PricewaterhouseCoopersCASEDISCUSSIONBUSINESSCASEInterviewCaseStudy#1RoaneHickey,Inc.YouhavebeenrecentlyhiredintotheStrategicChange(SC)group,abusinessunitofPricwaterhouseCoopers.SCisthestrategythoughtleaderinPwC.TheengagementpartnerinConsumerProductshascometoSCtohelpdevelopastrategyforRoaneHickey,Inc.(RH).ThisengagementhasthepotentialofpositioningPwCtoRHanditsparentconglomerateforthenextfive,possibletenyears.CompanyBackgroundRHisawholly-ownedsubsidiaryofamulti-nationalconglomerate.TheconglomerateownstencompaniesoperatingintheU.S.RHisthelargestoftheten.RHisaconsumergoodscompanydistributingwell-knownbrandedproductsthroughgrocery,drug,massmerchantandclubchannels.With$4billioninrevenuesintheU.S.,RHisoneofthetopthreeplayersintheconsumergoodsindustry.Thecompanyhasbeenmarginallyprofitableoverthepasttenyears.Lastyearthecompanymadeaprofitduelargelytoanaccountingchange.AlthoughRHonlyoperatesintheU.S.,itownsseveralmanufacturinganddistributionfacilitiesaroundtheworldtosupportitsproductionanddistributionsystems.RHtakesadvantageoflowerlaborcostsinMexico,CanadaandSoutheastAsiatoloweritsmanufacturingcosts.RHstillmaintainsthreeplantsintheU.S.Becauseoftheover-capacitythatRHhasexperienced,RHhasnegotiateddealswithsistercompaniesoverseastomanufactureanddirect-shipproduct.RHhasfourmarketsegmentsthatoperateasprofitcenters.Themarketsegmentsare:PersonalHygiene,ConsumerTissue,SoapsandDetergentsandPersonalCare.Eventhoughtherevenuesareroughlyevenlydividedamongallfourmarketsegments,PersonalCarecontributes90%ofthecompany'sprofits.InPersonalCare,RHownsthetwotopbrandedproducts,intheothercategoriesthecompanyhasthenumbertwobrand,andinonesegment,numberthree.RHhascommittedtobuildingaconsumerfranchisethroughaggressiveadvertisingandin-storemerchandisingsupport.1IndustryTrendsIntheU.S.,brandsareunderattackfromprivatelabels,whoarenowcompetingonbothpriceandquality.Brandsarelookingtojustifytheirpricepremiums.Thevalueofbeingthenumberonebrandcannotbetakenlightly.Thereturnonsalesofthetopbrandisalmosttwicethatofthenumbertwobrand.Thereturnonsalesforthenumbertwobrandistwicethatofthenumberthreebrand.ThepoweroftheretailindustryintheU.S.hasincreaseddramaticallyoverthepastfiveyears.Theretailersaredrivingadditionalcostsuponmanufacturers.Withestablishedproducts,retailersaredemandingaminimallevelofturnsperyear.Withnewproducts,retailersaredemandingslottingfeesandever-increasingpromotionalsupport.Productmanagersareforcedtoachievecurrentproductrevenueandmarketsharegoalswhilestimulatingdemandfornewproducts.ManyindustryexpertsfeelthattherewillbeconsolidationofbrandswithinmanyofthemarketsegmentsinwhichRHcompetesand,asaresultofthisbrandconsolidation,thatRHwilllosecriticalsalesmassandbecomeamajorcasualty.Inthelasttwoyearstheallocationofmarketingdollarshaschangeddramatically;tradepromotionhasrisento40%oftotalmarketingspending,consumerpromotionhasclimbedslightlyandadvertisinghasdeclined.IndustryanalystshavepointedtoRH'stradepromotionstrategyasbeingthecatalystforthegrowthintradepromotionintheindustryascompetitorshavebeenforcedtorespond.RHiswidelyregardedasaretail-orientedcompany.Withasalesforcethatistwicethesizeofanyoneelse'sintheindustry,RHhasforgedgreatretailrelationshipsovertheyears.RHtraditionallyhadthebestorderfillrateinthebusiness;however,recentlysomeoftheeffortstoreduceinventoryhascausedshortagesinkeypromotedproducts.RHOrganizat...