Saint Joseph’s University

Marketing Plan for Hormel Foods and Wakefern Natural Choice and

Jenna Conroy, Margo Derham, Elisa Grommisch, Jenna Lessel, and Corey Smith FMK 381 Professor Latella 25 April 2019

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Table of Contents

Executive Summary………………………………………... 2 Mission Statement………………………………………….. 2 Situation Analysis………………………………………….. 2 Market Analysis…………………………………….. 2 External Analysis…………………………………… 3 Competitive Analysis……………………………….. 4 Internal Analysis……………………………………. 7 Demand……………………………………………… 7 Customer Analysis………………………………….. 7 SWOT……………………………………………………… 8 Market Strategy…………………………………………… 9 Segmentation……………………………………………… 9 Target Market…………………………………………….. 10 Positioning Statement…………………………………….. 11 Marketing Mix………………………………………….…. 11 Product……………………………………..……….. 11 Promotion……………………………………………. 12 Pricing……...…………………………………………. 13 Placement…………………………………………….. 14 Appendix…………………………………………………...... 16 Works Cited…………………………………………………. 19

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EXECUTIVE SUMMARY Hormel Food Corporation is a well known brand that offers a wide variety of packaged and refrigerated food brands, two of them being Hormel Pepperoni, and Natural Choice lunch meat. After analyzing Wakefern and Hormel Foods both internally and externally, the ideas below determine strategies we would like to propose to answer our objective.

MISSION STATEMENT/BUSINESS DEFINITION → We aim to spice up traditional lunch meat with new usages for endless flavor combinations. ​

SITUATION ANALYSIS MARKET ANALYSIS The market for lunch meat and pepperoni has been growing and currently is showing no signs of slowing down. In 2018 the Deli department sales reached 27.12 billion dollars, up 4.6% from 2014 (Total Deli Sales). This shows that consumers are starting to get more products freshly sliced then years prior. This has not stopped the pre-packaged lunch meat market which is the largest category in the deli department with 1.3 billion dollars in sales. The second highest category is unpacked with 1.2 billion in sales (F&R Buyer). Some of the most popular lunch meat brands in 2018 according to Statista were Boar’s Head, Private Label, , Hillshire Farm, and Butterball. According to a report from Statista, 78.06 million Americans consumed Boar’s Head lunch meat in 2018. Hormel is 8th on the list with 18.58 million Americans (Cold Cut Brands). In the north east the market for pre-packaged lunch meat is smaller due to the high demand for freshly sliced deli meats. As you can see in this Statista report deli lunch meat recorded 5 billion dollars in sales and packaged lunch meat recorded 4 billion in 2017 (Retail Lunch Meat). Although this is a significant difference it does not mean that the East is not the best market for overall deli meats. According to a report from Statista grocery stores in the Eastern region have the highest weekly sales of deli meat per grocery store with $3,745. This translates to Oscar Mayer being the leader in sliced lunch meat sales with $393.13 million in 2017 with three of their products: Oscar Mayer, Oscar Mayer Deli Fresh, and Oscar Mayer Deli Fresh Bold. Hormel Natural Choice came in 8th for sales of sliced lunch meat brands with $29.66 million in 2017 (Leading Rfgd. Sliced Lunch Meat). Pepperoni is frequently restricted to pizza in the eyes of consumers, but new food trends are beginning to show its versatility. Hormel Pepperoni has always been at the top of the pepperoni market and in the latest 52 week reports they are continuing to blow their competitors out of the water. Hormel Foods biggest competitors in the pepperoni category are Bridgford, Margherita, Carando, and Private label. In a 52 week report ending March 24, 2019 Hormel Pepperoni lead sales in Wakefern’s pepperoni category with $7,275,755.49. Hormel’s dominance of the pepperoni market in Wakefern’s stores was validated by the second highest sales from Bridgford being $2,529,945. Pepperoni is a market that can see a large amount of growth in coming years based of the increase in meat snacking trends. In a Statista report we can see that 3 dollar sales of meat in U.S. convenience stores has grown $446.68 million from 2012-2017, showing that this growth has extreme potential to shift into the food retail market.

EXTERNAL P.E.S.T. ANALYSIS Prior to making any decisions, it is crucial to identify external factors that may impact a business and its operations. A PEST Analysis encompasses four key areas of a firm’s macro-environment: political/legal, economic, social, and technological. As long as the current climate allows for it, Hormel Foods can continue to innovate and implement new strategies. The political/legal sphere is one that pertains most to Hormel’s Natural Choice and pepperoni products. Due to the limited resources and manpower of the Food and Drug Administration (FDA), there are very loose guidelines on what can and cannot be labeled as ‘natural’. In general, products selling themselves as natural must be free of artificial or synthetic preservatives, additives, colors, sweeteners, or flavorings. These requirements can be translated in many ways, thus causing confusion within the food industry. Corporations are now started to face legal repercussions as a result. According to international law firm Perkins Coie, 33% of food litigations in 2017 revolved around the use of the world ‘natural’ (Perkins Coie 4). This number experienced a dramatic increase in 2018. Flavored seltzer water brand La Croix has been sued three times in the past year for claiming that the beverages are ‘naturally essenced’, when they allegedly contain an ingredient used in cockroach insecticide. Parent company National Beverage Corporation continues to fight these allegations. Within the , Tyson Foods, Perdue Farms, and other major chicken producers are being sued by big name retail customers including: Supervalu Inc., Publix Super Markets, Wakefern Food Corp, Kroger Co., Albertsons Co., and Hy-Vee Inc. The supermarket chains are accusing the chicken producers of price fixing poultry from 2008-2016. Tyson claims they are, “disappointed by the recent case filed by our customers” and are “determined to defend against these baseless claims.” The lawsuit alleges that, together, the chicken producers restricted supply, thus reducing the number of “broiler” chickens for purchase (Vasquez 1). The supply restriction was apparently done by destroying breeder hens. This practice would in turn increase prices for the retailers (Elejalde-Ruiz 1). Additionally, there are claims that the Georgia Dock price estimate was also manipulated by the chicken producers. The Georgia Dock estimates prices of many perishable foods like fruits, vegetables, nuts, and livestock. Producers weigh their long-term contract decisions heavily on the estimates. In recent years the Georgia Dock, “has drifted significantly upward from other chicken price averages, rising about 20 percent or more out of line with a separate but lesser known index maintained by the USDA” (Whoriskey 1). If found guilty, the chicken producers will be forced to pay millions of dollars to each of the grocers. There will also be a substantial amount of trust lost between the grocers and chicken producers. 4

Economically, young household incomes are continuing to increase. According to a Pew Research Center analysis of census data, “After bottoming out in 2011, incomes are rising for ​ American households – and those headed by a Millennial (someone age 22 to 37) now earn more than young adult households did at nearly any time in the past 50 years” (Fry 1). This finding is good news for many food manufacturers like Hormel Foods because Millennials are a significant target market. Increases in incomes means more of a portion of disposable income spent on food. The relatively high household incomes are mainly due to women in the workforce. Women are not only working more hours, but they are also being paid more than ever before. However, it is important to note that young adults are less likely today to have a dual income household than in the past (Fry 1). Socially, a paradigm shift has occurred in how Americans define health, wellness, and clean eating. This has caused consumers to become much more product-oriented than brand-oriented when it comes to food. Young consumers are far less devoted to big name brands than older generations. Millennials and Generation X are going to turn to brands that fit their price point, contain ingredients they can pronounce, and leave as little of a carbon footprint as possible. However, big brands are stuck in a balancing act because removing preservatives and switching to cleaner ingredients is a costly sacrifice. These changes would need to be reflected in the price tags on shelves, but young consumers are unwilling to pay more. Cereal is one category that has taken a massive hit from ever-changing consumer demands. Kellogg’s, , and PepsiCo have all attempted to innovate their products for a reduced-sugar content after years of declining sales. This small tweak has not satisfied customers who have now stopped eating entirely or switched to a more filling, nutrient-dense alternative (Selyukh 1). Brands need to catch fads before they become trends so they are top of mind when consumers seek the product. If classic brands ignore the trends, their devoted consumers will begin to die and no one will replace them. Technologically, a tremendous breakthrough has occurred in the meat industry. Cell-grown meat is the meat of the future and it appears that it is here to stay. The process begins by, “isolating livestock or poultry cells that have the capacity to renew themselves, and place them into room-size bioreactor tanks, similar to fermenters.” Then, the cells are fed with nutrients so they can grow into muscle. Once fully developed, the muscle can be formed into conventional meat products like a (Bunge 1). has seen declines in recent years due to concerns regarding the sustainability of raising and slaughtering cows. The future of cell-grown meat is so promising that it is being backed by Google Inc., Merck, and Tyson Foods Inc (2).

COMPETITIVE ANALYSIS Retail is an extremely competitive and constantly evolving industry. Hormel Foods and Wakefern Food Corporation both face their own set of competitors that are trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the 5 marketing mix. Wakefern Food Corporation is the largest member-owned wholesale distribution cooperative in the US, supplying groceries and other merchandise to more than 250 supermarkets under the ShopRite and The Fresh Grocer banners in New Jersey, New York, Connecticut, Delaware, Maryland, Pennsylvania, and Virginia. Beyond supplying its member-owned stores, Wakefern distributes products to other supermarkets across the northeastern United States. Although Wakefern Food is one of the largest member-owned wholesale distributors it does face competitors throughout the market. Wakeferns biggest competitors are in different categories. This includes mass stores like Walmart and Target. Next would be club stores like BJ’s, Costco, and Sam’s Club. Grocery includes stores like Stop & Shop, Acme, Giant, Wegmans, and Aldi, while drug stores includes CVS, Walgreens, and Rite Aid. Lastly, dollar stores as well as digital and emerging companies like Amazon, Blue Apron, and Instacart are competitors to Wakefern. All of these competitors, although in different categories, sell many of the same products as Wakefern. The industry is also evolving greatly as online shopping is becoming not only more powerful but much more appealing to consumers. To focus in on pepperoni, Hormel Foods offers many different options of pepperoni including original, turkey, 25% less , 50% less sodium, and thick sliced. They also offer many size options of pepperoni including minis, sticks, and bites. These options really enforce the idea of pepperoni being consumed as a snacking product. Although Hormel Pepperoni is one of the most well-known brands with a large variety of pepperoni, it still faces competitors throughout the market. One competitor to Hormel Pepperoni is Bridgford Pepperoni. Bridgford aims to have a more authentic Italian taste. They offer a 5 oz and 3 oz bag as well as a 5 oz thick sliced bag. Like Hormel, Bridgford offers a 4 oz bag of turkey pepperoni. They also offer pepperoni snack sticks and snack bites, and lastly a mixed pack of pepperoni and cheese. The next competitor Hormel faces is Margherita. Margherita uses, “There’s Italian and then there’s margherita” as their slogan and offers many different products. Their products include but is not limited to 50% reduced fat pepperoni, a variety of pepperoni sticks, Italian style pepperoni, turkey pepperoni, and sliced style. The website offers many different recipes and usages for the pepperoni as well. Not all are the same. That’s why the Smithfield family of brands offers a variety of pepperoni products and formats for you to craft and customize menu solutions for your exact needs. Pepperonis are available in links or slices, and your choice of spicing, diameters and pre-measured thickness. Hormel’s Natural Choice pre-packaged, and pre-sliced lunch meats has competition separate from the pepperoni category. According to Statista in which the data has been calculated based on the U.S. Census data and Simmons National Consumer Survey, 78.06 million Americans consumed Boars Head in 2018. Following that 74.46 consumers purchased store brand cold cuts. Then 72.36 of consumers eat Oscar Mayer. Then there is a significant drop to 6

49.77% of consumers choosing Hillshire Farm. Lastly, Hormel Food deli meat was consumed by 22.62% of consumers in the year of 2018. (Cold Cut Brands) One of the strongest of Hormel Foods competition in lunch meats and the number one most consumed lunch meat in 2018 is Boar’s Head. Many deli counters in food stores and privately-owned delis use Boar’s Head meats. Boar’s Head presents the extraordinary flavor that many consumers know and love. Consumers are aware of this brand and many stay loyal to it as well. Boar’s Head offers pre-sliced pepperoni under snacking category, as well as sliced turkey pepperoni, sliced . Although there are not many pre-sliced and packaged lunch meats offered from Boar’s Head, they are the biggest option for meat at deli counters and offer many snacking options as well. Although not on the list provided by Statista, Kretschmar is also a large deli counter competitor. Kretschmar offers many products with, “The Finest Ingredients and Legendary Taste”. Kretschmar has produced quality since 1883. They offer master’s cut beef, , turkey, chicken, and cheese. They also offer products from the deli counter including turkey, cheeses, pepperoni, salami, beef, chicken, ham as well as other old-world lunch meats. Lastly, they offer premium deli as well as other deli pre-sliced, prepared, and individually packaged snacking products and platters. Like Boar’s Head and Kretschmar, Black Bear is another deli counter product. Although the brand is mostly served at the deli counter, they do offer a small variety of pre-sliced ham, turkey, and chicken breast. Oscar Mayer follows Boar’s Head and store brand cold cuts with 72.36% of American consumers in 2018. (Cold Cut Brands) Oscar Mayer offers many pre-sliced and packaged lunch meats including a large variety of bologna, chicken, turkey breast, ham, salami, . There is a strong emphasis on the sliced chicken and turkey products and flavors. Another strong competitor for Hormel Foods according to Statista is Hillshire Farm. Its products are crafted with no artificial ingredients because “no sandwich needs that”. Hillshire Farm offers both original, natural, and even premium carved lunch meats including turkey, ham, buffalo chicken, roast beef, salami, and . The turkey has many flavors light tomato and basil, black pepper, and over roasted. Although Hillshire Firm offers many different options and flavors of pre-sliced lunch meats, they do not offer many snack items involving the lunch meats. Dietz & Watson has a lower consumption percentage of 17.35 compared to Hormel Foods they are still a large competitor in the packaged lunch meat category. (Cold Cut Brands) Dietz & Watson offers a variety of pre-sliced lunch meats. This includes ham, roast beef, chicken, turkey, Toscano, calabrese, sopressata with many having an antibiotic-free label. They also offer organic pre-sliced turkey. They offer pre-sliced sandwich and snack size turkey and original pepperoni. Dietz & Watson offers many snack products featuring the Italian specialty meats like calabrese, sopressata, and , but does not have a large focus on pepperoni.

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INTERNAL ANALYSIS The internal analysis will look at each organization's competitive viability in the marketplace. Hormel Foods is a Fortune 500 company with more than 20,000 employees across the globe, making a difference for their customers communities and shareholders. The company strives to bring more to the table for their customers, employees, consumers, shareholders and the communities where they live and work. Looking back on Hormel’s history, the company was in 1891 in Austin, . Since then the company has changed its original name of Geo. A. Hormel & Co. to Hormel Foods. Through this change the company now more accurately reflects their presence in the industry. Between 2000-2013 the company made 10 acquisitions. Their most current achievement includes expanding their international portfolio into South America with the acquisition of Cidade do Sol in Brazil. The company has over 50 brands ranging across many categories. From meat to Mexican to peanut butter, Hormel has expanded from just products. The brand manufactures and sells their products to over seventy countries. The company remains on their focus statement of “Inspired people. Inspired Food” and they do this through building on their founder’s legacy of innovation, quality and integrity (Hormel Foods). Hormel Pepperoni’s great flavor and high quality is what makes it America’s number one selling brand of pepperoni. Pepperoni is seen as one of America’s favorite toppings, and Hormel’s remains number one (Moskin). Geared toward a more conscious consumer, Hormel developed their natural Choice lunch meat. Hormel Foods believes in making delicious meat and cheese consumers can trust and that they always be 100% natural without artificial preservatives or ingredients (Hormel Foods).

DEMAND Hormel Foods Pepperoni had a household penetration of 20% in the United States reported in 2015, and has grown due to it being the number one pizza topping in America (Household Penetration). Hormel Pepperoni has grown 2.5% at Wakefern since last year (Class Data Pull). Hormel Foods Natural Choice lunch meat is ranked seventh in leading refrigerated sliced lunch meat brands. (Cold Cut Brands). Products stating “Natural” on their packaging saw a 2.3% increase in 2018. Products that state “antibiotic free” also grew 52.8% (Deli Meats: Dollar Sales). Natural Choice was reported to have a household penetration of 6% in 2015 (Household Penetration).

CUSTOMER ANALYSIS Hormel Foods utilizes ShopperSites through IRi Consumer Network panel data to help in segmenting their customers. Companies that use ShopperSights are able to allocate their marketing dollars more effectively and efficiently, and typically see a sizable increase in sales. Hormel Foods Current target markets that index high for Natural Choice lunch meat include IRi’s categories of the Power Elite, Young City Solos, Autumn Years, and Significant Singles. Hormel Pepperoni also has a high index in Autumn Years and Significant Singles, but also with 8

Cultural Connections and Aspirational Fusion. These indexes are measured for Hormel Foods Northeast target household percentages. Their main target market for both of these products includes those ages 35 and up, who have higher incomes, are married, and have kids. Hormel Foods reaches their target market through social media outlets including Facebook, Pinterest Twitter, Instagram etc. The company creates hashtags such as “#HORMELPEPPERONI” for users to use when they post photos using the products. They also continue to create new Television campaigns for both Hormel Pepperoni and Natural Choice lunch meat and are continuously seen in magazines, online videos, Google advertising, online ads and Digital FSI (online coupons). They also reach their customers through partnerships with movies like Hotel ​ Transylvania. Hormel Foods also creates promotions tied with brands such as Redbox, Xbox, ​ Hasbro, and Playmobil. The company also continues to promote their brands to their customers through in store promotions in weekly ads, with coupons, bogo deals, etc (Shopper Insights PowerPoint).

Strengths, Weaknesses, Opportunities, Threats (SWOT) Hormel Foods As aforementioned, Hormel Foods is a Fortune 500 company and is very well known. The company continues to grow, expanding product lines and acquiring new brands, while also maintaining their leading brands, such as Hormel Pepperoni. On the flip side, a major weakness for Hormel Foods is the current status of its pre-packaged lunch meats, Natural Choice (Cold Cut Brands). Competitors are selling more than Hormel Foods and the category is not as strong as pepperoni. With the growing young household income, it means consumers have more disposable income that they can spend on food. The median income for millennials is $69,000, which is more than ever (Elkins 1). Another change is the shift to a more health-conscious lifestyle for Americans. This pre-existing market for healthy alternatives and wellbeing awareness is growing. Many brands are already taking account for this, including Hormel Foods, however there is still room to grow more. In addition, the quick changing technology advancements are something to keep an eye on, especially regarding cell-grown meat. Tyson Foods is backing the movement, so it is could be something Hormel Foods should consider. Referencing, once again, the paradigm shift to a healthier lifestyle, more brands are coming up with and advertising their foods as “natural” and “organic.” With vague boundaries on what can and cannot be considered natural, lawsuits are hitting huge companies, including Hormel Food. Afterall, the packaged lunch meat is called “Natural Choice.” In the beginning of ​ ​ April the Superior Court of the District of Columbia dismissed a lawsuit from the Animal Legal Defense Fund (ALDF). This specific lawsuit alleged that Hormel Foods was misleading their customers for advertising “natural” claims (Shanker and Mulvany 1). This is definitely a potential threat, especially with no solid “natural” definition from the FDA. Another threat, 9 especially with selling in Shoprites, is the popularity of waiting at the deli for meat, instead of grabbing pre-packaged meat on the go.

MARKETING STRATEGY RECOMMENDATIONS SMART GOALS/OBJECTIVES The overarching goal of the proposed plan is to grow lunch meat sales for Hormel Foods and Wakefern. The lunch meat category is one that is in desperate need of innovation and creativity. We hope to achieve this by sparking interest in the deli aisle and change the usage of the ordinary lunch meat that has been in lunchboxes for decades. Hormel Foods’ Pepperoni and Turkey Pepperoni are two powerhouses that dominate the pepperoni segment of lunch meat. However, Natural Choice lunch meat sits in an oversaturated category and does not have any unique usage. To create a usage that combines these two products, we require the help of Hormel Foods’ Research and Development team. They will be able to do a more extensive study of the flavor preferences of our target market. Additionally, Wakefern can be of assistance in allowing us to implement our strategy in their stores. They will more than likely be willing to do so because they will assume that the plan will benefit them financially. They will have the prestige of knowing that our first rollout of the plan will be exclusive to Wakefern, Shoprite, and Fresh Grocer stores. Our goal of boosting the lunch meat category through innovation is attainable because Hormel Foods has not recently innovated within their lunch meat product lines. They created a new brand entirely with Natural Choice, but have not gone any further. The substantial revenue that Hormel Pepperoni products creates can be put toward the innovation and subsequent promotions. It is the right time for this type of plan because it will largely increase brand awareness for Natural Choice. It is difficult to put a particular time restraint on this type of plan because it involves ongoing trends that are here to stay. However, it is still important to start innovating as soon as possible and maintain a goal of starting promotions for the innovations within the next year.

SEGMENTING THE MARKET Hormel Foods uses many different segments when segmenting their market for their Hormel Pepperoni and natural Choice lunch meat. Hormel Foods uses IRi ShopperSights and Mosaic Thumbnails to segment their consumers and strategize on which to target. The data tells them products that individual households are likely to purchase, where they are likely to shop, and how much or their wallet they are likely to spend at a given store. The software also allows Hormel Foods to see categories’ income, home ownership, ethnicity, and age of children. Through this Hormel Foods can determine high opportunity households, understand how to reach them and better prioritize their activation process. It also allows for media planning and retailer execution at individual household and store levels (IRi Mosaic Segmentation PowerPoint). 10

Through IRi’s Mosaic Groups and Clusters, Hormel Foods has divided their Pepperoni and Natural Choice users into four different groups. Both brands share the Autumn Years and Significant Singles market segments. The Autumn Years segment makes of 6.0% of Hormel Food’s total demographic skews. The group is described as established, ethnically-diverse and mature couples living gratified lifestyles in older homes. Their average age is 66, they are home owners, married, a part of the lower middle class, have no kids, and live in a rural area. Significant Singles makes up 5.3% of Hormel Food’s total demographic skews. The group is described as middle-aged singles, with some couples earning mid-scale incomes, supporting an active city style of living. Their average age is 48, they are renters, and are single. They are of the lower class, their children are older teens and are situated in the City and/or surrounds the downtown metro. 9.5% of Significant Singles are Asian (IRi Mosaic Segmentation PowerPoint). Two categories specific to Natural Choice lunch meat are the Power Elite and Young City Solos. The Power Elite make up 5.4% of Hormel Foods total demographic skews. They are described as the wealthiest households in the U.S. and enjoying all that life has to offer. Their average age is 50, they are home owners, are married, affluent a part of the upper class, and live in the most exclusive neighborhoods; suburbs and towns or the downtown metro. Their children are in their teens and 9% of this population is Asian. Young City Solos are classified as younger middle-aged singles living active and energetic lifestyles in the metropolitan area and make up 3.2% of Hormel Foods demographic skews. Their average age is 37, they rent, are single, a part of the middle class, and their children are older teens. 9.7% of this segment is Asian (IRi Mosaic Segmentation PowerPoint). Two categories specific to Hormel Pepperoni are Cultural Connections and Aspirational Fusion. Cultural Connections makeup 5.6% of Hormel Foods demographic skews. This segment is diverse, mid-and low-income families in urban apartment and residences. Their average age is 43 years old, they rent, are single, and are a part of the lower class. They have younger teens and 61.3% of this population is Hispanic and 14.9% are African American. Aspirational Fusion makes up 3.1% of Hormel foods demographic skews. This division is described as multicultural, low -income singles and single parents living in urban locations and striving to make a better life. Their average age is 37, they rent, and have older kids. 37.9% of this population is African American and 15.5% is Hispanic (IRi Mosaic Segmentation PowerPoint).

TARGET MARKET SELECTION Our Target market will include the Power Elite, which is already part of Hormel Foods main contender for Natural Choice lunch meat, and Suburban Style. Some key aspects of these two that we find important is that they both earn upscape incomes and reside in suburban areas. This is key because Shoprites are largely located in these suburban areas. Both of these target markets are ethnically diverse as well. We want to showcase this aspect because of our fusion of flavor lineups. The Power Elite market is 9% Aian and the Suburban Style demographic is 35.9% African American. Both of these markets have a similar age range with the Power Elites 11 averaging at age 50 and Suburban Style at age 47. This target market is interested in keeping up with a healthy lifestyle, but also wants this lifestyle to be full of flavor. Both segments have teenage children, and will in turn make sure they are given a healthy lifestyle as well. Our goal is to entice our target market to not only purchase Natural Choice lunch meat, but to keep their healthy lifestyles interesting by adding exciting flavored Hormel Turkey Pepperoni to their lunch meat combinations. The markets we are targeting will react positively to this idea knowing that they can fulfill their health conscious choices with added flavor profiles. Their teens will also react positively because Hormel Pepperoni is seen as a young and fun product.

POSITIONING Positioning for lunch meat needs to be tactfully done in order to create a value proposition. Value propositions in highly saturated categories need to demonstrate a clear uniqueness and superiority. Natural Choice is currently positioned as a premium, natural lunch meat that is priced accordingly. Natural products are viewed as healthier than traditional products and align with current marketplace trends. We want the Hormel Turkey Pepperoni to be viewed in the same light, but at a non-premium cost. With the addition of the flavoring, it will appear higher end than the traditional, non-flavored variety. The Turkey Pepperoni is also an offering that contains 70% less fat than the Regular Pepperoni, making it factually healthier. These two products can easily go hand in hand to create a premium, healthy snack duo. We want to prove to consumers that lunch meat is not only for children's’ lunchboxes, it can be a zesty, bold snack for adults of all ages.

RETAIL EXECUTION PLAN/MARKETING MIX: PRODUCT We would like begin by proposing a new product line extension for Hormel Foods’ Pepperoni. This will be done by creating new, flavored pepperoni such as sriracha, teriyaki, and jerk. A product extension line like this will expand the possibilities for consumption as well as introduce a new market for lunch meat. Currently, the pepperoni market, specifically in ShopRite, is very one-dimensional. It has a couple different brands, and a small variety of consumption methods, sticks, minis, slices, etc.. However, for the most part it consists of the same relative “flavor” of pepperoni. With a growing number of bold and unique flavors in the lunch meat section, we noticed a gap in the market for “flavored” pepperoni (Fulbright). Our three suggested flavors are sriracha, teriyaki, and jerk. These choices are directly related to our chosen target market. Our target market consists of somewhat ethnically diverse households: 9% of Power Elite are Asian and 35.9% of Suburban Style are African American. These ethnicities relate to our Teriyaki and Jerk flavors, respectively. As the population as a whole becomes more diverse, more consumers are seeking and willing to try something a bit out of the ordinary- especially when it comes to their food (Prince). Data from Mintel indicates spicy-flavored products, such as sriracha and buffalo, grew by 54% in the past couple of years. 12

There has also been a growth in Asian cuisines and flavors. Spices blends, such as jerk, were listed as one of the 2018 emerging flavor trends (Prince). We do acknowledge that there is a growing trend in specificity, meaning flavors and ​ ​ spiced food products are become extremely specific and complex. Instead of “hot,” some consumers want “guajillo” or “poblano” or others particular spices (Kalsex). For our product extension, we will not be following this trend. This is because we want to produce flavors that are broad enough to capture a wide variety of consumers, yet specific enough for consumers to expect the relative flavor. By having somewhat familiar flavors, it eliminates part of the risk and allows both risk neutral and some risk averse consumers to be in the market. With new flavors comes new possibilities and new ways to use pepperoni. People think of pepperoni as only a topping for pizza, we want it to be a fun snack that compliments other products, specifically Natural Choice lunch meat.

PROMOTION Hormel pepperoni as well as their natural choice lunch meats face many competitors in the market today and our goal is to create marketing strategy recommendations with achievable and impactful goals. Hormel’s promotional strategy will be focused on getting new customers, retaining the existing customers, and getting customers to spend more and come back more frequently. Establishing awareness of our new products as well as old is of a paramount importance since such customer core will not only generate most of the sales but also will provide favorable referrals. Pepperoni has a variety of usages and flavors, but most people think of pepperoni as only a topping for pizza. That is not the case and we want it to become known as not only a pizza topping, but also a fun snack that compliments other products, such as Natural Choice lunch meat. Hormel Foods will communicate the ideas to the target market through a few different promotion strategies and tactics. Our promotion strategy will begin in the month of January and run through April. Our intentions are to grab the attention of consumers that are focused on starting new diets because of new year's resolutions interested in the Natural Choice lunch meat while tasting the new pepperoni flavors. Asides from this idea, the promotion will run through April, so consumers are able to become aware of the new pepperoni flavors and use them throughout the summer on homemade pizzas, party platters, as well as sandwiches and snacks throughout the day. The new flavors will be generated for both the original pepperoni and the turkey pepperoni, but there will only be cross promotion for the turkey pepperoni and the natural choice lunch meats. Our goal is draw in consumers who are somewhat health conscious leading them to purchase the new flavored turkey pepperoni and the natural choice lunch meats as well because they believe it is healthier. To promote the new flavors of the pepperoni we will emphasize the use of turkey pepperoni and the spice of flavor by saying having the packaging say, “70% less fat, 100% more flavor”. 13

To get the consumer aware of the new pepperoni flavors, as well as Natural Choice lunch meat, there will be banners in the aisle with both the images possible combinations of pepperoni, and the lunch meat making customers aware about the new flavors and reminding customers to buy the products together. There will be two signs, one next to the pepperoni that will say, “Did you grab your natural choice”? The other sign will be placed next to the natural choice lunch meat and will say, “Did you grab your flavored Hormel turkey pepperoni”. In order to make sure consumers are buying Natural Choice lunch meat and not another brand, there will be instant coupon stickers on the packaging of the lunch meat offering $1.00 off the natural choice lunch meat when both products are purchased. Our reasoning is because people are going to be buying Hormel Pepperoni as their pepperoni of choice, but with the coupon on Natural Choice, it creates incentive to buy Hormel Natural Choice over another brand of lunch meat. We have decided to do a bundle promotion month by month for the time of the promotion. As previously mentioned above for the month of January, we will be doing a cross promotion between both the Hormel flavored turkey pepperoni and the natural choice lunch meats. There will be a coupon on the pepperoni for a $1 off the natural choice lunch meat In the future once the flavored pepperoni sales start picking up with the Natural Choice and consumers become more are, we will begin to incorporate Wakefern’s private label. To incorporate the private label, we will have a featured flavor and usage for the next three months following January. These promotions will only be available through online popups and coupons in through the ShopRite online app which Wakefern will be responsible for. Using an app is relevant to our target market because since they are middle to upper income and suburban, they are probably work oriented and somewhat technologically savvy using online features. Some of the monthly flavored features will be done to market to occasions. If we can get people to think of this product for certain occasions it will hopefully translate to repeat purchases. For March we will feature the sriracha flavor pepperoni with nachos and offer an online coupon for $1.00 off Wholesome Pantry private label shredded cheese. The goal is to market to the March Madness tournament fans. For February we will feature the teriyaki pepperoni and offer an online coupon for Wholesome Pantry private label whole wheat bread. Lastly in April we will feature the jerk flavor pepperoni in a kabob with pineapple, pepper, and onion with the coupon for Wholesome Pantry private label chicken.

PRICING The new flavored product will be priced the same as the original pepperoni, $4.49. Research and development for the new flavored pepperoni will be paid for by Hormel Foods. Wakefern may be wary of the product’s success, so it is necessary to gather data to support our claim. The first promotion, meaning the cross-promotion solely between Hormel Flavored Pepperoni and Natural Choice lunch meat, will be paid for by Hormel Foods. This data will then be presented to Wakefern with the second promotion of pairing Wakefern’s private label with the Hormel products. 14

PLACEMENT Wakefern does a great job at advertising brands with their well-designed end-caps and display racks hanging from the shelving units. The ShopRite on Route 31 in Washington, NJ does a great job of using a refrigeration unit in an open area of the store. The unit itself is a reach in unit with a shelf on top allowing for products to be displayed on top that aren’t normal refrigerated products. Another reason that this an ideal spot for any product is that it can be accessed from every aisle in the store without having to exit to the back or front of the store. This amount of customer traffic makes this a great location for sales promotions. If you reference Appendix #1 and Appendix #2, Hormel pepperoni is placed on the shelving of this refrigeration unit as well as a small shelf next to it. Since this is an open area a display can be used to draw customers attention to the Hormel pepperoni. This product placement also works well for Hormel pepperoni due to its versatility, it can be used for pizza, party trays, meat trays, sandwich meat, etc. Many other stores depending on floor plans should follow this lead because it will allow customers to access Hormel pepperoni from any aisle which can be an advantage due to its versatility. A spot like this is also a great location for our promotion because its location next to the bread, cheeses, and frozen pizza. Being next to these products makes advertising a product that is complementary to these themes easier. In the ShopRite on Route 22 in Phillipsburg, NJ the Hormel Foods pepperoni was displayed on an endcap with a theme advertised towards making pizza. Outside of a single facing of the product by a few other pepperoni products in the deli section, the display was the only clear placement of Hormel pepperoni in the store. This pizza themed display also makes consumers think of pepperoni as a one-dimensional product that can only be used on pizza. This store also had a large display for the brand Bridgeford, the display mainly consisted of their pepperoni but also consisted of their salami, beef jerky, and dried . This is the type of display that Hormel Foods should aim to have because it was in the deli section of the store and near all the premium meats and cheeses. By having a display in this section Hormel Foods can easily advertise the flavored pepperoni as a complimentary premium product to the other meats and cheeses. Hormel pepperoni was not properly advertised near the premium meats and cheese in any of the stores visited, creating a concern because why would a consumer consider Hormel pepperoni and our flavored pepperoni a premium product if it isn’t represented that way in the store. As you can see in Appendix #3, one of the stores had two large rectangular refrigeration units filled with premium meats and cheeses. They had baskets of at the corner of each rectangular refrigeration unit with different pepperoni products, but none of them contained Hormel pepperoni. Natural Choice’s battle with the freshly sliced deli meats and their lack of SKUs is a constant battle affecting the growth of this brand. Prepackaged lunch meats are sometimes even segregated to are part of the store that does not see much customer traffic making advertisements in this area less effective. 15

Natural Choice lunch meat is not very well advertised in any of the 3 Shop Rite locations visited. Although the north east is known as mainly deli oriented, the lack of SKUs and advertising for Natural Choice is further hindering its ability to increase sales and compete with more popular brands like Oscar Mayer and Hillshire Farms. In many instances like in Appendix #4 and Appendix #5, you can see that the stores are allocating such a small space to the prepackaged lunch meats and Natural Choice never seems to have more than 2 or 3 facings on the shelf. In one location the prepackaged lunch meats where not located in the same vicinity as the deli. In order to compete with the freshly sliced deli lunch meats Natural Choice lunch meat should try and have a few SKUs moved to the front of the deli section. By placing the prepackaged lunch meats in small refrigeration displays within the deli section of the supermarket, in the direct line of sight of consumers we can create a comparable relationship between these products and fresh cut deli meats. This placement and relationship would allow consumers to more easily make the selection of a prepackaged lunch meat without feeling as though they sacrificed quality. Creating this convenience for the customers in a market that values convenience can help grow brand recognition as Natural Choice battles top lunch meat brands like Oscar Mayer and Hillshire Farms.

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APPENDIX Appendix #1

Appendix #2

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Appendix #3

Appendix #4

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Appendix #5

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