Case Study 1: Strategic Design of Supply Chains

Werner & Mertz and the Frosch brand – circular economy as a competitive strategy

Author

Supply Chain Management – Group Work

NoteOverview
Topic Strategic design of supply chains, strategic fit, sustainability
Link to the lecture Chapters 1–3 of the lecture materials (basic concepts, strategic fit, objectives and trade-offs, sustainability in SCM)
Type Qualitative case study (research and argumentation, no dataset required)
Group size 3–6 people
Deliverable Presentation (30 min) + discussion (15 min), slide deck as PDF

1 Learning objectives

After working through this case study, you will be able to

  • model the supply chain of a real company as a network (focal company, tier-n suppliers, customers, return flows),
  • classify products and markets and derive the resulting supply chain strategies,
  • assess the strategic fit between competitive strategy and supply chain strategy in a well-founded way using the supply chain drivers,
  • identify trade-offs between cost, service and sustainability, and
  • analyse a closed-loop supply chain and its specific risks.

2 Initial situation

Werner & Mertz GmbH, headquartered in Mainz, is a family business founded in 1867 as a wax goods factory and now run in the fifth generation by Reinhard Schneider. The company first became known for its shoe polish Erdal. Since 1986, Werner & Mertz has marketed ecologically positioned laundry, household and cleaning products under the Frosch brand. Frosch is now the company’s highest-selling brand. Production takes place mainly in Mainz-Mombach and in Hallein, Austria. Revenue was recently around half a billion euros (2024: approx. €611 million), and the company employs just over 1,000 people.

Frosch competes in drugstore and grocery retail with global corporations such as Henkel, Procter & Gamble and Unilever, and with the private labels of dm, Rossmann, Aldi and Lidl. The company consistently relies on environmental compatibility as its differentiating feature:

  • Recyclate Initiative (since 2012): Together with partners from waste management, recycling and packaging manufacturing (including ALPLA, NABU and Fraunhofer institutes), Werner & Mertz recovers plastic from the Yellow Bag (Germany’s household packaging waste collection) and processes it into new bottles. The share of Yellow Bag material in the PET bottles was increased step by step (2014: 20%, 2021: 50%, 2023: 75%) and reached 100% in 2025. In June 2025, the company celebrated its billionth rPET bottle made from recycled material. There are now also HDPE bottles, caps, spray heads and stand-up pouches made from recyclate.
  • Certifications and awards: Werner & Mertz has been EMAS-validated since 2003, and many Frosch products are Cradle to Cradle Certified. The company has also received several German Packaging Awards and German Sustainability Awards, and Reinhard Schneider was honoured with the German Environmental Award in 2019.
  • Raw materials: Surfactants are increasingly to be obtained from European plants (e.g. rapeseed, olives, linseed) instead of tropical palm or palm kernel oil.

Management faces the question of how the supply chain should be developed over the next five to ten years. The following developments must be taken into account:

  1. The EU Packaging and Packaging Waste Regulation (PPWR) prescribes binding minimum recycled content. As a result, demand for high-quality post-consumer recyclate is rising across Europe, while supply from the Yellow Bag is limited.
  2. Virgin material (virgin PET) is often cheaper than high-quality recyclate when oil prices are low. This creates a cost disadvantage compared with competitors that take a less consistent approach.
  3. Retailers are building their own “green” private labels, and consumers’ price sensitivity fluctuates with the economic cycle.
  4. Internationalisation (including France, Italy, Spain and North America) raises the question of whether to continue supplying centrally from Mainz/Hallein or to produce or bottle regionally.
ImportantNote on research

The information above is a starting point. Research up-to-date information yourselves, e.g. sustainability reports, the company website, press articles and academic literature on the circular economy. Cite all sources. Where information is missing, make plausible, explicitly labelled assumptions.

3 Tasks

3.1 Part A – Understanding the Frosch supply chain

A1. Network model. Sketch the supply chain of a typical Frosch product, e.g. the Frosch vinegar cleaner in the 500 ml bottle, from raw materials to the end customer. Take into account the tier structure (surfactants, fragrances, bottles, labels), the distribution stages (retailers’ central warehouses, stores, online retail) and the return flow of packaging (household → Yellow Bag → sorting → recycling → bottle manufacturing). Mark material, information and financial flows. Is this a focal or a polycentric supply chain?

A2. Product and demand characteristics. Classify typical products from the Frosch range within the strategic fit concept and characterise the implied demand uncertainty using the criteria from the lecture. Do individual product groups differ, e.g. basic cleaners, special editions or refill pouches?

3.2 Part B – Strategic fit

B1. Competitive strategy and supply chain drivers. Describe Frosch’s competitive strategy (e.g. following Porter). Then analyse, for each of the six supply chain drivers, how Werner & Mertz (presumably) configures it today and whether this is more efficient or more responsive:

Supply chain driver Configuration at Frosch efficient ↔︎ responsive Justification
Facilities/locations
Inventory
Transportation
Information
Sourcing
Pricing

B2. Assessment. Position Frosch in the strategic fit diagram (implied uncertainty vs. responsiveness). In which market segments is there a strategic fit? What role does the procurement side play (supply uncertainty for recyclate)?

3.3 Part C – Trade-offs and sustainability

C1. Trade-offs. Identify at least two specific trade-offs in the supply chain and illustrate one of them qualitatively as a Pareto front. Examples are recycled content ↔︎ material costs and availability, or centralised production ↔︎ transport emissions and delivery time in foreign markets.

C2. Closed-loop supply chain. Analyse the return chain: Who are the actors (dual system, sorters, recyclers), what risks exist (quantity, quality, price, regulation), and why did Werner & Mertz invest in the initiative instead of simply buying recyclate on the market (make-or-buy, vertical cooperation)?

C3. Sustainability strategy. Classify Werner & Mertz’s sustainability strategy within the matrix from the lecture (defensive, offensive, …). Which planning tasks from Chapter 3 are particularly addressed?

3.4 Part D – Recommendation and reflection

D1. Strategic recommendation. Choose one of the following options and evaluate it in terms of the supply chain drivers, strategic fit, trade-offs and risks:

  1. Backward integration: Taking a stake in or building an own sorting or recycling plant to secure the supply of recyclate.
  2. Regionalisation: Setting up a bottling operation in southern Europe or North America instead of central supply from Mainz and Hallein.
  3. Refill systems and concentrates: Switching significant parts of the range to concentrates and refill pouches.

Formulate a clear recommendation for action with justification.

D2. Reflection. Answer the following questions in your presentation. They form the starting point for the subsequent discussion:

  1. Your analysis is largely based on public information and assumptions. How robust are your statements, and which internal data would you need to validate them?
  2. Where does the strategic fit concept reach its limits when sustainability and supply uncertainty are at the centre?
  3. Is sustainability at Frosch part of the competitive strategy or a constraint on the supply chain strategy? What does this imply for companies that implement sustainability “only” because of regulation?
  4. What role do values and ownership structure (family business) play in supply chain decisions that do not pay off economically in the short term?
  5. Which insights can be transferred to international markets where there is no collection system comparable to the Yellow Bag?

4 Literature and sources (starting points)

  • Werner & Mertz: Recyclate Initiative, https://werner-mertz.de/en/recyclate-initiative/
  • Fisher, M. L. (1997): What Is the Right Supply Chain for Your Product? Harvard Business Review 75(2), 105–116.
  • Chopra, S.; Meindl, P.: Supply Chain Management – Strategy, Planning, and Operation, Chapters 1–3.
  • Porter, M. E. (1985): Competitive Advantage. New York: Free Press.
  • Course reader for the lecture, Chapters 1–3.