Reliance Baking Soda

Reliance Baking SodaA Case Study | Optimizing Promotional Spending

Case IntroductionStewart Corporation was founded in 1915 by Stewart Augusta who had discovered what he called the Miracle Compound NaHCO3 (Baking Soda).Reliance Baking Soda (RBS) a leavening agent has been one of the strongest brands of the Household Division of Stewart Corp.Apart from being a baking agent RBS can also be used as a substitute for cleaners, air fresheners, laundry detergents etc.Anna Regnante who has managed one of Steward Household Divisions weaker brands has been recently promoted to the position of Domestic Brand Director (RBS).She has been assigned with a task to come out with 2008 P&L budget within 3 weeks.ObjectivesOur primary objective is to develop a budget that will increase RBS profits by 10 percent (before SGA, Overheads and Taxes) over 2007 estimates.Optimize trade promotion strategy.Reallocate budgets for promotion and advertisements.

LimitationsTrade considers it to be boring and low traffic

No direct control over how trade manages inventory

Private Label selling at 30% lower prices

Market Share reduced by 5% in the last decade

Low Advertising Recall

Limitations (continued)Specialized products cannibalizing baking soda.

Majority products sold during Trade Promotions.

Consumption patterns remained unchanged for the last 3 years.

Old fashioned mainstay product.

Overstocked Trader Inventory.

After brainstorming and analysis of past year data.

Trade promotionsPrivate labelLow Advertising recallBoring and low trafficMarket share reducedOld fashionedOverstocked InventoryROOT CAUSE DIAGRAMStrengthsTrusted Brand RBS Clear Market Leader - 70% market share with 85% US household penetrationEnjoys high distribution penetration. 80% to 90%RBS promoted for a wide range of uses including household cleaner, laundry aid and deodorizer. Widely viewed as a substitute for specialized cleaners, air fresheners, and laundry detergentsExcellent Brand Awareness and Loyalty. 95% mentioned RBS when asked about Baking Soda.

OpportunitiesBaking Soda considered as inexpensive by 80%

Trade promotion events have produced attractive results in the past.

Baking Soda already promoted by RBS as pet care, pool care, outdoor cleaning, baby care.

Only 50% used it as a multipurpose product.

OpportunitiesOut-of-the-box uses for the product such as Sport equipment cleaning.

66% males and 48% females use sport equipment

27000 gyms in USA

Suggested Product doesnt break off from the Brand Lineage of the household division

Recommendations Consumer PROMOTION10% Price rise across all product ranges.

Promotion through Top 4 Women Magazines

Reintroduction of the highly demanded Twin Packs.

Loyalty Bonus - Redeemable 30 Coupons

innovationsWebsite Adds and Online Interactive Promotional Games

Communication through Sport Magazines, Pet Care Magazines etc.

Contribution to World Food Program from respective packs as (10/8oz, 20/1lb & 1$/5lb)

11The Supply ChainManufacturerTrader / Mass Merchandise / WorkhouseConsumerSupplierRecommendations- trade promotionsRe-emergence of the Buying Allowance.

Free Cases with a Minimum Order.

Performance Discount Incentive (10% OI with evidence of featured Trade Ad)

Twin Packs

Target Schemes

Year PeriodPromotion daysPromotion Activity8 Oz1 lbs5 lbs2006January41RefundScheme 11 + 1Scheme 11 + 1Scheme 11 + 1April 21Cross-ruff CouponScheme 10 + 2June38Twin Pack/RefundScheme 10 + 2 & 5% adAugust/ September43Sweepstakes and RefundScheme 11 + 1 & 5% adScheme 11 + 1 & 5% adScheme 11 + 1 & 5% adNovember/December5012 % Off Invoice15 % Off Invoice2007EJanuary/ February40Self liquidating premium10 % Off InvoiceApril 20Coupon10 % OI + 5% ad10 % OI + 5% adMay21Scheme 10 +2June2210 % OI + 5% ad2008EJanuary/ February41RefundScheme 11 + 1Scheme 11 + 1Scheme 11 + 1April 21CouponScheme 10 + 2May/ June38Twin Pack/RefundScheme 10 + 2 & 5% adAugust/ September50Target SchemeTarget 250 get 50 extraTarget 250 get 50 extraNovember/December50Target SchemeTarget 250 get 50 extraTarget 250 get 50 extraThreatsFiddling with an established Brand and Loyal Customers.Targeting a different consumer segment might not be accepted by customers using established products.Price rise may move customers towards purchasing Private labels over RBS.Declining importance of Baking Soda to Bakers because of Self Rising and Instant Cake mixes.

Final Budget Forecast

200520062007E2008IE2008EManufacturer's price per case8 oz$6.18$6.377.27.927.821 lb$10.33$10.6412.0213.22213.025 lb$46.63$48.0354.2859.70858.708Factory shipments(in 000's of cases)008 oz64079371471480027.70%1 lb1099136212261226135046.50%5 lb58172064864875025.80%Variable manufacturing cost per case008 oz$3.02$3.053.383.7183.411 lb$4.98$5.035.586.1385.635 lb$22.12$22.3424.827.2826Gross sales$42,400$541255505160556.167864Variable manufacturing cost$20,258$253542532527857.529828.5Gross margin$22,142$287712972632698.638035.552%53%54%54.00%56%AdvertisingTv$2,862$445338154196.54000Print $687$950694763.41500Internet$76$238248272.81000Total Advertising$3625$564147575232.76500PR/media production cost$191$297198217.8198Consumer promotion$424$1080551606.11400Trade promotion$4240$593855056055.58977.5Total marketting expenses$8480$129561101112112.117075.5Profit before SG&A, Overhead and Taxes$13,662 $15,815 1871520586.520960Budget ForecastBottom line growth

Thank YouRBS A Houseful of Uses