E.GOWTHAM(9UTA11)S.PARVADAVARDINI(9UTA19)

J.SANGEETHA(9UTA29)M.UDAYA KUMAR(9UTA37)

R.M. DHANANJAYAN(9UTA45)

ZENITH PET FOODS

ABOUT THE CASE

Zenith pet foods is a major distributor of dog foods for

show dog kennel in US

Its purpose was to review zenith entry in to household

dog food market in Boston, Massachusetts.

It sought the help of the marketing and advertising

consulting firm “Marketing Momentum Unlimited” for

the above purpose.

NATURE OF INDUSTRY Total dog food sales was $7.0 billion per year

US dog owners population 65 million.

Dog owners spend $20 billion annually as veterinarian fees

medication for dogs and dog toys, clothing, accessories

and furniture.

There are 50 dog food manufacturers and 350 dog food

brands sold in the US, which captures 83% of dog food

sales.

According to the 2009-2010 APPA National Pet Owners Survey, basic annual expenses for dog owners in dollars include:

                                                         Surgical Vet Visits  $532            Food $229            Kennel Boarding $273           Routine Vet $225            Groomer/Grooming Aids  $66       Vitamins $61       Food Treats $64       Toys $40        

NATURE OF INDUSTRY Dog food manufacturers spend about 2% of their sales for advertising.

Annual advertising spending for established brands is $7 to $8 million for

nationwide media promotion.

Main competitors are:

NESTLE PURINA PET CARE

IAM (P&G)

HILLS PET NUTRITION(COLGATE PALMOLIVE)

MASTER FOODS USA (MARS INC.)

DEL MONTE FOODS

PRIVATE LABELS (10% OF SUPER MARKET DOG FOOD SALES )

ECONOMIC TRENDS:Growth in unique pet foods

Growth in pet services such as grooming, boarding, pet

photography, dog walking and pet sitting.

Growing interest in pet health care.

Continued steady increase in pet insurance, with at least two

new players arriving in the market.

More pet friendly environments. 

Increased competition from large buyers.

ECONOMIC TRENDS

Large companies interact with small businesses behind the scene on monetary investments and market alliances.

Industry consolidation with large buyers buying

promising, small players.Increased online sophistication from new pet related

businesses in e-commerce, design and usability.More meaningful pet related blogs.Pet adoptions continue to grow.

Boston area has 1.2% of US population (since dog and human population are highly correlated).

SUPER MARKET SALES SEGMENTATION

The household dog food industry consists of four

categories of food. These categories and the percent of total

dog food sales of each are shown below:

Super market and grocery stores dispense 36% of all

dog foods sold in United States which represents $2.5

billion in sales at manufacturers price.

ZENITH PET FOODS Zenith pet foods is a major distributor of dog foods for show dog

kennel in US.

Show circuit was originally formulated by mink rancher for

improving the coats of his minks.

Kennel owners noticed that the dog’s coats were improved

dramatically, and business was born.

Zenith executives recognized packaging of show circuit would

definitely make a transition from Kennel market to household dog

food market.

ZENITH PET FOODS Packaged in 15 ounce plastic tub with 12 tubs per case

Cost of production, freight, packaging of meal was $6.37 per

case(total variable cost)

Super market would receive a gross margin of 22% of their selling

price for dog food.

GOALS:

To introduce & promote effectively the show circuit dog food in

Boston area.

Make public aware of the brand name through packaging

CASE ISSUE

Frozen foods

Advertising & Packaging strategy

Premium price

FROZEN FOODS Show circuit has two varieties Wet food and Semi moist dog

food. Both the food varieties should be frozen. Additional cost of

$30000 for super markets is included in the budget for freezer

space.

Even though Wet foods market is untapped by other competitors,

there is a threat in future that the fraction of market potential will

tremendously go down.

There is always a tendency that the dog owners will not look in to

the frozen section.

ADVERTISING STRATEGY

The communication budgeting approach used by

zenith pet foods is competitive parity.

The other competitors of zenith are well established, so

it is in appropriate to use this kind of approach.

The introductory advertising strategy is very low

which will not entertain more customers.

PREMIUM PRICE Price charged by zenith pet foods is quite high when

compared to their competitors

Organic dog food sales grow by 64% last year from

which only 0.9% are willing to pay premium price

Premium price is targeted to upper class people.

Niche market

TARGET MARKET:INCOME MARITAL STATUS AGE

>$25000 SINGLE AND MARRIED 21-54

AMERICAN VETERINARY MEDICAL ASSOCIATION SURVEY

MARKET POTENTIAL IN VARIOUS SEGMENTATION

75% OF PARENTS WITH SCHOOL GOING CHILDREN

71% OF PARENTS WITH OLDER CHILDREN

72% OF ROOMMATES HOUSEHOLDS

73% OF YOUNG CHILDLESS COUPLES

63% OF HOUSEHOLD WITH INCOME > $25000

30% OF OLDER SINGLES

41% OF RETIRED COUPLES

POSITIONING

It has a direct implication on pricing

Three companies capture 90% of the wet food market

Two companies capture 85% of semi moist food market

Here positioning becomes an issue because we assume the same

percentage also applies for the Boston market, therefore the

opportunity of show circuit is reduced.

Zenith has to maintain a high standard and high quality and

premium price to establish a unique place in the market.

MARKET POTENTIAL: DOG

FOOD CATEGO

RY

SALES DATA

% OF DOGS

EST DOG FOOD SALES

SUPER MARKET

%

SUPER MARKET

DOG FOOD

DRY 63% = $4.410 B

1.2% $52.92 M 36% $19,051,200

WET 17% = $1.190 B

1.2% $14.28 M 36% $5,140,000

SEMI MOIST

2% = $0.140 B

1.2% $1.68 M 36% $604,800

DOG TREATS

18% = $1.260 B

1.2% $15.12 M 36% $5,443,200

TOTALS $7.0 BILLION

1.2% $84.0 M 36% $30,240,000

MARKET SEGMENTATION Extreme dog lovers.

Dog owners concerned more with nutrition than

convenience and storage.

Dog owners who are unsatisfied with other dog foods.

As 75% of dog owners consider themselves as “mom

and dad” to their animal companions and who think

dog as a member of the family.

BREAK EVEN ANALYSIS - WET FOODS

Kal kan Pedigree = $.69/13.2 oz

1 ounce= $ 0.052

15 ounce = $ 0.78

Alpo = $.50/13.2 oz

1 ounce= $ 0.03815 ounce = $ 0.80

Zenith Pet foods = $6.37 /12 tubs

1 tub(15 ounce) = $ 0.53

Bill Jac = $ 2.29 for 2 pounds

(1 pound = 16 ounce)$2.29/32= $ 0.07215 ounce= $1.07

ACTION PLAN Zenith pet foods- wet foods cost of production, freight and

packaging of the meal $6.37 per case which represents total variable

cost.

Therefore one tub costs $0.53, we suggest zenith to recommend to

sell a tub for $0.80.

Compare to the wet dog foods the moist dog food category is likely

to be unprofitable for show circuit.

A lot depends on the quality of introductory promotion program and

the amount spend.

SHOW CIRCUIT CONTRIBUTION:

PREMIUM PRICED Wet Dog Food

PREMIUM PRICEDSemi- Moist Dog Food

CASE TUB CASE TUB

Price to Consumer

$ 9.60 $ 0.80 $ 10.80 $ 0.90

Price to Retailers(22% Gross

Margin)$7.488

$0.624 $8.424 $0.702

Broker Commission

(7% Commission)

($0.524) ($ 0.044) ($ 0.590) ($ 0.049)

Zenith Unit Revenue

$ 6.964 $ 0.58 $ 7.834 $ 0.653

Production + Freight +

Packaging cost

($ 6.37) ($0.531) ($ 6.37) ($0.531)

Contribution $0.594 $0.049 $1.464 $0.122

RECOMMENDATIONS

Create awareness of a new brand by motivating trials

through coupon redemption and emotional impact on TV.

Market coverage should extend to other mass merchandisers,

pet super stores, farm/feed stores, veterinarian and internet

retailers.

RECOMMENDATIONS

MEDIA SCHEDULING AND PLACEMENT:

The program planned seems to miss a sizeable

portion of target markets with day time TV scheduling.

So the advertisements impact should be measured from

time to time.

RECOMMENDATIONS

Trade program: a major issue here is whether the

proposed program will gain distribution.

The problem is - The broker must deal with frozen

food buyers and not pet food buyers, therefore

education is necessary.

RECOMMENDATIONSCoupon program: the consultants estimated that 1 in

10 coupons distributed would be redeemed with each

coupon valued at $0.10. On an average coupon

redemption will cost $0.01 per tub (or) $0.12 per case,

therefore the new contribution per case will be $0.12

less. This will increase the break even volume.

RECOMMENDATIONS Advertising spending level: Neither product pioneers a “new

category” frozen dog food therefore it would seem that show circuit is

under spending at $400,000 level for the introduction which further

places the market entry in danger.

The $600,000 spending level seems more appropriate. However, the

analysis of the marketing programs economics indicates this amount is

likely to be unprofitable.

RECOMMENDATIONS

They should provide dry foods and dog treats to compete

with the other competitors

The packaging quantity should be reduced and sold at

various quantity levels.

The best media to advertise about the product should be

found and the advertisement should have more emotional

impact on customers.

Trial packs should be introduced as introductory offers

SWOT ANALYSIS

STRENGTHIt is a highly nutritious and quality ingredient dog food

There is great potential to grow in this field.

Most pet owners want what is good for their pets, and

this includes pet food that is healthy for their dog.

Environmental trends.

Niche marketing.

WEAKNESSDog owners shopping for dog food in the supermarket

are not prone to look in the frozen section (awareness).

Competition in market.

Pricing

OPPORTUNITIESThe household dog food industry is growing and will

continue to grow

Potential to be the first to tap into frozen dog food

product in this region with possible expansion to other

regions.

Opportunity to invest in organic dog food which has

grown 64%

OPPORTUNITIESDistributing in grocery stores is ideal since it is the largest

channel for dog food .

The campaign will focus on national television reaching a

broad audience while still focusing on local media such as

newspapers.

The campaign will focus on the product being a premium-

priced, high-quality product highlighting the benefit of the

luxurious coat your pet will have. 

THREATSIntroducing a new dog food in a new form.

Category of dog food.

Lack of appeal of frozen dog food.