growth in
new flavors and products. Short term target is not being achieved.

Brand equity vs Brand constraint: Brannigan is perceived by consumers as

being behind competitors on health and diet trends and convenience
offerings. This strategy may remedy that, if Brannigan’s brand is used for sale
of the acquired product lines. If the acquired company brand is used,
Brannigan’s brand equity may not be affected that much. However, the
constraint of limited shelf space and cannibalization will be reduced by
maintaining the acquired company’s brand.

Category trend vs performance: There is a clear trend towards new flavors

and healthy and convenient soups which this strategy addresses.

Health: Target companies have products focused on health.

Convenience: Target companies have products focused on convenience.

Risk of options: There is high risk of unsuccessful integration, as in the case of

Annabelle Foods.

Opportunities and resource limits: This strategy will require around $ 29

million in acquisition expense, which the company will have to borrow.
What we do well: The flavors of the products are new to Brannigan and not a
traditional strength. Also, there were major problems with acquisition of
Annabelle Foods five years prior.

Competition: There is high competition in this category as consumer trends

are leaning towards it. In order to keep up with competition and protect its
market share, Brannigan will have to focus on this line of products sooner or
later.

Overall, this strategy has high risk and costs. Short term targets will not be
achieved through this strategy. Hence, this strategy is undesirable.

III. Invest in organic growth from internally developed

new products

Anna Chong, the Chief Innovation Officer, focused on the need for strong new
product development processes as Brannigan mostly operated in mature
products and categories. She advised increasing the R&D budget by over
35%. ‘Deli soups’, ‘Active Lifestyles’ ‘Great Meals’ were some of the projects
she found promising. While this option would address the issue of changing
consumer needs in the soup industry and develop new products at lower
costs than acquisition, it was wrought with high failure rates. Shorter life
cycles meant frustrating the retailers in addition to unmet profit expectations.
Also, the new product development costs would be very hard to allocate to
specific products. The pros and cons of the proposed strategy are listed
below.
Pros:
1. It will enable entry to the recently developed popular and healthier
categories, like Chicken noodle and Fast and Simple Mediterranean
Tomato Basil, packaged Deli soups, ‘weight watchers’, ‘active lifestyles’
etc.
 2. It will be less expensive to develop new products this way as compared
to inorganic acquisition of other companies which present a lot of
challenges, as listed in the last section.
3. Brannigan’s traditional strengths will be reinforced (new products build
on Brannigan’s most popular soups).
4. Address consumer’s changing needs and serve consumer’s desire for
innovation in the category. Retailers perceive Brannigan as not being
innovative. Developing new products regularly and coming up with new
and exciting flavours will help to change this opinion.
5. It will enable a price increase of ≈ $0.10 per can, resulting in an
incremental net earnings of up to $12 million. Up to $ 6 million in
additional gross profit can be achieved if fresh shelf space is obtained,
which admittedly has a low chance of happening. Profit gain from new
products has a 90% chance of occurring.

Cons:
1. Introduction of new products will cause cannibalization on existing
product lines. As mentioned in the earlier section, retailers are unwilling
to increase Brannigan’s shelf space. Clark thought that there was only a
5% chance of gaining shelf space.
2. The new product success rate of 7% (Exhibit 1) means that only about 1
out of 10 succeeds, while developing new products costs about $ 8
million per year. But, typically new products manage to at least recover
their development costs and marketing expenses.
3. It can be difficult to assign exact R&D costs to the new products as only
10% ideas develop in to products.
4. Retailers are also becoming intolerant of the cost of bringing in new
products with short life cycles that fail to meet their sales and profit
expectations. Stocking fees, returns and other charges for each new
product brought it in were a constant factor for Brannigan. There is a
chance of loss of retailers’ goodwill, thus potentially leading to a
devastating channel conflict.
The projected income statement for this strategy is given below:
20 20 20 20 20
Year 11 12 13 14 15
Net sales of Brannigan's Foods 73 79 82
worldwide 30 79 30
30 29 29 28 28
Net Sales of US Soup Division 34 73 29 94 66
Less:
16 16 16 15 15
Cost of goods sold 69 35 10 90 74
42 41 42 41 41
Marketing, R&D, Selling Expenses 5 6 3 9 6
62 62 60 58 57
Other expenses 5 7 0 8 6
31 29 29 29 30
Net Earning 5 5 6 6 0
Broken out of Marketing and
selling expenses
18 17 18 17 16
Advertising and Promotion 9 8 0 1 3
Table 6: Projected income statement from Anna Chong’s strategy (in $ millions)
As can be seen from the table, the short term target of 3% growth in profits
will not be achieved using this strategy. However, the net profits start
showing an upward trend from 2015 onwards, meaning there is a potential for
long term growth.

The analysis as per the decision criteria proposed by Clark is as follows:

Volume vs profit: This strategy may result in incremental net earnings of up to
$12 million. Up to $ 6 million in additional gross profit can be achieved if fresh
shelf space is obtained, which admittedly has a low chance of happening.
Profit gain from new products has a 90% chance of occurring.

Short term vs Long term: This strategy is focused on the long term growth in
new flavors and products. Short term target is not being achieved, but net
profits start showing an upward trend from 2015 onwards, meaning there is a
potential for long term growth.

Brand equity vs Brand constraint: Brannigan is perceived by consumers as

being behind competitors on health and diet trends and convenience
offerings, and on innovation by retailers. This strategy may rectify that.
However, the constraint of limited shelf space and cannibalization will be very
much there.

Category trend vs performance: There is a clear trend towards new flavors

and healthy and convenient soups which this strategy addresses.

Health: There are new products focused on health like To-your-health Chicken
Noodle.

Convenience: There are new products focused on convenience like Fast-and-

Simple Mediterranean Tomato Basil.

Risk of options: There is high risk of failure of new products as success rate is
only 7% (Exhibit 1).

Opportunities and resource limits: This strategy will require $ 5 million in

increased R&D expense and additional promotional expenditure of new
product lines.

What we do well: Brannigan is not perceived as innovative. This fact and the
low success rate of ideas show that developing new successful products are
not Brannigan’s strength.

Competition: There is high competition in this category as consumer trends

are leaning towards it. In order to keep up with competition and protect its
market share, Brannigan will have to focus on this line of products sooner or
later.

This strategy is plagued with problems and cannot be counted upon to

generate long-term growth for Brannigan on its own, given the low success
rate of 7% of new products and their associated costs.
IV. Invest in the core

Bob Pugh, Director of Marketing and Sales, wants to increase the marketing
expenditure for Brannigan’s core RTE (ready to eat) products by $20 million in
order to increase brand awareness. He also wants the company to take a
price decrease of the RTE soups by 5 cents per can as prices of RTE soups
have increased by an average of 2% per year for the past 5 years. He also
proposes a $22 million investment in capital to enhance the manufacturing
plants’ efficiency and cut production costs. Using this strategy would reduce
the risk of introducing new products which might not be effective in the
market, since it focuses on core products, which are the most
successful products of the soup division. However, the investment in the
manufacturing plants and in marketing is a very large investment and the
price reduction could harm Brannigan’s premium brand image. The pros and
cons of the strategy are listed below:

Pros:
1. This will reduce the risk of having to endure the failure of new products
and their associated costs.
2. It will maximise profit on maturing product, i.e., milk the cash cow (BCG
product matrix).
3. It can serve to attract young customers through the ‘Boys and Girls
Love Soup’ program.
4. Any brand dilution caused by reduction in perceived value due to
increasing prices and cutting back on promotion spending for the RTE
products will be reversed, thus stemming the sales decline.
5. The strategy will likely be backed by senior management and much of
the sales force. Mr. Pugh is himself a Vice President of the company.
Cons:
1. Price reduction could harm the premium brand image. It may also lead
to decrease in dollar sales if soup cans sales do not go up.
 2. The focus of this strategy is a mature product with declining sales
(10.5% and 3.8%, Table 1). As such, this strategy may lead to loos of
market share and not be very viable in the long run.
3. This strategy calls for a capital investment of $ 22 million in capital
expenditure. This will increase the interest and depreciation
expenditure (similar to alternative 2).

The projection of sales as estimated by Mr. Pugh and the corresponding

projected income statement are given below:
201 201 2013 2014
2 3 Pugh Pugh
Traditional ready to eat soups
Ready to serve wet soups 998 893
1819 1962
Condensed Wet soups 917 882
Broths 414 439 439 466
New products, acquisitions last
10 years
Low Sodium RTE "Heart Healthy" 321 356 356 395
Annabelle's Fast n Simple 71 79 79 88
Dry soups and mixes 53 54 54 55
Other, including private label 199 209 209 219
297 291
Total Sales 3 3 2957 3186
Table 7: Projected sales figures as per Bob Pugh (in $ millions)

201 201 201 201

Year 1 2 3 4
Net sales of Brannigan's Foods 733 797 823
worldwide 0 9 0
303 297 295 318
Net Sales of US Soup Division 4 3 7 6
Less:
166 163 162 175
Cost of goods sold 9 5 6 2
Marketing, R&D, Selling Expenses 425 416 427 447
Other expenses 625 627 600 588
Net Earning 315 295 304 399
Broken out of Marketing and
selling expenses
Advertising and Promotion 189 178 189 209
Table 8: Projected income statement (in $ millions)

The analysis as per the decision criteria proposed by Clark is as follows:

Volume vs profit: As shown in Table 8, this strategy will result in significant
growth in sales and profits.

Short term vs Long term: This strategy is focused on the short term growth
target of 3%. It does not address consumer preference for healthier and more
convenient products. As such, long term growth potential is limited when the
category sales have been declining steadily in the past (10.5% and 3.8%,
Table 1).

Brand equity vs Brand constraint: This strategy focuses on Brannigan’s core

products, which may lead to increase in brand equity.

Category trend vs performance: There is a clear trend towards new flavors

and healthy and convenient soups, which this strategy does not address. But,
this strategy has potential to generate good sales performance in the short
term.

Health: The traditional RTE products do not focus on health.

Convenience: The traditional RTE products do not focus on convenience.

Risk of options: This strategy is focused on short term growth and milking of
Brannigan’s fast maturing cash cow – the RTE soups. In the long term, if
Brannigan does not keep with changing consumer preferences, it may lose its
market leader position.

Opportunities and resource limits: This strategy will require $ 22 million in

capital expense for modernization of the manufacturing plants and additional
promotional expenditure of $ 20 million.

What we do well: This strategy focuses on Brannigan’s core products and

thereby plays to its strengths.

Competition: There is high competition in this category, but the market for
RTE soups i declining. Competition is focusing more on healthier and
convenient soups In order to keep up with consumer trend; which presents an
opportunity for Brannigan to aggressively market its products and capture
market share from its competitors.

This strategy is too focused on the short-term to incorporate all the

requirements of Clark at present. New products will have to be introduced in
the market to keep up with consumer preferences; otherwise Brannigan runs
the risk of losing its position as market leader. This strategy, while successful
in the short term in stemming the decline in sales and profits, will not be
viable in the long term. At that time, Brannigan will need a new direction.

Recommendations: -

Looking at both short term goal of profit growth target of 3% and long term
target of developing internal capabilities according to consumer needs and
maintaining brand equity, Clark should propose investing in core segments
for short term (Alternative IV) and investing in organic growth for long term
(Alternative III). Investing in core segments would secure leadership position
in market share and reduce the risk of new product failure. The ‘Boys and
Girls Love Soup’ program can attract young customers. Also as shown in
financial analysis, it achieves the company target of 3% growth in coming
years. For long term, investing in organic growth is beneficial as it is less
expensive to develop new products. It would also benefit Brannigan’s
perception of being an innovator and address consumer’s needs and reinforce
Brannigan’s traditional strengths. It would also lead to increase in sales in
future. The required increased expenditure for R&D can be easily served by
the increased profits as a result of investing in core products. Modernization
of the manufacturing facilities will help to reduce costs and bring Brannigan in
to the 21st century, technology-wise.
Conclusion: -

As shown in Table 8, if investment is done in core segments of Brannigan

Foods as suggested by Bob Pugh, net earnings increase up to 399 million or
3.05% growth year on year. The sales would increase up to 3186 million by
2014. Being market leader in Ready to Eat (RTE) segment Brannigan should
look forward to maximize profit on maturing product. Clark also has to decide
on a long term strategy. Inorganic growth is disadvantageous as they have
already faced operating problems when they acquired Annabelle Foods five
years ago. Hence they should look to cater to customer preferences by
developing new products internally. Although this may require additional
expenditure of around 5 million in R & D and also additional promotional costs
for the new products, the costs can be met by the increased profits due to the
increased investment in the core products. This would also reinforce
Brannigan’s image as an innovator and help increase its brand equity among
customers. As such, Clark would need to adopt both Alternative III and
Alternative IV to successfully satisfy all of his decision criteria.