Rob Price was recently made vice president of Own Brands, which was the private label of H-E-B. The chairman, Charles Butt, had a real interest in growing the sales of the Own Brand product line. At the time, Own Brand represented 19% of sales while national brands accounted for the rest, which was opposite of 30 years ago when Charles took responsibility for the business. Charles gave Rob a goal to increase the sales of Own Brand’s private label by 11% in the next five years to bring it up to a 30-70 ratio of private and national brands, respectively. The increase needed to be across all product lines, but Rob had a specific assignment regarding the Own Brand’s bottled water under the label Glacia. The problem with the existing Glacia water was that it did not accurately market itself as imported spring water from Canada, which would increase its market share from the French imported water, Evian. There were many things for Rob to consider as his research showed that consumers would be more likely to buy Glacia if they knew it was Canadian spring water.
With the competitive grocery market at the time, especially with Wal-Mart’s emerging into the grocery scene, Rob needed to make a specific recommendation on how to increase its sales in context of the overall Own Brand strategy. Initially, the problem was an undetected flaw in the marketing and labeling of the product. If consumers do not have something repeatedly pushed in their face, they will not likely remember it when asked. Other problems were caused by Wal-Mart and their huge ability to undercut pricing of most other chains because of their national, even international supply-chain relationships. Wal-Mart had its own brand in Great Value products but, according to the case, was not as high quality as the H-E-B Own Brand products. Great Value compared to the Hill Country Fare tier-3 generic that H-E-B put out. Rob knew that his competition was with Wal-Mart but he wasn’t sure yet how to properly compete. He wanted to keep their pricing model of Every-day Low Prices but the pricing against Wal-Mart was difficult to match because of other national brand’s pricing positions.
I think the options that Rob had to decide between were whether to place Glacia in competition with Evian as comparable imported spring water or keep it positioned against Ozarka, which is where it was, and add the Canadian value to help boost sales through points-of-difference? One of the reasons why they should consider a direct market-comparison with Evian is because there isn’t a competitor right now. Evian has far out priced itself among its competitors and Glacia scored equally as high in a double-blinded taste test showing that it didn’t actually need to change the product, just the positioning. Own Brand could significantly increase the pricing to be more related to the pricing of Evian. This would remove Glacia off the shelf next to Ozarka and next to Evian. This could possibly allow Own Brands to create a Hill Country Fare product to compete with Ozarka. However, Evian was a good premium national brand brought in money for procurement revenue. If the new Glacia began beating out Evian in sales and profit, Evian could pull its product from the H-E-B stores and then they would lose the procurement revenue derived from a national brand.
National brands also help bring in consumers who end up buying other Own Brand products in the store. This was a decision bases for the entire Own Brand product line. The options of pricing, promotions, positioning, and the overall corporate strategy were all involved in this first decision regarding Glacia. According to Butt’s target goal to Rob shortly after he became VP, only 30% of a store’s products should be their own, with a 70% mix of national brands. If Rob decided to simply elevate the existing position of the Glacia against Ozarka to increase their market share, they could grow sales and not have to compete with the national brands. I think this would be effective considering the low cost of refining their label and less hassle in re-configuring pricing and moving the product closer to Evian.
A third possibility was to reposition Glacia as domestic spring water, which is what Ozarka was. I don’t see the logic behind this because they were already a direct competitor with Ozarka and their only point-of-difference was the source of their water. Why would they go through all the effort and cost of relabeling, promoting, and re-launching to get more of the same? If I were in Rob’s position, I would re-launch Glacia to be a somewhat generic competitor to Evian and create a Hill Country Fare product with purified water to be placed just below Ozarka. Evian needs some competition and according to their profit data in Table B, Glacia could increase their price and profit significantly without changing the product, only the labeling.
Also, Evian users indicated preference for the Canadian water over France. I f Evian users began to prefer Glacia water instead, and that’s what H-E-B stores carried, what would be the downside if Evian eventually pulled their product out of H-E-B stores? It wouldn’t be in demand anymore, so the loss would be some procurement revenue, but the profits off the increased price of Glacia would seem to overcompensate for that.