Pedigree Case Study
Question 1: Is dog food an attractive category? In answering this question, please consider category size and growth rates, competitive intensity, competitive shares, advertising spending, and trends.
Dog food category is exceptionally competitive. Different companies invest heavily in innovation and marketing since spending on advertising surpassed $190million in 2004. Most of the spending was in traditional media outlets. About half of the advertising costs went into television and one-third – to print. The remainder was spent on outdoor ads, radio and the Web. Much of the advertising for dog food brands is similar featuring happy dogs along with their owners. Sponsorship is also important in this category; many brands sponsor breeders or dog events.
The dog food industry went through a major restructuring in the 1990s. As global consumer packaged goods, companies took steps to secure strong positions in the market. By 2004, the dog food industry was dominated by five huge global players: Nestle, Mars, Procter & Gamble, Del Monte and Colgate. Mars entered the dog food category in 1934 with the purchase of Chappie Brothers. It introduced the Pedigree brand in 1957. With more than 27percent of market shares, Nestle acquired Ralston Purina in 2001 for $10.3billion. It has several brands in different segments of the market. Its mainstream products include Alpo and Purina Dog Chow. In 2004, Nestle spent $55 million on advertising for all of its dog food brands.
Procter & Gamble entered the dog food category with the purchase of Iams and Eukanuba in 1999. In 2004, it spent $35 million on advertising, allocating $20 million to Iams and the remainder to Eukanuba. The primary marketing message for both brands was that they were made with superior quality that would help dogs live longer and healthier lives. Colgate and Del Monte are smaller players in the industry. Colgate owns the upper-premium Hill’s Science Diet brand. Del Monte acquired the Milk-Bone brand in 2006 and focused most of it marketing support on trade promotions with only limited advertising.
In 2004, Pedigree was the largest brand with a 14.5 percent market share. There are more than forty-five products in the Pedigree line including wet food, dry food and treat. The top-selling item was the 40lb. bag of dry dog food. The company spent more on marketing than any other brand in the category. Pedigree invested $57 million in television and print advertising, $ 38.9 million in consumer promotions and $8 million in breeder promotion programs. It further spent $82.1 million on trade promotion.
Until the 19th century, dogs were usually fed with leftover. The first processed dog food, Spratt’s Patent Meat Fibrine Dog Cakes, was developed and introduced in Europe in about 1860s. It was a biscuit made up of wheat, beetroot, vegetables and beef blood. In 1930, canned food was competitively presented to the market. In the 20th century, dry dog food was made into the pellet by hand or baked and crumbled. In 1950, the Purina Company discovered the extrusion process. Ingredients were cooked at a very high temperature, and then pushed through die-cut hole to form uniformly sized pellets. By 2004 officials from both the U.S Food and Drug Administration and the Association of American Feed Control created dog content and labeling rules. These bodies also enforce policies that govern the manufacture, distribution and sale of dog food.
Question 2: The dog food category can be segmented in several ways. Please identify at least three ways the dog food category can be segmented and the implications for brand marketing.
Wet food, dry food and treats are the main segments of dog food industry. Both wet and dry foods are given to the animals as main meals whereas treats are used to reward good behavior of for special occasion. Dry food has the largest selling index as illustrated in the table below.
|Sales ($ in billions)||Share of total (%)|
|Dry dog food||5.2||63.4|
|Wet dog food||1.6||19.5|
Client says about us
A huge thank you to 123HelpMe.org and the writer who finished my paper so quickly! My college professor didn’t ask for any corrections and I was really happy with the mark I got. So I think your writing service is very good. I was able to keep in touch with my writer while my paper was being written. I think the paper and the reference pages are great. I’m completely satisfied!
Thanks for helping me with the last 2 papers. The writer you've assigned to me complete my paper on time and with all requirements.
I work as well as study, so I do not have much time to spare … or to lose. I made a spur-of-the-moment decision to order from 123HelpMe.org but I have no regrets. The people who work at this company are very professional and well qualified. The customer support team are very helpful too. I will be recommending you to anyone who wants a good writing service.
It is worth using this 123HelpMe.org site to order custom academic papers. I ordered lots of my papers here and all of them were written professionally! I did not even expect such a high quality of writing!
I am a working student and I don't have enough time for doing boring paperwork. Besides, I want to spend time with my friends. Luckily 123helpme.org can help me. Thank you, guys!
The dry dog food segment is larger than the wet segment because it is more convenient. It can be scooped out easily while the wet food requires opening a can and then, in most cases, refrigerating the leftovers. Dry dog food is also relatively cheaper. In addition, there are four primary tiers of dog food, each representing a different combination of perceived quality and price. The low-price segment is characterized by a significantly lower cost. It is dominated by store brands such as Ol’Roy, a Wal-Mart private label for dog food.
The mainstream segment is slightly above the private label segment. It features brands such a Pedigree and Alpo. These brands promise a certain amount of quality at a slightly higher price. On the other hand, the premium segment was one notch further up in both quality and price. The super-premium segment feature brands are sold at a significantly higher price tag and quality reassurance. Premium and super premium are items targeted for dog of all shapes and sizes.
As to what concerns the implications of the marketing strategies, it should be stated that most dog owners are loyal to a particular brand; there is limited switching between the categories, as well. The major reason is that dogs’ organisms difficultly adapt to changes in diet; a new food may cause intestinal issues or stomach upset. The indigestion can last for several weeks..
Question 3: Who are the influencers on brand purchasing and how has this changed?
In Pedigree, the top breeders have an impact on brand purchasing. However, this tendency has changed over the years. For a long time, it was commonly believed that meat was the main ingredient for fodder. Recently, the perception of dog food has evolved to making products that are more nutritious, whole grains and vegetables are now used as ingredients.
Although Pedigree remained a leader in the industry, recent business results are a bit unsettling. The brand was losing share due to the competition from both the high end and the low end. At the high level, the expansion of Iams into mass merchandisers and retail channel has proven to be a significant issue for Pedigree. First of all, it has lost its position as retailers created room for Iams. Second, some consumers decided to trade up with Iams because of its strong nutritional promise. The introduction of Beneful by Purina also compromised the customer loyalty for Pedigree.
At the low end, private label was a continuing challenge. Retailers aggressively promoted private label products because they provided a higher margin than branded items. Furthermore, Pedigree’s message of “made with meat” and “recommended by breeders” did not seem to be resonating in the market. As a result, consumer loyalty has shifted to other formulation especially to the fast growing Beneful.
Question 4: In reviewing the Pedigree financial statements, how has the company been managing this brand?
Despite the share loss, the brand increased profits in both 2003 and 2004, operating profit grew 2.3% and 0.4% in these consecutive years. The increase was mainly due to category growth, cost savings and lower advertising spending. The brand focused on two key messages. First, Pedigree communicated that it was made with meat, which had long been regarded as the preferred ingredient in dog food; the brand seized on this point and communicated it consistently. Second, the brand claimed to be preferred and recommended by breeders. In relation, the 2003 and 2004 campaigns had an emotional feel and delivered the message that Pedigree food was developed with vets and recommended by top breeders. To an extent, it was the best-selling brand of dog food in the world.
Question 5: What is the current positioning of Pedigree?
Pedigree currently spends more than it gains. Therefore, there is a need to cut back on advertising and focus on other areas. Vegetable based food is new for this brand, therefore, trade promotions to secure distribution, display and retail discount are important to reach customers. Although Pedigree is facing stiff market rivalry from private labels, it does not want their prices to be much lower. In other words, the price should remain competition based. Remaining close with the competitor price is the best strategy and prices can only be lowered when launching trade promotion campaigns. After the trade promotion season, customers will continue to buy Pedigree at competitive-oriented prices.
Question 6: What options does Pedigree see moving forward?
In efforts to moving forward, Pedigree has a number of options. The new advertising strategy proposes a dramatic change in the brand’s go-to-market strategy. Instead of emphasizing product attribute, it suggests focusing on a wider idea. The new campaign focuses on imagery that aims at positioning Pedigree as a brand that cares for dogs. The campaign is built around an emotional message “We’re for dogs” and includes television pots, print ads, new packaging and a new website. The major advantage is that customers will be drawn to buy its products in order to show that they are also concerned about their dogs. However, these changes will lead to extra costs that will further reduce the profit margins.
Another option is for Pedigree to win in the store. This means that the brand should invest in a price discount program designed to reduce prices at key moments. In this case, Pedigree would be cheaper than Purina Dog Chow and close to the price of private label product. Alternatively, the brand should fight for a major new product launch. The company should introduce a new dog food that is more nutritious. For instance, instead of the products that are made of meat, it can include an item made up of whole grains and vegetables. Such a formula will be comparable to the fast growing Purina Beneful line.
On the positive side, launching a new product that has different features can enable the brand in reducing the prevailing competition. However, this process requires new skills, research and a market strategy that will enable the product to penetrate into a competitive market. Pedigree will be forced to make more investment, which could worsen its financial situation. Second, a new product can take a long time before it gains the customer loyalty, and thus the brand nay not receive as much as it has invested into the development process.
In efforts to ensure that Pedigree is flexible in a dynamic economic world, the brand should make its positioning realistic internally. The team should revise the company’s policies so that the employees can bring their dogs to work. The offices should be redesigned to create space for dogs in order to put emphasis on the message that the brand cares for them. All of the employees and visitors should also be given new cards featuring pictures of dogs as a way of driving the message home.
Further, the brand should embrace cause marketing and support dog adoption. Every year thousands of dogs are abandoned, some are adopted, but most of them are put to sleep. These are efforts to prove that Pedigree cares about dogs and is disturbed by a high number of dogs that are put to sleep. In consequence, the company can stand out because most of the food companies have ignored this issue for years.