SP Jain School of Global Management

GROUP 6

SEALED AIR CORPORATION

Anubhav |Apratim | Jatin | Meenal | Saumya

Sealed Air Corporation has been a market leader in protective packaging material for last ten years. The company has barrier coated bubble material known as AirCap that differentiates it from other competitors. The company has 8 different products with different layers and different bubble size depending on the load requirement. The company has presence in England, France and Germany. Lets discuss the corporate culture of company. CORPORATE CULTURE Sealed Air Corporation has a corporate history which has been characterized by technical accomplishment and market leadership. In the last 10 years alone, the company has been leading innovation by being the first to introduce the foam-in-place packaging systems and also pioneering the first complete solar heating system for swimming pools. The company has chosen a strategy of differentiation from its competitors and has not been afraid to take the path less trodden amongst its competitors. In essence, the company aims to use its expertise in technology by differentiating itself from its competitors because it is the only long term guarantee of market leadership. Further, the company has a strong set of core values which it has consistently been following through with. The president and CEO of the company has come out with a statement saying that the company intends to follow the same management guidelines it has been through the 1970s in the 1980s as well. Sealed Air Corporation has achieved its success with a strong focus on customer orientation. In 1970, most materials used for protective packaging were produced primarily for other purposes. Sealed Air Corporation was one of the first companies to approach the market with a strong customer orientation which means that it began product development only after analyzing and understanding the exact needs of its customers. There was a strong focus on people within the organization. This fact was validated by the fact that both distributors and end users regarded Sealed Airs salespeople as amongst the best trained and most knowledgeable in the packaging industry. The company placed an extra emphasis on training and retaining its staff. Sales force salaries were above average and were composed of a base salary plus commissions. The companys sales force was also known for its consultative approach towards selling

products. On an average, salespeople spent about half their time making cost studies at user end locations. The emphasis was on displaying to the consumers how the savings could be made in terms of material and labor and in terms of reduction of damage. In a week, a salesperson called upon 20 end users and checked in with two or three distributors. Also, Sealed Air had a focus on a very selective selection process as far as its distributors were concerned. Once selected however, it stressed on keeping excellent relations with the distributors which resulted in a high level of loyalty displayed by the distributors even though they kept competitors products. UNCOATED BUBBLE Although the company has enjoyed leadership position but now its facing competition from uncoated products and is thinking of launching the uncoated bubble product.
FOR INTRODUCING AN UNCOATED BUBBLE:

1) After observing the data in the case study, it can be inferred that in some cases a customers needs would be met very well by the uncoated bubble. For lighter loads, the uncoated bubble is comparable to three 120 lines of coated bubbles. When customer understand the close similarity between the two products they are very likely to defect. By introducing uncoated bubbles, Sealed Air will be able to retain these customers. These consumers are both price sensitive and have light loads or short shipping cycles. This argument can be reinforced by trends in Europe. Furthermore, GAFCELs ability to win sales of a huge magnitude to the tune of $1 Million/year with minimal sales force is an indication that the uncoated bubble will remain a strong competitor.
Unit Sales in KSq. Ft Jan-June 1980 A-100 SB-110 SC-120 SC-240 ST-120 ST-240 SD-120 17,802 48,513 81,014 4,426 42,234 3,914 43,624 366.72 1,467.52 3,524.10 249.18 2,170.80 255.78 2,850.80 $K Sales $K Sales %age share 2.91% 11.63% 27.93% 1.97% 17.20% 2.03% 22.59% 121.41 690.82 1,858.46 105.47 876.36 106.58 1,266.84 $K Contribution $K Contribution %age share 2.07% 11.78% 31.68% 1.80% 14.94% 1.82% 21.60%

SD-240 SD-480 Total

21,799 1,358

1,713.40 19.13 12,617.43

13.58% 0.15%

744.43 95.18 5,865.55

12.69% 1.62%

2) As per the calculations shown in the table above the SC-120, ST-120 and SD-120 are the most important products for the company and they will get affected by the competition from uncoated cheaper packaging material. The company cannot risk the main products whose contribution to overall sales is more than70% and this introducing a new product makes sense. 3) No R&D investment is required while introducing uncoated bubbles into the market. However, Sealed Air would have a higher variable cost component when compared to GAFCEL because it is positioned as a high-end player. 4) It is critical that Sealed Air introduces uncoated bubbles to maintain the excellent relationship it has with its distributors otherwise distributors may end up stocking the products of competitors and at the worst, Sealed Air may also end up losing their distributor network to the competitors or may find themselves locked out of some key channels for its products that it had one time owned.
AGAINST INTRODUCING AN UNCOATED BUBBLE:

1) The most vital argument against introducing an uncoated bubble offering would be possibility of cannibalizing its high margin coated bubbles. The new product might eat the share of coated bubble products and this will affect the overall profitability of the company as coated products have higher margin than the uncoated product.
Uncoated 3/16" (Page 7) Selling Price to Distributor Variable Manufacturing Price Freight Total Variable Cost Contribution %Contribution %Decrease in contribution from coated to uncoated (Cannibalization Cost) 31.63 19 2.64 21.64 9.99 31.6% Coated 3/16" (Table D) 43.5 17.92 2.64 20.56 22.94 52.7% Uncoated 1/2" (Page 7) 36.03 21 7.93 28.93 7.1 19.7% Coated 1/2" (Table D) 65.35 28.38 7.93 36.31 29.04 44.4%

-56.5%

-75.6%

2) Also, launching uncoated bubbles could lose the company as much as 68% of the profit margin. As shown in the table above the margin for uncoated products is 56.5% less than the coated product for 3/16 category and 75.6 less for category.

3) Some distributors are complaining about having too many products. If distributors decide to cut back on the number of products coated bubbles could be reduced. 4) Launching an uncoated bubble product will be against the long-standing tradition of innovation of the organization. 5) Naming of the new product will be a problem if they go for new brand name, then they have to invest in building awareness around it and if they keep their existing brand name then their brand might be diluted. 6) There might be challenges in motivating a top-quality sales force to sell a lesser quality and lesser margin product which could mean a reduction in their incentives.
THE PROBLEMS THAT NEED TO BE OVERCOME FOR LAUNCHING THE UNCOATED BUBBLE ARE

1. Promotion: Previously the sales force was promoting against the uncoated bubble protection by talking about the advantages of the coated bubble protection. Now the same sales force cannot start selling uncoated bubble products, as this will confuse and irritate the channel and customer. However this problem can be solved by positioning the product not against the existing uncoated players but against the paper based and foam protection. 2. Another problem is that product might be perceived as me too products with so many similar products in the market. This issue can be sorted by making the product different from current products in the market. This can be done by using different colours or may be different packaging and different size of the bubbles. The quality should be better than existing uncoated products in the market but shouldnt compete with coated air bubbles. 3. The distributors have already too many products and they are not willing to carry too many options. This can be handled by reducing the number of coated bubble products which might get substituted by the new product. 4. Cannibalization: The major problem that we have to overcome while launching the new product is cannibalization. It can be taken care by positioning the product for the paper, cardboard and foam users and not against the existing uncoated bubble packaging users.

MARKETING PLAN Sealed Air Corps objective is to be the market leader in the growing market. To achieve this, they must pursue the flanking strategy and come up with a new product that would safeguard their core product i.e. AirCap and also bring sales for Sealed Corp making them the market leader. The 4P marketing plan for the new product is given below:
PRODUCT

By using a flanking strategy and come up with product a level below their existing product, i.e. an uncoated product. It should be positioned in a way that there is clear distinction in the uses of coated and uncoated bubbles in the eyes of consumers. It should be positioned for the users of paper, cardboard, foam, etc packaging and not for the current users of uncoated packaging. This way, it will be able to differentiate in the market. Uncoated bubble packaging should differ in quality, color and design. It is important to leverage the brand name of Sealed Air and the new brand should have association with the Sealed Air. They should name it UCwrap by Sealed Air. This way AirCap can maintain its superior image. Sealed Air may eliminate lighter product A-100 as it will be replaced by uncoated bubbles. This will also appease distributors as they are not happy with lot of grades in coated bubbles market.
PLACE

UCwrap should be placed with retailers and distributors, with a large-scale market introduction, wide scale distribution, and increased levels of service. It should be simultaneously introduced both in Europe and US. The channels partners should be given higher margins so as to motivate them to recommend this product rather than the competitors. Also the incentives for sales team should be increased so that they stay motivation.
PRICE

The uncoated bubble wrap packaging by Sealed Air Corp called UCwrap, should be introduced at significantly lower prices than its traditional product line i.e. AirCap. The lower prices will make it feasible for customers who had previously used cardboard, paper, pieces of foam, etc to consider using bubble wrap packaging. This will significantly expand the Sealed Airs market. The prices of the different products in the market are given below:

Thickness/ Height 3/16 4/16 6/16 1/2

PaperBased $27.70 $50.60 $65.00

Foams $52.00 $109.72 --

Astro uncoated $47.00 $54.50 $65.75

GAFCEL uncoated $42.84 -$57.07

AirCap Coated $67.56 $78.42 $94.32

The proposed prices of UCwrap are given below:

Thickness/ Height 3/16 4/16 6/16 UCwrap $39.53 $41.10 $55.35

Also, volume discounts to be offered for the bulk orders.

PROMOTION

1.

Additional sales force: For promoting UCwrap, the same consultative method as used presently for selling AirCap should be used by the salespeople. As their sales force is burdened with selling Instapak systems, AirCap cushioning and other Sealed Air products, so some additional salespeople should be hired by Sealed Air Corp so that they are able to promote USwrap. We suggest that 10% more sales people should be hired to the existing sales force of 62, which would make it 68.

2.

Sales force training: Training should be arranged for the sales force as USwrap also targets the consumers who use paper, cardboard, etc. It is necessary as they need the knowledge of the new type of customers of paper, cardboard, etc to incorporate it into their consultative sales pitch. Also, they need to educate the users that this product cannot be used for heavy loads.

3.

Advertising: Advertising should target consumer who use paper-products, cardboards, foams, etc. It should leverage the companys highly trained sales personnel, relative benefits and long-term cost savings afforded by superior bubble product should be stressed. Additional promotional efforts should include direct mailings to potential clients in the US and Europe. Importantly, all promotional efforts must target packaging.