North Star Target Market

Introduction
Background
North Star is a producer of national, name brand consumer products. These products are currently distributed at all grocery stores and are advertised nationally. Their current annual sales are $847.2 million a year with a 4.5 percent consumer market share for the following six products: soap, deodorant, ammonia, chili, canned ham, and frozen vegetables. It is with these thoughts in mind, North Star is considering the profitability of expanding their business to include a line of generic products of their current name brand commodities. The generic products have plain labeling and will not require advertising. Therefore, a careful study must be made to determine if North Star could be competitive in the distribution

According to Nolan’s “No-Name Brands: An Update,” Consumer awareness of generics has tripled since 1978 (33). In fact, there is other research that agrees with this statement. For instance, starting from nearly zero in 1977, generics have acquired 7 percent of the $275 billion grocery market. Many Observers predict they will go up to 25 percent within the next five years (Rauch & McCleary, 120). In Exhibit 3, the data demonstrations that generic brands have steadily increased over the last 3 years by nearly 5%, while national brands have experienced a slight drop of 2% in just the last couple of years. It is feasible to view this drop as a result in the growing popularity of generic brands. To compete with this shift, many leading brand manufacturers feel compelled to produce the lower-profit generic brands because either the market has grown too big to ignore or the inroads generic brands have made on their own brands have left them with idle capacity (Nolan, 35). Therefore, in a struggling economy, the whole industry is trying to save money, even at the expense of the environment. For instance, today, 37 percent of the grocery stores have switched from paper bags to less expensive plastic bags for packaging customer purchases, even though the plastic bags are nonbiodegradable ((Rauch & McCleary, 119). This entails that there will be added costs to our already stressed economy to clean up this eventual biohazard and the money will come from tax revenues. Be that as it may, the data is clear; there does exist a growing popularity of consumer purchasing of generic products. In point, “Supermarket executives foresee a drop-in shelf space allocated to brand products and an increase in the space allocated to generics and private labels. Many experts predict that supermarkets will ultimately carry no more than the top two brands in a category plus a private label and a generic label”