KSB 612 Final Exam

KSB 612 Final Exam | Assignment Help |  Kogod School Of Business American University 

Question 1

"Big-Name Food Brands Lose Battle of the Grocery Aisle" by Annie Gasparro, Wall Street Journal, April 30, 2017, abridged.

America's packaged-food giants are losing the battle for retailers' shelf space, complicating their efforts to break out of a years' long slump. Instead of promoting canned soup, cereal and cookies from companies like Kraft Heinz Co., Kellogg Co. and Mondelez International Inc., grocery stores are choosing to give better play to fresh food, prepared hot meals, and items from local upstarts more in favor with increasingly health-conscious consumers. "We've got to maximize return on our shelf space," said Don Fitzgerald, vice president of merchandising at Mariano's, a Chicago grocery chain bought by Kroger Co. in 2015. Shoppers, he said, are drawn to steamy pasta at the store's deli counter, rather than a box of dried macaroni with powdered cheese sitting on the shelf for weeks.

New Jersey-based ShopRite and other grocery-store chains around the country are building new stores that have less space for traditional packaged foods in the center aisles and more for in-store restaurants and fresh meals shoppers can take home.

CVS Health Corp.'s drugstore chain recently said it planned to upgrade hundreds of its stores to focus more on healthier products. That means less space for traditional packaged-food brands, which are also facing increased competition from store brands and smaller upstarts.

Sales volume for packaged food and products—reflecting the number of items sold—fell 2.4% in the first quarter of 2017, according to market-research firm Nielsen. In the year ended Feb. 25, sales volume for packaged food and beverages shrank by 0.4%—compared with growth of 1.7% for fresh meat, 1.9% for produce and 4% for deli-prepared foods during that period, Nielsen said.

Teresa Benande, a 70-year-old shopping in a Chicago Mariano's grocery store, said she recently nixed chips and cereal, and now she usually buys chicken breasts, brown rice, potatoes, and fresh vegetables and fruit.

The shift in shopper preferences started several years ago, but its impact on big food makers is intensifying now because of added pressure from retailers. Big companies such as Unilever PLC and Nestlé SA said in April that North America food sales are underperforming as customers avoid the center aisles of grocery stores.

Mariano's Mr. Fitzgerald said his stores, like other retailers, aren't giving up on big brands. But finding new ways to entice people to walk through the center aisles again is tricky. Some brands are seeking ways to get their products into the fresh and prepared foods section of the store. But, Mr. Fitzgerald says: "If we overrun perishables with all the big packaged brands, we lose our competitive edge." Instead, retailers such as Wal-Mart Stores Inc. are pressuring big brands to lower their prices as a way to attract customers.

a) Based on this article, which macroenvironmental force is responsible for the downturn in sales in the packaged-food industry?

b) Which of the five industry forces are making this industry less attractive (name all that apply)?