Developed by Coca-Cola Asia Pacific, Coca-Cola Fiber+ (or just Coke Plus) is expanding through Hong Kong, Japan, Mainland China, Mongolia, and Taiwan. Coke Plus is a zero calorie soda (essentially Coke Zero) with 5 grams of dextrin, a dietary fiber that is difficult to digest. Described by some as Coke Zero with a laxative, Coke Plus is marketed as a health food that suppresses the absorption of fat and maintains moderate blood triglyceride levels. It has earned the Japanese government's "gold label," designating it as a government approved Food of Specific Health Use (FOSHU). Although Coke Plus reaps a higher wholesale price for the company ($1.35 per 470-milliliter bottle versus
$1.25 per bottle for the original Coke Zero), it also comes with higher variable costs ($0.95 per bottle versus $0.65 per bottle for the original product). Who will buy Coke Plus? Some current Coke Zero drinkers will shift their consumption to Coke Plus, and others will want to try Coke Plus because of its health benefits.

Assume the company expects to sell 19.2 million bottles of Coca Plus next year but that 35 percent of those sales will come from buyers who would normally purchase Coke Zero (that is, cannibalized sales). Assuming the sales of Coke Zero are normally 320 million bottles per year and that the company will incur an increase in fixed costs of $2,000,000 during the next year to expand manufacturing capabilities, will the new product be profitable for the company? Refer to the Financial Analysis of Marketing Tactics: Extend the Product Line section in Appendix 2: Marketing by the Numbers for an explanation regarding how to conduct this analysis.

Assume the company expects to sell 19.2 million bottles of Coca Plus next year but that 35 percent of those sales will come from buyers who would normally purchase Coke Zero (that is, cannibalized sales). Assuming the sales of Coke Zero are normally 320 million bottles per year and that the company will incur an increase in fixed costs of $2,000,000 during the next year to expand manufacturing capabilities, will the new product be profitable for the company? Refer to the Financial Analysis of Marketing Tactics: Extend the Product Line section in Appendix 2: Marketing by the Numbers for an explanation regarding how to conduct this analysis.

Data from appendix 2

As a final option, Wise Domotics is considering extending its product line by offering a lower-priced model. Of course, the new, lower-priced product would steal some sales from the higher-priced model. This is called cannibalization-the situation in which one product sold by a company takes a portion of its sales from other company products. If the new product has a lower contribution than the original product, the company's total contribution will decrease on the cannibalized sales. However, if the new product can generate enough new volume, it is worth considering.