Thomas Steeves, manager of the Marketing Research and Analysis Department of the Martin Packaging Company, Inc., faced the task of evaluating the marketing and sales strategy implications of the new “plasti-shield” bottle being tested by the soft drink industry. The plasti-shield bottle was a new soft drink bottle that had a plastic coating around the lower half of the bottle.’
Martin Packaging Company was founded in 1852. The company originally produced only paper products; however, in the last thirty years, Martin purchased a majority stock interest in twenty-four companies and a minority interest in several others. As a result, Martin had a diversified product line. One of the twenty-four companies which Martin controlled was the Dixon Paper Company, a family-held firm.
Dixon was established in 1936 and produced corrugated boxes, folding boxes, dry-cleaning bags, and other types of plastic bags. During World War II, under a government contract, Dixon developed “V-Board” packaging, which consisted of solid fiberboard. V-Board was water-resistant and highly durable packaging that could withstand even the hardest handling abuse. Therefore, when Dixon developed the V-Board Coca-Cola carton, Dixon Paper Company grew so rapidly that it became the leader in paperboard packaging. Martin Packaging Company also was involved with paperboard packaging; however, this part of its packaging line was not profitable. Consequently, when Martin was looking for further vertical integration through a merger, it was evident that Dixon Paper Company offered substantial promise, and Martin began to acquire Dixon stock. After the merger, Martin developed new packaging methods for the soft drink and beer industries. Martin also advanced into automated systems packaging. Net sales were approximately $1.1 billion.
Martin was organized into two divisions for producing and marketing paper and related products. The Martin Container Division produced folding boxes for frozen foods, dry goods, and hardware. It also made plastic Cluster-Packs for margarine and other dairy products. The Martin Packaging Division manufactured secondary packaging for soft drinks, beer, and wine.
The Packaging Division, for which Sleeves’ research and analysis was conducted, had a direct sales force of forty people. Martin management felt that the secondary packaging industry was changing from one in which the sales force simply took orders to one in which they had to provide “technical assistance” to the customer, as this was critical to success in the packaging industry. Martin’s sales force needed an excellent working knowledge of the packaging industry, plus considerable knowledge of each customer’s business.
The forty-person sales force was divided along both geographic and product lines. Martin believed it should deliver a total packaging system to its customers, and that to do this, ten salespeople made calls only on soft drink bottlers in major cities to explain the Martin automatic packaging system. The remaining thirty salespersons were assigned geographic areas within the Southeast. These salespeople handled all breweries as well as soft drink bottlers in their areas.
Sales personnel were compensated by salary, with no bonus system in effect, except “across-the-board” bonuses, the size of which was determined by overall company performance.
On the whole, Martin management was pleased with the performance of the sales force and it was regarded as a vital factor in the company’s success. However, recently a question had been raised concerning the information-feedback function of the salespeople. Instances were cited in which communications had been either nonexistent or had broken down somewhere between the sales personnel and the management.
The Packaging Division was continually being evaluated because secondary packaging, especially for the soft drink industry, was highly competitive. The industry leaders that provided major competition were International Paper Company, Olin-Mathieson, and Federal Paperboard. Secondary packaging in the soft drink industry consisted of packaging, such as soft drink cartons and wrap-around plastic cartons, which Martin produced. This was in contrast to soft drink primary packaging, which referred to the bottles or cans that contained the soft drink.
Soft drink bottlers traditionally operated small-scale bottling plants in almost every U.S. city of any size. For years they made use of only returnable bottles. Martin was among the leading producers, in sales volume and profit, of the traditional cardboard carton for returnable bottles.
With the innovation of the canned soft drink, the investment capital necessary to bottle (can) soft drinks increased substantially. Bottlers began consolidating into large-scale operations to gain economies of scale. As the primary packaging changed, the secondary packaging changed also. The revolutionary “wraparound” carton was developed. However, Martin did not adopt this new method for several months after its introduction by a competitor, and thus lost its position as the leader in the secondary packaging of soft drinks.
When the nonreturnable bottle was introduced in the soft drink industry, Martin welcomed this innovation. The canned soft drink had reduced the requirements of secondary packaging, because the cans themselves performed much of the advertising, promotion, and protection functions. The nonreturn-able bottle called for secondary packaging for promotion as well as for product protection and convenience in handling. Martin was among the leaders in developing cartons for the nonreturnable bottles. As sales of nonreturnable bottles grew, Martin again became the industry leader in secondary packaging in the soft drink industry.
But later, as sales of nonreturnable bottles began to slump, Martin speculated that people were becoming less willing to spend the extra money for nonreturnable bottles. To combat this slump, soft drink bottlers began to work on a new type of bottle that would have a plastic coating around the lower 50 percent of the bottle. This was called the “plasti-shield” bottle. As the industry began research on additional primary packaging, Martin began research on additional secondary packaging.
The plasti-shield bottle was born from interdivision rivalry at Owens- Illinois. Owens-Illinois invested over $40,000,000 in the project. The method of production used could produce up to 580 bottles per minute, with a future anticipated speed of 700 bottles per minute. Based on a forecasted market demand, Owens-Illinois planned to establish between eight and ten production facilities in Boston, New York, Chicago, Los Angeles, and St. Louis for the manufacture of 10- to 16-ounce sizes of primary glass containers.
The plasti-shield bottle weighed 3.5 ounces less than the lightest nonre-turnable bottle of any capacity. The plasti-shield rolls of polystyrene were decorated by printing with up to four colors, but factory production was limited by the number of bottles that could be plastic-wrapped in an “off-line” operation. Initially, machine lines applied the plasti-shield jackets at a rate of only 200 bottles per minute (B.P.M).
Plasti-shield bottles were available in colors of flint, green, and amber glass and were produced in five sizes: 10, 12, 16, 28, and 32 ounces. The plasti-shield container would have three convenience closures: the wide mouth, the aluminum ring-pull, and the narrow neck.
Owens-Illinois had begun work on plasti-shield several years ago, to combat the efficiencies of the 12-ounce can, with essential emphasis on a secondary packaging system to be developed that would handle at least 1,500 B.P.M. and having a packaging materials cost of less than $200 per thousand.
The current secondary packaging of the wide-mouth plasti-shield bottle used the “top-hold” principle in which paperboard cartons were used. Olin-Mathieson, Martin’s leading competitor, had arranged for a 60-day delivery on a lease-only basis of a machine designed to run at about 250 B.P.M. This machine was being used in the test setup at Owens-Illihois. The Olin-Mathieson “top-hold” carton was priced at $19 per thousand for 2 by 4 blanks and $16 per thousand for 2 by 3 blanks.
Owens-Illinois expected the plasti-shield bottles, plus the secondary packaging “top-hold” principle, to develop into a major part of the soft drink container market. Owens-Illinois was going after the can market by offering highspeed filling lines and lower packaging costs. Olin-Mathieson had the competitive advantage in secondary packaging with its new system, and Owens-Illinois’ market success with plasti-shield could bring Olin-Mathieson into some of Martin’s volume accounts.
Steeves believed that it would be necessary to react fairly soon to the plasti-shield bottle and to the competitive threat posed by Olin-Mathieson. He also believed that any delay would seriously threaten Martin Packaging Company’s position as industry leader. He believed that development of a sales and marketing strategy was essential to success with the plasti-shield bottle.
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.