Analyzing Superior Supermarkets

Analyzing Superior Supermarkets

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  Superior Supermarkets Josephine Roth,Cooper Thomas, Anyssa Volarath, & Anna Skoulsky
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  Problem and Solution ShouldSuperior Supermarkets change its pricing strategy to everyday low prices to combat decreasing sales and maintain its market share among its competitors? Superior Supermarkets will adopt everyday low pricing in few areas, such as dairy and everyday goods (beauty products etc.), which make up 57% of sales, and can allow Superior to save on costs and redirect money to improve marketing.
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  Executive Summary ● Overallgross profit margin of 28.8% - U.S. Industry avg. of 26.4% ● 2003, budgeted sales were down compared to previous years ● Decrease in Sales attributed to new market trends focusing on low pricing strategies being favorable to price conscious consumers ● 57% of Superior’s sales come from grocery, dairy, and general merchandise items ● Superior Supermarkets plan to implement a new pricing strategy focusing on grocery, dairy and general merchandise ● New pricing strategy will create excess funds in the budget to leverage more marketing that will increase sales, market share and customer loyalty
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  Brief History
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  Brief History ● Formedin 1959: Hall Consolidated, private wholesale and retail food distributor ● 1970: Purchased its first retail grocery store chain ● 1975: Acquired Superior Supermarket units in South Central U.S. ● Centralia, Missouri: North Fairfield, West Main and South Prospect ● Superior ranked #1 and #2 in each of its trade markets ● The three stores anchored strip shopping centers ● 1990-2000: Substantial improvements- remodeling, checkstands, freezers, frozen department, dairy department, and new “mini-deli” ● 2002: Total sales of $192.2 million ($14.33mm in Centralia) ● Mid-2002: Commissioned an independent marketing research firm
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  Business Key Points ●Mid-2002: Marketing research expressed that shoppers need lower prices and greater variety ○ Liked by shoppers: appearance, cleanliness, friendliness, service, and convenient to home/work ○ 7% reported Superior had the most reasonable prices ○ 35% reported Superior was the most convenient ○ 28% reported Superior had the best store service ● Q4, 2002: Slightly higher gross margin percent, coupled with lower operating expenses, resulted in net profit margin under 1 percent ● Superior could lose market share due to the price differentiation
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  Key Challenges Problem SolutionOutcome Increased total store customer count, but negative variance on sales Invest in store improvements Open a new channel for advertising and promotions; focusing on new store innovation Market trends have shifted to a focus on everyday low prices Change pricing strategy to everyday low pricing Lower priced products resulting in increased sales Everyday low pricing may confuse our brand image and positioning Use excess savings from an everyday low pricing strategy to bolster advertising budget and differentiate our stores Increase awareness of our everyday low pricing and product variety/quality Different everyday low pricing strategies result in mixed results Study consumer shopping behavior and implement the best strategy to suit consumer needs Improve market share and customer loyalty
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  Current Situation Industry Analysis
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  Financial Industry Analysis ●Centralia, Missouri had total retail sales of $725 million in 2002 ● Food and beverage retail store sales were $62.3 million in 2002 ○ Represents a 4.6 percent increase over 2001 ● Four grocery chain stores accounted for 85 percent of all food sales ● Median age of the Centralia population was 35 years and median household income was $36,000 ○ Growing price consciousness contributing to everyday low pricing trend
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  Financial Performance ● Increasedsales over the past three years ● Store sales were below budgeted levels in the first quarter of 2003 ● Gross profit margin was 28.8 percent in 2002 ○ US supermarket industry median gross profit margin 26.4 percent
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  Financial Performance
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  Current Situation Company Analysis
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  Company Analysis ● Superiorexecutives believe they carry high quality grocery items ○ Grocery accounts for 50% of Superior’s sales ● Prices are 10% higher than Harrison’s and 7% higher than Grand American and Missouri Mart ● Superior’s bakery and deli items yield the lowest amount of sales ● Centralia shoppers consider Superior to be a good neighborhood store
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  Product Life Cycle
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  Key Success Factors CustomersWant Competition Provides Key Success Factors Good Prices Everyday low pricing, double coupons, in-store promotions Operate with cost and process efficiency, ads focusing on low pricing, refrain from mix messaging and confusion Quality meat products Cleanliness in the meat department and a balanced variety of quality meats Train employees to maintain cleanliness, purchase from quality meat distributor Good produce quality and variety 40% of 120,000 sqft store is dedicated to food items Maintaining consistent quality and avoiding stockouts Convenience Excellent parking facilities, wide aisles, easy-to-shop layout Enough employees working for quick checkout, friendly employees to maintain store image
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  SWOT Analysis Strengths ● Secondlargest market share ● High quality merchandise ● Winner on shopping convenience ● Good appearance, friendliness, and service Weaknesses ● Higher prices compared to competition and price is the most important to customers ● Small stores ● Limited variety of merchandise Opportunities ● Everyday low pricing is a promising strategy ● 4.6% increase in food and beverage sales over 2001 ● Everyday low pricing can reduce operating costs Threats ● Could lose market share ● Competitors draw customers from larger geographic areas
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  Ansoff Matrix
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  Value Chain
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  Value Chain
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  Alternatives
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  Key Issues/Decision Criteria Increasemarket share and profit margins by switching to everyday low pricing Unconvincing marketing campaign Product variety Higher prices than competition Cleanliness in store departments
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  Option #1 Keep currenthigh-low pricing structure, but make store and marketing improvements Pros Cons ● Provides a differentiated pricing structure/value than competition ● Can keep current marketing slogan and build campaign around it ● Can use convenience of location as motivating shopping factor ● Could lose more market share if fails ● Growing price consciousness among consumers ● Prices are 10% higher than competition ● Discounting items is costly ● High initial costs
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  Option #2 Implement everydaylow pricing across the board Pros Cons ● Satisfies more price-conscious shoppers ● Could increase market share ● Reduce inventory and handling costs ● Reduce labor costs ● Less frequent temporary price reductions ● More impact on shopper perceptions ● Can’t outprice competition ● Could cheapen perception of quality of products ● No differentiation among competitors ● Must change marketing plan/slogan
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  Option #3 Implement everydaylow pricing in key areas, such as dairy and everyday goods (such as beauty products), which make up 57% of sales, and reduce these prices by 7% Pros Cons ● Satisfies more price-conscious shoppers ● Could increase market share ● Reduce inventory and handling costs in major categories that make up 57% of sales ● Less frequent temporary price reductions ● Can use cost savings in marketing budget ● Can’t outprice competition ● Inconsistent pricing ● Changes image of store ● Lower impact on shopper perception
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  Key Issues andRelated Solution Low Product Variety Confusing Store Image Poor Store Cleanliness Growing price consciousness among consumers Low Marketing Spending Everyday low pricing across the board ✔ ✔ ✔ ✔ Keep current pricing strategy but make store improvements ✔ ✔ Everyday low pricing in certain areas ✔ ✔ ✔ ✔ ✔
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  Recommendation Option #3 addressesthe most key issues and helps Superior Supermarkets remain competitive and increase their market share and sales.
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  Implementation
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  Timeline
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  Communication Priority Plan
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  Risks & Mitigation Risk#1: Confusing the store image or positioning of the products Mitigate: Be sure that we implement this new solution in all the stores in the trade area Risk #2: Perceived by supermarket shoppers as having low quality products since superior supermarket shoppers were used to the high prices on the products Mitigate: Advertise and market the products to be high quality Risks #3: Superior could lose market share in Centralia due to the price differential Mitigate: Ensure that our margins are lowered per unit. We can operate at a lower marginal cost than our competitors, which will alleviate some tasks.
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  Measure of Success ●Everyday low pricing to be implemented in all stores in the trade area of Centralia in 2-3 months ● Lower prices by 7% and with the price reduction, see results of a high gross profit margin ● See a sales increase after 1 year of implementing this plan ● With increase of .25% advertising budget, we will see our projected sales at $18,307,031
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  Recap ● Our solutionis to adopt everyday low pricing in few areas, such as dairy and everyday goods (beauty products etc.), which make up 57% of sales, and can allow Superior to save on costs and redirect money to improve marketing. ● By implementing this plan, our sales revenue will increase and we will generate more awareness from our target audience. ● We will also increase our market share by 7.5-8% to maintain 2012 level profits.
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  Thank you Questions?