Raul Ortega has just inherited Ortega's Stop and Shop, a small convenience store on the south...
Fantastic news! We've Found the answer you've been seeking!
Transcribed Image Text:
Raul Ortega has just inherited "Ortega's Stop and Shop," a small convenience store on the south side of Chicago. The store is small, even by convenience store standards, with an interior of 15' wide and 30' deep (plus a small amount of storage space in the back). Raul inherited the store from Uncle Jose, who passed away unexpectedly and did not have any children. Since Raul was his favorite nephew, Jose re- wrote his will to leave the store to Raul in hopes that he would keep it going. Raul worked in Ortega's during the summers when he was in high school and college, but he mostly just ran the cash register, re-stocked shelves, cleaned, and listened to Uncle Jose talk about the store, the neighborhood, and life. But now that Raul suddenly owns the store, he has many decisions to make that he has never made before. One of the biggest decisions is ordering products from suppliers. Raul has spent his nights going through what Uncle Jose had been ordering, and he has figured out the following: 1. Beer and wine are bought through two local distributors, and the store has a gross margin of 40% on these items. 2. Uncle Jose was buying all his soft drinks and bottled water from local Coke and Pepsi distributors - these distributors also handle less popular but noteworthy brands such as 7-Up, Dr. Pepper, Deja Blue, Aquafina, etc. The gross margin on bottled soft drinks is 50%. Uncle Jose also had fountain service through the Coke distributor, who supplies the fountain drink equipment for free-fountain drinks have a gross margin of 80%. 3. The food, tobacco, and other non-perishable items are all purchased at a cash-and-carry wholesaler that's also on the south side. Raul plans to look at this mix of items going forward, as he's guessing that some of the items don't sell as well as others; however, for now, he'll keep this product mix where it currently is until he has time to adjust it. The gross margin on these - items is 40%. 4. One of five sections the cooler was set aside by Uncle Jose for selling soft drinks and juice drinks that are popular in Mexico. This section includes many brands unfamiliar to US consumers, such as Sidral. Mundet. Jarritos, Jumex, and Goya. In looking at the sales records, Raul notices that these brands have been declining in sales for several years, until they now collectively account for only 10% of the sales that are generated by the Coke and Pepsi bottled products sold in the store. In 2019, Ortega's Stop and Shop sold $3,000 of Mexican soft drinks/juices (40 % gross margin) that occupied one cooler section, compared to $20,000 of Coke and Pepsi distributed product that also occupy one cooler unit. Raul thinks the reason for the decline of these Mexican brands is the changing demographics of the neighborhood surrounding Ortega's. When it opened in 1981, the neighborhood surrounding Ortega's was around 50% Mexican-American, 40% African-American, and the remaining 10% being white. The most recent census data indicates the neig borhood is more diverse, including individuals that are African-American (down to 25%), Cuban (10%) , Haitian (5%), Somali (5%), Mexican (down to 20%), and an increase in whites (35%), which signals coming gentrification for the neighborhood. One of the product categories Uncle Jose chose not to carry were energy drinks. The gross margin % on energy drinks is usually lower than bottled soft drinks; however, the gross margin dollar per unit is usually better. A 16 oz bottle of Coke normally sells at Ortega's for $1.69. With a gross margin of 50%, the store is buying each bottle for $0.845 while also making $0.845 in gross margin per bottle. By comparison, a can of Red Bull typically sells for $3.49 and costs $2.09, for a gross margin of 40.1% but generates $1.40 of margin dollars for every can of Red Bull. The question is: Which four brands should Raul carry? Ortega's has cooler space to stock four different brands of energy drinks, and you need to select the four brands that will make the most sense for Ortega's. Brand¹ Monster Xyclence Nos Red Bull Kickstarter Bang Amp Rockstar Selling price per unit (per can) $2.99 $3.49 $2.99 $3.49 $2.39 $2.99 $2.99 $2.49 Cost (units per case) $21.50/case (12 cans) $36/case (12) $41.50 (24) $50.20/case (24) $14.04/case (12) $22/case (12) $28/case (12) $32/case (24) Estimated Cannibalization Demand Rate² per Month (cans) 120 30 60 95 120 60 20 30 35% 10% 15% 25% 60% 15% 50% 40% Price of other items bought in Ortega's (40% margin) $1.75 $0.50 $0.45 $1.00 $1.50 $0.25 $1.40 $1.75 You will need to either include a spreadsheet (put the brands in the rows, Just like in the table above). When the term "brand" is used, we are referring to one brand with multiple variations. For example, Red Bull is a brand, but if Red Bull was selected, the store would stock Red Bull Original, Red Bull Sugar Free, Red Bull Plum- Twist, etc. Cannibalization refers to the percent of a product's sales volume that is drawn from existing bottled soft drinks sold by Ortega's. For example, if an energy drink will sell 200 units and has a 30% cannibalization rate, it means that by selling those 200 energy drinks, you are reducing the number of soft drinks to be sold by 60 units. Raul Ortega has just inherited "Ortega's Stop and Shop," a small convenience store on the south side of Chicago. The store is small, even by convenience store standards, with an interior of 15' wide and 30' deep (plus a small amount of storage space in the back). Raul inherited the store from Uncle Jose, who passed away unexpectedly and did not have any children. Since Raul was his favorite nephew, Jose re- wrote his will to leave the store to Raul in hopes that he would keep it going. Raul worked in Ortega's during the summers when he was in high school and college, but he mostly just ran the cash register, re-stocked shelves, cleaned, and listened to Uncle Jose talk about the store, the neighborhood, and life. But now that Raul suddenly owns the store, he has many decisions to make that he has never made before. One of the biggest decisions is ordering products from suppliers. Raul has spent his nights going through what Uncle Jose had been ordering, and he has figured out the following: 1. Beer and wine are bought through two local distributors, and the store has a gross margin of 40% on these items. 2. Uncle Jose was buying all his soft drinks and bottled water from local Coke and Pepsi distributors - these distributors also handle less popular but noteworthy brands such as 7-Up, Dr. Pepper, Deja Blue, Aquafina, etc. The gross margin on bottled soft drinks is 50%. Uncle Jose also had fountain service through the Coke distributor, who supplies the fountain drink equipment for free-fountain drinks have a gross margin of 80%. 3. The food, tobacco, and other non-perishable items are all purchased at a cash-and-carry wholesaler that's also on the south side. Raul plans to look at this mix of items going forward, as he's guessing that some of the items don't sell as well as others; however, for now, he'll keep this product mix where it currently is until he has time to adjust it. The gross margin on these - items is 40%. 4. One of five sections the cooler was set aside by Uncle Jose for selling soft drinks and juice drinks that are popular in Mexico. This section includes many brands unfamiliar to US consumers, such as Sidral. Mundet. Jarritos, Jumex, and Goya. In looking at the sales records, Raul notices that these brands have been declining in sales for several years, until they now collectively account for only 10% of the sales that are generated by the Coke and Pepsi bottled products sold in the store. In 2019, Ortega's Stop and Shop sold $3,000 of Mexican soft drinks/juices (40 % gross margin) that occupied one cooler section, compared to $20,000 of Coke and Pepsi distributed product that also occupy one cooler unit. Raul thinks the reason for the decline of these Mexican brands is the changing demographics of the neighborhood surrounding Ortega's. When it opened in 1981, the neighborhood surrounding Ortega's was around 50% Mexican-American, 40% African-American, and the remaining 10% being white. The most recent census data indicates the neig borhood is more diverse, including individuals that are African-American (down to 25%), Cuban (10%) , Haitian (5%), Somali (5%), Mexican (down to 20%), and an increase in whites (35%), which signals coming gentrification for the neighborhood. One of the product categories Uncle Jose chose not to carry were energy drinks. The gross margin % on energy drinks is usually lower than bottled soft drinks; however, the gross margin dollar per unit is usually better. A 16 oz bottle of Coke normally sells at Ortega's for $1.69. With a gross margin of 50%, the store is buying each bottle for $0.845 while also making $0.845 in gross margin per bottle. By comparison, a can of Red Bull typically sells for $3.49 and costs $2.09, for a gross margin of 40.1% but generates $1.40 of margin dollars for every can of Red Bull. The question is: Which four brands should Raul carry? Ortega's has cooler space to stock four different brands of energy drinks, and you need to select the four brands that will make the most sense for Ortega's. Brand¹ Monster Xyclence Nos Red Bull Kickstarter Bang Amp Rockstar Selling price per unit (per can) $2.99 $3.49 $2.99 $3.49 $2.39 $2.99 $2.99 $2.49 Cost (units per case) $21.50/case (12 cans) $36/case (12) $41.50 (24) $50.20/case (24) $14.04/case (12) $22/case (12) $28/case (12) $32/case (24) Estimated Cannibalization Demand Rate² per Month (cans) 120 30 60 95 120 60 20 30 35% 10% 15% 25% 60% 15% 50% 40% Price of other items bought in Ortega's (40% margin) $1.75 $0.50 $0.45 $1.00 $1.50 $0.25 $1.40 $1.75 You will need to either include a spreadsheet (put the brands in the rows, Just like in the table above). When the term "brand" is used, we are referring to one brand with multiple variations. For example, Red Bull is a brand, but if Red Bull was selected, the store would stock Red Bull Original, Red Bull Sugar Free, Red Bull Plum- Twist, etc. Cannibalization refers to the percent of a product's sales volume that is drawn from existing bottled soft drinks sold by Ortega's. For example, if an energy drink will sell 200 units and has a 30% cannibalization rate, it means that by selling those 200 energy drinks, you are reducing the number of soft drinks to be sold by 60 units.
Expert Answer:
Related Book For
Quantitative Analysis for Management
ISBN: 978-0132149112
11th Edition
Authors: Barry render, Ralph m. stair, Michael e. Hanna
Posted Date:
Students also viewed these mathematics questions
-
South Side Corporation has no debt outstanding, a total value of assets of $500,000, a total market value of the firm of $300,000, a market-to-book ratio of 1.0, a dividend payout ratio of 100...
-
The City Commission of Nashville has decided to build a botanical garden and picnic area in the heart of the city for the recreation of its citizens. The precedence table for all the activities...
-
South Side Oil and Gas, a new venture in Texas, has developed an oil pipeline network to transport oil from exploration fields to the refinery and other locations. There are 10 pipelines (branches)...
-
Find a and b if, y= ax+b has mean 6 and variance is unity, where x is a random variable with mean 8 and variance 16.
-
Carbon dioxide enters an adiabatic compressor at 100 kPa and 300 K at a rate of 1.8 kg/s and exits at 600 kPa and 450 K. Neglecting the kinetic energy changes, determine the isentropic efficiency of...
-
The 116th House of Representatives of the United States of America has 435 members, of which 106 are women. An alien lands near the U.S. Capitol and treats members of the House as a random sample of...
-
How many times a minute will a technician feel this beat rise and subside?
-
RxDelivery Systems is a research and development venture specializing in the development and testing of new drug delivery technologies. Driving factors behind this growth include efforts to reduce...
-
Pharma Company produces various medicines in capsule form. At the beginning of the month of February, it had 9 , 0 0 0 units that were 5 0 % complete. ese were assigned costs of $ 7 0 , 0 0 0 ....
-
You are a profitable conglomerate thinking about getting into the gelati business by acquiring the firm Alati Gelati (AG). Current info for you, AG and their similar comp is listed below. You...
-
Talk about the defense of duress. You're on that lifeboat again. This time it's you, the bad guy, and a senior from Monroe College who is almost done with her CJ degree. Only enough room for two and...
-
Assume the role of Latisha. Write a proposal to develop a stress management program. Use well-justified logic to support your conclusions and recommendations. When Jeff arrived back at the office, he...
-
Think about a recent movie or TV episode you watched. Select a scene that involves an interesting but difficult conversation. Ideally, select one that might occur in the workplace. Based on this...
-
The European Central Bank (ECB) is the central bank for the countries that participate in the European Monetary Unionthe euro area. a. The Euro system is composed of three distinct parts: i. The...
-
The quantity theory of money explains the link between inflation and money growth. a. The equation of exchange tells us that: i. The quantity of money times the velocity of money equals nominal GDP....
-
Read the Ideas in Action section in this chapter. Based on Mark Zuckerbergs comments and your own experiences, respond to the following questions: A. What are the reasons Zuckberg provides for...
-
Diagon Alley Magic Company Ltd On February 9, 2021, Harry Potter, Materials Manager at Diagon Alley Magic Company Ltd in Diagon Alley UK, was preparing for the next continuous improvement team...
-
What tools are available to help shoppers compare prices, features, and values and check other shoppers opinions?
-
Thaarugo, Inc., produces a GPS device that is becoming popular in parts of Scandinavia. When Thaarugo produces one of these, a printed circuit board (PCB) is used, and it is populated with several...
-
Juhn and Sons Wholesale Fruit Distributors (of Problem 13-19) are considering building a second platform or gate to speed the process of loading their fruit trucks. This, they think, will be even...
-
The seasonal yield of olives in a Piraeus, Greece vineyard is greatly influenced by a process of branch pruning. If olive trees are pruned every two weeks, output is increased. The pruning process,...
-
Victoria has prepared the following list of statements about corporations. 1. A corporation is an entity separate and distinct from its owners. 2. As a legal entity, a corporation has most of the...
-
Indicate whether the following items would appear on the income statement (IS), statement of financial position (SFP), or retained earnings statement (RES). a. Dividends. b. Cash. c. Salaries and...
-
On May 10, Chen Co. issues 2,000 6 par value ordinary shares for cash at 13 per share. Journalize the issuance of the shares.
Study smarter with the SolutionInn App