Sealed Air Corporation

Case Analysis













MK810 Adrianne Wenisch
Teopaco Christopher Buckwell
June 21, 2010 Matthew Whiten
1

Position

Sealed Air should move forward with the introduction with an uncoated bubble product. (1)
Coated bubble market share has been declining over the past ten years. Sealed Airs AirCap
product initially dominated with their strong patent protection though recent new players in
the industry have proven that they cannot ignore the growth of uncoated bubbles. (2) Sealed
Air has a strong Brand Image in the industry that will enable them to be strong player in this
market proof strong AirCap sales and good relationships with distributors. (3) Gain market
share prevent new companies from gaining market share in the US with cost conscious buyers
proof -

Arguments

1. Low market entry barriers (US and Europe).
Sealed Air is regionally well established to market an uncoated product in the United States
and in Europe. Given Sealed Airs selective distribution policy, Sealed Air can take
advantage of distributor loyalty. Sealed Air should utilize their strong standing relationships
and have them adopt Sealed Airs uncoated bubble over the competition; this will
streamline the distributors product offering while maintaining their current portfolio.
Unlike GAFCEL, Sealed Air is also well distributed throughout the United States and
therefore maintains a superior operational advantage for product expansion. There is a
greater share of uncoated product in Europe than in the United States. Sealed Air has a
particular advantage in England where they were the first to develop the protective packing
market and they have a solid distribution. Ownership of the uncoated bubble manufacturer,
SIBCO, in France, also provides Sealed Air with an inside perspective of the uncoated market
in this country. Finally, although Sealed Air was a late entrant in Germany they do have
presence for the uncoated demand.

2

Sealed Air is also well established to produce an uncoated bubble given their available
manufacturing equipment and similar production process to the existing Solar Pool
Blankets. The minimal expenditure required for Sealed Air to introduce an uncoated
bubble minimizes time to market and overhead expenses as compared to GAFCELs
relatively new product introduction.

Finally, the Sealed Air brand name is recognized throughout the world as the leader in the
packing market. Introduction of an uncoated bubble will simply expand on an already strong
presence and the product will be quickly adopted due to customers brand recognition.


2. Protect Market & Grow Market Share
Launching an uncoated bubble product to market will help Sealed Air protect its market
share and provide growth opportunities. Over the past nine years Sealed Air has built 82%
market share in a $31M market for coated and uncoated bubble products. Recently, new
entrants, specifically GAFCEL are threatening Sealed Air via the introduction of uncoated
bubble products, which although functionally inferior to coated bubbles, are generally 5-
25% less expensive. Having an uncoated product will protect Sealed Air from losing any
customers who opt to downgrade from coated to uncoated. Market trend from coated to
uncoated bubble is not unprecedented. In England, where Sealed Air once has 90% market
share based on the coated bubble, company officials anticipate losing 50% market share to
uncoated bubbles over three years.

3

For many customers, price has always been the primary factor in the buying decision.
Evidence of this is the $91M market for cellulose (paper-based) and polyethylene (foam)
products which are an alternative to protective packaging in the flexwrap segment. Sealed
Air will now be able to compete directly against these alternative products with the
introduction of the uncoated bubble. Offering both uncoated and coated bubble products
will transform Sealed Air into a more complete solutions provider and compliment their
philosophy as a market leader.

3. Company Performance Consistency
With its new uncoated product offering, Sealed Airs remains committed to its long-term
strategy of remaining a market leader. This market leadership is sustained by improving
upon quality deficiencies currently present in the uncoated market. With the addition of a
competitive, quality uncoated bubble solution, Sealed Air can further strengthen its market
approach to customer orientation. Equipped with an expanded product mix, Sealed Air once
again proves its commitment to being a market driven organization by being the first
company to offer both uncoated and coated solutions for the flexwrap market.




Action


Product Mix
With its product expansion into the flexwrap uncoated bubble market, Sealed Air must
continue to anticipate and monitor market trends. Understanding how customers use flexwrap,
4

what alternatives or substitutes are readily available and what motivates purchasing behaviors
will allow Sealed Air to offer a relevant and targeted product mix. In parallel to producing its
uncoated bubble, Sealed Air should implement the following changes to its product suite:
a. Eliminate its lightest AirCap product lines, specifically A-100 and SB-110 as they will likely be
cannibalized by the new uncoated product. (United States, England, France and Germany)
b. Improve uncoated bubble quality in SIBCO uncoated bubble. In 1980, SIBCO, a
subsidiary of Sealed Air, achieved 16.7% of the French bubble market. With product
enhancement similar to that of Sealed Airs uncoated offering, SIBCO will be in a better
position to compete against recent market entrants and gain market share. As to not
create a brand that might cannibalize or confuse the uncoated market in France, Sealed
Air will not launch its uncoated product in France. (France)

Brand
In the United States and select parts of Europe, the Sealed Air name carries with it significant
brand equity established with its market leadership in both its technical innovations and its
customer orientation. As a result, Sealed Air should leverage its brand with the launch of a new
uncoated bubble product called Bubble LT by Sealed Air. The familiarity with the Sealed Air
brand will help distributors facilitate an easier introduction of a new product in a market when
confusion among products already exists. To differentiate Bubble LT amongst its competitors,
product branding should extend beyond the product name. The product itself needs to convey
its superior performance features. Sealed Air should consider manufacturing Bubble LT in
various colors and offer distinct packaging.

Price
Sealed Airs uncoated bubble product pricing strategy strives to accomplish the following:

5

Compete in a land grab for uncoated bubble market share through aggressive pricing.
Purchasers of uncoated bubbles are extremely price-sensitive and are willing to sacrifice
performance for a lower-priced product. Sealed Air will continue to offer a coated
bubble for customers who value performance over price.
Enable Sealed Air to compete on price, against paper-based and foam products. Sealed
Airs coated bubble products have traditionally been more expensive than these
alternatives. The uncoated bubble will enable Sealed Air to tap the balance of the
$126M flexwrap market.
Maintain attractive margins to Sealed Air and distributors. Sealed Air must ensure its
margins on uncoated bubbles are not significantly different from their coated bubble
products should the balance of market share shift from coated to uncoated.
Additionally, distributors margins will be an important consideration in the pricing
strategy.
Allow flexibility for Sealed Air to offer discounts in key strategic geographies (if
warranted). For example, Sealed Air may opt to offer discounts in the New York market
where GAFCEL is beginning to establish operations.

The following schedule articulates Sealed Airs costs and pricing strategy for and 3/16 inch
uncoated bubbles:

6



The following observations can be made from this pricing strategy.
The $36 and $32 distributor truckload price is identical to GAFCEL. Sealed Air anticipated
is brand recognition and distributor relationship to result in a competitive advantage.
The 72% and 66% distributor margins are on par with existing Sealed Air coated bubble
product margins.
Distributors margins are similar, and in some cases slightly higher (depending on order
size / square foot) than that of existing Sealed Air coated bubble products.
Sealed Air will be price competitive with paper-based and foam products for higher
order size / sf.

Incentive Structure
a. Increase incentives for distributors to immediately thwart GAFCELs uncoated expansion
into Ohio and California. Offer incentives for converting a GAFCEL customer to SA.
b. Direct Sales force should be incentive structure should be more aligned with selling
higher margin AirCap although they should be knowledgeable to cross sell during
consultative approach focusing on Packaging Engineers.
Sales force time allocation:
TBD determined - do we know margin on Instapak? If not, then
Air Cap: 60%
Instapak: 35%
Other 5% (includes uncoated)

7

Note: uncoated should be primarily sold through distributor channel


Concerns

1. Cannibalization of AirCap market?
2. Uncoated market already saturated? (according to some distributors)
3. Brand dilution? (not big concern)
4. Europe?
5. Corporate Culture?


Conclusion