Oscar Mayer Essay

1036 Words5 Pages
Problem:

One of the key issues faced by McGraw is that there is a large gap between his projections for next year, and what the manager’s are promising him . His goal is to obtain a 15% increase in the operating income from his division (OM, LR and NP). The managers are projecting a decrease of 5.2% from the current year. In absolute terms there is a gap of $27 MM in the projected divisions operating income.

If McGraw were to keep his A&P budget the same as last years, he would save $32MM over the managers’ projections. Therefore, one solution could be to effectively use the strengths of the product lines and the A&P dollars by consolidating his sub-divisions.

Analysis:

Comparing the contributions and costs of the three
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Additionally, LR brand generates less operating income for the number of pounds sold compare to Oscar Mayer.

Our next question follows, Can Louis Rich Brand alone make up the income short fall? The answer seems no, looking closely at the numbers, one can clearly see a decline in pound volume from 3% to 2% in the current year. Increase in the operating income is likely being driven by the change in consumer trend towards white meat, not superior management of the sub-division nor its marketing distribution channels. Additionally, LR is generating only 7cents per pound of operating income compare to Oscar Mayer which generates 16 cents per pound.

The decline in Oscar Mayer brand is also due to consumer trend, but is further compounded by a decline in A&P and increased competition. Loss of market share is evident by the 6% decline seen in pound volume matched by a 6% decline in revenues. Oscar Mayer has so far opted to loose market share rather than lower its price.

Based on this analysis, there is more to loose if the Oscar Mayer brand is allowed to wilt over the Louis Rich Brand. Giving up on Oscar Mayer would mean loosing it’s well established, well recognized OM brand name and its equity. May be even future profitability may be lost if the trend towards white meat is only a temporary one. This can be seen in McTiernan’s Report on consumer satisfaction survey,
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