1) Discuss the brand positioning of Infinity and Timeless? (read Background on page 2-3, Exhibit 13a and 13b) [3 pt] 2) What are the strength and weakness of Berlei (or Pacific Brands)? (read Overview and Strategy of Pacific Brands on page 5-6, and try to find and discuss Berleis position in Exhibit 4 on page 13) [3 pt]

**NOTE** THIS IS MARKETING ANALYTICS. I DON'T KNOW WHAT CATEGORY ON CHEGG THIS WOULD FALL UNDER. SO IF YOU DON'T KNOW THE PROBLEM THAT'S OKAY BUT LET ME KNOW WHAT CATEGORY THIS QUESTION WOULD FALL UNDER. THANK YOU

Background:

In her last meeting with Pacific Brand Limiteds (PBG) Board of Directors, Sue Morphet, PBGs Chief Executive Officer, had updated the Board about the companys half-year results for 2009 (see Exhibit 1). Results were lackluster: sales were down 5.2% from FY2008, and net profits after taxes were down 0.9%. Net sales for the Underwear & Hosiery operating group had fallen 1.4% from 2007 figures despite strong performances by the Bonds, Berlei, and Hosiery brands. There also continued to be significant uncertainty about PBGs future earning potential, because consumers seemed to be trading down from department store-grade product line into discount store brands and private labels. On the supply side, unfavorable changes in the exchange rate between Australian and U.S. currency also made sourcing costlier, giving the company little flexibility on the price front. Sue was particularly worried about two of PBGs new products, Infinity and Timeless, which had both just been launched under the Berlei umbrella. Both targeted fashion-conscious, female consumers seeking a high-end product. Sue had supported Berleis aggressive outreach to this consumer profile, largely because of the flexibility and price inelasticity associated with the customer. In addition, with such a consumer in-hand, PBG could showcase advances in its abilities to reach the most creative and technologically advanced customer. Some of the improvements PBG could pursue on the target customers behalf included greater technological manufacturing precision in fabrics, with cognizance toward accommodating body-fitting angles. Flexibility and choice other improvements the company was well-positioned to offer, thanks to PBGs control of its manufacture and design. It had also implemented a number of cost-cutting measures that allowed it to grow customer variety without losing control of its supply chain. Infinity targeted young women who sought color variety and saw a brassiere as an opportunity to make a fashion statement, while Timeless pursued women in their late thirties and early forties who were young at heart and wanted to look sportier and younger. In both cases, style variety would be key to the lines success. Despite PBGs understanding of the above segments, a struggling economic environment had dampened brand allure in general and any legitimacy that Infinity and Timeless would normally inherit from Berlei in particular. 3 less willing to pay more for stylish lingerie. Sue knew that lingerie was one of the few industries that could escape a recession relatively unscathed, but she also knew she would need a shrewd strategy to protect profits without undercutting quality. She also knew that given a spiraling economy, the company would have to promote Timeless and Infinity very aggressively but resist the temptation of running gimmicks to excite the customer. The company knew from experience that gimmicks raised awareness but not necessarily sales among consumers, and that this would be doubly true in the current economic climate. To address the dual challenges of the markets austerity and a factious C-suite at PBG, Sue would need to call upon lessons she had learned from her many years at PBG. As General Manager of Bonds, the companys most iconic line of mens underwear, she had made the pivotal decision to launch a womens Bonds line as well. A well-executed strategy, Bonds nearly doubled its sales, and Sue found herself on the fast track to her current role as CEO. Sues Chief Marketing Officer, Mark Baxter, had now been with PBG close to two years. While PBG had not yet set him onto a large campaign, he had proven himself in the industry working with the Hanes and Fruit of the Loom brands prior to joining PBG. Sue trusted Marks judgment both as a marketer and an industry expert. As PBG was now emerging from an intensive two-year restructuring, Mark had approached her with a segmentation strategy that would improve the way PBG identified and targeted customers for its different brands. Upon hearing of this, PBGs CFO, Kevin LaSalle had immediately intervened. Kevin argued strongly that developing a separate marketing program for each target segment would be a waste of resources. He felt that since most consumers looking for Infinity or Timeless shopped at the same outlets, the brands would naturally cross-market as women saw them side-by-side at their retailers. The company had already sunk a massive number of resources into dealing with operational changes to accommodate dozens of additional SKUs over the last season alone, and Kevin saw Marks segmentation strategy as a way to use up scarce cash flows during the tightest economy he had yet seen as PBGs CFO. Kevin also cited the growth of the discount store segment, which was far greater than any other segment, to bolster his argument that now was not the time to fragment the companys marketing program and resources. He believed that PBG should cut costs wherever possible to preserve funds as long as the global economy and consumer spending were suffering. In the meantime, Mark was going home shell-shocked daily, wondering, What did I get myself into? I am getting paid too much not to contribute here, and I have been waiting now for nearly two years. I should be moving the company forward. I never dreamed I would be fighting for my team to undertake something as basic as a segmentation strategy. It will be on my head if consumers do not respond to the lines who does he think he is, telling me not to segment my customers? Kevin, having been burned in the past and afraid of having to shore up PBG through a possible recession, is not about to budge on this. He did not want to be in the same situation he had been in with Marks predecessor, Jeff Hindiger. Kevin had had it with marketers who thought they were media stars and just wanted limelight for PBG or for themselves. Sue knew that she had to either steer Mark and Kevin toward an agreement or decide herself how to keep PBG competitive in the new normal of a slow, extended period of economic recovery. The irony was that she had brought Mark into PBG originally because of his reputation as a numbers man. She was convinced that both officers were exactly the right individuals for their roles and for this moment in time. She would simply have to convince them how to talk to one another: in figures.

Overview and Strategy of Pacific Brands:

Pacific Brands originated in 1893 as Pacific Dunlop, a manufacturer of bicycle tires. In the 1920s, the company expanded into the manufacture of rubber boots and later entered the outerwear and underwear categories as well (see Exhibit 6). In the early 1990s, the company restructured, leaving the Dunlop family of brands to specialize in tires, safety, and health products, and the newly formed Pacific Brands to focus on wholesale distribution and brand management of consumer lifestyle brands. Through a large house of brands, PBG aimed to address consumer lifestyle needs for the underwear, socks, hosiery, intimate apparel, footwear, bed linens and accessories, foam, corporate uniforms, workwear, streetwear, lifestyle apparel, and sporting goods markets (see Exhibit 7). The vast majority of its sales occurred in the Asia-Pacific region, and the company maintained four operating groups: (1) Underwear & Hosiery (U&H); (2) Workwear; (3) Footwear, Outerwear & Sport; and (4) Homewares. In FY2008, Underwear & Hosiery represented the second-highest contributor to PBG sales at 30.1%; U&H also experienced 3.3% sales growth during 2008 and became the clear market leader in Australia in the category. Berlei, Bonds, and Hestia represented the top three brands for the region, the category, and within PBG. In short, PBG dominated womens intimates. In 2008, PBG divested to the tune of $27 million in low-performing brands in response to findings from a strategic review of the company conducted earlier that year. The review concluded that PBG had overall (1) too many brands, (2) too much complexity, (3) significant excess costs, (4) limited uniformity of process and procedures, and (5) no significant organic growth.5 It recommended that PBG pursue cost savings through outsourcing and best-in-business processes. In addition, PBG realized that smaller businesses were succeeding by providing fewer, but more profitable brands, than was PBGs norm. PBG decided to follow suit and dump its low-margin brands to compete more effectively and build profit reserves. In 2009, however, the companys overall sales declined significantly anyway. Volume through department stores represented the greatest decline (see Exhibit 8), though PBG saw growth in discount department store sales. This change in sales distribution reflected a shift in consumer spending patterns as well as of locations where the consumer thought to seek out PBG products. Despite these setbacks, the Board had supported Sue in continuing forward with PBGs restructuring efforts toward a more consolidated operation. The focus of the PBG 2010 strategy was a brand restructuring taking into account the given data: (1) top 20 PBG brands contribute 67% of sales, (2) top 10 contribute 40% of sales, and (3) top 5 contribute 33%. In 2008, more than 200 PBG brands had contributed to only 2% of the companys sales. Mark wondered if he should reach out and tell Kevin how much he supported Kevins leadership and analyses during the decision to refocus on fewer brands. After all, that was essentially the same goal Mark was trying to achieve through his segmentation study. 6 As Exhibit 9 highlights, the 2010 strategy focused on increasing marketing and manufacturing efficiencies, and the company decided to focus its efforts and resources on more profitable brands. In addition to discontinuing brands, PBG closed seven manufacturing sites in Australia and moved production functions to China. This resulted in 1,200 layoffs in Australia, which led to a rash of bad publicity for PBG due to the sense of pride Australians took in purchasing Australian-made products. Berlei The Berlei group offered three intimate apparel brandsBerlei, Playtex, and Hestiathat catered to various levels of functionality and fashion including Everyday, Everyday Special, Full-figure, Maternity, Post-surgery, and Sport products. From its beginnings in the early twentieth century, Berlei had always been an innovator. From developing the first physician-designed corset to the development of the Figure Type Indicator facilitating a perfect fit, and from the Gothic bra to Australias first maternity bra (see Exhibit 10), Berlei had served a wide variety of consumer preferences. However, while the brand had often self-identified as a luxury bra brand, consumers often perceived it as an economy brand (see Exhibit 11). Among its competitors, Calvin Klein, offered by PBGs closest competitor, Gazal Corporation, had communicated greater luxury appeal consistently to consumers, and had captured two categories in the same pricefashion matrix: the high-priced traditional practical and the upper-brand functional sport. Gazal portrayed its brands with more class than Berlei did, according to the perceptions of the highly influential fashionista constituency at Fashion Week and other leading-edge events throughout Australia.