Sealed Air is in the protective packaging business. It is known for its Air Cap offering, which is different from all other bubble products because of its “barrier coating”. This saran coating provides better protection of shipped material and has been the central theme of Sealed Air’s sales for years. The primary problem they now face is a reduction in their market share due to the presence of competition in Europe and New York, who have begun selling a cheaper, uncoated bubble version of this product.
As the market leader in protective packaging, Air Cap had global sales of $34.3 million and enjoyed a 25% increase in sales and earnings each of the past ten years. GAFCEL and similar companies in Europe have taken significant market share by offering a lower quality, cheaper product. In order to protect their market share, Sealed Air can either introduce ...view middle of the document...
If customers respond positively to uncoated bubble products and Sealed Air waits too long, they may miss out on gaining market share.
Our recommendation for Sealed Air is to enter the uncoated bubble market in the European market, but forgo entering the American market for this product. Europe and America are essentially two different market segments with significantly different priorities in what they look for in protective packaging.
Since the European market is extremely price-sensitive, the uncoated product will likely be more effective in gaining market share than the higher quality, more expensive coated product. Sealed Air should utilize its already superior production and distribution network to achieve economies of scale and offer the uncoated product at a lower price than their competitors. Salespeople could continue to educate consumers on the benefits of the coated product to those customers that have a focus on higher quality goods.
Entering the uncoated bubble market could change Sealed Air’s entire corporate identity, which is why it should be forgone, or at least delayed, in the U.S. In order to continue to meet the higher quality needs of the American market and not diminish all of the work its sales force has done to promote the higher quality coated bubble product the brand has come to stand for, Sealed Air should continue to market to quality focused needs of its consumers. Beginning production of an uncoated product in its largest market would require a total adjustment of its sales strategy, which would be extremely costly and a large risk. Additionally, shifting Sealed Air’s production and distribution to the uncoated bubble product shifts the production and distribution to a lower margin product, while the market for the coated product continues to grow in the American market.
After a period of 12 to 18 months, this marketing strategy should be revisited. Assuming the introduction of the uncoated bubble product was successful in the European market, there would then be potential to utilize some of these strategies in the American market if competitors continue to gain market share.