Drypers Corporation free essay sample

Problem definition What are the questions to be decided? Drypers Corporation’s senior executives were discussing about spending 10 million dollars which will increase 33% in the company’s combined advertising and promotion budget on national television advertising in 1998. What are the objectives/goals? 1) Increase penetration of grocery outlets 2) Increase grocery penetration will help increase mass merchants see us in a new light and help us break into this all-important retail channel. ) Move from promotion-driven sales to brand-driven sales. Is there any secondary concerns? 10 million dollars is huge amount expenditure, so short- and long- term sales and brand-building effect and profit impact are parts of the plan for 1998. 2. Situation analysis Company background Drypers Corporation is a producer and marketer of premium- quality, valued- priced disposable baby diapers and training pants sold under the Drypers brand name in the United States and under the Drypers n ame and other brand names internationally. The company also manufactures and sells lower-priced disposable diapers under other brand names (Comfees) in the United States and internationally, in addition to private- label diapers, training pants, and premoistened baby wipes. In 1997, branded products represent 88. 9% of company net sales in the United States; sales of private- label and other products account for remaining sales. The company’s Drypers premium- brand diapers and training pants account for 52. 3% of total company and domestic net sales in 1997, down from 62. 3% in 1996 and 61. 3% in 1995. The company leases manufacturing, distribution, and administrative space in nine locations in the US, Brazil, Puerto Rico, Argentina, and Mexico. Corporate headquarters are in the Houston, Texas. The company is the world’s sixth largest producer of disposable baby diapers and the third largest marketer of brand- name disposable diapers in the US. In 1997, the company’s Drypers brand was the fourth largest selling diaper brand in the US and the second largest selling training pants brand in US grocery stores. Demand analysis From 1994 to 1997, the number of infants born in US is around 10 million (birth to 30months). A baby, on average, uses five diapers per day for 30 months, for a total of 4500 diapers. At an average retail price in the range of 18 to 27 cents per diapers, each baby represents about 1012. 5 dollars in retail sales. The retail dollar value of the US disposable diapers market was estimated to be 3. 39 billion dollars in 1997. The retail dollar value of the training pants and young pants market was estimated to be 595 million dollars in 1997. Distribution channels Disposable diapers and training pants are distributed principally through grocery stores, drugstores and mass merchants. Grocery stores accounted for approximately 2 billion dollars in diapers and training pants retail sale in 1997. Grocery store distribution of diapers and training pants has been decreasing as a percentage of total retail sales since 1994. Grocery Stores accounted for 51. 2% of retail sales in 1997, compared with 60% in 1994. Mass merchants and drugstores recorded diaper and training pants retail sales of about 1. 9 billion dollars in 1997. Mass merchants have increased their share of total diaper and training pants retail sales from 30% in 1994 to 39. % in 1997. The drugstore share of diaper and training pants retail sales has declined from 10% in 1994 to 9. 2% in 1997. Competitors Manufacturers of disposable diapers and training pants are typically grouped into 3 categories: 1) Premium- priced branded PG and Kimberly- Clark are the leading manufacturers of this category with their well- known Pampers and Huggies premium brands respectively. They compete on the basis of product quali ty, product features and benefits and price. Both companies invest heavily in research and evelopment and also in consumer advertising and marketing support for their brands. For example, in 1997 PG spent an estimated $69. 6 million in measured media advertising for its Pampers brand ($52. 8 million of it was Television, i. e. 75. 86% of total) and Kimberly- Clark spent $75. 6 million for its Huggies brand ($57. 2 million of it was Television, i. e. 75. 66% of total). The percentages of advertising through television of these two companies are very close. From exhibit 2, we can see that, Kimberly- Clark has the highest market shares through 1994- 1997, and the second place is PG. Both companies sell their products in stores that account for over 90% of US diapers and training pants sales. 2) Value- priced branded Drypers Corporation is this category of manufacturer; typically market their products through grocery stores due to their general lack of national brand name recognition and less extensive national production and distribution capabilities necessary to supply large mass- merchant and drugstore chains. So the strategies for this kind of companies are widely, ranging from an emphasis on quality and â€Å"good for money† to simply low price. ) Private- label Paragon Trade Brands, Inc. and Arquest, Inc. are the two largest private- label manufacturers in US. This kind of manufacturers typically emphasis on lower price over quality and product features. Private- label manufacturers spend little on consumer advertising and marketing; however, retailers often promote their individual private- label brands. Private- labels account for approximately 16% of 1997 retail dollar sales and 23% of until sales for diapers and training pants. Private labels are the most prominent in the drugstore channel. External environment Drypers Corporation is the third largest marketer of disposable diapers in the US, and it has found it necessary to compete against Kimberly-Clark and PG. Drypers has demonstrated an ability to shift the ground rules I diapers marketing through product innovation. It is an opportunity to compete with Kimberly- Clark and PG through spend more money and time on introducing new technology that only belong to Drypers. 3. Optional strategies a. Do nothing b. Spend 10 million dollar on TV advertising c. Spend more money on printed advertising promotion sales Evaluation a. Do nothing There will not be significant changes in Drypers in recent year. For long- term consideration, do nothing is not a good marketing strategy, market share will be occupied by other competitors. b. Spend 10 million dollar on TV advertising This strategy is worth to do, because there is a trend that if a company wants to expand a large market, it should spend more money on advertising especially through television (Kimberly and Clark, PG spend the most money on television and they also obtain the largest market share). To spend more on TV advertising is a effective way to increase brand awareness and retail penetration.