2. SUMMARY The protective packaging market is becoming more competitive. Sealed Air company is encountering a growing number of competitors in its field. Similar or alternative systems are now proposed against those of Sealed Air. These new systems are often cheaper but as argued by Sealed Air less effective concerning the protection they offer and therefore less cost-effective.
A new company (GAFCEL) has entered the market with an uncoated product and is having success on the New York, California and Ohio market. Sealed Air will face further erosion of its US market share. Based on the analysis of the Air Cap (R) product as well as on the analysis of the market, we will answer questions regarding Sealed Air's reaction to its new competitor GAFCEL and the opportunity to introduce a new uncoated product in the market. We will make marketing recommendations on how to introduce this new product and in which geographical market to launch it in order to maintain Sealed Air as a leader of the protective packaging market.
3. QUESTIONS 3. 1. What should Sealed Air be trying to accomplish in any decision it makes in response to the GAFCEL threat? o It should be trying to gain back the market share that was taken by GAFCEL and it should ensure it does not loose anymore market share. o It should ensure it keeps its reputation of a company built on 'technical accomplishments' and must ensure its image does not suffer from the possible introduction of this new uncoated product. o It should not 'cannibalism' itself and therefore it should ensure the products are segmented correctly.
3. 2 What has been happening in the market and how is Sealed Air doing? In order to answer this double question, we have completed and focused our analysis mainly on the Air Cap product manufactured by Sealed Air. 3. 2.
1 Strengths and Weaknesses MIX STRENGTHS WEAKNESSES PRODUCT - quality & reliability- benefit to customers- barrier coating with saran- 8 different grades to fit all applications- patent protection- registered trade mark - only coated products offered in the USA PRICE - 10[%] margin to distributors for direct sales- quantity discount - higher than competitors, up to 50[%] (England) COMMUNICATION - promotional brochure- competitive product information- price lists- direct communication to end customer DISTRIBUTION - 7 regional manufacturing operations in USA- manufacturing facilities in Canada- licensed manufacturing facilities in Australia, Mexico, South Africa and Spain- sales organization in Japan- manufacturing operations in Europe- 62 salespeople- 370 distributors- licence to ASTRO- distribution policy and loyalty from distributors - 60[%] of time of salespeople to Instapak- 35[%] of time of salespeople to Air Cap- distributors offer competitive products SERVICE - packaging labs- strong support to distributors- best trained salespeople in market Conclusion: Between 1971 and 1980 Sealed Air and Astro were the only producers of air bubble packaging in the USA. With its patented coated product Air Cap (R), technologically more advanced than its competitor, Sealed Air is the leader of the market. Using a very efficient distribution policy and innovative services has allowed Sealed Air to make Air Cap (R) coated products the undisputed number one in the bubble products. 3. 2. 2 Opportunities and threats of market ENVIRONMENT OPPORTUNITIES THREATS ECONOMY - growing world market for bubble protective packaging- shipping and freight are increasing in the world COMPETITION - Sealed Air is the leader of US market- SIBCO is already in the French market with uncoated products - Sealed Air is losing market shares very rapidly in Europe- major competitors have better facilities- price is the key buying determinant TECHNOLOGY - barrier coating is more advanced - easy to do uncoated bubble (New Jersey) POLITIC/LAWS - patent and license protection for coated product CULTURE - acknowledgement of packaging engineers in USA- market education and mentality in favour of coated bubble- packaging supplies are seen as productive and cost-saving resources in USA - European market sees packaging supplies as costs ECOLOGY - long lasting product Conclusion: On one hand, despite cost differences between coated and uncoated material, Sealed Air has kept most of the U.
S. air bubble market. The company has increased its sales from [$] 7. 7 million in 1972 to [$] 25. 3 in 1980 and figures written in the case study show that it is well ahead of its main competitors. On the other hand, because of a different mentality and the crucial importance of price which influences the type and the quality of the protective material, Sealed Air is losing market shares in Europe.
Sealed Air has the technology to launch uncoated products which will maintain its leadership in the US market and reverse the decreasing tendency in the European market. 3. 3 Should Sealed Air introduce an uncoated product? What are the Pros and Cons? Level-headedness are the following: 1 not important, 2 important, 3 very important. PROS CONS - easy and quick to make on old machines- production process identical to Pool Blanket- New Jersey close to New York market- comparable production costs to competitors- respond to the demand from distributors- success from GAFCEL at Astro's expense only- SIBCO already produces uncoated in France- growing polyethylene air bubble market- increase world market shares - increase sales and profits- maintain leadership in the market- increase and complete range of products from low to high-end packaging- increase loyalty from distributor- ensure optimum use of distribution network- offer new product to limited packaging requirements- react immediately to GAFCEL threat 3332112333322212 - too many coated grades - loss of credibility- destroying company's vision- damaging a respected brand and change of image- risk to shift the sales from coated to uncoated- uncoated is inferior in quality- lose market education in favour of coated product- expensive marketing programme to launch new product- loss of margin from 52. 7[%] to 39.
9[%] for product of same thickness (SC-120 Air Cap (R) and 3/16 [inch] uncoated of GAFCEL) - cannibalism product line- enter price war with competitors 22223233332 36 27 Conclusion: Analysing the arguments for and against, we clearly see a solution whereby Sealed Air should enter the uncoated market in order to maintain its leading position and increase its sales. 4. If Sealed Air were to introduce an uncoated product, what marketing programme would you propose? 4. 1 Recommendation According to the Pro and Con arguments, our working group is proposing an aggressive marketing strategy which aim is to develop and proactively sell an uncoated product across Europe and the US markets through a distinct brand in order to capture market share from the most important competitors within the above markets, this thanks to an accurate marketing plan (programme).
4. 2 Marketing Programme for the European and American launch of the uncoated product under the branding SIBAirCap (R) The above recommendation strongly emphasizes the fact that Sealed Air should develop two main strategies: o the first is continuity with its current highly qualitative coated products under the brand names Sealed Air and Air Cap (R) o the second an aggressive "low cost" strategy based on uncoated products and targeting the "uncoated" market potentials. Given the above ambitious programme we have decided to capture and sustain market share with the new uncoated product under a new separate brand name SIBAirCap (R), this for a matter of differentiation and to avoid tarnishing Sealed Air's image. The success of this aggressive strategy will strongly rely on an accurate and professional marketing and distribution programme targeting two distinct goals: o quality with Sealed Air low price with SIBAirCap (R) for the uncoated worldwide high potential.
4. 3 Product and Price Specification It is obvious that the quality of the uncoated product SIBAirCap (R) should be slightly higher than its main competitors, GAFCEL, Astro, Sansetsu and the other. The production of the uncoated product for Europe will be located in France at the current Sealed Air Corporation owned SIBCO plant; for the US the company will set up the New Jersey plan quickly in order to address the American market. It is obvious that the price policy should be very aggressive in order to compete against the main competitors (listed above).
The price differences will be as follows (comparison with Sealed Air Cap (R) ): Europe- France 40[%] less than the coated product- England 50[%] less than the coated product- Germany 35[%] less than the coated product America- 40[%] less than the coated product The rebates above could be higher depending on the sales volume of the distributors. If the assigned objectives of the main distributors are met or even exceed our expectations, a higher rebate will be given to them thus increasing their margins. SIBAirCap (R) will be available in the 3/16 [inch], 1/4 and 1/2 [inch] sizes. 4. 4 Brand Identification As already written, we strongly suggest Sealed Air to use and develop a new brand name for its uncoated line of products. The brand name for the uncoated products will be SIBAirCap (R) with a new logo and a distinctive brand not to be associated with Sealed Air as this could jeopardize the image (linked with top quality products) of the Air Cap (R) and therefore the Sealed Air branding.
By keeping the brand name separate, Sealed Air will still be able to promote Air Cap (R) as the best product available on the market. Sealed Air's production company in France will continue operating under the name SIBCO (well known in France) and then be renamed SIBAirCap (R) next year depending on the success of the brand within all of Europe and the US. 4. 5 Promotion Programme According to the specific situations and differences (mentalities, buying attitudes) in market preferences in the US and in Europe, we recommend that the Sealed Air group should set up specific promotion programmes linked with the different in each country.
Since the purchasing habits vary strongly from a country to an other, the promotional programme should be tailored accordingly. In the US it is estimated that a packaging engineer could influence about 40[%] of the material purchase decisions; they also enjoy a status in US organisations not accorded to them elsewhere. Packaging suppliers are viewed as a productive, cost-saving resource and in contrast European firms view packaging suppliers as "expendable commodities." Given the different "point of views" the marketing plan (programme) should be tailored country by country. The commission rates should be increased in order to boost the sales of Sealed Air coated products which margins are higher. This will be a kind of compensation for the uncoated products which margins are less important. - The commission rates will be 3, 5[%] for Air Cap (R) and 1[%] for the other products.
4. 5. 1 US Promotion Programme The aim is to stop the main competitor GAFCEL, by this we mean to stop its fast market share expansion. Moreover, the promotion of SIBAirCap (R) should be conducted carefully in order to avoid a major "cannibalism effect." The following steps should be undertaken: - The first important move is to quickly increase the sales time allocated by the Sealed Air salespeople to selling Air Cap (R) from between 20[%] and 35[%] to at least 50[%]; the distributors sometimes complain that so much time is devoted to the selling effort (greater allocation of salesperson time) for Instapak. This move is obvious and logical in order to satisfy the network of distributors, especially the most important and key players, since the margins on Air Cap cushioning are generally higher. - Distributors will be the main exclusive channel of the new uncoated product line SIBAirCap (R), but the first approach is to try to sell the coated products (higher margin & higher quality); if a current and/ or potential customer absolutely wants a better price, only then will the distributor propose the new uncoated product.
- Sealed Air Group will also organize sales training sessions, events and road shows for the salespeople of its main distributors in order to train and to teach them the appropriate professional approach. - Sealed Air salespeople will concentrate on selling the traditional high qualitative coated products. 4. 5.
2 England With the important price difference between Air Cap (R) and uncoated products (50[%]) and this highly competitive market (tough competition), this market is crucial and key for Sealed Air Group to sustain and enhance its current market share for its Air Cap (R) coated products and also to capture market share with its new uncoated products under the brand name SIBAirCap (R). Sansetsu and other uncoated bubble manufacturers have already chipped away at Sealed Air's one-time 90[%] market share. The most pessimistic Sealed Air distributors estimate that the firm would lose 50[%] of its current market share to uncoated bubbles within three years. Sealed Air should absolutely avoid this cat a strophic scenario in reacting quickly. Commissions for distributors must be increased for the sales of the Air Cap (R) coated products to boost sales and sustain current market share against competitors. Distributors will target the potential key customers who did not take the Air Cap (R) products because of the price and offer them the SIBAirCap (R) uncoated product.
Former customers (lost) will be contacted and the SIBAirCap (R) products will also offered to them in order to win them back. It will be crucial to underline the competitiveness of the uncoated price. 4. 5. 3 GermanyAirCap (R) has lost share at a rate of 20[%] to 30[%] per year. The price for uncoated products is about 35[%] less than for coated products.
Germany is a huge country, therefore with a high potential: current market share of Sealed Air is only 5. 3[%] (England 68. 2 Sealed Air should strongly react and launch an aggressive campaign throughout Germany. The market has a great potential for coated products since the price difference is "only" 35[%] and of course for uncoated products since the most important competitor Sansetsu sold roughly [USD] 6 million of uncoated products; Sansetsu is benefiting from an efficient manufacturing facility in Germany. Germany is a key country within Europe for Sealed Air strategy and expansion plans. The existing sales structure must be reviewed quickly.
With a plant in France for its uncoated products it will be easier to capture market share and also be more efficient. SIBAirCap (R) will be used to pick up the market share from its main rival Sansetsu and therefore destroy its supremacy in Germany. Launch of the uncoated products in Germany should be carried out in major exhibitions with accurate advertisements in local magazines. 4. 5. 4 France Sealed Air has a market share of 13.
2[%] in France with Air Cap products and an other stake of 16. 7[%] with its subsidiary SIBCO, that means together roughly 30[%] of the whole market share for bubble wrap. The major French distributor of Air Cap (R) cushioning had a 50-50 mix of coated and uncoated sales in 1978; in 1980 the mix had changed to 30-70 (uncoated over coated), with 90[%] of new bubble applications being uncoated. France is definitively "uncoated" oriented and this trend is very obvious and strong; Sealed Air should follow this trend (wave) with SIBAirCap (R) (SIBCO). Sales should be focused on the uncoated products since price is the key buying determinant. Sealed Air should sustain its current market share of Air Cap (R) and also develop and enhance its market share of uncoated products.
Sales network (distributors) should quickly be reviewed with two main priorities: High quality for Air Cap (R) and price competitiveness for SIBAirCap (R) (SIBCO) uncoated products. Given the above scenario, Sealed Air must be careful in order not to lose more market share (13. 2[%]) of its coated products against the uncoated products (cannibalism effect). 4. 6 Brochures, advertisements and technical material These must be written in three languages: - English- French- German Brochures will underline the new uncoated product SIBAirCap (R) and highlight the highly competitive price, stress the large experience of the company and also point out that this new product is the appropriate packaging solution.
Advertisements should be placed in local technical magazines. Sealed Air (Air Cap (R) ) brochures will as usual stress on the top quality of the coated products and therefore the most appropriate added value packaging solution. 4. 7 Training of Sales Forces (distributors and salespeople) It is undeniably a key success factor in order to avoid the cannibalism effect and fear, and of course also to convince the main distributors (key players) to sell the coated and uncoated products of the Sealed Air Group. Distributors should be aware of the two distinct products and how to sell these to the right customers using the most appropriate approach; distributors could compensate cannibalism of their revenues with the SIBAirCap (R) uncoated products and therefore offer the whole range of products. The marketing department will set up an accurate "arguments list" with real life examples.
4. 8 Geographic Markets SIBAirCap (R) will be launched simultaneously in the US where the potential is huge and in Europe. To be consistent in our approach, we need to analyse the market potentials, the evolution of the different competitors, the evolution of the different market shares, the trend of the sales and be careful and aware about the of each country (buying mentalities). 4. 8. 1 US AIn 1980, there were two providers for air bubble: Sealed Air with 71[%] (25.
35 [USD] million) and Astro 29[%] (10. 5 [USD] million); it still exists a potential of 75[%] (PAM). The PAM for air bubble products is worth 142 [USD] million in the US. Sealed Air should target quickly and strongly GAFCEL since 1. 5 salespeople sold for 1 million [USD] and since this dynamic competitor could jeopardize and capture market share from Sealed Air Group.
Sealed Air can produce an uncoated product under the brand name SIBAirCap (R) within one month with no major capital investment in New Jersey. 4. 8. 2 Europe Within the three countries (Germany, France and England) the competition between uncoated and coated products is very tough. Coated bubbles is losing market share in each country year after year with new competitors. SIBCO the French partner will heavily produce the uncoated products ready to be launched across England, Germany and France under the new brand name SIBAirCap (R) (France will continue one year with the SIBCO brand name and then also take the new one).
The Europeans are price oriented: strategy should focus on prices. In 1980 the total bubble market in Europe was [USD] 15. 8 million; the coated bubbles market accounts for only 22[%] of the total bubbles sales compared to 85[%] in the US. Europe is definitively "uncoated" oriented, thus strongly price oriented. The European market will witness a price war. SICBO's manufacturing capacity should be increased in order to cover the future needs of the different European countries.
4. 8. 3 GermanyAirCap (R) cushioning was a late comer to the German market; it had lost share at a rate of 20[%] to 30[%] per year. The main competitor Sansetsu now has a market share of 78[%].
Price difference between coated and uncoated is 35[%]; Air Cap (R) market share is only 5. 3[%]. The launch of SIBAirCap (R) will therefore not cannibalism Air Cap (R) since the current market share is so small. Sealed Air Group with SIBAirCap (R) is now able to compete against its major rival Sansetsu and regain market share.
4. 8. 4 France In France as already stressed, the price is the key buying determinant. Market share of SIBCO products is only 16. 7[%]; Air Cap (R) market share in bubble sales is 13[%]. There is no big risk of cannibalism effect since market share is not too big and brand names of Sealed Air and Air Cap (R) are not well known in France (same as in Germany).
Uncoated products are widely accepted in France like in Germany, since price sensitivity is strong. 4. 8. 5 England The market share of bubble sales is 68[%], decreasing year after year. Prices for the uncoated bubble are 50[%] less than the cost of comparably sized Air Cap (R) cushioning; the most important competitor is once again Sansetsu which is capturing the current market share of Sealed Air Group. The launch of an uncoated product like SIBAirCap (R) will be welcomed since price war is strong and since UK distributors unfortunately predict a future market share of 50[%] for coated products.
Sealed Air should "compensate" and fulfil this gap with uncoated products and therefore follow the trend of heavy demand of uncoated products. 4. 8. 6 RoW Now with a low-cost product and also a new "low cost" oriented strategy, Sealed Air should think and look at the high potential market within the fast developing countries.
The group also has a manufacturing facility in Canada and a sales organisation in Japan. Sealed Air licenses operated manufacturing facilities in Mexico, Australia, South Africa and Spain. Sealed Air could also launch in a second phase (mid-term) its uncoated product line under the brand name SIBAirCap (R) across these above relevant countries representing a high potential and it could benefit from the experience gained in the US and in Europe. 4. 9 Distributor Programme SIBAirCap (R) will be exclusively distributed through the network of distributors.
The priority of the special training will be given to the 135 key distributors (first line distributors) because they collectively handle over 80[%] of the whole sales. Due to the different mentalities in the US and Europe countries, different distributor programmes should be implemented across these key markets, with a different training programme and targeting the key distributors first. Distributors are like brokers, they distribute a wide range of products including the uncoated products of the main competitors. The Sealed Air strategy is to convince the key competitors to distribute quickly its uncoated new product SIBAirCap (R), giving them special incentives (launch incentives) and stressing the price difference. 4.
9. 1 US Distributor Programme The 135 key distributors (first line distributors) will be the first to get the new uncoated product (exclusive priority). The first strategic goal is to convince them to sell in priority Sealed Air products instead of those of GAFCEL or other competitors. Sealed Air should organise road shows, special events with senior management to explain and present the new strategy for the new uncoated products (uncoated SIBAirCap (R) ). As the margins are higher with the coated products, distributors will continue to sell those to key accounts wanting quality and ready to pay a higher price for it. For the other customers (current and or potential) SIBAirCap (R) is the appropriate solution.
The balance between the two lines of products will be good, because selling the uncoated product will target a huge niche (potential); it is simply the best alternative if the distributor is unable to convince a potential / current customer of the real benefits of the coated products. Sealed Air should also launch an aggressive price strategy campaign in the New York metropolitan region since the price is the only "buying motivator" and gain the price leadership. Sealed Air should also definitively hire the 1. 5 salespeople of its competitor GAFCEL offering them perhaps a management function within the Sealed Group (better loan) and use and benefit from their accurate selling skills, their relationships with the distributors (training of distributors). 4. 9.
2 European Distributor Programme The distributors loyalty is less developed than in the US, and Sealed Air seems not to benefit of a bulk of key distributors like in the US. Moreover, it is more difficult to sell coated products in Europe since price is the key factor and therefore the "buying motivator." The distributor programme should be quite different in each country where Sealed Air is present. Continental Europe (France, Germany) accepts only the uncoated products (price oriented), thus Sealed Air should launch an aggressive strategy based on the price and look after the key distributors (build up customer loyalty) in these countries and absolutely convince them to sell the SIBAirCap (R) products which are cheaper than those of the competitors, offer better quality and also offer special incentives to the key distributors (special motivation programme). The goal is to capture the market share quickly and to gain the leadership of uncoated products. 4. 9.
3 England The market share of coated bubble sales is currently 70[%], but will quickly decrease, therefore Sealed Air should react and implement the same strategy as in the US, train the key selected distributors proactively to sell the coated and the uncoated products. It will be important to offer the right product to the right prospect and this will be effective only with specific selling training sessions with real life scenarios. 5. Conclusion Sealed Air Group will now be able to offer a complete range of products: uncoated and coated.
Sealed Air Group will maintain its reputation, its image of quality regarding the coated products. Sealed Air Group with its accurate and well-thought strategy will avoid the cannibalism effect as much as possible. Sealed Air Group will regain market share and sustain its leadership across the US, Europe and in the developing countries (expansion programme). Sealed Air Group will be able to propose and sell the appropriate product to the appropriate customer through the appropriate distributor.
Sealed Air Group will set up tailored-made programmes for each country according to the buying mentalities, the purchasing habits and of each country. Sealed Air Group is fully aware that key success factor of its above strategy is the distributor network: Sealed Air Group will build up loyalty with the key distributors through exclusivity, special incentives, special events and higher commissions, in the US and even more across Europe.