Marketing Strategy- CTW
17 February 2015
Case Analysis: CUTCO
a) Competitors: CUTCO, J.A. Henckels Zwillingswerk Inc., Wustoff-Trident, Shun Cutlery
b) Industry Sales for 2011: $733,000,000 (appendix 1.1)
c) CUTCO’s revenue in 2012 was $250,000,000; Henckels was approximately the same. Shun Cutlery and Wustoff-Trident were unlisted, but combined can be estimated at approximately $233,000,000.
d) Marketing strategy:
i) Henckels, Wustoff-Trident and Shun Cutlery utilize department store sales and mass merchandising to market their products.
e) Pricing strategy:
i) CUTCO: highest prices in the market; list prices are valued anywhere from $30.00 (vegetable peeler) to $1,599.00 (signature set) ii) Henckels: List prices are comparable to CUTCO; street prices are valued at 25% less than list price. iii) Wustoff-Trident and Shun Cutlery- Valued well below CUTCO.
i) CUTCO Corporation: originally known as ALCOA (Aluminum Company of America), formed in 1902. ALCOA created the WearEver subsidiary and marketed aluminum cookware using in-home demonstrations. ii) In 1948, ALCOA and W.R. Case & Sons formed a joint venture, ALCAS. In 1972, Case sold 49% interest in ALCAS to ALCOA. 10 years later, ALCOA sold ALCAS in a leveraged buyout. iii) This was followed by a period of mergers, reorganizations, and acquisitions, which ultimately led to ALCAS being re-branded to CUTCO in 2005.
i) 2011: $260,000,000 ii) In 2007, revenue was listed at $197,000,000; in the past 4 years, CUTCO has increased revenue by approximately 75%.
c) Product lines:
i) Basic set: 10 knives, can be purchased individually or in various sets. ii) Signature set: 10 knives, hardy slicer, santuko-style knife, cheese knife, shears, and 10 table knives displayed in a wooden block. iii) Additional products: 5 piece set of flatware, 6 piece serving set, a complimentary line of additional kitchen utensils, including: potato masher, pizza cutter, and cleaver. CUTCO recently added new types of santuko-style knives, as well as an explorer knife (CUTCO and KA-BAR joint venture) iv) In the past decade, product line has expanded up to 500 SKUs.
v) “Cutting edge” cutlery (exclude additional kitchen product) account for 90% of product sales
i) Retail prices range from $30.00 to $1,599.00 ii) Because CUTCO knives are manufactured to be the best in the world, the price is increased approximately 5% every other year to offset one-half of rising labor and materials cost.
e) Marketing strategies:
i) Direct sales marketing ii) In home demonstration of products iii) Internet sales; page is taken down during summer months and iv) Catalogs
v) Marketing events, such as local fairs, where CUTCO products can be demonstrated
a) Other stores in the industry use retail stores to market, promote, and sell their product.
b) CUTCO brand has established itself as a high-end cutlery brand.
i) Other competitors have established themselves as lower cost, non-luxury cutlery brand.
4) Problem Definition
a) The most important strategic issue CUTCO faces is identifying what will be the company’s biggest growth driver for the next decade, and its subsequent implementation. CUTCO will be attempting to grow their revenue to 1 billion, and choosing the correct growth driver will be vital in growing revenue.
5) Alternatives: Identification
a) 6 strategic options:
i) Status quo strategy ii) Investment in recruiting approaches and structures iii) Investment in expansion of CUTCO brand recognition/preference iv) Expansion into International markets
v) Using supplemental sales channels vi) Full entry into retail sales channel
6) Alternatives: Analysis
a) Status quo strategy:
i) Maintain current production and selling levels, with no change. ii) 113 million households in the U.S.; median income $50,000+; 14 million college students iii) The market and sales representative pool is vast