Demand Elasticity

1. Olena CanessaMKT – 300Case Study: Oscar Mayer (Harvard Business Review)Case AnalysisOscar Mayer Foods, according to the report of McTiernen Corp, is facing two major challenges that are going to affect company’s future profitability: The increasing popularity of healthier products with less fat and salt content.The increasing demand on products that are more convenient to cook and easy to consume.Overall red meat consumption level has decreased nationwide about 7,28%, while white meat demand dramatically increased by 33,73% within last five years. Meat Consumption in United States (annual per capita pounds) Current YearFive Years Ago% ChangeRed Meat$124.9$134.7-7.28%White Meat$45.2$33.833.73%These two main tendencies have affected two main brands of the company – Oscar Mayer and Louis Rich. OM brand, in particular, is in unfavorable position as it was described by McTiernen as “too high in fat content’. The brand’s pound volume sales have decreased 3.13 %, while operating income has gone up only by 4.76% for the last two years. In the meantime, LR brand, which specializes in white meat products, has shown the signs of slowing growth: the pound volume went up only by 10.9% since last year versus 13.4% and 14.2% in the previous years; however, the operating income more than tripled for the last two years. Total DivisionCurrent Year Last Year Two YearsPound Volume934916886% change2.60%3%3.10%% change for 2 years5.42%Operating Income134118108% change14%12%11%% change for 2 years24.07% OM Brand Pound Volume650662671% change-1.80%-1.30%0.30%% change for 2 years-3.13%Operating Income110107105% change2.80%1.90%2.10%% change for 2 years4.76% LR Brand Pound Volume272244215% change10.90%13.40%14.20%% change for 2 years26.51%Operating Income29147% change107.14%100.00%++% change for 2 years314.29%SnB Pound Volume12 --Operating Income-5 --Marcus McGraw’s objective is to increase sales by 4% (from 2.6% in a current year) and to increase the operating income by 15%