Published on March 13, 2014
Case Summary Positive Income: Year 3 Target Demo: Men 16-34 Potential Market: >$100 M Launchpad to Western Europe
Procter and GambleP&G: Touching Lives, Improving Life... • 1837 • 175 years history • Serves 4.8 billion people / Operation in 70 countries • 50 Leadership brands/ 25 billion-dollar brands • Beauty/ Baby, Feminine and Family Care • Fabric and Home Care/ Health and Grooming
Profitability P&G Industry Gross Margin 49.59 52 ROA 8.33 8.64 ROE 17.38 22.21 Solvency P&G Industry Debt/Equity .47 .85 Interest Coverage 23.25 13.60 Efficiency P&G Industry Inventory Turnover 6.23 4.85 Receivables Turnover 13.39 10.06 Asset Turnover .62 .82 Financial Performance Liquidity P&G Industry Current Ratio .80 .88 Quick Ratio .41 .53
2013 Net Sales
Italy Country Analysis Population 61.5 M Growth Rate 0.34% Urban Pop. 68% Male Age 15-35 5.1 M
Government & Political direction Corruption & Organized crime Judicial system Ranked 102nd- Institutional environment Political Factors
Economic Factors GDP $ 2.014 T GDP per capita $ 33,115 Europe 5th largest economy Italy is part of a monetary union, the Eurozone (dark blue), and of the EU single market. World 10th largest economy
GDP Growth Rate
Social Factors Fashion Conscious First Impressions Face-to-Face contact Expressive Communicators Sports Low Labor Efficiency
Technology Highly educated workforce Sophisticated work process Long tradition in science & technology Advanced medical care
Bologna University is the oldest academic institution of the world, founded in 1088. Environmental Factors Good infrastructure Education and Training Programs Electricity and Telecommunications is good Highly sophisticated business environment High Tax Rate, Ranks #4
Most Problematic Factors
Italian Personal Hygiene Industry
Industry Definition Bath & Shower Products Oral Care Deodorants Grooming
Industry Opportunities Export Growth Global Distribution Organic Product Youthful New Target Markets The “Italian Man
Market Growth Hygiene Market $ 1,513 M Market Volume -2% Growth Forecast 0.8%
Growth by Value
Growth by Units
Personal Hygiene Market Share
Fading Traditions Growing Industry Traditional belief: “Human Smell” Marketing Push by Manufacturers The “Italian Man”
Porter’s Analysis Summary Analysis Summary
Barriers To Entry
Rivalry From Competitors
Rivalry From Substitutes
SWOT STRENGTHS WEAKNESSES ● Leading market position garnered on a strong brand portfolio ● Significant R&D and marketing investments ● Strategic acquisitions expanded P&G’ s product portfolio ● Increasing presence in the developing markets ● Robust cash productivity ● Increasing instances of product recalls ● Weak brand presence in Italian hygiene industry OPPORTUNITIES THREATS ● Growing men’ s grooming industry Initiatives to improve productivity ● Growing personal care and home care markets ● Rising input cost inflation ● Counterfeit goods
Deodorants Company Shares
Italy Deodorants Brand/Parent Share Parent Brand % Share Parent Brand % Share Artsana, Gruppo Lycia 6.8 Mirato Nuova SpA Malizia 6.5 Avon Products Inc Avon 1.7 Mirato Nuova SpA Intesa 5.7 Beiersdorf AG Nivea 14.9 Other (<1%) 15.9 Bolton Group, The Roberts 11.9 Paglieri SpA Azzurra 1.5 Bolton Group, The Borotalco 2.5 Private Label 3.1 Dibra Spa Hanorah Breeze 1.5 Procter & Gamble Co, The Infasil (divested) 8.5 Henkel AG & Co KGaA Neutromed 1.8 Procter & Gamble Co, The Gillette 0.4 L'Oréal Groupe Vichy 1.8 Unilever Group Dove 13.2 Unilever Group Axe/Lynx/Ego 2.3
Deodorants Brand Shares
P&G - Italy Shaving Deodorant Skin & Hair Soap/Body Wash/ Shampoos Gillette + Fusion Braun Venus Mach3 Gillette Infasil (divested) Sebastian Herbal Essence Pantene Olay Koleston Head & Shoulders Herbal Essence Gillette Perfumes Colognes Teeth/Oral care Medicines Makeup Laura Biagiotti Puma Hugo Boss Dolce & Gabbana Lacoste Replay Gucci AZ Flucaril Parogencyl Oral B Kukident Vicks (Nyquil/Dayquil) Dolce & Gabbanna Max Factor Wella Sebastian
Products Product Types Fragrance Variations Total Products 7 22 96*
Value Proposition Masculinity - Maturity - Confidence Product: Innovative and masculine Targeted female viewers, despite the product's target market being male
A Product for Your Hygiene Problem
4 D’s of Marketing Distinct Desirable Defendable Deliverable
Entry Model 1. Introduce 2 product types, 3 scents Target: men’s market 2. Utilize Existing manufacturing capacity in Germany Import to Italy 3. Ally Italian PR company and advertisers 4. Share Distribution channel with Gillette Expand channels corresponding to growth
Entry Model Introduce Utilize Ally Share
Marketing Mix Implementation
Product Fragrance from market research Vibrant Packaging Target Males 16-34 Position Gillette Males 35+ Single package: - 2.35oz (80ml) stick - 5oz (150ml) spray Brand: Classic, dapper masculinity
Price € Stick Spray Low Cost 2-3 2-4 Super-Premium 19-25 22-35 Old Spice as mid-premium pricing Stick Spray 6 7
Place Super/Hyper Markets Online Retailers Dense Cities Conad eBay Milan Coop Amazon Florence Essalunga Naples Panorama Rome
Personal Hygiene Distribution
● Social Media ○ Outsource viral marketing to local PR firm ○ Satellite to sales ● Scented Magazine Ads ● Television Networks ● Athletic Sponsoring ○ 2014 World Cup ○ 2016 Olympics ● Promotional Special Events Promotion
Product Manager (From Old Spice American Parent company) Sales Manager (Italian/ Local) Marketing Manager (From Old Spice + local) Outsourcer (local marketing agency & advertisers) Operation Manager Administrative Manager Human Resources
• Start investing from the first quarter of 2014 • The initial investment in 2014 is $12.85 million. • Direct investment from the P&G American parent company Finance Source
$$$$$ Finance Source Invest: First Quarter 2014 Initial investment $12.85 million Direct investment from parent company
Market Volume Forecast
Financial Projections 1.50% 2014 2015 2016 2017 2018 Italian Deodorant Market 569.41 577.95 586.62 595.41 604.35 Old Spice Market Share 2.00% 2.40% 2.88% 3.60% 4.32% Projected Revenue (M) 11.39 13.87 16.89 21.43 26.11 COGS 2.28 2.77 3.38 4.29 5.22 Gross Income 9.11 11.10 13.52 17.15 20.89 SG&A 2.85 3.47 4.22 6.43 7.83 Extra Marketing 10.00 8.00 6.00 3.00 3.00 Total Expenses 12.85 11.47 10.22 9.43 10.83 Operating Income -3.74 -0.37 3.29 7.72 10.05 Taxes -1.17 -0.12 1.03 2.42 3.16 Net Income -2.56 -0.25 2.26 5.29 6.90 Net Profit Margin -22.51% -1.84% 13.37% 24.70% 26.42%
Next Steps Expansion 1. Old Spice bodywash and soap 2. Italian women’s market 3. France and Spain Exit If the project cannot reach or beat P&G general net profit margin in year three, suspend the project and reposition the brand
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