AutoSave O Off) 15 - 7) - Bounty Case Study - Hand Out 2022 (1) v Search (Alt+Q) thembekacele111@gmail.com T X File Home Insert Design Layout References Mailings Review View Help Comments Share Scenario P&G's Bounty concept "The Quicker Picker-Upper" is well established in the USA and several European countries. Bounty is a high-quality product that stands for absorbency as well as strength and softness. The concept of Bounty Basic has now allowed P&G to play in the mid-tier paper towel category too. After a successful launch of Bounty Basic in the US, P&G Germany is now considering launching this mid-tier offering in Germany in January 20231 (note that these types of investment decisions would normally be made at a Head Quarters level in Cincinnati & Dubai, and not at a country level). Results look promising after an initial phase of soft launch testing for the German Market. Consumer market research estimates that the category base volume on high-tier Bounty paper towels in 2021 was 12,000 cases with each case containing 24 consumer units. The market for high-tier paper towels in Germany is expected to grow by 5% in 2022 then decrease by 0.1% in 2023. The mid-tier paper towel category in Germany was measured to be 25,000 cases in total, with a slightly higher expected category growth of 5.5% for 2022. Due to the growth of the "savvy" ROLL consumer segment driven by higher inflation in the ROULEAU 100 37000 cost of basic goods such as electricity and gas 47792 prices, it is estimated that the mid-tier category will continue to experience positive category growth of county 0.1% in 2023. As a new tier entrant with a strong product, the market research team estimates that Bounty Basic can capture 40% of the expected mid-tier sales in 2023 and will then experience growth equal to that Bounty Bounty Bounty Bounty County of the category growth in 2024 of 2%. Bounty The learning on the soft launch further predicted a 5% rate of cannibalization on the Bounty High-tier category base volume in the first year of the launch of Bounty Basic. 4 P&G Page 4 of 8 2608 words DX English (United States) Accessibility: Investigate Focus . + 100% O 17.C Partly cloudy 04:47 Type here to search 22 O W 55 2022/11/1.AutoSave O Off) 15 - 7) - Bounty Case Study - Hand Out 2022 (1) v Search (Alt+Q) thembekacele111@gmail.com T X File Home Insert Design Layout References Mailings Review View Help Comments Share Procter & Gamble Bounty Case Study Adapted for UKZN, 2022 Material Presented is for Educational Purposes Only Pricing Decisions The commercial team has recommended the optimal pricing strategy for Bounty Basic to be 66% of the cost to retailer of existing Bounty High-tier.' The product cost (COGS) is 50% of revenue received by P&G. (table below) The marketing expenses to deliver these sales are E150,000, incurred annually. There is an additional E80,000 in Sales and Administration Expenses (combined), incurred annually. The firm pays corporate tax in Germany at a rate of 15%, one year in arrears, and given that there is a double taxation agreement between Germany and the USA, profits will not be taxed in the USA.2 To launch this product P&G will purchase machinery costing $2,500,000 that can be depreciated straight-line to zero over 5 years, and will also require an upfront investment in net working capital of E100,000. All costs quoted are ex- VAT and costed at 2022 prices The team in Germany has advised that the local VAT rate is 19%% and inflation is hitting an all-time high of about 7.9% as of August 20224. Inflation is expected to stabilize at 5% for 2023 and beyond. Bounty High-Tier Pricing in other European markets: Bounty Pricing in other EU Markets Cost to the Retailer VAT (ex VAT) Retailer Mark-Up on Cost Shelf Price (incl VAT) Austria 1.25 20% 10.00% 5.61 Sweder 4.68 19% 12.00% 6.24 France 4.91 20% 5.50% 6.22 Switzerland 4.50 20% 17.50% 5.35 Germany 20% 19.00% 6.20 `Shelf Price assumes items not on promotion. Page 5 of 8 2608 words DX English (United States) 1% Accessibility: Investigate Focus . + 100% 04:5 Type here to search Zi O W 18 C Mostly cloudy ~ $ENG 55 2022/11/1.AutoSave O Off) 15 - 7) - Bounty Case Study - Hand Out 2022 (1) v Search (Alt+Q) thembekacele111@gmail.com T X File Home Insert Design Layout References Mailings Review View Help Comments Share Material Presented is for Educational Purposes Only Year 1 Plan (Brand Equity and Awareness Building) Since Bounty Basic is launching in the mid-tier paper towel segment, it is important that costs are minimized wherever possible. As such the finance team is recommending a launch without the support of television media. One alternative awareness building strategy that has been suggested is print media. The marketing team is intent on printing copies that scored well on consumer tests. Based on the copy scores, awareness building and conversion to purchase intent, you have received a model which projects the volume growth per E10,000 investment in magazines and newspapers. The table below summarizes the projected results: Print Media Cost Volume Uplift (units) 10,000.00 37,235.00 20,000.00 86,882.00 30,000.00 153,078.00 10,000.00 235,824.00 50,000.00 335, 118.00 60,000.00 455,098.00 0,000.00 37,843.00 80,000.00 670,941.00 90,000.00 612,314.00 100,000.00 37,137.00 1 10,000.00 661,961.00 Question 1: Determine the optimal level of investment in print media, in terms of maximizing your profit, and justify your choice. Note this strategy is only applicable in Year 1, yet the volume uplift will hold thereafter). Page 6 of 8 2608 words DX English (United States) 1% Accessibility: Investigate Focus . + 100% 04:5 Type here to search Zi O W 18 C Mostly cloudy ~ $ENG 55 2022/11/1