Maple Leaf Consumer Foods - Fixing Hot Dogs

1. THEME:

Can Kelly Gervin, new senior marketing director of MLF turn around the negative trends that are impacting MLF's hot dog industry and in turn gain back some of the market share or is it too late?

If not handled precisely Kelly may face substantial losses for MLF and essentially termination of not only her position as a senior director but the MLF's brand as well.

2. BACKGROUND:

MLF can be traced as far back as 1836 where Grantham Mills opened a flour production and distribution facility in St. Catharines Ontario. After several mergers and acquisitions the MLF brand grew in popularity and can proudly say they have been in Canada for over 100 years. Between 1995-2000 MLF introduced several new systems and operations were streamlined and by 2001 they were Canadas largest and most dominant food processor and generated $4.8 billion in annual sales. MLF's operations focused on 3 main areas being bakery, meat products, and agribusiness, however their core division of expertise was meat products with sales of $26.5 million. (after taxes, depreciation, and amortization) Gervin worked for the packaged meats division which accounted for 10% MLF's overall revenues, and was responsible for the production and distribution in these areas. Within the packages meats division the hot dog portfolio was by far their largest meat category with over twice the dollar sales of any other MLF brand. With 75 years of experience in the production and distribution of hot dogs MLF was able to gain their product as a cultural icon in the marketplace. This traditional way of driving business allowed MLF to drive sales of hot dogs to $50 million annually.

In comparision $ sales - kg weight between 2000-2001 MLF's average price per kilo was going up however they were not selling as much. MLF is beginning to lose market share.

(Canadian Industry) The average sales in Canada for 2000 were $220 million which means a consumption rate of 52 hot dogs per person in Canada. Contribution = 64% - pork and meat, 24% - all beef, and 12% - Poultry. Sales are strongest during the summer months (May - August = represented 44% of annual total) baseball games, summer picnics, backyard BBQ's

(Demographic) Demand was highest among western Canadian consumers, Larger families, younger families where HOH is under 35. And key selling point was that children were heavy influencers on purchase decisions. Consumption patterns consistent throughout all levels of income.

(Concerns) around content and manufacturing of "Mystery meats"

MLF currently has 9 Brand competing in the Canadian marketplace with no brand having a strong national presence. Current focus is on smaller niche markets according to different geographic regions. MLF operates under 2 different target segments, adult and family. Adult is growing at 11% industry wide and represents 16% of total dog industry while the family was growing at 2% however had 84% overall industry. 6 different MLF brands competed for shelf space at any given retail outlet.

MLF 7 core principles (3 major ones to focus on to turn things around)

1. **focus on markets and categories where we can lead**

2. **Develop brand equity**

3. **Be the lowest-cost producer**

3. EXTERNAL ANALYSIS:

Schneiders: Had over 20% of national market share in Canada. With 110 years of experience in the industry (10 more than MLF) Schneiders had a strong reputation and was known as a fierce competitor. They led the industry with possessing over 28% of the dollar share in the hot dog market. They knew the hot dog business inside and out and has very loyal employees working for them. JMS has strong national brands that were supported by effective promotional campaigns that focused on quality, heritage, and great tasting. They has a very consistent product line with no sub brands like MLF and kept their packaging the same and familiar to the consumer. "Familiarity and family focused strategy" JMS products were mostly considered "mainstream" (both red hots, and Wieners) In comparison with MLF, these were usually priced between $2.50 - $3.50 per pound. In 2001 Schneiders heavily discounted these mainstream products to 1.99 and in return received a 10-20% price advantage of MLF. Between 2000 - 2001 JMS dollar sales increased by nearly 3%. This price cut to their mainstream products may have contributed to this increase in sales. In addition over the past 52 weeks their dollar share has increased 2.9 % giving them an overall dollar share of 28.2 %.

4. INTERNAL ANALYSIS:

9 different brands with pros and cons

Brand Info Negatives

Burns

(western Canada) Recently fixed price formula, and reduced production costs Drove prices substantially higher then competitors

Hygrade

(Quebec) 25% Province

8% Nationally Minor taste differences between hotdog products within each price segment.

Shopsy's

(Ontario) 8% Province

2% Nationally Minor taste differences between hotdog products within each price segment

Lean & Light Unwillingness to compromise taste for low fat was not proven through market research in fact 70% of consumers still showed interest.

Top Dogs

Captured 2.8 nationally

4.6 Western,

2.6 Ontario, 2.3Maritimes, 1.7 Quebec. Originally national product, focus on healthy and natural food product. Appeal to both children and parents, first and only hot dogs that were nutritionally enhanced, orginal value price of 1.99 with strong consumer demand Substantial price increase to 2.49 and sales noticeably decline (price sensitive shopper) Also changed and altered the formulation

Beef Dogs Calcium and Iron, launched in 2000 Taste chalky, and artificial, sales were down 7% 2001

Lack of Data: MLF has no current data or consumer research to refer back to for making future decisions. All they can do is see when sales started to decline and relatively compare that to what changes they made at that time. Once major issue that I noticed was all the price