integrated project presentation slides
DESCRIPTION
Final Presentation for our fall 2010 Integrated Brand Management team project on Barbasol Shaving CreamTRANSCRIPT
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Barbasol Acquisition Final PresentationFor: Diversified Products Corp.Prepared by: Rook Consulting Cohort C – Team 2December 15, 2010
Team Members:Hythem AbdelwahabTejas AtawaneEszter HamoriKevin HarderMolly PlimptonCarl Uttaro
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•Why Shaving Cream?
•Why Barbasol and who is Perio Inc.?
• Estimated Current Value = $52.7M
• Under DPC Management = $78.1M
Introduction
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• Company Profile
• Industry Overview
• Current Valuation
• Recommendation #1
• Recommendation #2
• Acquisition Summary
Agenda
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Company Profile
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Company Profile - History
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
1919:Barbasol Invented
2001: Bought by:
1962: Bought by:
1949:Created Aerosol Shaving Cans
1923:Babe Ruth endorses Barbosal
2007: Launch Barbasol Ultra
2010: Barbasol Ultra Pulled
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$26.7M, 89%
Other Products $3.2M, 11%
Perio Inc. Revenue by Brand:
Company Profile - Products
Men’s Shaving Product Portfolio:
Barbasol Soothing Aloe:#1 Retail SKU of any men’s
shaving cream
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Company Profile: Strengths and Weaknesses
Systems• Lean manufacturing• Hiring software
Staff• Many new employees
Strategy• Maintaining position in
foam economy segment• Not thinking big
Shared Values• Conservative, family
oriented culture
Strengths Weaknesses
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Summary of Company Performance
WeakPerformance,
Bad Team
HighPerformance,Strong Team
HighPerformance,
Bad Team
WeakPerformance,Strong Team
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Industry Overview
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Men’s Shaving Cream Industry Overview
Source: Mintel DataSource: Nielsen Data adjusted for Wal-Mart
Shaving Cream MarketHistorical & Projected Market Growth
Shaving Cream MarketLTM Retail Sales by Product Category
Total Retail Sales = $ 338M
2005 2007 2009 2011 2013 2015$100M
$200M
$300M
$400M
$500M
Actual ProjectedYears
Reta
il Sa
les
Foam = 54% of unitsGel = 41% of units
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Breakdown of Foam & Gel Market Segments
37%
51%
Other 12%
Source: Nielsen Data Adjusted for Wlmart
FoamTotal retail sales $99M
GelTotal Retail Sales $221M
32%
43%
Other25%
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Price Analysis of the Foam and Gel Segments
Average Retail Price
Premium $8.23
Mid-price $2.63
Economy $0.97
Average Retail Price
Super Premium $4.65
Premium $3.75
Mid-price $2.87
Economy $2.03
Economy
Mid-price
Premium
0% 10% 20% 30% 40% 50% 60% 70%
51.45%
48.52%
0.03%
Mkt. Share (Equiv. Unit )
Pric
e Se
gmen
t
Foam Unit Market Share by Price Point Gel Unit Market Share by Price Point
Economy
Mid-price
Premium
Super Premium
0% 10% 20% 30% 40% 50% 60% 70%
1.9%
75.9%
13.8%
8.4%
Mkt. Share (Equiv. Unit )
Price
Segm
ent
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Brand Perceptions
Source: Rook Consulting Shaving Cream Survey 2010
Barbasol:• Second highest Net Promoter Score• Good value for price • Brand stand for values
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
Perceived Value (NPS)
Reta
il Pr
ice
per U
nit
Gel
Foamy
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Current Valuation
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Income Statement Projections
Perio Company Projected Revenues($ millions)
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Valuation of Perio Company
Projected Unlevered Free Cash Flows($ millions)
NPV of Future Cash Flows = $52.7 million
18.9% CAGRAssumptions:
• Beta: 0.79
• Post-tax WACC = 5.7%
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• DPC willing to pay a premium
• Leverage DPC’s resources
• Future access to capital
• Channel synergies
• Negotiating Power
• Favorable market timing for Perio
Why Perio Would be Interested in Sale
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Recommendation #1 – Adjust Pricing
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Re-pricing Barbasol Foam
96.7%
All Others3.3%
• Barbasol dominates economy foam
• No major substitute product in economy segment
• 86% Net Promoter Score
• $0.76 (51%) gap in retail price per can between Barbasol and next major competitor
FoamUnits Sold – Economy Price Point
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Price Elasticity
Channel-Weighted Average MSP: $0.9247.8% Contribution Margin Ratio
• The price elasticity suggests a price increase of 15 cents on retail price
• Expected 1% lower sales volume
Barbasol Foam – Before Price Adjustment
Channel-Weighted Average MSP: $0.9750.2% Contribution Margin Ratio
Barbasol Foam – After Price Adjustment
5%INCREASE IN CONTRIBUTION MARGIN
150,000 250,000 350,000 450,000 550,000$0.00
$0.05
$0.10
$0.15
$0.20
$0.25f(x) = − 0.091559222756658 ln(x) + 1.34273510120911
Gillette Foamy Logarithmic (Gillette Foamy)
Equivalent Unit Sold
Pric
e pe
r Uni
t
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Scenario Analysis of Foam Price Raise
Monte Carlo Variables:• Range of Sales unit growth rate: -0.13% to 13.35%• Range of WACC: 3.74% to 7.45%
Median NPV = $1.9MAvg. NPV = $2.3M
Std. Dev = $3.5MMargin of Error = $ 0.07M
Results:• Average NPV of Price Increase = $2.3 million• 24.51% probability of loss
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Recommendation #2 – Launch Gel
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Why is Gel an attractive product option?
Gel vs. Foam Usage by Age
18-24 25-340%
10%
20%
30%
40%
50%
60%
13%
23%
50%
31%
always use foam always use gelAge Groups
% o
f Res
pons
es p
er A
ge G
roup
s
Note: Data for responses other than gel or foam preferences (such as cream, oil or water) are not shown on chart.
Source: Rook Consulting Shaving Cream Survey 2010
• Gel products:• 66% retail sales dollars• 41% units sold
• Gel preferred among 18-34 year olds
• Low competition at the economy price point
• Opportunity for Barbasol to target new consumers
n = 69
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Mis-alignment with core strategy and values
“Barbasol is a value brand”– New Barbasol VP of Product Management
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Gel Pricing & Channel Distribution
$1.43MSP
39%Store
Margin
$2.35Retail Price
$1.39MSP
25% Wal-Mart
Margin
$1.85Retail Price
$1.74MSP
20%WS Margin
39% Retail Margin
$3.56Retail Price
Supermarket & Chain Drug
Wal-Mart DistributorsChannel-Weighted Average Retail Prices:
Gillette Series: $2.73Edge: $2.62Barbasol Gel: $2.09
Average Mass-Retail Margins:
Gillette Series: 47%Edge: 33%Barbasol Gel: 39%
INDUSTRY BARBASOL GEL
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Introducing Barbasol Gel
Images Copyright José Luis García Eguiguren
• 7-oz packaging
• Two SKUs – “Original” and “Soothing Aloe”
Alternative Colors:
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Advertising Strategy
• Most effective method of advertising for Barbasol is ESPN.com because of its strong 18-34 year old male demographics• Online advertising is more cost-effective than TV commercials• ESPN.com is the #1 site for male sports fans
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Market Share Projections
Latent Market ProjectionsTargets who will buy (less market sizing & ESPN) 5.08 millionProjected Unit Sales 1.49 millionProjected Contribution Margin $1.58 million
Market Projections from ESPN.com AdvertisingTargets who will buy (less market sizing) 112.8 thousandProjected Unit Sales 248.2 thousandProjected Contribution Margin $225.9 thousand
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Production of Barbasol Gel
• Inventory of gel “bladder” and 7-ounce cans• Additional step of injecting gas to the formula
during line production• Variable COGS per unit increase 15%
Necessary Costs & Logistics
Overall Benefits
• Very few differences with ingredients• Both products are easily and commonly made
in the same factories• New factory is still only at 50% capacity
Valve
Dip Tube
Shaving Cream Ingredients
Gas
Pressure
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Product Contributions
Original Barbasol50.2% Contribution
Margin Ratio
Channel-Weighted Average MSP: $0.97
$0.48 Variable Costs/Unit
$0.49 Barbasol Contribution
Barbasol Gel62.3% Contribution
Margin Ratio
Channel-Weighted Average MSP: $1.46
$0.55 Variable Costs/Unit
$0.91 Barbasol Contribution
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• As we enter the gel segment, we anticipate potential competitor responses:– Heavy counter-advertising to Barbasol Gel’s target age group,
building on brand name– Increase spending on promotions:
• Couponing• Bundling: razor package deals
– Lower prices
Competitor Responses
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Valuation of Gel Option
NPV of Future Cash Flows from Gel option = $21.5 million
Gel Product Free Cash Flows($ millions)
Assumptions:• Beta: 0.79• Post-tax WACC = 5.7%• PV of Perpetuity: $18.2 M
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Scenario Analysis of Gel Launch
Results:• Expected company revenues of $2.5M in year 1• Year 1 sales variation ranged from 0 to $4.8M• Sales growth rate varied based on average for gel industry: 7.15%• Post-tax WACC of 5.7% was varied from 3.84% to 7.58%
Median NPV = $21.1MAvg. NPV = $21.5M
Std. Dev = $7.6MMargin of Error = $ 0.15M
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Acquisition Summary
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Valuation of Company With Gel and Price
Current Valuation$52.7M
Price Increase
New Gel Product$21.5M
$78.1M valuation
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• Recent industry acquisitions value shaving companies at an average of 2.2x forward revenues
• Rook Consulting suggests that DPC offer between $45M and $68.8M• ROI estimates based off of future selling price of full $78.1M Rook
Consulting valuation
Range of Offers
ROI: 73.5%
Initial Offer$45M
Current Valuation$52.7M
Maximum Offer$68.8M
ROI: 13.5%
Future Valuation$78.1M
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Effect of Acquisition and New Product Launch
Consumers• Leverage “Classic American brand”• Targeted ad campaigns• Economy segment consumers
Employees
• “Separation method” of merging corporate cultures• Current leadership team remains• Maintain compensation and benefits• Hire Senior marketing VP
Collaborators
• Existing channel partnerships leveraged in gel distribution• Higher margins for partners• Subsidize channel advertisements
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Conclusion
• Strong brand and company• Potential for high ROI• High valuation for Perio
Win-Win Situation
• Capture more value in foam segment• Launch gel products• New strategy of diversification
Vision
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1. Perio Inc. Linked Company Profile. Accessed 12th December 2010: http://www.linkedin.com/companies/perio-inc.-barbasol-brands 2. Indianapolis Motor Speedway, Indianapolis 500 official website historical box scores. Accessed 12th December 2010. 1938:
http://www.indy500.com/stats/view/boxscore/year/1938, - 1939: http://www.indy500.com/stats/view/boxscore/year/1939 3. Perio Inc. Company homepage; Accessed 12th December 2010, http://www.perio-inc.com/ourstory/history4. Barbasol breaks ground; Christ, Ginger, Ashland Times-Gazette, August 13th, 2009. http://www.times-gazette.com/news/article/4646958 5. Barbasol has grand opening for Ashland facility; Christ, Ginger, Ashland Times-Gazette, May 20th 2010. http://
www.timesgazette.com/news/article/4830421 6. Barbasol gives Syracuse the brush-off, picks Ohio for new plant, By Marie Morelli Syracuse.com - The Post-Standard, Published: Friday, August 07, 2009.
http://www.syracuse.com/news/index.ssf/2009/08/barbasol_gives_syracuse_the_br.html 7. Barbasol coming to Ohio, News Home Executive Team, Vindy.com, A service of The Vindicator Published: Tue, May 26, 2009. http://
www.vindy.com/news/2009/may/26/barbasol-coming-to-ohio 8. Mintel Reports USA “Shaving and Hair Removal products – US – May 2008”, Accessed 12th December 2010. http://
academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/my_reports/display/id=482893&anchor=atom/display/id=548163 9. Mintel Reports USA “Men’s Grooming – US – September 2010”. Accessed 12th December 2010. http://
academic.mintel.com.ezproxy.bu.edu/sinatra/oxygen_academic/my_reports/display/id=296601&anchor=atom/display/id=34384510. AC Nielsen database, The Nielsen Company - United States, Accessed 12th December 2010. 11. Barbasol press release: May 25, 2010. http://perfectshave.blogspot.com/2010/05/new-barbasol-plant-opens-in-ashland 12. THE "GREAT RECESSION" AND SHIFTS IN CONSUMER BEHAVIOR, BERNSTEIN RESEARCH; 2009. 13. Mckinsey & Co., Compustat: Mckinsey Team Analysis.14. Today's Facility Manage, August 2009 issue, By Anne Vazquez http://www.todaysfacilitymanager.com/articles/manufacturing-case-study-room-to-grow.php
15. Industry profile; Personal Care Products Manufacturing, quarterly update; 8.9.2010 SIC CODES: 2844 - NAICS CODES: 325620, First Research, a D&B
company.16. Professor Aimin Yan, OB 713 Lecture notes, MBA Class 2012 - Boston University School of Management – Cohort (C).17. Tom Gallerani, Former VP of Shaving Technology Lab, Gillette Company, Personal Interview.18. Select International Announces Benchmarks, Successes with New Client Barbasol, May 17, 2010 . http://
www.free-press-release.com/news-select-international-announces-benchmarks-successes-with-new-client-barbasol-1274109461.html19. A Framework for Marketing Management 4th ed. (2009), by Philip Kotler and Kevin Keller
20. Westervin.com, A Fine Design: Old Stuff, Posted: February 19th, 2010 Author: Brian | Filed under: A Fine Design | Tags: 50's, 60's, advertisement, past, shaving, time travel, vintage | http://www.westervin.com/blog/tag/past
21. Town and Country Hobbies, Billboards; Barbasol Shaving Cream (2602-36). www.towncountryhobbies.com/Billboard_pictures/2602-36 22. Barbasol home page; Accessed 12th December 2010. www.barbasol.coms 23. Ashland Times-Gazette “Barbasol breaks ground”; Christ, Ginger, August 13th, 2009. http://www.times-gazette.com/news/article/4646958 24. Barbasol gel can designed by José Luis García Eguiguren | Jan 20, 2010 | Country: Spain©2010 | Published by Lovely Package®
http://lovelypackage.com/student-work-jose-luis-garcia-eguiguren/#more-10446
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