Reynolds

REYNOLDS METAL COMPANY

Group 8

NIKITA SOOD

RESHU AGARWAL

DISHA AHIR

AVNI GHODASARA

ROHAN MANTRI

SWATI SHAH

SIDRAJ AUSEKAR

POOJA JETHMALANI

REYNOLDS METALS COMPANY

1919-United States Foil Company1929-Officially Reynolds Metals Company1947-Household aluminum foil introduced

• Entry into consumer products industryOther consumer products include plastic wrap, freezer bags, wax paperMarket leader in food bags & wraps industry

CATEGORY MANAGEMENT

Industry wide strategic initiative• Improve effectiveness of marketing-mix• Stresses cooperation and coordination

• Channel members (manufacturers & retailers)• Managerial Divisions (marketing & sales)

Efficient promotionEfficient distribution & shelf replenishmentEfficient product assortmentEfficient new-product introduction

Marketing Department

Temporary per case discounts

to retailers & distributors

Objective: higher purchase

orders

Benefits retailers &

distributors

OFF-INVOICE VS. MDF

Sales Department

Case allowance tied to retail

merchandising support

Objective: category

management

Benefits all parties

Off-Invoice MDF

OFF-INVOICE VS. MDF

Major issues for transition• Competition still use off-invoice• Elimination of off-invoice may result in 5% higher

prices to consumers

Benefits of transition• Average daily inventory would be reduced• Five additional weeks of retail price cuts

• Total of 8 weeks of price cuts

High brand loyalty

Would not substitute

High market share• aluminum foil -

41%• plastic wrap - 24%• wax paper - 60%

High quality

perception• aluminum foil

ranked #7 of 200

Used day-to-day

PULL STRATEGY IS MORE FITTING

Push Strategy (off-inv)• low brand loyalty• brand choice made in

store• impulse item

Pull Strategy (MDF)• high brand loyalty• brand choice made

before going to store• perceived brand

differences

MDF PROMOTIONSStimulating trial by non-users

Introducing new usage ideas to the current users

OBTAINING RETAILER SUPPORT

Retailer support needed:• To secure shelf-space for Reynolds’ product line• To discourage negative reactions (increasing shelf-

price by 5%)

HOW?

Build on Reynolds’ “preferred supplier” status• Emphasis trust and good intention

Cooperation needed for a win-win situation• Greater profit and margin• Lower inventory cost• More store traffic

GREATER PROFIT AND MARGIN

Reynolds’ Sales - Trade Case Allowances - Coupon

Fees = Retailer Cost of Goods

Retailer Operating Margin: 2%

(Retail Sales - Retail Cost - Retail Expense) / Retail

Sales = 2%

Assume retailer expenses as $0 for ease of

calculation

GREATER PROFIT AND MARGIN

No Promotion• Gross Profit: $18.1K & Gross Margin: 2.0%

Current Promo. (60% Off-Invoice & 40% MDF)• Gross Profit: $99.5K & Gross Margin: 10.8%

100% MDF (with 5% shelf-price increase)• Gross Profit: $63.6K & Gross Margin: 6.7%

100% MDF (without 5% shelf-price increase)• Gross Profit: $149.7K & Gross Margin: 14.9%

LOWER INVENTORY COST

Inventory Cost:• Cost of losing the use of funds tied up in inventory• Rent (extra warehouse / storage space)• Record keeping• Theft• Interest of loans used to purchase inventory• Breakage• Obsolescence (holiday products)

LOWER INVENTORY COST

Retailers were stocking up • Forward-buying and Diverting practices• Inefficient (can they compete with Wal-Mart?)

MDF could reduce the average days worth of

inventory: 30 days to 15 days

Borrowing rate: 10%

Inventory cost savings: $3.2 millions

MORE STORE TRAFFIC

MDF promotion

Coordinated marketing

More overall sales for retailers

TRANSITION OF RESPONSIBILITY

Shift is benefit to entire organization

Gradual change• Smooth transition to get all parties comfortable with

the change

THANK YOU