Old El Paso

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  • Topic: Brand, Food, Mexican cuisine
  • Pages : 7 (2530 words )
  • Download(s) : 56
  • Published : June 11, 2009
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OEP Industry Landscape:
At the time of PET business acquisition by GrandMet's/Pillsbury, the food industry and traders were undergoing the phase of consolidation. Food product manufacturers were aiming to acquire bigger economy of scale and keeping only selective brands in their portfolio. This was an important factor to make the business efficient and competitive in market place. From branding perspective, as the cost of developing and supporting brand increased and companies required high commitment close to 20% of sales, the absolute scale size and selection of brands in portfolio, those required push (i.e. launching, developing and supporting), became all the more important. Therefore, GrandMet/Pillsbury followed the strategy to retain only 2-toptier brands in growing category that have the potential for growth in US and diversification. Its strategy further focused on extending brand to international market for scale size growth and expending the range of products (line extensions). Brand Old El Paso-OEP:

The acquisition of PET (Old El Paso-OEP) brand ticked most of the right boxes in GrandMet's checklist. OEP was market leader brand for 30 years with 75 years of historical heritage in Mexican-food category. It had diversified product range1. OEP had good distribution network and commanded the status of 'Category-Leadership' in Mexican-food category. This resulted in better control of in-store presence (shelf space) and cross-selling of its products as they were all displayed together in prominent single space. 'Category-Leadership' position had also given other commercial advantages in terms of favourable contract-terms with suppliers and customer (retail) network. However, OEP had low average CAGR2 as compare to Mexican industry average. It was mainly due to its falling share in Mexican Sauce sub-category; which was one of the fastest growing and largest segment of Mexican food. Market-Research indicated that OEP enjoyed high-level to very high level of unaided Brand awareness among consumers. Data suggested that brand attributes that consumers associated with it were - Authentic, South-West, Versatile, Exciting-Seasoning and Good Bargain. However, OEP had followed multiple positioning statements approach; that might have led to confusion in the minds of customers. These taglines appeared to be driven by subcategory then its brand heritage. Market Opportunity:

At the time of OEP acquisition, combined Mexican food market in both restaurant and retail had healthy size and was growing3 at the rate faster than the food industry average. Mexican food category was attractive to branded food companies as market-research exhibited that Hispanic people and Heavy users were generally brand loyal. Geographically, consumption was mainly concentrated in Pacific and West-South-Central region where people were from Mexico origin. Hence, there was potential for future growth in East-North-Central, Middle-Atlantic and New England regions and extending it further internationally. Additional two key factors offered good insight for future growth. Firstly, Mexican restaurants were growing in those regions where Mexican food consumption was low. Secondly, Hispanics were the fastest growing minority population. Therefore growth of Hispanics and Mexican restaurants will lead to two fold growth in demand for Mexican-food; first by their own growth would lead to growth in food consumption, second their growth and spread would have also helped in increasing awareness and accessibility of Mexican cuisines to non-Hispanic people. This will encourage non-Hispanics to try Mexican food and develop taste for it. The more they go to Mexican restaurants, the more they will try new cuisines and lead to increase in acceptability and taste development; hence fuelling the higher consumption. Stimulus Effect of 'Hispanics' and 'Mexican-Restaurant's' may likely be one of the reasons leading to increase in average household penetration4 of Mexican...
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