Oscar Mayer Foods
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Case Study Report
Company Name
Oscar Mayer
Nature of Operations
Processed red meat products
Problems in the case
Change in consumer lifestyle and eating habits. People prefer those food items which are convenient to prepare and are healthy with less fat content. Thus, Oscar Mayers red meat products are seeing softening in sales trends.
Threat from substitute products. Most consumers have shifted their preference from red meat products to white meat and seafood.
Failure of the new convenient product line of Oscar Mayer, “Stuff n Burgers”
LR facing competition from copycat brands
Declining sales for Oscar Mayer
Alternatives available
Adding new benefits to the current OM/OR products
Strengthening/diversifying your lines via another acquisition
Internally developing new products that tap the new needs
Bringing a new advertising campaign for OM/LR brands
Analysis of Alternatives
Now, looking at the case we can see that McGraws objective for the next 3 years was to promise the board an annual growth of 4% per year on volume and 15% percent on operating income but an alarming market research report is threatening the company and his objectives in the long run.
The new research report shows changes in meat consumption where consumption in red meat has reduced since last 5 years while white meat consumption has increased. This has hit OMs profits and is likely to threaten the company in the coming years. This combined with other problems had put McGraw in a dilemma. But when he sat down with the letters, reports and memos he began to plan and organize the data that was given to him to formulate a divisional strategy. He has already taken the initial steps of strategy decision making by gathering information about the external environment, analyzing internal strengths and weaknesses, formulating goals, strategies and supporting programs, and now hes at the organizing and implementation step.
Currently, McGraw has 4 options:
To back Louis Rich and launch new products with a expensive advertising campaign
Louis Rich has shown promise and is doing well in white meat market. Louis Rich is balancing the scorecards of the division with increased growth and the consumer shift to white meat is favoring LR even more. There is a flip side to this option that is the huge advertising budget. Also, there is a risk in introducing the new products (turkey bacon) into the market, because of taste issues. As seen from the industry trend, the market for white meat is already growing by 15%.
Current Year
Prior Year
From Exhibit 2:
Current Year
Last Year
All lunch meat: White
Louis Rich Brand:
All hot dogs: White
Pound volume
% change from last year
10.90%
White meat (Industry standards)
15.74%
The industry sale of white meat for the current year is 15% higher than the previous year whereas the LR brand has only grown by 10.9%. Louis Rich brand, although growing, it has not been able to completely utilize its potential to reach the industry standards. There is definitely a potential for growth as the eating trends have now more focus on nutritious products.
Go aggressive – buyout and acquire smaller companies of interest
This would seem like an ideal option of buying out smaller companies. They can eliminate competition and capture an already existing market share directly. Turkey Time Ltd. seems like the ideal option as it has a similar line to LR and readymade products. It is located in the west coast allowing them to penetrate a new market. Turkey Time also has a new plant with excess capacity which would further our growth. The biggest problem in this strategy is that the huge investment is required purchasing and setting up the business. Also, the debt cost would be hanging on the business for the years to come. The other options like Chicken Rite Inc. and Crabbies, Inc. would not be feasible mainly because of too much diversification into new unknown products. As of now, it is best to stay with your know-how products.
Developing a 4th major category of products to already existing ones
Introducing a 4th category product may seem to be the thought of the day as this has been recommended by the consultancy as well. The company should bring in products dealing with latest consumer trends so that they can continue to establish themselves in the market. By doing this the company can address consumer trend with “Zapetites” and “Lunchables” and employ the Porters Differentiation strategy where a business concentrates on achieving superior performance through unique product valued by the large part of the market. As the company is a quality leader it can innovate and bring unique products. However, the research and development of these two products is still in its early stages and would be launched in the later part of next year. The investment cost for these products is too