Sealed Air CorporationCase Analysis

BBM, NMP Term III

Group 4Argha Ray - 15 Chakra Dhar Kundu - 22 Khushal Malik - 28 Sanjay Kumar Prasad – 45

Context• Sealed Air is an Market Leader in Highly sophisticated packaging products

• An ardent advocate of Coated Bubble Technology

• Competes in following Product segments Positioning, Blocking and Bracing Flexible Wraps Void Fills

• Offers following products Instapak (Positioning, Blocking and Bracing) Aircap (Flexible Wraps, Void Fills)

• Facing Increasing competition from Uncoated Bubble Manufacturers• US Market share for Aircap (17.9% for above Target Market)

ConcernsIn face of new Competition the following questions are staring at Sealed Air’s Aircap Division

• Stick to old philosophy• Launch Uncoated Bubbles• Slash price across product lines to counter imitators• Engage further in Market Education• Sales force distribution

Product Manager Hauser is flipping through training manual about “How to Sell against uncoated Bubbles”

• Aircap sales almost moves with US Bubbles Market.• Foams turning out to be biggest competitors rather than Uncoated Bubbles• Graphs plotted considering Flexible Wraps Market ignoring Void Fills which in any case is a very

small market compared to the aforementioned (126 Vs 15.6 Million)

Market Analysis

1975 1978 19800

20

40

60

80

100

120

140

12.818.4

25.3

71

93

126

1522

3115

22

444149 51

Aircap US Sales

Flexible Wraps Market

Bubbles withing Flexible Wrap Market

Foams withing Flexible Wrap Market

Papers withing Flexible Wrap Market

1975 1978 19800

5

10

15

20

25

30

35

Aircap US Sales

Bubbles withing Flexible Wrap Market

Portfolio Analysis

• 3 products can be ejected or margins slashed

• New products with shorter bubbles and thicker films can be launched

• All foam segments do not have rival Aircap products (Foam thickness considered for plot)

Profitability Contribution by Product Line Jan-Jun 1980

Product Sales in 1000 Sq Feet Contribution Margin $ Profit Margin $ Percentage Contribution TrendA-100 17802000 6.82 121409640 2.07 GrowthSB-110 48513000 14.24 690825120 11.78 DeclineSC-120 81014000 22.94 1858461160 31.68 Growth

SC-240 4426000 23.83 105471580 1.80 DeclineST-120 42234000 20.75 876355500 14.94 GrowthST-240 3914000 27.23 106578220 1.82 DeclineSD-120 43624000 29.04 1266840960 21.60 DeclineSD-240 21799000 34.15 744435850 12.69 Decline

SD-480 1358000 70.09 95182220 1.62 Decline

Total 264684000 5865560250 SD-120 0.5 Taller SD-240 SD-480 Foam 3/8 ST-120 0.3125 ST-240 Foam 3/16 SC-120 0.1875 SC-240

100 120 240 480

Foam 1/8 Thicker

SB-110 0.125 Foam 3/32 A-100 0.09375 Foam 1/16 0.0625

Price Analysis

• Table plotted against thickness and shows uncanny relationship• Sintinel seems to be a clear winner with Foam products due to price as Exhibit 6

suggests Polyethylene ascendancy• GAFCEL’s fastest growing product LO-22 wins on basis of price and even SO-22 has

lowest price in 3/16 inch product category• Aircap’s growth products have comparable price with competition and its products

loses its way when their prices are marginally higher in the product category• According to Cushioning Curves Aircap loses out to GAFCEL on price for pressures

less than .15 (LO-22 Vs ST-120,SD-120) but has lower priced products for pressures more than .25 (LO-22 Vs A-100,SB-110)

• Packagers seems to be evaluating products on thickness and price.

Price Analysis with Competition for 50000 Sq Ft order based on product thickness (40000 Sq Ft for GAFCEL)Thickness Jiffy Sentinel Du Pont Astro Coated Astro Uncoated GAFCEL Aircap Aircap Product Aircap Product Trend1/16 20.3 18.2 17.2 3/32 25.9 24 25.17 24.75 A-100 Growth1/8 34.15 32.7 34.9 35.25 49.5 37.05 SB-110 Decline3/16 53.35 49.4 53.86 42.84 52.6 SC-120 Growth3/8 109.72 1/2 71.75 65.75 57.07 79.35 SD-120 Decline

Price Analysis with GAFCEL for 40000-50000 Sq-Ft order sizeGAFCEL Aircap Aircap Aircap AircapLO-22 ST-120 SD-120 SB-110 A-100

57.07 62.75 79.35 37.05 24.75

Additional Considerations

• Instapak is growing leaps and bounds and sales force is decisively skewed in its favour

• Dealers allowed to carry competitor’s products even in selective distribution

• Can launch comparative Coated products against Uncoated Bubbles if Sealed Air applies lowest profit margin of A-100

• Above Table shows price advantage without any heavy investment

• Astro Licenses Aircap’s patents and also not able to compete on price

• Consolidate on US Market due to wobbly conditions of Aircap products in European markets

Product Manufacturing $ Freight $ TVC $Applying Profit Margin as A-100 $ Sale Price for Truckload $

Sale Price of GAFCEL $

3/16 19 2.64 21.64 6.82 28.46 31.635/16 20 5.29 25.29 6.82 32.11 1/2 21 7.93 28.93 6.82 35.75 36.03

Decision• Stick to Coated Bubbles and not dilute Brand

• Allocate more sales force for Aircap

• Counter Foam Product Category by either Aircap or new foam products (Jiffy, Sentinel, Du Pont)

• Rationalize Contribution Margins as done in A-100

• Capture Market Share rather than be a niche player as done in A-100

• Get Distributors to fall in line ( Decide to downsize [370-135= 235] Non First Line Distributors)