Mit Case Study

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  • Topic: Marketing, Sales, Breakfast cereal
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  • Published : March 21, 2013
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BCG - Join BCG - Interview Prep - Practice Cases - Distribution...

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Distribution Strategy
Crafting a Distribution Strategy for a Sugar Cereal Manufacturer Your client is the sugar cereal division of Foods Inc., a U.S.-based distributor and manufacturer of packaged foods. According to the division president, Foods Inc.'s traditional strength has been with grocery stores, which still account for the majority of its $1.1 billion in sugar cereal sales. But Big M Mart, a discount chain, has been growing at a healthy rate of almost 15 percent per year and has now become Food Inc.'s largest customer. Your client is not sure how to react, and has asked BCG for assistance with its distribution strategy. Establish Understanding of the Case First, let me make sure I understand the problem. Our client specializes in sugar cereals traditionally distributed through grocery stores. Sales to Big M Mart, a discount chain, have been growing at 15 percent per year, and the chain has recently become the largest distributor of the client's product nationwide. We are here to help evaluate the distribution strategy in light of Big M Mart's growth. That is correct. Could you explain to me how grocery stores differ from discount stores? Sure. Grocery stores generally specialize in food, as well as selling some household goods and over-the-counter pharmaceuticals. Discount stores, on the other hand, offer food alongside a wide variety of merchandise, including clothing, home electronics, and housewares. Does Big M Mart market its food products differently than do grocery stores? Discount stores advertise lower prices for a wide variety of foods, particularly staple, nonperishable foods. Could I take a moment to write a few notes to myself? Please feel free. Set Up the Framework Before making recommendations, I think we would need to evaluate whether sales growth at Big M Mart is good or bad for Foods, Inc. To do that, I would first look at how its sugar cereal performance at Big M Mart compares with that in other distribution channels. Second, I would look at its performance at Big M Mart in relation to competitors' performance. Next, I would determine what drives customer purchases. Finally, I would want to understand the supply chain. That certainly sounds like a reasonable approach. Let's proceed. Evaluate the Case Using the Framework

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10/2/09 6:57 PM

BCG - Join BCG - Interview Prep - Practice Cases - Distribution...

http://www.bcg.com/join_bcg/interview_prep/practice_cases/dis...

First, I would like to get a better sense of where Big M Mart stands in relation to our client's other distribution channels by examining the client's sales data and margins, by distributor. The marketing department does not have margins by channel, but tracks sales and volume for its top five distributors.

What does this imply about Big M Mart as a distribution outlet? It looks as if the top distributors have been growing more important, but particularly Big M Mart, which is growing faster than all the others. This is particularly true when we look at volume, where Big M Mart's growth is much higher than that of the other four channels. And how could you interpret what these data says about margins? While the client's sales through other distribution channels are growing faster than volume, Big M Mart volume and sales growth are the same, so the average price paid by Big M Mart has remained constant. That implies that sales growth at Big M Mart could have negative implications for our client's margins. Next, I would like to look at how our client is doing in relation to the competition within Big M Mart. Have they been gaining or losing market share? How might you find that out? I would try to interview Big M Mart's purchasing personnel, since they would probably track...
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