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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