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Australian Agribusiness Review - Vol. 3 - No. 2 - 1995

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Wintulichs Pty. Ltd. and marketing environmental disturbance:
The 'Garibaldi effect'

David Pointon
David G Pointon is a postgraduate student in the Department of Agricultural Business, at the University of Adelaide, and partner in the Chartered Accountancy firm Ewen and Pointon Pty. Ltd. with offices in Gawler, Adelaide and Murray Bridge.


Wintulichs Pty. Ltd. and marketing environmental disturbance: The 'Garibaldi effect'

Abstract
A brief history of Wintulichs Pty. Ltd.
Management aspect
Production aspect
The pre E. Coli marketing strategy
Product strategy
The environmental change: the E. Coli incident
The effect on Wintulichs Pty. Ltd.
References


Abstract

One child died and many children and some adults were admitted to hospital as a result of the presence of escherichia Coli (E. Coli) in some small goods products produced in South Australia, allegedly by Garibaldi Smallgoods Pty. Ltd., a company not related to Wintulichs Pty. Ltd., but competing in the same market. Although Wintulichs Pty. Ltd. adopts a quality raw material purchasing and production process, this incident had a devastating impact on the company and the industry as a whole. Metwurst sales had fallen to less than ten per cent of the level achieved before the E. Coli incident. This incident illustrates that irrespective of how a company structures its marketing plan, how well established it is, or how well it complies with public health regulations, changing, uncertain and unpredictable environmental factors can profoundly affect a company's performance. This paper reviews the effect of this marketing environmental disturbance on Wintulichs Pty. Ltd.

A brief history of Wintulichs Pty. Ltd.

Management aspect

Jakob Wintulich was born in 1875. After arriving in Australia he moved to Tanunda where he started his own business in 1909 as a family butcher smallgoods man. In 1924 he sold up in Tanunda and moved to Gawler South, the site of the present factory. In 1925 he recommenced making smallgoods which he retailed through a shop in the main street of Gawler. After about two years he dosed the shop and distributed his goods on a wholesale basis to shops located mainly in Adelaide.

In 1942 his son Frank took over the business and decided to concentrate on the production of metwurst. Until 1948 all production had taken place in a 17 square metre workshop with a curing cellar beneath an external smokehouse. In 1948 a new 80 square metre factory made of concrete block was built with an abutting smokehouse. By 1956 the original factory had been demolished to make way for a further 80 square metres of garage, workshop and storeroom.

In 1962 Frank's eldest son John joined the business and became manager in 1967. By 1970, due to the demand for Wintulichs' Metwurst, expansion to 480 square metres of export standard factory was completed. By 1977 the factory had been further expanded to 1800 metres of floor space.

By 1986 a further extension of 600 square metres had been added to the existing floor space. Also John's second son, Mark joined the company in that year.

Production aspect

In 1984 the company acquired the French-style pate` company, La Belle France. Although an integral part of the Wintulichs organisation, it is run as a separate business with its own staff.

In 1985 there was a significant marketing development when Wintulichs Pty. Ltd. was approached by Rosella Lipton Pty. Ltd. to manufacture Bi-Fi mini salami. This was a joint project with Wintulichs doing the manufacturing of Bi-Fi. and Rosella Lipton the marketing.

The company extended its range of metwurst by adding a pepper variety, and diversified into other products, including a number of varieties of fresh sausage. Processing equipment in the factory was acquired or upgraded as the need arose. John Wintulich has travelled to Germany on a number of occasions to select equipment and ingredients. This was a means of keeping pace with changing technology.

Wintulichs Pty. Ltd. operates one of the most modern, hygienic and efficient smallgoods factories in Australia. Wintulichs Pty. Ltd. is registered for export, and operates under an Approved Quality Assurance program with the Commonwealth Department of Primary Industries. The company has been manufacturing and exporting beef jerky to Japan since March 1991. In 1993 the company became a founding member of the 'Australia's Best Food' network.

The pre E. Coli marketing strategy

The company's customers are intermediaries operating warehouses, retailers and merchandisers, though the majority of sales are achieved through warehouses.

The production staff operate under a quality assurance program that assumes the next operator along the line is the customer. The various department heads interact in determining the company's plans. Information feeds up and down the system on various matters with respect to presentation, processes and production; all with consumer needs as the prime consideration.

The sales force is required to consult with persons in other operations, including production, inventory, advertising, management, and so on. Inventory levels are based on customer need requirements. Raw material is purchased and manufacturing is based on sales levels. For instance, pate` is packaged upside down for use at parties, and as such is not ideal for daily use in the fridge. The presentation of the product is a result of market research to determine the needs of target markets.

Geographically, the main target market for all products, except beef jerky, is South Australia. Research has shown that the main users of metwurst, pate` and sausage products are, in demographic terms, the average 'dinky die Aussie', children, later teens, and housewives, (typically, the main decision-maker). The company does not target persons in the 10 to 13 year age bracket, who are believed to be more interested in potato chips, lollies, and fast food in general.

Product strategyroduct strategyroduct strategy

Product quality is a prime objective of Wintulichs Pry. Ltd. and is employed for the production of high quality smallgoods. The products produced by Wintulichs Pry. Ltd. are:

  • Metwurst: A dry fermented product made of beef and pork and manufactured to the German tradition.
  • Beef Jerky: Sliced full beef muscle, which is marinated and dried to produce a snack food item.
  • Pate` A fine chicken liver based product made to the French style, but not the French provincial style.
  • Sausage: A product made of pure meat, either pork or beef, or a mixed meat such as an epping or BBQ with the meat being either minced or emulsified.

Metwurst sales represent approximately 50 per cent of the total annual value of turnover of the company, with Beef Jerky being 35 per cent, Pate` 13 per cent, and Sausage two per cent.

Product safety is a prime consideration. For instance, the perceived need of the consumer for the Pate` product was to have the product free of preservatives while at the same time wanting product safety. The processing procedure was changed to increase shelf life and to provide product safety. The product was hermetically sealed in an oxygen impervious container and a preservative added. This procedure, coupled with the preservative, provided product safety. Thus product safety overrode the preference for preservative-free product.

There are many manufacturers of metwurst products, so therefore it is important for the company to create brand awareness for product differentiation. Brand awareness enables Wintulichs' metwurst to be positioned as a superior product. This also enables the product to be 'pulled' through the intermediaries by the final consumer. The maintenance of consistent quality is a condition favourable to branding. Packaging is seen as a means to promoting the brand image and enabling consumer problem-solving.

Informal market research caused changes to be made to the packaging of Wintulichs' Pate` product. The retailer required a long shelf life, while the final consumer required a tamper resistant pack, wanted to be able to see the side and top of the product, did not want preservatives, and preferred that the product had a use-by date. The tub size was changed. These factors caused the company to experience a threefold increase in the sales of the product.

Wintulichs Pty. Ltd. has implemented the following campaigns:
'Metwurst - it isn't Salami'
'Metwurst Appreciation Society'
'The Original Gawler Metwurst'
‘Wintulichs the munch munch Metwurst'

John Wintulich was keen to emphasise that advertising is not focused on how the product is made. Detailing the production process could be seen as having a negative effect. Even though meat is a product originating from animals it would not be in the industry's best interests to actively promote this association.

Promotion strategies are planned over a six-month period. The utilisation of the general media has created consumer demand, which in turn has pressured the retailer to stock the product. Store promotions and price-generated strategies, trade tasting and personal visits by the sales manager, have encouraged the retailer to assist in promoting the product to the consumer.

Wintulichs Pry. Ltd. adopts a premium price strategy. Both the market and pricing authorities have accepted this pricing strategy in the past.

The environmental change: the E. Coli incident

In January 1995 a food poisoning outbreak was attributed to escherichia Coli (E. Coli). One child died and many others were made critically ill. The source of this organism outbreak was traced back to metwurst allegedly produced by Garibaldi Smallgoods Pry. Ltd. This incident has had a devastating effect on the industry. In the short term, turnover declined to some ten per cent of levels achieved before the incident. Five months later, sales returned to about 70 per cent of levels achieved before the incident.

Escherichia Coli (E. Coli) is one of the predominant organisms found in the gut of all animals, including man (Ratcliff et al. 1995). According to this source, it is usually harmless in its environment but certain strains produce disease. In the process of disembowelment of cattle, poor standards in meat preparation can result in the bowel being ruptured, allowing faeces to contaminate the red meat. Inefficient production processes could fail to destroy the E. Coli, and therefore allow the affected meat to pass to humans.

When consumed by humans these organisms can colonise the bowel, releasing Shiga-like toxin (SLT), Which is absorbed in the blood stream. This toxin is responsible for causing the Haemolytic Uraemic Syndrome (HUS). Cell and secondary organ cell death occurs. Most organs can be affected but especially the kidney, bowel, and the central nervous system.

On learning that children had suffered from food poisoning after consuming metwurst, the general perception of consumers was that all metwurst, irrespective of brand, could be dangerous. The image of the product to the consumer was tarnished. Though the evidence is conflicting, it is believed that the general public in Queensland were not completely aware of the implications of the e. Coli incident until a local company, concerned for the possible outcome on local sales, adopted a promotion strategy to persuade its consumers that it had nothing to do with the South Australian incident.

The company claimed that it adopted higher quality and more stringent processes within its operations. This strategy had the effect of highlighting the implications of the incident and, it is understood, helps create the perception that one could die or become ill from consuming metwurst. As a result of this strategy, sales of metwurst products in Queensland are said to have dropped dramatically.

The publicity also provided the consumer with the details of how the product was made. Previously many consumers were unaware of the production process for metwurst. The publicity provided information to the consumer that metwurst was made of fermented meat and involved the management of bacteria.

As a result of the publicity there was a lot of resistance on the part of retailers to promote, or even stock, the product. The company could no longer rely on retailers to 'push' the product.

The effect on Wintulichs Pty. Ltd.

After the E. Coli incident, Wintulichs Pry. Ltd. greatly reduced promotional expenditures until July 1995. The strategy gave the consumers time to come to their own conclusions, and this was considered, at the time, to be the best approach to adopt.

Despite the de-emphasis on promotion, consumption of metwurst produced by the company increased from 10 per cent of levels achieved before this incident in February 1995, to 70 per cent in April 1995. The Government's inquiry commenced in April 1995, and the continued negative information in the media shows growth in sales still holds to this level of 70 per cent. Resistance from retailers continues, but consumer 'pull' could result in retailers continuing to provide shelf-space for the product.

The product, pricing and place strategies adopted by the company have not changed from that adopted before the incident. The company expects that consumer confidence will return with time. The company re-commenced its promotion strategy in July 1995; the only change to this strategy from that employed before the incident has been an increased emphasis on the company's quality assurance status, and thus product safety.

As a result of the E. Coli incident the company may need to undertake further market research so as to redefine its target market, and to ascertain if consumer preferences have changed. This research should also provide to the company information on how well the company are currently satisfying consumer perceptions. As a result of this research, the company's marketing strategies may need to be reviewed.

The E. Coli incident highlights how uncontrollable environmental factors can have adverse effects on the performance of a company even though the company is well established, and has no fault associated with its product. Customers' attitudes and perceptions of a company's product can thus develop outside the company's control. The E. Coli incident is expected to continue to have an effect on Wintulichs Pry. Ltd. for some time to come.

References

Ratcliff R, Doyle R, Davos D, and Lanser J, (~995) 'First Use of Molecular Techniques to Elucidate Food Borne Outbreak', IMVS Newsletter, Number 25, May.

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