Becel Margerine Case

INTRODUCTION

In early January 1998, Alexander Barrett, President of Jones Blair Company (JBC), was not satisfied with the meeting which is still has no resolution. The executive group still had not decided where and how to deploy the corporate marketing efforts among the various architectural paint coatings markets serves by the company in the Southwestern United States.

The critical issues that JBC should look into in the current situation is whether to:

(i) Segment the market ~ identify and profile the groups of buyers who differ in their needs and preferences.

(ii) Target the market ~ select one or more market segments to enter

(iii) Position the market ~ for each target segment, establish and communicate the key distinctive benefits of the company's market offering.

OVERVIEW OF THE PAINT INDUSTRY

Paint is known as durable goods, which infrequently purchased. Thus, it is also perceived as a commodity good. The industry is growing mature and the volume growth is slowing down with limited potential for differentiation. Increasing competition at both manufacturing and retail levels requires further concentration in manufacturing sector and vertical integration at retail level. There was also an increasing competition from substitute products as for example aluminum and vinyl sliding, interior wall coverings and wool paneling. The paint industry faced a strong price competition between paint manufacturers. The paint purchase behaviors are as follows:

щ Industrial Sales ~ electrical households goods, cars, ships, furniture etc.

щ Trade Sales ~ for three groups of buyers i.e. households, professional painters, contractors.

OVERVIEW OF JBC MARKET AREA

The overall sales volumes in dollar are growing at 6% per year. In urban area, dollar sales are static. However, the sales volumes in rural areas are growing at about 21% per year. The mass-merchandiser (private brands) account is 50% of household or Do It Yourself (DIY) sales in the urban area. The DFW urban area accounts for majority of dollar paint and sundry sales is 60% or $ 48 million in 1997.

SITUATIONAL ANALYSIS OF JBC

(i) DISTRIBUTION

The total number of outlets is 1000, 300 outlets in the urban area and 700 outlets in rural area. JBC also has 200 independent stores, 80 (40%) in the urban area and 120 (60%) in the rural area.

Therefore,

Total : 200 / 1000 = 20 %

JBC Distribution Share Urban : 80/300 = 27%

Rural : 120 / 700 = 17%

Referring to the percentage of JBC Distribution Share, it is recommended that JBC to add more independence stores in the rural area.

(ii) MARKET ATTRACTIVENESS & COMPETITIVENESS

Based on the details given in the case study, we can identify the figures on the market sizes of paint industry and market shares for JBC.

MARKET SIZES OF PAINT INDUSTRY

With reference to Exhibit 3 in the case study, the total market sales in the paint industry in 1997 were $80 Million. Urban area was estimated to account for 60% and the remain volume (40%) was being sold in rural area. It is noted that out of the total for the urban area, 70% was for households account and 30% for professional accounts. As for the rural area, 90% was for households account and 10% was for professional. The diagram below represents the summary of the above information given.

TOTAL MARKET ($80 MILLION) 60% URBAN ( $ 4.8 MILLION ) 70% HOUSEHOLDS

30% PROFESSIONAL

40% RURAL ( $ 3.2 MILLION) 90% HOUSEHOLDS

10% PROFESSIONAL

Important notes:

There is a mid to long run issues in the market of paint industry. By 2000 and 2001, the rural segment could be equal or exceed the urban market, even though the urban segment accounts is 60% of the paint sales volume.

MARKET ATTRACTIVENESS PER SEGMENT

Lets analyze the market attractiveness as per segment. Diagram 1 below describes the segregation between urban area (60%) and rural area (40%) sales in the market.

DIAGRAM 1

URBAN Households$ 33.6 Million(70% of Urban Market) Professionals$ 14.4 Million(30% of Urban Market) Total$ 48 Million

RURAL $ 28.8 Million(90% of Rural Market) $ 3.2 Million(10% of Rural Market) $ 32 Million

Total $ 62.4 Million $ 17.6 Million $ 80 Million

Important notes:

The mid to long issues is the household segment currently accounts for majority of JBC paint sales, this segment will become saturated with the private brand in future.

JONES BLAIR COMPANY'S MARKET

As for JBC, the products sales volume recorded in 1997 was $12 million. The sales volume was distributed evenly between urban and rural by 50%. For urban area, 30% was represent sales for households and 70% for professional. However, for rural area, it is just the opposite. The diagram below represents the summary of the above information given.

TOTAL MARKET ($12 MILLION) 50% URBAN 30% HOUSEHOLDS

70% PROFESSIONAL

50% RURAL 70% HOUSEHOLDS

30% PROFESSIONAL

Lets analyze the market attractiveness as per segment for JBC market. Diagram 2 below describes the segregation between urban area (50%) and rural area (50%) sales in the market.

DIAGRAM 2

URBAN Households$ 1.8 Million(30% of Urban Sales) Professionals$